Financial Review

Buy a Ticket

…31 years after Black Monday. Existing home sales flat. Italian debt probs. China’s growth slows. Earnings season. Tesla’s pricey cheap car. Attacking the midterms. Amazon HQ2. Buy a ticket.

Financial Review by Sinclair Noe for 10-19-2018

DOW + 64 = 25,444
SPX – 1 = 2767
NAS – 36 = 7449
RUT – 18 =1542
10 Y + .02 = 3.20%
OIL + .72 = 69.37
GOLD + 1.20 = 1227.50


Today marks the 31st anniversary of the Crash of 87. The crash was 508 points, or right at 22%. It was the largest, single day percentage point drop in market history. A similar percentage point drop today would result in a loss of over 5,700 points. Today, the Dow Industrial Average pulled off a small gain, and a small gain of 0.4 percent for the week, and the S&P 500 rose fractionally, successfully snapping a three-week retreat while the Nasdaq shed 0.6% to extend losses into a third week. Stocks are down sharply for the month. The Dow and S&P 500 have fallen more than 3 percent each in October, while the Nasdaq is down more than 7 percent.


The National Association of Realtors reports existing-home sales ran at a seasonally adjusted annual rate of 5.15 million in September. That was a 3.4% decline for the month, and the lowest pace of sales since November 2015. Sales were 4.1% lower than year-ago levels. The median sales price in September was $258,100, which was 4.2% higher than a year earlier. Home prices are still growing faster than wages, but the pace of price increases is decelerating steadily. At the current pace of sales, it would take 4.4 months to exhaust available supply, up from 4.3 months last month. And it’s taking properties longer to get snatched up: homes stayed on the market for 32 days in September, up from 29 days in August.


Italian sovereign debt yields hit fresh multi-year highs. Ten-year and 30-year bond yields hit their highest levels since early 2014, just hours after the European Union warned of rule breaches in Italy’s draft budget. Investors have shown concerns over Italy’s 2019 budget, which was officially sent to the EU this week for analysis. The anti-establishment and partly right-wing government in Italy plans to increase public spending, sticking with campaign pledges before the general election in March this year. There are fears that the fiscal plan will derail the reduction of the country’s debt pile — which is the second largest in the euro zone, totaling 2.3 trillion euros ($2.6 trillion). Within Europe, countries are expected to not run an annual deficit greater than 3 percent of gross domestic product (GDP). However, in Italy’s case its debts have led to Brussels requesting that Rome work toward balancing its books. Five months after putting Italy on downgrade watch, Moody’s has seen enough and cut Italy’s debt rating to Baa3 – one notch above junk status.


China’s economic growth dropped to 6.5% in the third quarter — the weakest it’s been since the financial crisis. Shortly after the announcement, the heads of the People’s Bank of China, the Securities Regulatory Commission and the Banking and Insurance Regulatory Commission all issued statements expressing support for the stock market and positive economic fundamentals. China’s securities regulator unveiled a series of measures to aid the country’s struggling stock market, which had been on a downward trajectory all year.


Investors fear that if China, the second-largest economy, begins to experience further pains, it could spillover first into emerging-market economies and then developed markets like the U.S. Market participants were also watching escalating tensions between the U.S. and Saudi Arabia as Treasury Secretary Steven Mnuchin on Thursday announced that he was pulling out of an investment conference in Riyadh in response to the disappearance of Saudi journalist Jamal Khashoggi, a U.S. resident.


Earlier, Honeywell said it was seeing slower growth in China and that trade tariffs would squeeze margins and potentially cost it “hundreds of millions” of dollars in 2019. Meanwhile, the Securities and Exchange Commission had opened an investigation into accounting practices at Honeywell.


Procter & Gamble will boost prices 5 to 10 percent on household products such as Crest toothpaste, Dawn dish soap and Old Spice deodorants to combat rising commodity prices and increased pressure from foreign exchange. P&G reported its strongest quarter in five years as consumers snapped up products from Tide detergent to Pampers diapers. P&G said organic sales rose a robust 4 percent. Procter & Gamble Co  rose 7.8%.


Schlumberger reported third-quarter adjusted earnings of 46 cents a share, beating forecasts of 43 cents. Revenue of $8.5 billion came up just shy of estimates of $8.58 billion. Schlumberger rose 0.1%.


StarKist agreed to plead guilty to a felony price fixing charge as part of a broad collusion investigation of the canned tuna industry. The Department of Justice said StarKist faces up to a $100 million fine when it is sentenced. Prosecutors allege that the industry’s top three companies conspired between 2010 and 2013 to keep prices artificially high.


PayPal Holdings jumped 8.2% after the digital-payments company posted stronger-than-expected third-quarter earnings and its active customer base topped 250 million.


Tesla introduced a new $45,000 version of its Model 3 sedan, as the promised base-level version of the car, with a starting price of $35,000, was earlier pushed back until next year. The new, rear-wheel model comes with a “mid range” battery pack and a range of 260 miles. The “long range” model 3 – which starts at $49,000 and has been out for more than a year – has a range of 310 miles.


Apple CEO Tim Cook is calling on Bloomberg Business to retract a story that said his company was the victim of a hardware-based attack carried out by the Chinese government. It’s the first time Apple has ever publicly demanded a retraction. Apple and Amazon have said they have no knowledge of ever finding or removing servers that contained the kind of spy chips Bloomberg alleged were found in the companies’ networks. Supermicro has also denied knowing anything about malicious chips being secretly implanted into any of its motherboards during the manufacturing process.


We’re still seeing the fallout from the European Commission’s $5 billion antitrust fine against Google. Earlier this week, Google announced it would comply with the ruling by unbundling the Google Android app package, allowing OEMs to skip Chrome and Google Search in favor of alternatives. The catch is that, since ad revenue from these Google services was used to support Android development, Google will start charging device makers that license Google apps but choose the unbundled route. Google will charge device makers as much as $40 per device if they don’t use Google’s preferred Android setup. The pricing is flexible based on the country and the pixel density of the device’s screen.


A Russian woman has been charged with trying to interfere and “sow discord” in the American political system, including in the 2018 midterm elections as part of a conspiracy that exploited thousands of social media accounts and emails that claimed to be owned by U.S. residents. Elena Khusyaynova of St. Petersburg, Russia, is accused of participating in a conspiracy engaged in “information warfare against the United States” that aimed “create and amplify divisive social media and political content.” The case against the 44-year-old Khusyaynova, which does not allege involvement by any Americans, is the first to involve alleged interference in next month’s Congressional elections.


Ever since Robert Mueller was named special counsel to investigate Trump campaign collusion with foreign governments, and Donald Trump’s obstruction of justice into that investigation, Trump lawyers have been promising that the probe will be completed “soon.” A report from Bloomberg indicates that “soon” might finally be here. But given that we’re dealing with anonymous sources, it’s impossible to know if this timeline for wrapping up the investigation is Mueller’s actual timeline, or more wishcasting from the White House, or a best guess of a lawyer who’s part of the investigation and thinks it seems to be wrapping up. Special Counsel Robert Mueller is expected to issue findings on core aspects of his Russia probe soon after the November midterm elections. Specifically, Mueller is close to rendering judgment on two of the most explosive aspects of his inquiry: whether there were clear incidents of collusion between Russia and Donald Trump’s 2016 campaign, and whether the president took any actions that constitute obstruction of justice.


Amazon won’t say a word about where it plans to put its much-hyped second headquarters. Officials in the 20 cities and regions named as finalists say that they don’t know anything — and that even if they did, they wouldn’t share it publicly. The growing consensus is that the place that checks the most boxes is Northern Virginia. In online betting forums, it has the best odds of landing the project. Analysts at Citi recently said most investors they spoke with also expected HQ2 to end up in the Washington area, noting that Northern Virginia is home to Amazon’s cloud computing division’s “largest and fastest-growing office outside of Seattle.” Amazon says it will announce its decision by the end of the year. Other areas that are regularly named as strong contenders include Chicago, Atlanta and Austin, Tex. Washington and the Maryland suburbs are also finalists.


The Mega Millions lottery jackpot jumped to a record $1 billion, hours before the drawing for what is also the second-largest lottery prize in U.S. history. The winner can opt for an immediate cash payment of $565.6 million or receive the $1 billion prize over 29 years. The Powerball jackpot on Saturday isn’t too shabby either: $470 million. Just imagine if you won both. Nearly $1.5 billion! The odds of winning both are 1 in 88 quadrillion – So, I’m saying you’ve got a chance


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