…..Homebuyer sentiment down. Small biz optimism. Consumer credit up. More job openings. Repeal and replace with something maybe. Farewell address. AZ State of the State – we needs schoolin. Apple to Mesa. Yahoo now Altaba or something maybe. Blockchain goes mainstream. BofA fined again. VW settles for guilty. Goodbye The Limited.
Financial Review by Sinclair Noe for 01-10-2017
DOW – 31 = 19,885
SPX unchanged = 2268
NAS + 20 = 5551
RUT + 13 = 1370
10 Y + .01 = 2.38%
OIL – 1.16 = 50.80
GOLD + 6.50 = 1188.30
World stock markets nudged back toward recent multi-month highs, aided by a rally in commodity prices. The US dollar index slumped to a low of 101.51 in overnight action, breaking slightly below the lows of mid-December. The post-Brexit British pound moved lower; it’s the gift that keeps on giving, as the FTSE 100 closed in record territory for the 9th straight session. The Dow Industrials flirted with 20,000 again but it was nothing more than coy flirtation – moving within 42 points then slipping away. The S&P 500 was flat; not a fraction – no change at all. The Nasdaq posted its third straight record high close.
The home purchase sentiment index compiled by mortgage finance provider Fannie Mae fell in December, its fifth straight monthly decline. Tight inventories, rising mortgage rates and higher home prices are taking a toll on Americans’ attitudes toward home ownership. The overall index dropped 0.5% to 80.7 in December; down 2.5% from one year ago.
The National Federation of Independent Business said its optimism index jumped 7.4 points to 105.8, the highest level in 12 years. Small business owners overwhelmingly expect business conditions to improve under the new administration. Most of the December improvement came from the “expectations” components of the index. Owners say now is a good time to expand. Job creation plans increased 1 point, to a 9-year high, in December, but actual hiring was basically flat during the month.
Consumer credit expanded at a seasonally adjusted annual rate of 7.9%, or $24.6 billion, in November. The Federal Reserve reported that revolving credit, such as credit cards, jumped 13.5% while nonrevolving credit, such as car and student loans, rose 5.9%.
The Labor Department published its Job Openings and Labor Turnover Survey, also known as JOLTS. There were 5.5 million openings on the last day of November. That was 1.3% higher than October. The number of hires rose 1.1% to 5.2 million. The number of people who quit jobs voluntarily also rose, to 3.1 million. That was the second-highest level since before the recession. Quits are tracked as a measure of worker confidence in the ability to land another job. The JOLTS report shows employers are slow to fire but also slow to hire. There were some signs of tightening in the labor market; the ratio of the unemployed per job opening dipped to 1.3, from 1.4 in each of the prior three months.
Meanwhile, confirmation hearings are underway for President-elect Trump’s cabinet nominees. Tomorrow, Trump holds his first news conference since before the election, but he was still making news today, calling for the immediate repeal of Obamacare. Trump, who seemed unclear on the timing of already scheduled votes in Congress this week, demanded a repeal vote “probably some time next week” and adding, “the replace will be very quickly or simultaneously, very shortly thereafter.” The Senate is planning a vote related to repeal on Thursday morning and the House could vote on Friday; the problem is the replacement, which doesn’t yet exist.
Later tonight, President Obama will give his farewell address in Chicago at 7PM Arizona time (9 ET). This is traditional for most two-term presidents. Most farewell addresses are forgettable, with 2 notable exceptions: the first presidential farewell delivered by George Washington, which was framed with warnings to the young nation about the dangers of sectionalism, overzealous partisanship, and of permanent foreign alliances; and the second noteworthy farewell address was from President Eisenhower, where he warned that the new “conjunction of an immense military establishment and a large arms industry” — which he dubbed “the military-industrial complex” — could pose grave dangers to American liberties and US democracy.
Arizona Governor Doug Ducey delivered the State of the State address yesterday. Ducey said he was ready to make “a commitment our educators can take to the bank.” That includes promises of increased state aid and higher teacher pay. And he had special programs designed to get teachers into schools in areas of high poverty. But Arizonans will have to wait until Friday when the governor releases his budget proposal to find out what that actually means in dollars and cents.
Apple has submitted a proposal to expand its manufacturing capabilities at a site in Mesa, Arizona where it already produces certain components for its consumer products. The notice shows Apple seeking to expand its production capabilities at the site in Mesa to be able to produce finished products and utilize foreign status materials/components — including a laundry list of core electronics components, such as printed circuit board assemblies, lithium polymer batteries and monitors. If it’s approved, however, the Arizona facility would mark an unusual instance of a U.S. tech company manufacturing and assembling a finished product domestically, where labor costs are higher.
Yahoo will rename itself Altaba Inc and Chief Executive Officer Marissa Mayer will step down from the board after the closing of its deal with Verizon. Yahoo has a deal to sell its core internet business, which includes its digital advertising, email and media assets, to Verizon for $4.8 billion. The terms of that deal could be amended – or the transaction may even be called off – after Yahoo last year disclosed two separate data breaches; one involving some 500 million customer accounts and the second involving over a billion. I wonder how many high level corporate board meetings were required to come up with the new name – Altaba – and I’m not really sure how to pronounce it, but it should throw the hackers off the trail for a while.
Wall Street’s largest back-office processing service, Depository Trust & Clearing Corp, is partnering with IBM to upgrade how payments and record-keeping for credit-default swaps are handled by putting the system on a blockchain by early next year. If you’re wondering what blockchain is, it is basically a digital ledger that can publish a continuously growing list of ordered records through peer-to-peer transactions, without the need for a third party. This is the technology behind Bitcoin; and while Bitcoin might be a bit dodgy, many of the world’s biggest banks and corporations are trying to harness the technology to make the likes of transacting cross-border payments, issuing debt and recording health data more efficient – or in this case record keeping for derivatives. And if it works here, look for it to eventually spread to the Options Exchanges and stock exchanges, etc, etc.
Bank of America is being accused of stiffing the FDIC, the government agency that insures people’s deposits against a bank failure. The FDIC filed a lawsuit in federal court demanding that Bank of America pay $542 million it owes to the regulator’s deposit insurance fund. The lawsuit claims Bank of America underreported a key risk metric by tens of billions of dollars during the final three quarters of 2013 and all of 2014. The FDIC said that allowed BofA to appear less risky than it really was – and avoid paying the FDIC an average of $77 million each quarter into the agency’s deposit insurance fund.
Volkswagen is considering a $4.3 billion settlement to resolve civil and criminal allegations stemming from its emissions-cheating scandal. The agreement, which has yet to be finalized, would lead to a financial expense that exceeds current provisions. It also includes a guilty plea to some criminal charges, strengthening compliance systems and installing an independent monitor for three years
Alibaba is leading a $2.6 billion bid to privatize Intime Retail Group, which operates 29 department stores and 17 shopping malls in China, giving the e-commerce giant a firmer foothold in bricks and mortar.
Jack Ma, executive chairman of Alibaba, met with Donald Trump to pitch the U.S. president-elect on how the company can create one million small business jobs in America.
Valeant is selling assets. The embattled drugmaker announced plans to sell three skincare brands to L’Oreal for $1.3 billion.
American Apparel has a new owner. The Canadian apparel maker Gildan Activewear won the auction for the failed retailer American Apparel with its bid of about $88 million.
Add another retailer to the casualty list – The Limited has shut down all 250 of its stores and laid off 4,000 workers. Sun Capital, the private-equity firm that owns The Limited, attributed the decision in part to falling foot traffic at shopping malls. They issued a statement saying: “We’re sad to say that all The Limited stores nationwide have officially closed their doors. But this isn’t goodbye. The styles you love are still available online—we’re just a quick click away 24 hours a day.” I’m not sure, but certainly sounds like goodbye.