It’s all about China. Specifically, the world’s third largest economy after the European Union and the U.S., is becoming an increasingly growing concern. Manufacturing and service activity is under increasing strain, while its currency and financial markets are experiencing mounting pressure. The troubles in China and devaluation of the yuan sent shockwaves around international equity markets. The Chinese stock markets nearly crashed triggering trading circuit breakers twice last week. Commodities, especially oil, plunged again on weak prospects for global growth. And political troubles in North Korea and the Middle East were no help.
Therefore, it has been rough sledding for the three portfolios under review here. The only good news is that dividends, for the most part, are growing and appear to be well covered at the present. Investors need to be patient as the oversold condition in equities is no time to run for cover and selective buying opportunities exist. However, the stock market had its worst opening week of a New Year in history and off 11% from its highs set in May. This start is not good news for the so-called January effect, whereby the market returns for the year follow the results of the first trading month.
The Dow and S&P 500 declined 6% and the NASDAQ was off 7.12% this week. The MSCI World Index also lost 6%. Energy-related stocks were particularly hard hit as West Texas crude settled Friday at $33.16/bbl. down $3.88. Basic material shares were the worst performing sector falling over 8% on average, followed by technology and oil & gas, each off 7%. The “best” performance was seen in safe-haven utilities with a decline of 0.44%. Gold moved higher on the negative economic news showing a $37.50/oz. gain. Here at home, the Labor Department reported that 292,000 new jobs were added in December and revised October and November’s figure by 50,000.
Looking ahead, fourth quarter earnings season begins this week with CSX Corp. reporting on Tuesday ($0.46/share vs. $49 last year); JPMorgan Chase on Thursday with expectations of $1.29 per share vs. $1.19 a year ago; along with Intel Corp. estimated to have earned $0.63 vs. $0.74, with guidance to be a key issue for the giant integrated circuit provider.
Finally, congratulations to Ken Griffey, Jr and New York Met’s Mike Piazza being elected to the baseball Hall of Fame.
Here is the answer to last week’s trivia question: Which state, according to Forbes, ranks highest for being the best for business? Texas, Utah, North Carolina or Virginia. Answer: Utah. The least most business friendly state is West Virginia.
Today’s Trivia Question: EOG Resources, Inc. is one of the largest independent oil and natural gas exploration and production companies in the United States. The “E” originates from its once parent company, which was? Exxon-Mobil, Encana, Enron or Enterprise Products.