…..Nasdaq’s 12 record for 2017. Crude glut, prices rise. Intel investing in AZ. Sharp investing in US. Brexit vote. VW investing in Electrify America. Takata guilty. Earnings season roundup. BofA opens robo-branches. Goldman Sachs robo-bankers.
Financial Review by Sinclair Noe for 02-08-2017
DOW – 35 = 20,054
SPX + 1 = 2294
NAS + 8 = 5682
RUT – 2 = 1358
10 Y – .04 = 2.35%
OIL + .19 = 52.97
GOLD + 8.10 = 1242.50
Another record high for the Nasdaq Composite, its 12th all-time close of 2017.
The American Petroleum Institute reported crude supplies rose by 14.2 million barrels last week, undermining OPEC’s efforts to re-balance global markets. The Energy Information Administration said that the U.S. will pump the most crude next year since 1970, as OPEC cuts lift prices and benefit domestic producers. And in its weekly report this morning, the EIA reported a larger-than-expected increase in crude-oil supplies—their fifth weekly rise in a row and the second-biggest on record, based on EIA data going back to 1982. Crude inventories climbed by 13.8 million barrels in domestic crude-oil supplies for the week ended Feb. 3. Weekly crude stockpiles haven’t climbed by this much since the week ended Oct. 28. Crude oil prices reversed an earlier loss and eked out a gain on the day. Go figure. Best guess is that the report also showed gasoline supplies fell by 900,000 barrels. Sorry, but that’s about the best excuse I can come up with.
Intel will invest $7 billion to build a new chip factory in Arizona. Brian Krzanich (pronounced Krah-ZAN-nitch – you are welcome) the CEO of Intel says that tax cuts and deregulatory policies pushed by President Trump prompted the company to move forward with its plans to complete the Fab 42 plant. The completion of Fab 42 in 3 to 4 years will directly create approximately 3,000 high-tech, high-wage Intel jobs for process engineers, equipment technicians, and facilities-support engineers and technicians who will work at the site. Combined with the indirect impact on businesses that will help support the factory’s operations, Fab 42 is expected to create more than 10,000 total long-term jobs in Arizona. The 7 nanometer semiconductor manufacturing process targeted for Fab 42 will be the most advanced semiconductor process technology used in the world.
Japanese display maker Sharp Corp may start building a $7 billion plant in the United States in the first half of 2017, taking the lead on a project initially outlined by its Taiwanese parent Foxconn. Japanese Prime Minister Shinzo Abe is scheduled to meet President Trump in Florida this weekend. Abe will reportedly unveil a package of investments to create as many as 700,000 US jobs. The investment will be by a Japanese consortium that will also include manufacturing equipment makers.
Britain’s House of Commons gave its final approval Wednesday to a bill authorizing the government to start exit talks with the European Union, despite fears by opposition lawmakers that the U.K. is setting out on the rocky path to Brexit with a sketchy roadmap. The bill now goes to the House of Lords, which has the power to delay — but not to derail — the legislation; it should become law within weeks.
Volkswagen has launched a U.S. subsidiary designed to oversee $2 billion in investments to promote zero-emission vehicles, a commitment the German auto giant made in the wake of Dieselgate. The Electrify America unit will open more than 500 EV charging stations as it works toward building out a national network. VW will also launch a “Green City” initiative in a yet-to-be-identified California city to pilot future concepts.
According to a court filing, Takata will plead guilty on Feb. 27 to a single felony count of wire fraud to resolve a DOJ investigation into ruptures of its air bag inflators linked to at least 16 deaths worldwide. Last month, the auto parts firm agreed to the guilty plea as part of a $1 billion settlement in the world’s largest-ever recall.
Time Warner reported higher-than-expected fourth-quarter results, largely due to box office hits such as the “Harry Potter” spinoff “Fantastic Beasts.” Time Warner reported an 11.5% rise in quarterly revenue and said the planned $84 billion merger with AT&T remained on track to close later this year.
Swiss pesticides and seeds group Syngenta pushed back the expected closure of its agreed $43 billion takeover by ChemChina to the second quarter of 2017, but said it was making progress in winning regulatory approval for the deal.
Humana earned an adjusted $2.09 per share for its latest quarter, while revenue was slightly below projections. Humana said that it added members in its Medicare Advantage business, and that it would give an update on its transaction to be bought by Aetna by February 16. That deal was blocked in a court ruling last month.
Allergan earned an adjusted $3.90 per share for its latest quarter, beating estimates of $3.76 a share. Its revenue also came in above forecasts on increased sales of Botox and other therapeutic treatments.
Shares of Microchip Technology are up, continuing last night’s gains, after the chip maker yesterday afternoon beat fiscal Q3 expectations and topped consensus as well.
Shares of Panera Bread surged to a record high and the biggest one-day move in almost two years after the company gave an upbeat forecast and said technology investments at its restaurants were paying off.
Whole Foods Market reported revenues and comparable sales that fell short of Wall Street’s expectations. Whole Foods also lowered full-year sales and earnings guidance in wake of the weak results.
Alaska Air, the fifth-largest U.S. carrier, beat estimates by 16 cents a share, with adjusted quarterly profit of $1.56 per share. Revenue beat forecasts and the company also increased its quarterly dividend.
Canada’s government will provide $282 million in support for Bombardier to help fund two jet programs, including the C Series, the single-aisle plane that competes with Boeing and Airbus Group SE products. After landmark sales of the jetliner to Air Canada and Delta Air Lines in 2016, the company is now seeking new orders while also targeting the first delivery of the Global 7000, its largest business aircraft.
Bank of America is opening robo branches. The bank has opened three automated branches over the past month and has plans to roll out more over the next year. Customers can use ATMs and have video conferences with employees at other offices. BofA is set to open 50 to 60 new branches over the next year, but will also be closing some in certain markets, so they will not represent a net increase.
At its height, back in 2000, the US cash equities trading desk at Goldman Sachs’ New York headquarters employed 600 traders, buying and selling stock on the orders of the investment bank’s large clients. Today there are just two equity traders left. Automated trading programs have taken over the rest of the work, supported by 200 computer engineers. The experience of its New York traders is just one early example of a transformation of Goldman Sachs, and increasingly other Wall Street firms, that began with the rise in computerized trading, but has accelerated over the past five years, moving into more fields of finance that humans once dominated. Some areas of trading, like currencies and even parts of business lines like investment banking are moving in the same automated direction that equities have already traveled.
Today, nearly 45 percent of trading is done electronically, according to Coalition, a UK firm that tracks the industry. Complex trading algorithms, some with machine-learning capabilities, first replaced trades where the price of what’s being sold was easy to determine on the market, including the stocks traded by Goldman’s old 600. Now areas of trading like currencies and futures, which are not traded on a stock exchange like the New York Stock Exchange, are coming in for more automation as well. To execute these trades, algorithms are being designed to emulate as closely as possible what a human trader would do. Goldman Sachs has already begun to automate currency trading, and has found consistently that four traders can be replaced by one computer engineer. Some 9,000 people, about one-third of Goldman’s staff, are computer engineers.
Goldman’s new consumer lending platform, Marcus, aimed at consolidation of credit card balances, is entirely run by software, with no human intervention. Next, will be the automation of investment banking tasks, work that traditionally has been focused on human skills like salesmanship and building relationships. Though those “rainmakers” won’t be replaced entirely, Goldman has already mapped 146 distinct steps taken in any initial public offering of stock, and many can – and will – be automated. Reducing the number of investment bankers would be a great cost savings for the firm. Investment bankers working on corporate mergers and acquisitions at large banks like Goldman make on average $700,000 a year, according to Coalition, and in a good year they can earn far more.