Dear PGM Capital Blog readers,
In this weekend’s blog edition we want to discuss some of the most important events that happened in the global capital markets, the world economy and the world of money in the week of July 20, 2015:
- Bad start of earnings season Q2-2015
- DOW Jones Down YTD
- Gold falls below US$ 1,100.00 a Troy Ounce
BAD START OF EARNINGS SEASON Q2-2015:
The stock market’s reaction to a heavy week of earnings reports was not encouraging.
Last week’s stock trading featured a few winners but there were more losers as declining stocks swamped the advancing ones by a 4-1 margin. Some of the losers like Caterpillar (NYSE: CAT) are large multinational companies that have been hurt by the stronger dollar and the resulting weakness in their overseas business.
Below a list of stocks and blue chips that were hit hard last week:
- Apple Inc. (NASDAQ: AAPL) where shares were down 7% at US$121.63 after it reported earnings on Tuesday, July 21st.
- Technologies Inc. (NYSE: UTX) reported a 10% drop in elevator orders from China and it’s stock was down 10% for the week.
- IBM Inc (NYSE: IBM) shares fell in the week of July 20, from US$ 172.57 to US$ 159.75 a share, –US$ 12.82 or 7.4%, after the company reported its second-quarter earnings fell 17% as the technology giant posted its 13th straight quarter of year-over-year revenue declines.
DOW JONES INDEX DOWN YEAR-TO-DATE:
U.S. stocks fell for the fourth straight session on Friday, leaving indexes with the biggest weekly losses in months.
Over the past week, investors sold stocks as disappointing earnings results from companies such as Apple Inc., Caterpillar, United Technology and IBM as well as a dramatic sell-off in commodities, brought back concerns over a slowing growth in global economy.
- The S&P 500 closed 22.50 points, or 1.1%, lower at 2,079.65, booking a 2.2% weekly loss. The weekly decline for the benchmark was the steepest since March.
Among the S&P 500 sectors, materials stocks were hit the hardest, with the sector falling 5.5% over the week, while the energy sector booked a 4.1% loss. - The Nasdaq Composite dropped 57.78 points, or 1.1%, to 5,088.63, ending the week with a 2.3% weekly loss.
- The Dow Jones Industrial Average, dropped 163.39 points, or 0.9%, to 17,568.53, recording a 2.9% weekly loss.
Investors also grappled with a housing report that showed sales of new single-family homes in the U.S. dropped to the slowest pace in seven months, suggesting the U.S. housing market may not be firing on all cylinders.
GOLD FALLS BELOW US$ 1,100 PER TROY OUNCE:
Gold fell more than 1 percent to a five-year low on Wednesday as a bounce in the dollar fueled downside momentum, with investors continuing to pull away from the metal after its dramatic slide earlier this week.
A looming increase in U.S. interest rates, the first in nearly a decade, has diminished gold’s appeal to investors, encouraging more sellers in the market after Monday’s 3 percent rout, the biggest one-day drop since September 2013.
As can be seen from below chart Spot gold hit the lowest since February 2010 at US$1,078.24 an ounce on Friday, July 24 at noon for it to rebound with 0.5 percent, to close at US$1,096.29.
The above shows that although it closed below the psychological important level of US$ 1,100.00 per Troy ounce, it was only down with approx. 1.00% last week.
PGM CAPITAL COMMENTS:
Corporate earnings in the USA are being hurt by the high US-Dollar, while on the other-side the positive impact of lower oil prices has not materialized.
In the meantime oil prices continued to decline as West Texas Intermediate crude closed 0.72% lower to US$48.88 a barrel and down 5.4% for the week as can be seen from below chart.
Prices dropped after the total number of active U.S. rigs drilling for oil climbed 21 to 659 over the week, according to Baker Hughes. Crude took a dive last week after six world powers agreed to a nuclear deal with Iran that would lead to Iranian oil on global markets.
USA Stocks by extended losses in the final hour of trading Friday, pushed the Dow Jones Industrial Average into negative territory for the year as can be seen from below chart.
The USA-media is blaming the Greece woes in the Euro-zone and the slowdown in China the decline of global demand for commodities and USA produced goods, and subsequent the decline in earnings for USA Companies.
How ever below chats of the German DAX-30 and China CSI-300, shows that both index are in the green YTD.
Germany’s DAX Index performance Year-To-Date
China’s CSI-300 Index, performance Year-To-Date
Beside this it is also worth mentioning that the Euro, was up in the week of July 20, as can be seen from below chart.
“Markets can stay irrational longer than you can stay solvent.“
Until next week.
Yours sincerely,
Eric Panneflek