After a booming week last week for common stocks, with the DJIA up over 700 points it will be interesting to see what excitement the coming week brings.
The DJIA traded in a range of 25,009 to 25,883 and closed at the high of 25,883. This based upon the government not shutting down and a potential deal coming soon with China trade. The 10 year treasury traded in a range of 2.64% to 2.71% before closing the week at 2.67%. Seems everyone is convinced that rates have peaked and this 2.60% to 2.70% range is just about right for the time being.
The average preferred stock closed the week at $24.40 as the party goes on as this is up 37 cents in a week. While we thought shares had peaked virtually everything we own continues to creep higher–guess we’ll take the gains, but it is too far, too fast. There are 216 $25/shares preferreds trading at $25 or below compared to 228 last week which reflects continuing march upward. This remains a long way off from the crazy prices last year when we had some weeks with just 70 issues trading at or below $25.
Last week the Fed Balance sheet GREW by $2 billion. The last 4 weeks has seen a runoff of total of $19 billion. Has the FED already started to back off on the ‘runoff’? Who knows, but it is possible–on the other hand we might see a huge runoff in the coming week.
Last week we had the Job Opening and Turnover report come in at 7.3 million which is a strong report. Then we had the Consumer Price Index come in at a flat reading–0 change, although the core rate (without food and energy) came in at a plus .2%–as forecast. Consumer Credit rose for the 18th consecutive month. Subprime auto loans which are seriously delinquent kept rising which shows a little stress–no giant surprise at this point in the economic expansion. Retail sales for December showed a massive 1.2% drop which of course everyone, upon reflection, decided this must be a bad number–plus it bolsters low interest rates so it must be ‘good news’–it remains to be seen if this was a total fluke. We do know that we have seen forecasts for the 4th quarter being reduced drastically to as low as 1.5% according to the Atlanta Fed–down from 2.7% the week before. Their forecast is here.
For the coming week who knows what economic news will be released as numbers continue to be screwed up because of the government shutdown. Some of the items we may see are housing starts and building permit numbers. Durable goods orders may be released and existing home sales.
All in all it would appear that retail sales is giving the most dire signal of economic problems. If the GDP released the end of the month is as dire as the Atlanta Fed forecast common stock prices are too high.
Last week we didn’t have any new issues come to market. We await trading of the CMS Energy 5.875% baby bonds which was sold 10 days ago, but has not as of yet traded. We see the issue in the database at eTrade with ticker CMSD, but we show no trading as of yet. This issue has a maturity in 2079.