Dow Jones Industrial Average
Dow Jones Industrial Average 2014
The Dow Jones Industrial Average (DJIA) is a weighted index representing the stock price action of 30 of the largest U.S. corporations. The world’s most widely followed stock market index, the DJIA was created on May 26, 1896 by Charles Dow and Edward Jones. When it was first launched, the Dow Jones stood at 40.94.
The DJIA is calculated by taking the average price of the listed stocks and dividing that figure by a number called the divisor. The divisor is there to take into account stock splits and mergers, and it changes frequently.
Why a Soft First Quarter Offers Hope
By George Leong for Daily Gains Letter | Apr 3, 2014
The first quarter, by all accounts, was a dud, especially if you were invested in blue chip stocks as the Dow Jones Industrial Average retracted 0.74% in the quarter.
Yet March also saw some shifting of capital from higher-risk assets into blue chips and large-cap stocks, as the NASDAQ and Russell 2000 underperformed with declines of 2.53% and 0.83%, respectively.
But the muted gains in the first quarter do offer some hope heading forward, especially if the stock market can attract some leadership and if the economic outlook and jobs numbers can improve. For instance, the S&P 500 led the way in the first quarter with a 1.32% advance (or a 5.28% advance on an annualized basis). By comparison, in 2013, the index had already surpassed this level of advance by March.
Given the muted results to date, we could see much better gains in the quarters ahead, but much will depend on several variables that currently cast a cloud over the stock market.
First, the Fed is continuing to cut its quantitative easing and the consensus is that the bond purchases will dwindle to zero by year-end. While this is discounted by the stock market, traders are more concerned about when the Federal Reserve will begin to increase interest rates. The early thoughts are for rates to rise sometime in the first half of 2015.
Yet Fed chairwoman Janet Yellen gave the stock market a lift on Monday after suggesting the central bank would do whatever is necessary to make sure the economic renewal and jobs growth continue unabated. Now, this could imply that the bond buying could continue … Read More
Three Ways to Combat a “Recovery” That Even the Fed Says
By John Whitefoot for Daily Gains Letter | Apr 2, 2014
Federal Reserve Chair Janet Yellen confirmed what we’ve been espousing in these pages for the last couple of years—that the so-called recovery feels an awful lot like a recession for most Americans.
Addressing a crowd in Chicago, the head of the Federal Reserve said the U.S. jobs market is still underperforming and will continue to need the help of an artificially low interest rate environment “for some time.”
Investors were, as you can imagine, afraid the Federal Reserve was going to raise short-term rates. A rate hike would elevate borrowing costs and pull the rug out from under stock prices.
But instead, the Federal Reserve said it was committed to keeping interest rates low in an effort to stimulate borrowing, spending, and economic growth. The artificially low interest rate environment is a welcome sign for Wall Street—which essentially ended the first quarter of the year where it began.
By committing to keeping interest rates low, the Federal Reserve is ensuring a steady flow of money into the stock market…which cannot help but raise the already-bloated indices higher. The S&P 500 continues to trade near record-highs, as does the Dow Jones Industrial Average. Even the NASDAQ’s all-time high is, all things considered, within striking distance.
With the current bull market now in its fifth year—all is well in the U.S.A.! That is, if you’re one of the fortunate few to even realize we’re in a bull market. There are far too many weak underlying indicators to suggest we’re on a stable—let alone sustainable—economic footing.
For instance, the U.S. unemployment rate has improved from 10% in 2009 to 6.7% today. On the … Read More
How to Generate Premium Income in a Stalling Stock Market
By George Leong for Daily Gains Letter | Mar 6, 2014
The S&P 500 recently traded at a record-high, just before tensions in the Ukraine erupted and the global stock market declined as fear of an escalation and war intensified.
While the charts continue to show the stock market wanting to move higher after excellent gains in February, I still sense the upside moves will be more difficult to come by compared to what we saw in 2013. Even at this point, the Dow Jones Industrial Average and the S&P 500 are still negative this year.
If the stand-off between the Ukraine and Russia doesn’t escalate, I would expect the stock market to advance higher by year-end. If tensions erupt in the Eastern European region, we would likely see major selling across stocks worldwide; commodities such as gold, oil, and grains would edge higher.
If the stock market fails to find its footing—and especially a fresh catalyst—we could see mixed and volatile trading in the months ahead as the market looks for direction.
And if the stock market fails to get any positive leverage heading into the summer months, we could see some stalling in the stock market.
If the stock market does stall, an investment strategy to consider would be to write and sell some covered call options on your stocks in order to generate some premium income. This would also help to lower the average cost base of your positions, while also setting a selling price you would be willing to sell your stocks at. Of course, your goal would be to generate premium income and not look to sell stock, as I believe the stock market will head … Read More
How to Invest in a Stock Market Correction
By John Whitefoot for Daily Gains Letter | Feb 12, 2014
Has the stock market rebounded? Some seem to think so. After recording the worst month in more than a year and the first monthly loss since August, some analysts think the worst is behind us and February will be a winner.
What further evidence do the bulls need than to point to the numbers! After falling more than three percent in January, the S&P 500 is up 0.75%; the NYSE is up a little more than 0.50%; the NASDAQ is up roughly 0.75%; and the Dow Jones Industrial Average is up around 0.50%. Not a spectacular display of strength—but enough to buoy up some investors.
But the euphoria may be short-lived. While stocks are holding up right now, there are more than enough warning signs (technical, economic, and statistical) that are pointing to a correction.
For starters, February is the second-worst-performing month for the S&P 500 and Dow Jones Industrial Average so far, and it’s the fourth-weakest month for the NASDAQ. Plus, according to historical data, February tends to perform even worse when January is negative. Since 1971, when January ended on a negative, the S&P 500 extended its losses into February 72% of the time—falling an average 2.4%. For the Dow Jones Industrial Average it ends down 65% of the time and 57% of the time the NASDAQ ends down, too.
But the stock markets are only as strong as the stocks that make them—so statistics on their own are a little short-sighted. Every quarter since the beginning of 2013, more and more S&P 500-listed companies are revising their quarterly earnings lower. During the first quarter of 2013, 78% … Read More
Why January Auto Sales Point to Bleak Future for U.S. Economy
By John Whitefoot for Daily Gains Letter | Feb 5, 2014
Despite assurances from analysts, economists, and central bankers, the U.S. economy isn’t faring so well—and the markets are finally beginning to see what we’ve been warning about in these pages all last year.
For sustainable growth, the U.S. economy needs to be reporting consistently strong fiscals. But it isn’t. For starters, the key stock indices, a reflection of the U.S. economy, have extended their sharp January losses. The S&P 500 is down 5.6% year-to-date, the Dow Jones Industrial Average has lost more than seven percent of its value so far this year, the NYSE is down roughly six percent, and the NASDAQ is in the red by four percent.
Every quarter since the beginning of 2013, an increasingly larger number of S&P 500-listed companies have revised their quarterly earnings lower. During the first quarter of 2013, the number stood at 78%. This time around, 81% of S&P 500 companies have revised their first-quarter earnings lower.
Why the big losses? That depends on whom you talk to. The Bank of America, without even a hint of a smirk, blames the much colder-than-expected weather for the weak U.S. economy, meaning the U.S. economy and global markets are performing poorly because of a snow storm…
I suggest the U.S. economy is doing poorly and the U.S. markets are tanking for entirely different reasons. For starters, the U.S. economy needs steady jobs and earnings growth. Instead, the U.S. economy is facing high unemployment and stagnant wages. For the week ended January 25, jobless claims jumped more than forecast to a seasonally adjusted 348,000.
And a record number of Americans rely on food stamps. Interestingly, … Read More
