Rising interest rates is one of the most oft-referred-to topics on Wall Street right now. Some see higher borrowing costs as the straw that could break the market's eight-year bull run while others see it as needed counter-weight to emerging inflationary pressures.
Members of the Federal Open Market Committee (FOMC) already expects three rate hikes this year, and we may see more monetary tightening than that if fiscal stimulus jump-starts the economy.
Bond investments and dividend-paying stocks have sold off on a 33% jump in the rate on the 10-year Treasury since the beginning of November. Existing bond prices drop when rates increase and investors fear that higher rates will draw others out of dividend stocks for the relatively safety in fixed-income. Continue reading "3 Hidden Winners On Higher Interest Rates"→
Geopolitical issues have dominated the markets this year, and polls have been useless in lending any kind of certainty to asset prices.
OPEC has successfully managed expectations for a production freeze, even if an eventual deal is still unlikely, which has driven oil prices to nearly double since their February lows. Few would have predicted in January the momentum of the Trump campaign and the potential uncertainty on global trade.
In June, as the third quarter got underway, consensus profits for companies in the SP 500 were expected to show a modest 1% year-over-year dip. Three months later, analysts now think profits will slide nearly 5%, from year-earlier levels.
Of the companies that have announced guidance, 76 expect negative EPS growth for the third quarter according to FactSet Research. That compares to only 32 companies that have issued positive guidance for the three-month period so far.
The pain continues to build in the energy and materials sectors, but many other sectors are seeing downward earnings revisions as well. Fear of higher interest rates and declining earnings growth led an 8.6% drop in the SP 500 index, and a sharp spike in the VIX volatility index since mid-August.
The trend is so bad that analysts are expecting earnings growth of just 0.6% in the fourth quarter. The revenue picture is equally challenging.
The surge in natural gas production has changed the energy landscape in the United States. Production jumped 44% between 2005 and 2014 compared to a decline of 4.5% over the previous nine-year period.
Prices for natural gas at the Henry Hub in Louisiana jumped 162% between 2002 and 2008 on lower production and an economic boom in emerging markets. By 2012, prices had fallen nearly 70% to $2.75 per million BTU. Beyond a few spikes on colder weather, prices have flatlined between $2.50 and $3.50 for the past two and a half years.
Futures prices on the Chicago Mercantile Exchange (CME) suggest traders are not expecting much to change this year, with the December contract priced at $3.17. But two catalysts may prove speculators wrong and spark a rally in natural gas prices. Traders who get positioned now stand to make up to 50% profits without ever touching a futures contract. Continue reading "A Small Bet On Natural Gas Could Make Traders Big Profits"→