Week of August 10, 2015
Major markets returned to the red this week due largely to a continued slide in oil, disappointing earnings reports (particularly media stocks) and economic data that emboldened believers in a September rate hike. In fact, the Dow Jones Industrial Average posted losses each day last week, pushing its losing streak to seven consecutive days, the longest run in four years. For the week, the Dow Jones Industrial Average fell 1.8%. The S&P 500 slid 1.2% and the Nasdaq Composite dipped 1.7%. It’s worth noting that the S&P 500 has declined for five of the past seven weeks, but it still remains closer to all-time highs than correction territory, sitting only 2.5% below its May peak.
Solid Jobs Figures
On Friday, the Labor Department reported that U.S. employers added a seasonally-adjusted 215,000 jobs in July, and the unemployment rate remained at 5.3%. This was spot on according to most economic forecasts and marks the 58th consecutive month of gains, the longest on record. On average, firms have hired a little over 210,000 employees each month in 2015. The participation rate, or share of the population working or actively seeking employment, remained at 62.6%. This currently stands at 1977 levels as more baby boomers retire and discouraged job seekers stop looking for work. The average hourly wage improved slightly to $24.99 but growth remains stubborn. This represented a 0.2% monthly increase, or just 2.1% year-over-year.
Expectations of a September Rate Hike Jump
The solid jobs report has many traders believing a September rate is now more likely. On Thursday, prior to the release of the employment data, the probability of a September rate hike jumped from 38% to 52%, largely on the hawkish comments made by Atlanta Fed President, Dennis Lockhart, earlier in the week. These comments, along with surprisingly strong service sector growth announced mid-week, pushed yields on two-year Treasury notes to their highest level since 2011. After the jobs data, expectations for a September hiked jumped again to 58%.
No Silver Bullet In Sight For This Commodity
Coming out of the financial crisis, silver had a respectable reputation as a hybrid metal. Unlike gold, silver’s value is not only derived from its shine, but also from demand for its use in several industrial applications. However, silver is now getting hit by a perfect storm as investor sentiment toward precious metals sours and slowing growth in China curbs its industrial appeal. China makes up nearly a third of silver’s global industrial demand. Over the past twelve months, silver prices have declined 27% below $15 an ounce. This has exceeded the nearly 16% fall in the price of gold. Silver’s collapse in 2015 caps off a 70% slide since hitting a 30-year high at more than $48 in April 2011. Despite the collapse, silver output continues expanding which, much like oil, is putting further pressure on prices.
Fun Story of the Week
Anyone who has been on the internet over the past two weeks has heard about Cecil, the South African lion that was illegally hunted and killed with a bow and arrow by an American dentist. Cecil’s death created an outrage among conservationists and many others who called for stepped up efforts to protect animals. However, armadillos are taking matters into their own hands. Last week, a man from East Texas found himself in the hospital after he shot at an armadillo with a .38 caliber revolver and the bullet ricocheted off the animal’s back and struck him in the face. The local Sherriff claimed the injury was serious enough that the man had to be airlifted to a nearby hospital and have his jaw wired shut. This is the second report this year of an armadillo deflecting an oncoming bullet back at people. According to ABC News, In April a Georgia man put a bullet into his mother-in-law’s back after it bounced off an armadillo’s bony shell and went through the wall of her mobile home and the back of the recliner she was sitting in.
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Securities offered through Jacques Financial, LLC (JFLLC) a Broker-Dealer, Member FINRA and SIPC. Certain associates of Joseph W. Jacques, CPA, CFPTM are registered representatives of JFLLC. Joseph W. Jacques, CPA, CFPTM and JFLLC are affiliated. Investment advisory services are offered through Jacques Advisors, LLC an affiliate of JFLLC. Tax services are offered through Jacques & Associates Certified Public Accountants, LLC an affiliate of JFLLC.* Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, consult with your financial advisor.
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* This newsletter was prepared by CWM, LLC.
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Wall Street Journal, August 2015, https://blogs.wsj.com/briefly/2015/08/07/july-jobs-report-the-numbers/
Reuters, August 2015, https://www.reuters.com/article/2015/08/07/us-usa-economy-idUSKCN0QB1FP20150807
Washington Post, August 2015, https://www.washingtonpost.com/news/morning-mix/wp/2015/08/01/texas-man-shoots-at-armadillo-but-the-varmint-got-him-back/?tid=sm_tw
Barron’s, August 2015, https://blogs.barrons.com/incomeinvesting/2015/08/07/u-s-adds-215000-jobs-in-july-unemployment-remains-at-5-3/
Bloomberg, August 2015, https://www.bloomberg.com/news/articles/2015-08-05/wall-street-says-yellen-poised-to-end-long-run-of-zero-rates
Bloomberg, August 2015, https://www.bloomberg.com/news/articles/2015-08-07/september-rate-rise-stays-in-play-as-job-market-meets-fed-s-test
Barron’s, August 2015 (subscription required), http://online.barrons.com/articles/dow-suffers-longest-losing-streak-in-four-years-1439009810