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  • U.S. Economy

  • With "Risk Off" Trades Waning, U.S. Stocks Could Be Ready to Reverse Course There are new signs that institutional traders are preparing for a change in direction of the U.S. dollar and European euro that may have big implications for U.S. stocks.

    For months, the winning trade was to short stocks, the euro, and commodities, while buying gold, bonds and the dollar. Commentators labeled this the "risk off" trade since gold and bonds were seen as safe-haven assets. But when crowd mentality is at work, and sentiment - not fundamentals - is driving the bids, there really isn't such a thing as a "safe" trade. It's all speculation.

    Take yesterday (Tuesday), for example: After surging 131 points, or 1.4%, out of the gate, the Dow Jones Industrial Average relinquished most of its advance to close just 16 points higher at 9,702.98. Meanwhile the Standard & Poor's 500 Index, which had climbed 1.5% to 1,038 in early trading, ended the day just 0.18% higher.

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  • Government Spending Cutbacks Increase Odds of Double-Dip Recession The odds of slower economic growth or even a double-dip recession are increasing as industrial countries, led by the United States & United Kingdom, embark on the most aggressive government spending cutbacks and tightening of fiscal policy in four decades.

    As they reduce or eliminate stimulus programs installed in reaction to the Great Recession that began in December 2007, governments are gambling they can pare debt without strangling an economic recovery.

    Nations will reduce their primary budget deficits, excluding interest payments, by 1.6 percentage points next year, the most since the Organization for Economic Cooperation and Development (OECD) began keeping records in 1970, according to JPMorgan Chase & Co. (NYSE: JPM) economists. The budget squeeze will lop 0.9 percentage point off growth in 2011.

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  • Unemployment Report Shows Sluggish Recovery Will Take Years to Replace Jobs Lost in Great Recession Unemployment figures released Friday confirmed that the U.S. economy is still recovering, but they also showed it will take years to replace the 8 million jobs lost during the Great Recession.

    And until meaningful hiring takes place, consumers are unlikely to loosen their purse strings, the key to putting the economy back on track to full recovery.
    Employment fell in June for the first time this year, reflecting a drop in federal census workers and a smaller-than-forecast gain in private hiring.

    Payrolls declined by 125,000 as the government cut 225,000 temporary workers conducting the 2010 census, Labor Department figures in Washington showed. Economists projected a decline of 130,000, according to the median forecast in a Bloomberg News survey. Private employers added 83,000 to their payrolls.

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  • U.S. Economy: Headed For a Second-Half Slowdown Constant stock market volatility, a crippled job market and the troubles plaguing the European markets are starting to take their toll on the U.S. economy. After the major market rally of 2009, is the U.S. economy headed for a second-half slowdown... or, worse, the dreaded double-dip recession? Read this report to find out exactly what’s in store for the U.S. economy... Read More...
  • The 'New' Energy Sector: Windfall Profits for Investors, Energy Independence for the U.S. Economy The BP PLC (NYSE ADR: BP) oil spill has been a wakeup call for energy-sector regulators.

    But it's been an even bigger wakeup call for investors.

    Years from now, investors will look back at this period as a turning point - the start of the greatest profit opportunity of this generation. And that's not all. The post-oil-spill period will go down in history as the period during which the United States was finally able to break its dependence on foreign oil, says Dr. Kent Moors, a career energy-sector consultant who works with governments and corporations throughout the world.

    Investors who understand the energy-sector shifts that are taking place "will make more money in energy investments over the next several years than in any other sector during any other period in their lifetimes," says Dr. Moors, who is also the editor of the Oil & Energy Investor newsletter. With the changes he's currently projecting, "a large measure of energy independence for the U.S. becomes possible. And I'm not just talking about a mere economic 'recovery' here. We'd be looking at a standard of living that's 60% higher, an economy expanding at 5% to 7% a year and - most important of all - a future that we could dictate."

    To understand the top trends unfolding in the new energy sector, please read on... Read More...
  • Money Morning Midyear Forecast: The U.S. Economy is Headed For a Second-Half Slowdown Most textbook economists say that the U.S. economy is engaged in a broad-based recovery. But while there's a consensus that there's no "double-dip" recession on the horizon, the evidence suggests the nation's economy is headed for a slowdown in the second half of 2010.

    The reason: In a market that derives 70% of its growth from consumer spending, the last half of this year will be all about those consumers - and about the economy's inability to generate enough jobs to keep the nation's cash registers ringing.

    If you add to that concern the end of the various government stimulus efforts, possible fallout from the Eurozone debt contagion, and oil in the Gulf of Mexico defiling the shores of four states, you end up with an economic outlook that's clouded with uncertainty.

    And that uncertainty will continue to stifle hiring and will result in another round of consumer belt-tightening - and a continued economic malaise.

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  • United States Fears Economic Stimulus Measures Will Choke on Europe's Drastic Budget Slashing While U.S. President Barack Obama will be gunning for more economic stimulus measures at this weekend's Group of 20 (G20) meeting in Canada, European lawmakers continue drastic efforts to rein in spending.

    The coordination of global efforts to promote economic recovery will be the main issue at the weekend's meeting, which was set to spotlight the value of China's currency before Beijing announced Saturday that it would allow the yuan to appreciate. The United States and Europe's differing views on the most effective strategies to maintain global economic growth and slash bloated government budgets are increasing tensions between leaders.

    "There is a need to move toward rebalancing," Stewart M. Patrick, a senior fellow at the Council on Foreign Relations in Washington, told CNN. "But every country has different domestic political demands, and that is what drives decision making."

    President Obama is worried that drastic austerity measures in Europe will choke global growth and collapse a fragile recovery.

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  • The Sovereign Debt Crisis: Bad For Europe, Good For U.S. Stocks For several months now, we've been talking about the post-financial-crisis "new world order" that's emerged from the speculative excesses, recessionary realities and regulatory breakdowns of recent years. This new world order has created a world of lucrative new profit opportunities - that are governed by a new set of profit rules.

    In terms of that whole new rules/new profit opportunities paradigm, here's one that may surprise you: The ongoing European crisis could end up as a net positive for U.S. stocks.

    Let me explain...

    To see how Europe's travails can aid U.S. stocks, please read on... Read More...
  • The Midterm Elections: No Panacea for the U.S. Economy With many of the primaries past, and the November 2010 midterm elections less than five months away, it is worth taking a look at what policy changes we might expect from the next U.S. Congress. Both the political and economic worlds have changed one hell of a lot since the last elections, in 2008.

    Thus, even though U.S. President Barack Obama is slated to remain in office until at least 2013, the Congress elected in November will be very different from the one that was elected in November 2008.

    For a view of the future after the U.S. midterm elections, please read on... Read More...
  • Four Factors to Consider Before Determining Your Long-Term View on U.S. Stocks Stocks rose worldwide over the past week -- ranging from +2% in U.S. big caps to +6% ingold -- as investors swelled with sudden courage in response to positive reports on Chinese economy and glimmers of hope that European governments can get their financial houses in order.

    The week's results erased four weeks of losses, including the despairing session that ensued on June 7 after a disappointing report on U.S. employment. Meanwhile, the result of the past 35 trading days, or seven calendar weeks, are still largely negative, ranging from a loss of 5.5% for U.S. stocks and -8.5% for Europe. Only gold stocks have eluded the smoke monster, rising 7% in the span.

    The variation in one-week and one-month results illustrate perfectly how investors are showing that they arehopeful but unconvincedthat recent strength in gross domestic product (GDP) growth and corporate income advances are sustainable, and therefore won't buy stocks heavily until prices are so cheap that they discount worst-case scenarios. In other words, they want a high risk premium before buying -- sort of like demanding a 72-month warranty before buying an expensive car.

    To read about the four factors you should consider before investing click here.


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  • Oil Prices Set to Soar in the Second-Half of 2010 Oil prices hit a wall this spring. But don't be fooled. The spring retreat simply set the stage for a second-half rally. Despite lingering fears over the global economy, demand for oil isn't slowing down at all. In fact, it's rising... and oil prices will rise right along with it. Read this report to find out why oil is poised to take off in the next six months... and how you can profit. Read More...
  • Bull Market Update: U.S. Stocks Are Hanging By a Thread – But It's a Tough Thread If you ask me, the current bull market in U.S. stocks is hanging by a thread.

    In fact, a decline that takes the Standard & Poor's 500 Index down below the 1,040 level - roughly 7% below where it closed yesterday (Wednesday) - would probably murder the bull-market case for stocks.

    But until that decline actually occurs, don't rule the bulls out for the count.

    That "thread" may be tougher than you think.

    To see what's in store for U.S. stocks, please read on... Read More...
  • The U.S. Economic Recovery is on Cruise Control Assessing the U.S. economic recovery right now is a bit like buying a used car: Although it sure looks good, you can't help but wonder what's really going on under the hood.

    In terms of the U.S. recovery, here's what I see: The U.S. economic recovery looks good. And it is good. But the pace of that recovery is about to slow down - which is part of the reason that the U.S. stock market sold off and why the Dow Jones Industrial Average is down about 7% from where it was in early May (and that's even after the 5% rebound the Dow has seen from the June 7 nadir it established down around 9,800).

    To put this into context, I had a long discussion about this topic with Lakshman Achuthan, managing director of the Economic Cycle Research Institute. Let me share his thoughts.

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  • Question of the Week: Readers Respond to Money Morning's Technology Trends Query Apple Inc. (Nasdaq: AAPL) delighted smartphone consumers and enthusiasts of technology trends when it unveiled its new iPhone 4, which will go on sale in the United States on June 24. The fourth-generation iPhone upgrades previous versions with a front-facing video camera for video calls, a higher-resolution screen, slimmer body, and an operating system that accommodates multitasking ability.

    Chief Executive Officer Steve Jobs referred to the phone as the "biggest leap we have taken since the original iPhone." It's aimed at keeping the company's momentum going as Motorola's Droid phone, which uses Google's Android system, has edged some market share from Apple.

    Apple's iPhone and iPad have helped supercharge the mobile-communications market. Those products - and others - have helped make sure that consumers and companies alike are inundated with new technologies, new applications, and a slew of new products. All these new options have potential buyers asking such questions as "Can this help me? " or "Do I need one? " or "Should I upgrade? "

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  • Defensive Investing: Seven Signs Your Dividend is in Trouble Both the U.S. stock market and the U.S. economy are navigating rough waters right now.

    U.S. employment, which had appeared to be moving into rapid expansion, suffered a setback in May, with the economy creating only 41,000 jobs. Meanwhile, the stock market - even with the recent rebound that brought it back to the 10,000 level - remains more than 15% below its cyclical high.

    That's been the uncomfortable pattern: One economic report points toward a continued U.S. recovery; the next one points toward recession. Sometimes the contradictory research is separated by a single day, other times they are just hours apart. The resultant uncertainty is whipsawing U.S. stock prices - and is leaving investors feeling shaky.

    Fortunately, there is a ready remedy, not to mention a place of refuge, from this kind of grinding uncertainty - high-yielding dividend stocks.

    To discover the seven signs that a dividend isn't secure, please read on...

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