Download RESOURCE LOG – SEPTEMBER 2014 Article Title Detail

Article Title
The Kiplinger Letter
RESOURCE LOG – SEPTEMBER 2014
Detail
A hardier economy in 2015 will bode well for businesses. We see GDP rising 3% vs.
2.1% in 2014, led by consumer demand for cars, electronics and other goods plus a
pickup in home sales.
Publication
The Kiplinger Letter
Date
8/29/14
Author
The Wall Street Journal
9/3/14
Kathleen Madigan
Corporate profits…up a solid 7%, off a weak performance this year attributable to the
bitter winter weather that ushered in 2014, hitting businesses hard enough to bring fullyear profits down around 2%.
Inflation will behave overall, easing many cost pressures on companies. Measuring
Dec. over Dec., the Consumer Price Index should climb by just 1.8%...
A moderately higher cost of money is on tap. The Federal Reserve is poised to begin
bumping up short-term rates again in the second half of 2015. For planning purposes,
figure on a modest quarter-percentage-point increase. 10-year Treasuries will climb to
3.5% next year from 2.8% at the end of 2014…
Economic Reports
Signal Growth
A strengthening manufacturing sector is fueling expectations that the U.S. economy will
expand at a more robust clip in the second half of the year. But manufacturers are
concerned that international turmoil could temper the rebound…
Economists had expected the gauge to fall, but instead the latest reading rose to its
best show since March 2011…
What’s News
♦ Investors sent European stocks soaring and punished the euro. U.S. stocks reversed
early gains to end lower.
The Wall Street Journal
9/5/14
Europe’s Bank
Primes Pump
FRANKFURT—In an effort to keep too-low inflation from derailing the eurozone’s weak
economy, the European Central Bank surprised financial markets with a cut in interest
rates and new stimulus plans, despite opposition from Germany’s powerful central
bank.
The Wall Street Journal
9/5/14
Brian Blackstone
The Wall Street Journal
9/6-7/14
John F. Wasik
ECB Cuts Rates and
Launches New
Stimulus, Surprising
Markets; Germans
Dissent
How Much Junk Do
You Need
The moves on Thursday pummeled the euro and boosted European stock and bond
prices. They also highlighted the increasingly diverging paths between central banks in
the U.S. and U.K., which are eyeing tighter policies…
In these yield-challenged times, there’s no sin in scavenging for an extra point or two in
returns.
But higher yields mean higher risk—particularly in high-yield or “junk” bond funds, which
invest in corporate debt that has been deemed below investment grade by ratings firms.
It is easy to see why investors are tempted by the funds. Junk bonds are yielding an
average of more than 5%, compared with just above 3% for investment-grade corporate
bonds and more than 2% for a 10-year U.S. Treasury note…
As long as you recognize that junk bonds have a higher risk of not paying off in lean
economic times and may be currently overpriced relative to other corporate bonds, they
make sense in a well-rounded income portfolio…
How Soft Payroll
Gains Change Fed
Thinking
Federal Reserve officials are entering a deepening debate about the guidance they
give the public about their interest-rate plans…
The Wall Street Journal
9/6-7/14
Jon Hilsenrath
The Wall Street Journal
9/8/14
Min Zeng
The Wall Street Journal
9/9/14
Dan Strumpf
The Wall Street Journal
9/9/14
Timothy Puko
The Wall Street Journal
9/12/14
Nick Timiraos
The Fed’s debate about interest-rate guidance is taking place against a jumbled
economic backdrop. Friday’s disappointing employment report left many officials feeling
they don’t need to start signaling that interest-rate increases are nearing…
…Many investors expect the central bank to start lifting rates next summer.
Since April, however, the labor market has lost a little steam. The jobless rate is down
0.2 percentage point since then. This has taken pressure off the Fed to move quickly…
U.S. Debt Gets a
New Boost From
Abroad
ECB’s Intervention
Sends Bargain Hunters
After Treasurys; U.S.
10-Year Yield Tops
Peers in Some
European Countries
Stepped-up central-bank intervention in Europe is bolstering the appeal of U.S.
Treasury debt among a surprising crowd: bargain hunters.
Last week the European Central Bank cut interest rates and set plans to buy European
bonds…
The gains left the U.S. 10-year yield higher than many counterparts across the
Atlantic…
…Foreign buyers of U.S. Treasurys get both a yield premium and an opportunity to pick
up extra gains as the dollar appreciates against the euro.
The shift is the latest twist in a surprisingly strong year for U.S. government bonds,
whose near-record-low yields obscure solid investment fundamentals, many buyers
say. Yields fall as prices rise…
Treasury prices this year have pushed higher amid geopolitical unrest in the Middle
East and Ukraine and a fresh economic reversal in Europe, upending Wall Street
expectations that U.S. debt prices would tumble as domestic economic growth picked
up and the Federal Reserve stepped back from monthly stimulus…
Slide in Oil Prices
Unplugs Energy
Stocks
U.S. stocks eased as investors took a breather…
Energy companies, meanwhile, posted steep losses, as U.S. oil prices fell to their
lowest level in eight months.
Investors continued to digest Friday’s disappointing jobs report for August…
Crude Prices Sink As
Soft Economic Data
From U.S., China
Trouble
Global oil prices ended Monday at the lowest level in more than a year as Chinese and
U.S. data spurred investors to bet demand wouldn’t rise fast enough to absorb new
supply.
Oil markets have been in decline since mid-June, with booming production, primarily in
the U.S., outweighing worries that crises in the Middle East and Eastern Europe could
disrupt supply distribution…
Biggest Growth
Threat? Not U.S.,
Economists Say
After an uneven first half, most economists are relatively sanguine about the U.S.
economy’s outlook. It’s the rest of the world that’s a concern, according to The Wall
Street Journal’s monthly forecasting survey.
More than 90% of the 48 surveyed economists…
Just one-third said their outlook for the Eurozone had improved, roughly balanced with
the share seeing a worse outlook for the currency union. About 40% said their outlook
for Japan had improved, compared with 12% that said it had deteriorated.
“The U.S. cycle is well ahead” of Europe and Japan, said Joseph Carson, an economist
at Alliance Bernstein…
Economists cited the situation in Ukraine as the largest threat to global growth, followed
by missteps by central bankers and structurally high unemployment…
Bears Turn Docile as
Market Keeps on
Roaring
…For some investors, the disappearance of negative views is cause for concern. They
worry that with bulls so dominant, whenever any shocks do hit, the damage could be
much worse than if there were more skeptical investors around.
Former Pessimists
Throw in the Towel In
Face of a Rally That
Won’t Quit
But a healthier U.S. economy, solid corporate profits and low interest rates have
persuaded many bearish analysts that a major pullback for stocks isn’t in the cards at
least well into next year…
The Wall Street Journal
9/15/14
Alexandra Scaggs,
Steven Russolillo
The Wall Street Journal
9/15/14
Russell Gold
The Wall Street Journal
9/16/14
Chris Dieterich,
Saumya
Vaishampayan
The Wall Street Journal
9/17/14
Nicole Hong, Matt
Day
The Wall Street Journal
9/18/14
Min Zeng
To be sure, the former bears are predicting only small gains for the S&P 500 for the
remainder of the year…
U.S. energy Boom
Has Room to Run
Skeptics of the U.S. energy boom say it can’t last much longer because it requires
drilling an ever-increasing number of wells.
But the boom already has lasted longer than anyone would have imagined just a
decade ago and has more room to run. That’s because oil and natural-gas wells have
become more productive—an unrecognized but potent trend that should keep the fuels
flowing…
Tech Stocks Lead
Drop On Jitters Over
Fed
Technology and small-company stocks recorded their biggest declines since July, as
investors turned wary ahead of this week’s Federal Reserve meeting.
Declines among the riskier corners of the stock market came as traders girded for any
signs from the Fed that it is readying an increase in interest rates and move away from
the extremely aggressive easy-money policies…
Fed Dims Emerging
Markets’ Allure
Fears of higher U.S. interest rates are prompting fund managers to cut back on
investments in emerging markets…
But after months of heavy buying in such places as Brazil and India, hired by the
prospect of higher returns than in the Western world, investors are taking a more
cautious stance…
Higher interest rates will boost returns on U.S. debt and bank deposits, drawing money
back from riskier markets…
Shift in Rate Forecast
Boosts Yield
Treasury prices declined after the Federal Reserve’s statement reinforced investors’
anxiousness about policy makers’ plans to raise interest rates.
Treasury Prices Sink
After Central Bank Says
It Sees Rates Climbing
Faster Than Previously
Thought
Shorter-dated Treasurys, which are most sensitive to changes in the central bank’s
stance on borrowing costs, led the selling…
Fed Plots Careful
Course On Rates
The Federal Reserve took two steps toward winding down the historic easy-money
policies that have defined its response to the financial crisis, but stopped short of the
move markets are awaiting most: signaling when interest rates will start to rise.
…Fed officials also indicated that they expect rates to increase faster than they had
recently projected. The median forecast from Fed officials sees the federal-funds rate at
1.375% by the end of 2015, compared with a 1.125% forecast in June…
The Wall Street Journal
9/18/14
Jon Hilsenrath
The Wall Street Journal
9/18/14
Justin Lahart
The Wall Street Journal
9/19/14
Min Zeng
The Wall Street Journal
9/20-21/14
Dan Strumpf
…the bond-buying program known as quantitative easing… has left the Fed holding
more than $4 trillion of Treasury and mortgage bonds…
Fed Walks the Line
on Expectations
The Federal Reserve doesn’t plan on getting back to normal anytime soon.
On Wednesday, its rate setting committee once again said it doesn’t plan on raising the
target range for overnight interest rates for “a considerable time.” That defied the
expectation of many economists that it would dial back such language in preparation for
tightening policy next year. Nor did the Fed change its wording about “significant
underutilization of labor resources,” despite a growing belief much of the decline in the
labor-participation rate—the share of the population working or looking for work—is
here to stay.
One possible factor behind the Fed’s decision to stay its hand: Inflation readings remain
remarkably cool…
The low levels of inflation suggest there is still plenty of slack in the labor market, and
so the economy continues to run well below potential…
Debt Market Goes Off
Script
Narrowing Gap Between
Short- and Long-Term
Treasury Yields Signals
Worry
The crosscurrents roiling the bond market intensified Thursday, as the gap between
short- and long-term U.S. Treasury yields narrowed in the latest sign of uncertainty over
the pace of U.S. growth.
Yields on short-term U.S. Treasury debt maturing in two to five years hit the highest
level since 2011, reflecting an investor scramble to place bets on an expected Federal
Reserve rate increase as soon as next spring. Yields rise when prices fall…
The softness of longer-term yields highlights concerns shared by many analysts and
policy makers about the uneven growth of the U.S. economy and failing expectations
for inflation. Investors broadly expect the Fed to raise the fed funds rate next year for
the first time since 2006. But many analysts say that even a small uptick in rates could
slow the economy and send already-low inflation further below the Fed’s target…
Dow Record Caps An
Upbeat Week
The Dow Jones Industrial Average notched a new record, capping an upbeat week in
which the Federal Reserve reaffirmed its easy-money policies and investors snatched
up the biggest-ever U.S.-listed public stock offering.
The Dow on Friday advanced 13.75, or 0.1%, to a record close of 17279.74. The bluechip index posted a 1.7% weekly gain.
Investors also applauded news that Scottish voters had rejected a referendum to break
from the U.K…
Many investors see smooth sailing for U.S. shares in the months ahead, given the
Fed’s commitment to low rates into next year and a steadily growing economy…
The S&P 500 Utilities Index is up 12% this year…
But the high yield on U.S. government bonds compared with other developed-nation
sovereign debt drew investors back, pushing the yield down to 2.589%...
What’s News
♦ Concern over growth in China drove down financial markets from metals to U.S.
stocks. The Dow slid 107.06 points to 17172.68.
The Wall Street Journal
9/23/14
What’s News
♦ New-home sales in the U.S. climbed 18% in August from a month earlier, hitting the
highest level since 2008.
The Wall Street Journal
9/25/14
♦ U.S. stocks rallied, with the Dow jumping 154.19 points, or 0.9%, to 17210.06.
Drug Firms Redirect
Pitch to Hospitals
…Today, 42% of doctors practice as salaried employees of hospital systems, up from
24% in 2004, according to Cegedim Relationship Management, a marketing
consultant…
The Wall Street Journal
9/25/14
What’s News
♦ The dollar climbed to its highest level against the euro in almost two years.
The Wall Street Journal
9/26/14
Global Anxiety Roils
Markets
Money managers began issuing the warnings late last year: Financial markets would be
more volatile in 2014 than in 2013. They were right.
The Wall Street Journal
9/26/14
Jonathan D.
Rockoff
E. S. Browning
After posting sharp but limited declines in January, April and July, the Dow Jones
Industrial Average on Thursday fell 264.26 points, or 1.5%, to 16945.80, its largest oneday point and percentage decline since July 31…
Traders and money managers blamed the same things that have roiled markets before:
high stock prices, the uncertain global economy and international conflicts…
What’s News
♦ Stocks surged, capping a turbulent week for markets, with the Dow gaining 167.35
points, or 1%, to 17113.15.
The Wall Street Journal
9/27-28/14
Stock Valuations Go
Under the Lens
…While blue chips are riding a bull market now in its fifth year, shares of small
companies have struggled amid concerns over lofty prices and an early-year scare over
U.S. growth…
The Wall Street Journal
9/29/14
Small-Company Shares
Struggle As Investors
Fret About Rate Rise
Given that periods of market turmoil tend to buffet small stocks more than their larger
counterparts, many investors in small companies are fearful as the Federal Reserve
moves toward raising interest rates…
While the S&P 500 holds a respectable 7.3% gain for the year, the Russell 2000—the
widely followed index for small-capitalization stocks—is far behind. The Russell 2000 is
down 3.8% for the year and off 7.4% from its most recent high in July…
Alexandra Scaggs
Fed’s Policies Funnel
Cash Overseas
Half of the Interest the
Central Bank Paid on
Reserves Went to NonU.S. Firms
…Foreign firms have received nearly half of the $9.8 billion in interest the Fed has paid
banks since the beginning of last year for the money, called reserves, they deposit at
the U.S. central bank, according to an analysis of Fed data by The Wall Street Journal.
Those lenders control only about 17% of all bank assets in the U.S…
The Wall Street Journal
9/30/14
Ryan Tracy, Jon
Hilsenrath
The Wall Street Journal
9/30/14
Dan Strumpf
Though small in relation to their overall revenues, interest payments from the Fed have
been a source of virtually risk-free returns for foreign banks…
“It is a small transfer from U.S. taxpayers to foreign taxpayers,” said Joseph Gagnon, a
former Fed economist…
In part because regulatory requirements discourage domestic banks from holding more
cash reserves than they need, many of the reserves created by the Fed are held by
foreign banks…
Hong Kong Upheaval
Shakes Stocks
…stock investors are closing out the quarter in a state of heightened alert.
Developments ranging from Russia’s deepening rift with the West to an escalation of
tensions in the Middle East have unsettled financial markets…
The Dow is up 1.5% in the third quarter through Monday. The S&P 500 index is up
0.9% in the period.
As they head into the fourth quarter, investors are confronting not only geopolitical
instability but also a Federal Reserve readying a halt to its monetary stimulus…
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