Financial Review

25K

….Dow, S&P, Nasdaq, and Russell hit record highs. Intel’s Meltdown and Spectre. Krzanich sells early. Capital One – what’s in your wallet? AG Sessions announces war on the evil weed…

Financial Review by Sinclair Noe for 01-04-2018

DOW + 152 = 25,075
SPX + 10 = 2723
NAS + 12 = 7077
RUT + 3 = 1555
10 Y + .01 = 2.45%
OIL + .28 = 61.91
GOLD + 9.90 = 1323.40

 

Record highs for the major stock indexes. The big news was the Dow breaking through the 25,000 milestone. The Dow posted 71 record highs last year, and 2 records this week. It passed 24,000 on Nov. 30.  It took the measure 35 calendar days to achieve the feat, tying the fastest move on record. The gain of 1,000 points was just over 4 percent. 25,000 is impressive, but it is just another number. It does not mean a correction is imminent, and it doesn’t mean stocks will never drop. At most it serves as a reminder to rebalance your portfolio.

 

The company behind the Dow’s sky-high performance is Boeing, the plane maker. Over the last year, the Dow is up approximately 25%, or about 5,000 points – and Boeing is responsible for about 1,000 points. The second-best performer is Caterpillar – which added about 450 points to the Dow over the year.

 

The S & P 500 hasn’t dipped 3 percent in more than a year for the first time in recent history. And the S&P 500 has posted record highs for every trading session of 2018 – yes, that’s just 3 sessions, but that trick hasn’t happened since 1964.

 

ADP reports that private sector payrolls increased by 250,000 in December. Tomorrow, the Labor Department will report non-farm payrolls, which includes private and public sector hiring for December. A separate report showed initial unemployment claims rose by 3,000 to 250,000 in the week ended Dec. 30.

 

A report that Intel chips are vulnerable to hackers raised concerns about the company’s main products and brand. On Tuesday, the technology website The Register said a bug lets some software gain access to parts of a computer’s memory that are set aside to protect things like passwords. All computers with Intel chips from the past 10 years appear to be affected. The report said patches to Microsoft’s Windows and Apple’s OS X operating systems will be required. The security updates may slow down older machinery by as much as 30 percent. If the error can’t be fixed easily in software, it could be necessary to redesign the chip, which can be extremely costly and time consuming. Cybercriminals are likely to already be looking for ways to exploit the vulnerabilities, aware that not everyone will install the patches. Google said in a blog post that it privately informed Intel, ARM Holdings and AMD of these issues on June 1 last year to give them time to find remedies before the vulnerabilities became public. While the companies were working on fixes, the same vulnerabilities were independently discovered by a team of researchers affiliated with several academic institutions and computer-security firms. Intel’s rival AMD believes its chips are safe. Intel said in a blog post that it has begun providing updates to mitigate the risks posed by the exploits. The company also downplayed concerns about slowed performance, noting that for the “average computer user” the impact should not be significant and will lessen over time. What should you do? Your computer should have an emergency patch pop-up. Install it. If it doesn’t pop-up, go to settings and then install it. Good luck.

 

The bugs go by the names “Meltdown” and “Spectre”. While Meltdown is specific to Intel processors, and can be patched, Spectre affects Intel, AMD and ARM processors. It would be easy to dismiss as something from a James Bond movie. There is something else that is a bit on the sinister side. Intel CEO Brian Krzanich sold off a large chunk of his stake in the company last year — after the chipmaker was already aware of serious security flaws in its computer processors. Krzanich sold almost 900,000 shares for a little over $39 million, apparently netting about $25 million. An Intel spokeswoman said Krzanich’s decision to sell the shares was unrelated to the security vulnerability. Still, it makes Krzanich the number one choice to play the lead role of an evil mastermind in the next Bond film.

 

Capital One said it had resolved an internal technology issues that left customers across the country with multiple charges for the same debit card transactions on their accounts. The company was vague about the cause and the number of accounts affected, but a spokesperson said the problem was not due to an external cause, such as a hack. They say all accounts have been credited for any inaccurate postings related to this issue…, still, you should probably double check your statements.

 

JC Penney and Macy’s are two of the better-known brick and mortar retailers that have been struggling in recent years. But today, both reported better than expected results for the holiday shopping season. Call it a Christmas miracle. Macy’s said its comparable sales for November and December were up 1 percent over a year earlier, a welcome turnabout for a company that has posted 11 consecutive quarters of declines on this measure. JC Penney, meanwhile, reported a 3.4 percent comparable sales increase over last year for the nine-week period that ended December 30.  The improvement seemed to be broad-based across various departments, a good sign for both retailers.

 

In October, Gallup conducted a poll that shows 64% of Americans, support legalizing the use of marijuana. On Jan.1, California became the latest state to legalize moderate recreational marijuana use. Eight states have legalized pot; and 29 states allow medical marijuana. It is still illegal at the federal level. The Obama administration Justice Department issued three memos on marijuana between 2009 and 2014. They eased up on enforcement except in certain circumstances, when goals were to prevent proceeds from going to drug cartels or prevent distribution to minors. Essentially, the Department of Justice does not enforce marijuana laws in states where it is legalized. Today, Attorney General Jeff Sessions told federal prosecutors they can enforce federal law in marijuana cases, even in the states where it is legal. Sessions compares marijuana to heroin and blames it for spikes in violence. The move does not proactively direct prosecutors to ramp-up marijuana enforcement, and nobody really knows what prosecutors will do with this discretion.

 

But it could send a chill through the marijuana industry, which saw explosive 30 percent growth that drove sales of $6.7 billion in North America in 2016 that are projected to crest $21 billion by 2021. Cannabis stocks plunged. Canada’s Canopy Growth, the biggest pot company by market value, fell 17 percent, while Aphria dropped 19 percent. Scotts’ Miracle-Gro, the U.S. maker of lawn and garden products which has been expanding into fertilizers and lighting for cannabis, fell 5 percent, the biggest intraday drop in eight months. Congressman Ted Lieu of California wrote on Twitter: “Let me give you a list of things more important for federal prosecutors and federal law enforcement to pursue other than marijuana: 1. Basically anything.”

 

The Trump administration wants to open up nearly all the country’s offshore areas for oil drilling, leasing areas off places like Florida and California for the first time in decades. Secretary of the Interior Ryan Zinke announced his department is planning the largest number of oil-lease sales in U.S. history starting next year. It would open up 90% of offshore land for drilling as part of a five-year plan. It reverses an Obama-era plan that would have kept only 6% of the same acres available for drilling.

 

Last year was the second hottest worldwide on record, just behind a sweltering 2016, with signs of climate change ranging from wildfires to a thaw of Arctic ice. In 2016, an extra dose of heat came from El Nino, a natural event that releases heat from the Pacific Ocean every few years. 16 of the 17 warmest years have all been this century. German reinsurer Munich Re said insurers would have to pay claims of around $135 billion for 2017, the most ever, following a spate of hurricanes, earthquakes and fires in North America. The Copernicus Climate Change Service, the first major international weather agency to report on conditions in 2017, said temperatures averaged 58.46 Fahrenheit at the Earth’s surface – 2.2F above pre-industrial times. And no, the cold weather in the northeast does not mean that climate change is not a problem. It means that it is winter, and there is a bad cold snap – it just has a freaky sounding name – bombogenesis, or bomb cyclone.

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