News for the Week of 05/09/2016 – 05/13/2016
by David Abuaf, CFA
Investment Manager, RJFS
Government / Political / Economic
1. Greece’s parliament voted to overhaul pensions and increase taxes amid strikes and street protests
2. Kim Jong Un said he would press on with nuclear-weapons development and state guidance of the economy
3. As promised, the DoJ filed a lawsuit over NC’s bathroom law on transgender use
4. California’s governor made some temporary water curbs permanent despite a wet winter
5. The US sent a warship through the South China Sea in another challenge to Chinese territorial claims
6. Pope Francis said the Vatican would study the possibility of ordaining women as deacons
General Markets / Economic
1. China is doubling down on efforts to keep unprofitable factories afloat, adding to a glut of basic materials flooding the globe
2. Saudi Arabia forged ahead with the latest government shake-up as it aims to overhaul the economy and create jobs
3. The cost of credit card fraud is rising for merchants that haven’t made the transition to chip cards
4. Regulators are ramping up a new approach in policing the hedge-fund industry, focusing on how fairly managers treat their investors
5. Japan’s finance chief said he is prepared to intervene in currency markets if the yen rises further and sharply
6. Department stores are losing market share to Amazon, as profits at Kohl’s and Nordstrom and Macy's fell
1. Twitter cut off US intelligence agencies from access to a service that sifts through the entire output of its social-media postings
2. Krispy Kreme will be acquired for about $1.35B by European investment fund JAB Holding
3. A federal judge blocked the planned merger of Staples and Office Depot over antitrust concerns
4. Walmart is testing a two-day shipping service and building a regional delivery network in a bid to compete head-on with Amazon.
1. Budweiser is renaming itself America until November of this year
2. Pfizer is blocking the use of its drugs for use in lethal injections
3. A 96 year old man became the oldest USC graduate
Commentary for Week of May 9 – May 13, 2016
by David Abuaf, CFA
Investment Manager, RJFS
Stocks fell last week, once again, on concerns about US retailing, commodity-price weakness, credit data in China, and a stronger dollar. It was the stronger dollar that impacted large-capitalization stocks the most, most readily seen by the Dow Jones Industrial Average which was down 1.2% on the week.
One of the more perplexing issues last week was a combination of the Commerce Department saying that April retail sales had jumped 1.3%, while Kohl’s, Macy’s, and other big department stores operators had reported poor first quarter numbers (it should be noted that April is technically in the second quarter!) and were offering low guidance going forward. The entire department store group slumped 16% on the week, with Macy’s down 17%.
While the story earlier this year was the greenback softening, it did begin to move up once again in May with all the international macro-economic concerns. Back to retail, the data did point to a strong shift in consumer dollars from malls to online spending, prompting Walmart to issue its decree of competing with Amazon and many shops located within malls to question whether JCPenny’s, Macy’s, etc. would stick around, causing a bit of tumult in the REIT marketplace.
According to John Brady at RJ O’Brien, he says the market (S&P 500) has been trading in a range around 2100 for a while and looks as if it is struggling for additional multiple expansion to push the indices up; though he does see the market moving sideways short-term, he believes the Fed is ever ready to prop it up with dovish talk about rate hike expectations. On the flipside, Brian Lazorishak at Stack Financial says there is enough technical strength to give the rally the benefit of the doubt.
All opinions presented are those of David Abuaf, and not of Raymond James or Forman Investment Services
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