Financial Review

Into the Weekend

…Stocks slip again, but up for the week. Oil down. Trade war bluster. EU GDPR – Alexa, is that a good idea? No cruising in the Chrysler.

Financial Review by Sinclair Noe for 05-25-2018

DOW – 58 = 24,753
SPX – 6 = 2721
NAS + 9 = 7433
RUT – 1 = 1626
10 Y – .05 = 2.93%
OIL – 3.13 = 67.58
GOLD – 2.90 = 1302.20


Well, it wasn’t pretty but it wasn’t as ugly as it could have been. The Dow Industrials dropped more than 100 points intraday, but then staged a partial recovery. The main drag again today, was oil, which dropped 4.3% – not soon enough for any relief at the pump heading into a Memorial Day holiday where many people will hit the road. A spike in crude oil prices has lifted the national average price of gas by 31% over the past year to an average of $2.97 a gallon, according to AAA. Fifteen states are already facing $3 average gas prices or higher. Saudi Arabia said this week that OPEC and Russia could supply more oil to world markets “in the near future.” That news led to the steepest one-day decline in oil prices in a year. Feel free to remain skeptical that OPEC and Russia will do anything to spoil the high prices needed to balance their budgets. Energy stocks dragged on major indices, with Exxon Mobil down nearly 2%, Chevron lost 3.5%. For the week, the Dow was up 0.2 percent, the S&P 500 was up 0.3 percent and the Nasdaq gained 1.1 percent.


The US-North Korea summit is on again, maybe, maybe not. Nobody seems to know much with any certainty. It’s like a bad soap opera. Same jumbled mess when it comes to trade policy and possible tariffs. Tariffs on China, then more tariffs, then forget tariffs and focus on jobs at ZTE, the Chinese telecom giant, but keep steel and aluminum tariffs on the Eurozone, all while negotiating a new and improved NAFTA, which seems stuck in the mud. Trump’s feigned unpredictability has become the most predictable aspect of his administration. The latest gambit is a threat of 25% tariffs against foreign car manufacturers – affecting some 8 million cars sold in the US, after he directed Commerce Secretary Wilbur Ross Wednesday to conduct a Section 232 investigation into whether foreign competition in the auto sector represents a threat to national security risk. The Honda Rebellion?


The market has shrugged off the news, with Toyota stock falling less than 2% during trading Thursday, and other foreign car makers like BMW, Hyundai, and Daimler have all paired back losses since the announcement Wednesday afternoon. If investors were taking the president seriously, one would expect a much larger reaction, given that Toyota, for instance, sells more cars in North America than in its home base of Japan, as its projected to sell roughly 2.4 million cars in the U.S. this year alone. The auto tariff threat is part of a NAFTA-related bank shot, not a new policy initiative on its own. Until something actually happens, it’s just so much hot air.


The European Union General Data Protection Regulation (also known as GDPR) went into effect today. The GDPR clarifies and strengthens existing individual rights, such as the right to have one’s data erased and the right to ask a company for a copy of one’s data. Companies will now have to report data breaches within 72 hours and allow people to access the private data that has been gathered on them and find out how it’s being used. Users also have the “right to be forgotten,” allowing them to demand that companies remove certain personal information from the internet, and the right to opt out of sensitive data collection. The GDPR further broadens the definition of “personal data” to include locations, browsing history, IP addresses, and other information. You may have noticed a few emails from tech companies asking you to accept updates to their terms of service. This is because the GDPR requires organizations to get consent from users before storing and processing personal info. Some organizations are threatening to remove users from mailing lists if they don’t actively give their consent, so it might be worth reading through those newsletters in your inbox. Before you hit delete, this might be a good chance to clean up the digital remnants of your consumer history. Specifically, it’s a reminder that all these places—online and brick-and-mortar businesses where you’ve registered an online account or used your credit card or were entered into a system for whatever reason—have some kind of data on you, and therefore you’re getting an email with updates to their privacy policy. It’s a moment to take stock of all the corporate relationships you didn’t even know you still had. While outside the EU, we don’t have the level of control over our digital lives that EU residents now do, we can still treat the arrival of the new rules as an empowering moment—and delete some accounts.


Also, some sights will have a box telling you to click to accept their cookie tracking policy, and the default is that their cookies will track you, so it doesn’t seem like much of an option.


The financial toll is steep for companies found to be violating the GDPR. The fine is either 20 million euros (approximately $24 million) or 4 percent of global revenue for the year, whichever is higher. As Ars Technica points out, that could mean a maximum fine of $500 million for Facebook and $2.5 billion for Google. Several news websites have been taken offline for British and European audiences. The LA Times, The New York Daily News, Chicago Times, Chicago Tribune, Orlando Sentinel and Baltimore Sun are all blocked from those trying to access the news in European countries.


You know that crazy fear about Alexa recording everything you say and then leaking it online? Yea, like that little machine is invading your privacy? Yeah, that happened. It’s time to break out your “Alexa, I Told You So” banners – because a Portland, Oregon, couple received a phone call from one of the husband’s employees earlier this month, telling them she had just received a recording of them talking privately in their home. “Unplug your Alexa devices right now,” the staffer told the couple, “you’re being hacked.”


At first the couple thought it might be a hoax call. However, the employee – over a hundred miles away in Seattle – confirmed the leak by revealing the pair had just been talking about their hardwood floors. The recording had been sent from the couple’s Alexa-powered Amazon Echo to the employee’s phone, who is in the husband’s contacts list. The machines are designed to constantly listen out for the “Alexa” wake word, filling a one-second audio buffer from its microphone at all times in anticipation of a command. When the wake word is detected in the buffer, it records what is said until there is a gap in the conversation, and sends the audio to Amazon’s cloud system to transcribe, figure out what needs to be done, and respond to it. The talking, always listening system is remarkably effective, which has led to it becoming extremely successful as a consumer product and sparked competing voice-controlled gizmos from Google and Apple. Which all sounds terrific until it goes wrong and your device acts like a bug. I’m not sure if the European privacy rules could have prevented this type of glitch, but it is probably time for all of us to start paying greater attention to digital privacy.


Durable-goods orders fell 1.7% April, but the dropoff stemmed almost entirely from a decline in contracts for Boeing planes. Orders for commercial jets plunged 29% last month following a 61% spike in March.  Most businesses took in more orders and increased investment last month. A better way to judge orders is to strip out the outsized effect of planes and cars. Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, jumped 1.0 percent last month. The increase in the so-called core capital goods orders reversed March’s 0.9 percent drop.


The final reading for University of Michigan consumer sentiment index slipped to 98 points from 98.8 in April. The index had hit a 14-year high in March. Americans found that discounts for new autos and other durable goods were at decade lows, a sign that inflation is rising because of strong demand for goods and services, but most people are pretty optimistic about the economy. Incomes are rising, job openings are at a record high and layoffs and unemployment have fallen to the lowest levels in decades.


Next Friday we’ll get the monthly jobs report for May. Most of the recent evidence shows the economy is still strong and that it’s a great time to find a job. But what that really means is the cost of borrowing for consumers and businesses is going up again soon. Economists predict the U.S. likely added nearly 200,000 new jobs in May, keeping the unemployment rate a hair below 4%. The yearly growth in worker pay is likely to stick near the current pace of 2.6%. If the employment report for May comes in fairly strong, it’s a foregone conclusion the Federal Reserve will raise its benchmark interest rate at its next meeting in June. Senior Fed officials appeared to strongly lean toward an increase in interest rates when they last met a month ago, according to minutes released earlier this week.


Fiat Chrysler is warning the owners of nearly 5 million vehicles to stop using the cruise control immediately due a potential defect that could leave the driver unable to cancel cruise control during certain circumstances. The automaker says it knows of no accidents, injuries or fatalities caused by the defect. The recall is one of the largest ever issued in the U.S. It covers 15 Jeep, Ram, Chrysler and Dodge models built between 2014 and 2018.



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