Financial Review

Bull Run

….Stocks hit record highs again, House passes a budget. Trade gap declines. NRA does the very least. Russia hacked NSA. Catalan split on hold. California is a sanctuary state. Stranger Things will cost more. Amazon delivers. Shine on.

Financial Review by Sinclair Noe for 10-05-2017

 

DOW + 113 = 22,775
SPX + 14 = 2552
NAS + 50 = 6585
RUT + 4 = 1512
10 Y + .02 = 2.35%
OIL + .78 = 50.76
GOLD – 6.80 = 1268.80

 

This is the second-longest bull market ever, trailing only the 1990-2000 run during the dot-com era. Today was the eighth straight gain in the S&P 500, its longest winning streak since 2013. The S&P 500 also had its sixth straight record close, the longest such streak since 1997. The S&P 500 is on track for its ninth consecutive winning year, tying the record from 1991 through 1999. It’s been more than a year since the S&P 500 fell as much as 5 percent from a previous high, the fifth-longest period without such a correction. The Nasdaq is also on an 8-day winning streak. The Russell 2000 was just a fraction off the record high from Tuesday. The VIX, has closed below 10 for the seventh straight day, already making this the least volatile October in the history of the so-called fear gauge.

 

Now you might say that this just means the market is overextended and overdue for a pullback. You might say that.

 

The House narrowly passed a $4.1 trillion budget today. The final tally was 219-206. More than a dozen Republicans voted with Democrats against the budget, objecting to elements of the spending package or to parts of the tax reform proposal. The budget contains $1.1 trillion in non-entitlement spending, including nearly $622 billion on defense. The Senate is voting on a similar measure. When both chambers pass their respective budget resolutions, it would trigger a legislative process known as reconciliation, during which they could pass a sweeping tax reform bill with a simple majority of 51 votes in the Senate, instead of the usual 60-vote requirement. That does not mean tax reform will be easy. There are already disagreements over how much to cut certain tax rates, which deductions could be eliminated, and whether the tax reform package would be revenue-neutral. Look for a fight over the elimination of state and local tax deductions.

 

The number of Americans filing for unemployment benefits dropped 12,000 to a seasonally adjusted 260,000 for the week ended Sept. 30. The Labor Department’s closely watched employment report on Friday will likely show that nonfarm payrolls increased by 90,000 jobs last month after rising by 156,000 in August. The estimates are all over the place because no one is sure exactly what impact the hurricanes had on jobs.

 

The Commerce Department said the trade gap declined 2.7 percent to $42.4 billion, the smallest since September 2016. When adjusted for inflation, the trade deficit was little changed at $61.8 billion.

 

The so-called real trade deficit average for July and August was below the second-quarter average of $62.4 billion. That suggests trade could contribute to gross domestic product in the third quarter and help to soften the economic blow of the hurricanes, which are expected to cut at least six-tenths of a percentage point from economic growth in the third quarter.

 

In another report, the Commerce Department said orders for non-defense capital goods excluding aircraft – seen as a measure of business spending plans – jumped 1.1 percent in August instead of the 0.9 percent increase reported last month. Shipments of these so-called core capital goods, which are used to calculate business equipment spending in the gross domestic product report, shot up 1.1 percent instead of the previously reported 0.7 percent rise. Strong business spending on equipment is helping to underpin manufacturing. Business investment in equipment grew at its fastest pace in nearly two years in the second quarter.

 

The National Rifle Association announced it will support “additional regulations” on devices that boost semi-automatic weapons’ firing rates, like the tools used by the shooter in the Las Vegas massacre. In a statement, the NRA urged the Bureau of Alcohol, Tobacco, Firearms and Explosives to review the legality of so-called bump stocks. They stopped short of pushing Congress to pass a bill banning or regulating the devices. It is always surprising to see the NRA support restrictions but it was the least they could do. Really, this was the least they could do. Anything less would have been nothing.

 

Russian government hackers stole NSA information on how the US infiltrates foreign computers and defends itself against cyberattack. They hacked an NSA contractor who was using antivirus software made by Russia-based Kaspersky Lab, the sources said, which was how the hackers were able to target the contractor. The incident occurred in 2015 but wasn’t uncovered until last year.

 

Spain’s Constitutional Court ordered the suspension of Monday’s session of the regional Catalan parliament, throwing into doubt its plans to declare unilateral independence from Spain. The speaker of the Catalan parliament accused the Madrid government of using the courts to deal with political problems and said the regional assembly would not be censored. But she said parliamentary leaders had not yet decided whether to defy the central court and go ahead with the session. Secessionist Catalan politicians have pledged to unilaterally declare independence at Monday’s session after Sunday’s referendum, banned by Madrid and marked by violent scenes where Spanish police sought to hinder voting.

 

California Gov. Jerry Brown signed sanctuary state legislation extending protections for immigrants living in the United States illegally — a move that gives the nation’s most populous state another tool to fight President Donald Trump. Brown’s signature means that police will be barred from asking people about their immigration status or participating in federal immigration enforcement activities starting Jan. 1. Jail officials only will be allowed to transfer inmates to federal immigration authorities if they have been convicted of certain crimes. The measure came in response to widespread fear in immigrant communities following Trump’s election. Among other things, the other bills signed today by Brown will limit federal immigration authorities from entering schools and workplaces without warrants; prohibit landlords from reporting tenants to ICE; and stop local governments from contracting with for-profit companies and ICE to hold immigrants. Some law enforcement officials say the impact of the sanctuary measure likely will be minimal because it bans immigration enforcement activities that few agencies participate in. The bill does not prohibit ICE from operating in California.

 

Stranger Things will cost more. Netflix will now charge $11 per month instead of $10 for a plan that includes HD and allows people to simultaneously watch programs on two different internet-connected devices. The price for another plan that includes ultra-high definition, or 4K, video, is going up by 17 percent, to $14 from $12 a month. A plan that limits subscribers to one screen at a time without high-definition will remain at $8 a month. The increase will be the first in two years for Netflix, although it won’t seem that way for millions of subscribers. That’s because Netflix temporarily froze its rates for long-time subscribers the last two times it raised its prices, delaying the most recent increases until the second half of last year for them. Netflix isn’t giving anyone a break this time around.

 

A new program called Seller Flex would allow more items on Amazon — even those sold by third parties — to be listed with the Prime badge of two-day shipping. Amazon itself will handle the pickup of packages from sellers. In some cases, it will also handle delivery to customers, eliminating the major delivery partners of UPS and FedEx.

Shares of UPS and FedEx were initially hit after the report about competition from Amazon. FedEx ultimately closed a fraction of a point higher, while UPS recovered to close 0.7 percent down. UPS says that no customer constitutes 10 percent of its revenue, and FedEx says no one constitutes three percent of its revenue. So, while there is exposure to Amazon, it is not make or break. Amazon is prudently cherry-picking areas with dense delivery and will probably still leave rural delivery up to other companies. Meanwhile, Amazon could also take years to establish its new service, but it is coming. Amazon has not taken over the world, not yet. Two-thirds of Amazon’s revenue comes from sales in the U.S. Amazon Prime is available in a dozen or so countries, but it’s not big in many of them. The biggest global prize is India, where Amazon has pledged to spend $5 billion to break into what many technology companies see as a future gold mine.

 

Tonight, that full moon you’ll see ascending in the east after sunset is the Northern Hemisphere’s Harvest Moon. Over the years, we’ve seen lots of informal uses of the term Harvest Moon. Some people (in the Northern Hemisphere) call the full moons of September and October by that name. And that’s fine. Point is the moon will be full, it is fairly close to Earth, and that means there will be strong gravitational pull. In Miami, that means King tides. King tides are determined by the orbits and alignments of the Earth, moon and sun. In South Florida, they occur each fall, but in recent years they’ve gotten increasingly dramatic. In Miami Beach, University of Miami researchers found flooding from high tides soared 400 percent between 2006 and 2016. Parking lots turn into lakes. Streets turn into rivers. It is quite the problem. Earlier this year, Miami Beach initiated $100 million in spending to raise roads, redesign sewers and install pumps to keep the tidal impact in check. Across Biscayne Bay, Miami will vote in November on whether to approve what is called the “Miami Forever” bond issue, a $400-million tax increase that includes nearly $200 million for seawalls and drainage pumps, in addition to money for housing and economic development.

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