…..Fed and BOE on hold. Productivity slows. Unemployment claims dip. WH loosens sanctions against Russian FSB (or not). FB no likes. AMZN misses. Deutsche Bank’s negative news flow. A sale at Macy’s. Shell beats Exxon. Sony cuts forecast. Hanjin sinking. Mead Johnson baby. Waymo better. Drones at airports. Watson does taxes. The Greenest Show on Grass.
Financial Review by Sinclair Noe for 02-02-2017
DOW – 6 = 19,884
SPX + 1 = 2280
NAS – 6 = 5636
RUT – 3 = 1357
10 Y – .01 = 2.47%
OIL – .23 = 53.65
GOLD + 6.40 = 1217.00
In Pennsylvania, today the famed groundhog Punxsutawney Phil emerged from his burrow Thursday and saw his shadow. In Arizona, Agua Fria Freddie slithered form his hole and saw his shadow. Six more weeks of winter per folklore. Yesterday, Janet Yellen must have seen her shadow, so at least 6 more weeks without a rate hike.
Yesterday afternoon, the Federal Reserve wrapped up its two-day policy meeting and stuck to its mildly upbeat view of the economy but gave no hint on when it will next raise interest rates. The FOMC held its benchmark interest rate between a range of 0.50% and 0.75% while noting that the labor market “remains solid” and inflation was “still below” its 2% target.
Today, the Bank of England, while raising its forecast for British growth this year, also kept policy unchanged and said rates could go either way depending on the economic outlook. The BOE held its key interest rate and asset-purchase program unchanged at 0.25% and 435 billion pounds, respectively, but some members raised concerns about accelerating inflation, with forecast that prices could rise at 2.8% following the sharp drop in the pound sterling.
U.S. worker productivity slowed in the fourth quarter, leading to the smallest annual increase in five years. Productivity, which measures hourly output per worker, rose at a 1.3 percent annual rate in the quarter. Productivity in the third quarter was revised up to show a 3.5 percent pace of increase. Productivity has increased at an annual rate of less than 1.0 percent in each of the last six years.
The number of Americans who applied for unemployment benefits at the end of January fell by 14,000 to 246,000, an extremely low level that might foreshadow another solid employment report tomorrow. New claims have tallied less than 300,000 for 100 straight weeks, a streak that last occurred in 1970. The economy had created more than 2 million jobs per year for six straight years.
Tomorrow is the nonfarm payroll report for January. Most estimates are running around 175,000 new jobs for the month, but with strong economic reports, some estimates are running as high as 200,000. The December report came in at 156,000 jobs and 4.7% unemployment.
The US Treasury Department said it will allow companies to do some transactions with Russia’s Security Service (FSB), despite cyber-sanctions put in place by former President Barack Obama. US intelligence agencies accused the FSB of involvement in hacking of Democratic organizations during the 2016 presidential election. But the White House insists it is not loosening sanctions.
President Trump said today he’d like to “speed up” talks over renegotiating the North American Free Trade Agreement, which he said has been a “catastrophe” for U.S. workers and jobs. His comments come a day after Mexico kicked off the countdown on trade negotiations. President Enrique Peña Nieto announced Wednesday he would start trade negotiations to reform NAFTA in May, after a 90-day consultation period with Mexican businesses.
Facebook had a blockbuster quarter. The social-media giant earned $1.41 a share as revenue exploded by 51% versus a year ago to $8.81 billion. Both monthly active users and daily active users outpaced estimates. Ad sales grew 53 percent. But Facebook shares dropped almost 2% today. Go figure.
After the closing bell, Amazon reported weaker-than-expected holiday sales. The company reported net income of $749 million, or $1.54 a share, compared with $482 million, or $1 a share, in the year-earlier period – missing earnings estimates. Sales for the period increased 22% to $43.7 billion from $35.7 billion a year ago, that was also a miss on revenues. Amazon lowered guidance for the current quarter. Amazon dropped about 4% in after-hours trade, which was easy to figure. And while Amazon is being punished for falling short of expectations, let’s take a moment to recognize that Amazon had $2.4 billion in net income for the full year, up more than 300% from the year before. While it did not manage to match that performance in the fourth quarter, Amazon still increased profit 55% in its biggest period of the year.
Deutsche Bank posted a loss of €1.4 billion-euro for 2016, citing restructuring and “negative news flow” around a fine from the US Department of Justice. Legal costs hurt as well. Its $7.2 billion US penalty, the largest against any bank, was for fines and compensation for its involvement in the toxic debt crisis of 2008. Revenue declined 10% to €30 billion-euro.
Merck reported better-than-expected U.S. quarterly sales for its key cancer drug, Keytruda, but overall fourth quarter sales missed estimates. Earnings of 89 cents per share matched estimates. Merck forecast largely in-line 2017 results.
Ralph Lauren dropped about 10% this morning after its CEO abruptly resigned. The fashion company reported a 12% drop in holiday quarter revenue to $1.71 billion due to weak consumer demand.
Macy’s is trying to sell Macy’s. The department store chain has slashed jobs and stores, sold off pricey real estate, and announced the retirement of its long-time CEO Terry Lundgren to appease investors. But hedge funds have run out of patience for losses as the entire apparel sector reels from a disappointing Christmas holiday shopping season.
Royal Dutch Shell recorded its worst annual profit in more than a decade. The CEO said he’s pleased with 2016’s $52 billion takeover BG Group, but Shell is close to selling assets totaling $5 billion to cut debt. And although Shell’s fourth-quarter profit was lower than expected at $1.8 billion due to tax impairments and full-year earnings dropped, it still made more money than rival Exxon Mobil in the second half of the year.
Sony cut its full-year profit forecast for a second time after posting quarterly earnings that missed estimates on a major writedown. Net income will be $23 million in the 12 months ending March. Sony said it does not plan to sell its pictures business after suffering a $1 billion writedown, and instead aims to turn it around by adding sales channels and making more use of movie characters.
Reckitt Benckiser Group is in advanced talks to buy Mead Johnson Nutrition in a $16.7 billion deal that would take the British consumer goods maker into the baby formula market and boost its business outside of Europe.
A South Korean court has decided to end Hanjin Shipping’s court receivership process and expects to declare bankruptcy on Feb. 17 after a two-week period for appeals. It made the decision as the firm’s liquidation value would be worth more than its value as a going concern.
Alphabet’s self-driving car unit is far more comprehensive and mature than its rivals, according to new statistics released by regulators. The data shows that Waymo logged 30 times more miles of testing in autonomous vehicles than all of its competitors combined last year in California. Its cars were also the most accurate, with human intervention needed for safety reasons only 0.2 times per thousand miles.
It’s not legal to fly a drone anywhere near an airport — at least not without a special waiver from the Federal Aviation Administration. For the first time under the FAA’s commercial drone rules, the agency granted permission to operate a drone at an airport. Seven flights were conducted by Berkeley-based 3D Robotics on Jan. 10 at Hartsfield-Jackson Atlanta International, the busiest airport in the world. The 3D Robotics drone was given permission to collect data on two, four-story parking structures at the airport that a construction firm was hired to demolish.
In its broadest deployment so far, IBM’s Watson will be assisting H&R Block’s 70,000 tax professionals this filing season at 10,000 branch offices across the country, where 11 million people file taxes. The AI partnership will be presented during a 60-second Super Bowl television ad.
Over the past week or so, we gave away a boatload of tickets to the Waste Management Phoenix Open; it’s sometimes called the Greatest Show on Grass; and while that might be debatable, it is absolutely the Greenest Show on Grass, or anywhere else. For four years running. Whether through recycling, composting, re-using or converting to energy, none of the more than 1,700 tons of waste generated at the tournament since 2012 has ended up in a landfill.
There are no garbage cans on the course during tournament week. Instead, there are 4,000 compost and recycling containers, and 60 solar powered compactors. A clean-up crew of about 1,500 is overseen by approximately 100 WM managers from around the country, working day and night shifts to make sure 100% of materials is diverted from landfills. A year ago, when the weekly attendance of 618,365 set a PGA Tour record, there were more than 500 tons of waste. The breakdown: 46% was recycled, 38% composted, 10% waste-to-energy and 6% was donated. And last year vendors donated over 18,000 pounds of unused food to local non-profits. No coincidence that the tournament sponsor is Waste Management, and they are using the sponsorship to educate fans as well. They’ve done such a good job that the PGA is now using Waste Management for other tournaments and the company will work with the Golf Environment Organization (GEO) to pilot a new sustainability standard for golf events. The Valley of the Sun is known for many things – some good, some bad – this is one of the best.