….Records on Wall Street. Carnage on the Vegas Strip. Construction spending up. Manufacturing stronger. Tax plan might raise middle class taxes. Catalonian independence. Monarch grounded. GM goes electric. Equifax bungle grows.
Financial Review by Sinclair Noe for 10-02-2017
DOW + 152 = 22,557
SPX + 9 = 2529
NAS + 20 = 6516
RUT + 18 = 1509
10 Y + .01 = 2.34%
OIL – 1.04 = 50.54
GOLD – 8.90 = 1271.50
Once again, we saw records on Wall Street for the Dow, S&P, and Nasdaq. There will be no celebration today. The flags are at half-staff. By now, you all have heard about the mass shooting in Las Vegas. Here is the latest information. Last night, shortly after 10 p.m., at an outdoor concert in Las Vegas, gunfire erupted. The gunman was on the 32nd floor of the Mandalay Bay, firing into a field of 22,000 concertgoers, across the Las Vegas Strip. At first, the people at the concert didn’t realize what was happening or where the gunfire was coming from. The gunfire sprayed down in rapid fire, likely from fully automatic guns – machine guns. 59 people are dead and over 527 injured, several in critical condition. Some of the injured were wounded, others hit by shrapnel, others were trampled in the chaos as they tried to escape. It ranks as the worst mass shooting in the US so far. Approximately 15 minutes later, police broke through the gunman’s hotel door. Stephen Paddock, a 64-year old from Mesquite, Nevada was dead of a self-inflicted gunshot. He was surrounded by 19 guns and hundreds of rounds of ammo.
To a certain extent, we have all become inured to this carnage that happens with sickening regularity. The reality is that mass murder is more and more common – even as violent crime has been on the decline. Since 1970, more Americans died from guns (either murder, suicide or accident) than the total of all the people who died in all the wars in American history, going all the way back to the American Revolution. And while the event in Las Vegas is jarring, each day 92 Americans die from guns; more than 33,000 last year. After various times, I half expected there would be some action to address this problem: after Columbine, after Newtown, after Tucson, after Aurora, after Charleston, after Orlando. Nope. Today, the shares of gun stocks went higher. No surprise. More people will buy more guns because they are afraid. More people will buy more guns because they think gun control advocates might sway someone to do something. There were calls for legislation. It won’t happen. Even before today there was legislation in Congress to ease firearms rules and make it easier to purchase silencers. Nothing will happen after Las Vegas. Lives were shattered today. Daughters and sons, Moms and Dads, sisters and brothers – gone, permanently. In a week, or a month, or a year it will happen again and then again. I would like to say something hopeful but I have no expectations anything will change.
Taking a look at today’s economic data: Construction outlays jumped in August, led by a surge in spending for public works projects. Spending increased 0.5% during the month, and stood 2.5% higher than a year ago. Outlays were at a seasonally adjusted annual $1.22 trillion rate in August. Private construction spending rose 0.4% in August, while public outlays jumped 0.7%, driven by a 3.5% increase in educational construction projects. Public construction spending has stagnated for years. Florida and Texas, the areas most impacted by Hurricanes Harvey and Irma, accounted for 22% of U.S. private nonresidential construction spending in 2016, and 15% of state-and-locally-owned construction spending. Meanwhile, residential construction spending was up only 0.5% for the month, but was 11.3% higher than its year-ago level.
The Institute for Supply Management said its manufacturing index jumped to 60.8 in September from 58.8%, hitting the highest level since 2004.
The Atlanta Federal Reserve’s GDP Now forecast model was revised to show third quarter GDP growth of 2.7%, up from an earlier estimate of 2.3% growth.
Treasury Secretary Steven Mnuchin on Sunday said one of the top goals of the Trump administration’s tax plan is to help the middle class, but he could not guarantee that every middle-class family would receive a tax cut. President Donald Trump last week outlined his plan, which includes reducing the corporate income tax rate to 20 percent, establishing a new 25 percent tax rate for pass-through businesses and lowering the top income tax rate for individuals to 35 percent. A report on Friday from the non-profit Washington-based Tax Policy Center found that taxpayers in the top 1 percent income bracket – above $730,000 – would receive about 50 percent of the total benefit from the overhaul, with their after-tax income forecast to increase an average of 8.5 percent. The group said about 12 percent of taxpayers would face an average tax increase of roughly $1,800. This includes more than a third of taxpayers making between about $150,000 and $300,000, as most itemized deductions, including for state and local taxes, would be repealed.
The Spanish region of Catalonia attempted to hold a contested independence referendum on Sunday and Catalonia’s leadership has declared the region has “won the right” to independence. Catalan officials claimed that around 90% of votes cast were for independence with a turnout of around 43%. Spain’s central government does not recognise the referendum, with Prime Minister Mariano Rajoy saying it made a “mockery” of democracy and refusing to recognize that a vote happened. Sunday’s referendum was marred by violent scenes as police were ordered to confiscate ballot boxes and prevent people from voting. Videos surfaced of officers forcibly dragging would-be voters from polling stations. Spain is the fourth largest eurozone economy. But what will happen if Catalonia does declare independence from Spain? Declaring independence from Spain would automatically mean that Catalonia would have to leave the European Union, which would inevitably cause issues around its membership of the EU’s single market. The economic cost for Catalonia could proportionally exceed that of Brexit for the UK. Spain’s benchmark IBEX 35 stock index slid 1.8 percent, led by shares of banks. Spanish 10-year government bond yields climbed as much as 11 basis points.
The UK’s Civil Aviation Authority (CAA) is launching the biggest repatriation effort of Brits abroad since the Second World War after the bankruptcy of Monarch Airlines over the weekend. Monarch, which flies to the Mediterranean and other warm weather destinations, cancelled an estimated 300,000 bookings and an estimated 110,000 travelers were stranded.
Spectrem Group’s monthly confidence index of investors with at least $1 million to invest soared to 19 for September from 10 in August. The index, which is based on 250 interviews, has only been higher twice since the markets began recovering from the worst financial crisis since the Great Depression in 2009 — in April of this year and in September 2013.
General Motors is going all electric. GM will begin selling two new all-electric vehicles in the next 18 months, and will have at least 20 new zero-emission electric vehicles in its lineup by 2023. Chairman and CEO Mary Barra, making the announcement in Detroit, said the new cars are part of a sweeping plan to move toward an automotive world that includes zero emissions, zero congestion and zero crashes. The two new cars will be based on technology derived from the company’s Bolt EV, the 238-mile-range electric sedan that Chevrolet introduced late last year. They will be plug-in electric vehicles or hydrogen fuel cell vehicles that have no internal combustion engines and do not burn gasoline or emit harmful vapors from their tailpipes. GM, with its Bolt EV battery-powered car and its Volt plug-in hybrid, is pushing into an increasingly competitive space. Almost 50 new pure electric-car models will come to market globally between now and 2022, including vehicles from Daimler, Volkswagen, and Volvo. The car companies dragged their feet with electric. Now they are being dragged into it by Tesla and by regulations. Though more than 350,000 people put down $1,000 deposits to get in line for the upcoming Tesla Model 3 BEV sedan, sales of the Bolt EV have not met analysts’ expectations. Tesla had record sales of its EVs last year — and still lost $675 million on $7 billion in sales. To date, in the United States, pure battery-electric vehicles account for fewer than 1% of all vehicles sold.
The massive data breach at Equifax may be even larger than originally thought, according to an independent investigation by a cybersecurity firm. Mandiant, a cybersecurity investigations firm retained by Equifax to look into the breach, found that 2.5 million more U.S. consumers were potentially affected than originally estimated, bringing the total to 145.5 million. The recently former CEO of Equifax, Richard Smith is scheduled to appear before four Congressional panels this week, beginning with the House Energy and Commerce Committee on Tuesday. In prepared remarks, Smith said Equifax was alerted to the breach by the Homeland Security Department on March 9 but did not act to patch the vulnerability.
The Interior Department’s inspector general’s office has opened an investigation into Secretary Ryan Zinke’s use of taxpayer-funded charter planes. The watchdog has “received numerous complaints” and launched its investigation late last week. Interior secretary Zinke has flown on government-owned or -chartered aircraft several times this year, including one $12,000 trip from Las Vegas to an airport near his hometown in Montana and another trip in the Caribbean
At Oracle’s OpenWorld conference yesterday, Larry Ellison announced a new autonomous database that can patch itself from cybersecurity flaws without having to go offline. While the idea of a human-free database maintenance is compelling on its own, Ellison spent the second half of his presentation comparing Oracle 18c to Amazon Web Service’s database product, Redshift. The automated database, called Oracle 18c, can instantly patch itself while still running, which Ellison says is a big advantage over the current system, in which humans have to schedule downtime for a database.