Equities fluctuated with the S & P hovering around a one month low amid data that bolstered the argument for higher borrowing cost, while remarks from FRB Chair Yellen signaled the central bank will remain deliberate in rising rates.

Commenting further about Yellen, the Chair started there are “plausible ways” that running the economy hot for a while could fix some of the damage caused to growth during the recession, indicating a willingness to only lift rates slowly even as inflation reaches or surpasses it target.

Some could interpret the above remarks as dovish but are they?  Interest sensitive ideas have come under considerable pressure during the past two weeks as the markets fear the Fed is falling behind the proverbial curve as inflationary expectations are rising, partially the result of crude.

Several weeks ago I referenced data provided by Bloomberg that it would take about a 45% decline in utilities to return to its average dividend yield.  I am not suggesting that this will occur but only making an observation.  Utilities are now down about 7% in 10 days and have posted the steepest short term decline since the implosion of Enron.  Utilities—or a favorite for alternative income investors—are off almost 10% from their July apex.

Earning season accelerates this week.  As previously noted expectations are very low with some already pronouncing the current season a complete disappointment.  I do not agree with this assessment but will write there are wide ranging implications of revenues growing greater than profits, the first time in many years.

Will this trend continue and if so how will it be interpreted?

The economic calendar is comprised of several manufacturing and inflation statistics as well as housing data.  Also released is the Beige Book or the statistical compilation utilized at the upcoming Fed meeting.

Last night the foreign markets were down.  London was down 0.62%, Paris down 0.25%, and Frankfurt down 0.33%.  China was down 0.74%,  Japan up 0.26% and Hang Sang down 0.85%.

The Dow should open flat ahead of a large increase in earnings reports.  The 10-year is up 3/32 to yield 1.79%.


The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.