Like a Bird on a Wire
…..Dow record high. Commodities, financials up. Bonds, tech and emerging markets down. Fed jawbones for higher rates. Trump transition takes shape. Trumpcare takes shape vaguely. Happy Singles Day. App judgment. Super moon rising. Veterans Day thanks.
Financial Review by Sinclair Noe for 11-11-2016
DOW + 39 = 18,847
SPX – 3 = 2164
NAS + 28 = 5237
10 Y closed 2.12%
OIL – 1.21 = 44.15
GOLD – 31.00 = 1228.60
The Dow closed at a new all-time high. Milk and cookies for everyone. Or wine and Xanax – your choice. It was a wild ride. For the week, the Dow rose around 5.4 percent, marking its best weekly performance since December 2011. The S&P 500 gained 3.8 percent for the week. The Nasdaq Comp posted a 3.4 percent weekly gain.
While stock markets were open today for Veterans Day, bond markets were closed, after taking a beating over the past few sessions. The global bond sell-off continued; across the world, more than $1 trillion has been wiped off the value of bonds as President-Elect Trump’s policies are seen boosting inflation.
One bright spot in the bond market, TIPS, or Treasury Inflation Protected Securities, which are indexed to inflation, have enjoyed their largest eight-week inflow on record, attracting over $5 billion. Commodities and equities also proved big gainers. Commodities funds attracted $1.5 billon inflows in the week to Wednesday, the largest in 14 weeks. Copper is eyeing its biggest weekly rally in 35 years and iron ore is heading for its biggest weekly gain on record, helped by a rosier outlook for Chinese demand and anticipation of infrastructure spending straight from the pseudo-Keynesian playbook. Equities funds attracted $8.9 billion, the most in 17 weeks, but some $200 million was pulled from bond funds in the US. Healthcare stocks enjoyed their largest inflows since October 2015, attracting $700 million, but European equities continued to suffer outflows, with some $1.3 billion redeemed. The financial sector has rallied 10% over the past 4 days. Just remember, early market strength after an election is not a guarantee of future long-term performance.
In addition to bonds and tech stocks, emerging markets are not faring so well in the election’s aftermath. That’s down to fears about how Trump will act on global trade. But it’s also about the prospect of higher U.S. interest rates – which is boosting the dollar and hitting far-flung currencies.
Fed Vice Chair Stanley Fischer said this morning that economic growth prospects appear strong enough for the Federal Reserve to proceed with a gradual increase in interest rates. The central bank’s second-in-command said the Fed was “reasonably close” to achieving its employment and inflation goals, and the case for tightening is “quite strong” as a result. Fischer did not mention the outcome of the presidential election in his remarks. Yesterday, Richmond Fed President Jeffrey Lacker said that if the next Congress passes a stimulus program, the Federal Reserve should respond with more interest-rate hikes.
The Bank of Korea kept policy on hold. The central bank held its key interest rate unchanged at 1.25%, as expected. The British pound is up – at $1.26, its highest level since the October 6 “flash crash,” but remains nearly 20% below its pre-Brexit level. Meanwhile, the dollar is off slightly this morning but still on course for its best week in a year, racking up another round of gains against the yuan and peso.
An organizational chart released by the Trump campaign detailing who will handle his transition into office is filled with Washington lobbyists, insiders, and GOP veterans. Vice President-elect Mike Pence will take over the Transition Team from Chris Christie, who will now serve as vice-chair. Other advisers will include: Ben Carson, Newt Gingrich, Rudy Giuliani, Reince Priebus, Stephen Bannon, Peter Thiel and Trump’s children Donald Jr., Eric and Ivanka.
Going through the chart, Bill Walton, chairman of the DC-based private equity firm Rappahannock Ventures, and David Malpass, an economist and former Reagan administration treasury official, will head Trump’s economic team. Dan DiMicco, the former CEO of the largest steel producer in the United States, Nucor, was listed as Trump’s trade representative on the transition team. Former Securities and Exchange (SEC) Commissioner Paul Atkins will be in charge of “Independent Financial Agencies”. Atkins is now the CEO of Patomak Global Partners, a private DC firm that consults companies on how to navigate post-financial crisis Dodd-Frank financial regulatory overhaul, to which Atkins staunchly opposed. Former congressman Mike Rogers is slated to lead the national-security transition. And former Ohio official and George W. Bush honorary campaign co-chair, Ken Blackwell, will be in charge of domestic issues, including health and human services, labor, and environmental protection. The management and budget team is being jointly handled by former Attorney General Ed Meese and Kay Coles James, a former director of the Office of Personnel Management who served under George W. Bush. Trump’s Homeland Security team, for example, is being led by Cindy Hayden, a director at the US tobacco giant Altria. Jim Carter, an in-house lobbyist for the manufacturing company Emerson, has been tasked with overseeing tax reform policies. Not exactly draining the swamp.
President-elect Donald Trump outlined some pieces of his health-care program. A document was posted on the presidential transition website, the first look at Trump’s plan since the election. It includes protecting “innocent human life from conception to natural death” and gives states a big role in regulating health insurance and in running their Medicaid health-insurance programs for the poor. Whether the 15.7 million people who have gained access to Medicaid through the ACA expansion will keep it is not clear from Trump’s plan. Trump hinted at softening the coverage guarantee for those with pre-existing conditions under the ACA, saying high-risk pools – state insurance programs for individuals who are sick or otherwise unable to get coverage – would cover those with large medical expenses who have “not maintained continuous coverage.” Maybe – and this is just a shot in the dark – rather than relying on private citizens’ employers to select individual insurance plans from third-party providers, the government could try buying one great big insurance plan that covers everybody when they get sick? Not sure if there’s a term for that.
Alibaba has set new records for its annual Singles’ Day event as sales reached $1 billion in the first five minutes and hit $17.7 billion, or about one-third more than last year’s total; and more than double Black Friday and Cyber Monday combined online sales in the US. The world’s biggest retail event features 6 million products from 30,000 brands sold by 40,000 merchants and is closely watched for clues on the health of China’s economy and its largest online retailer – Alibaba.
Disney said it expects modest earnings growth next year and an even more robust rise in 2018. The assuring message came after the media company reported weaker-than-expected third quarter earnings – hit by a drop in ad sales and subscribers at its struggling ESPN unit. New deals with Hulu and AT&T/DirecTV could also help Disney attract elusive millennial customers.
Allianz beat expectations in the third quarter, posting a 37% rise in net profit. Europe’s largest insurer saw improvements across all its businesses, including bond fund manager Pimco, which logged net inflows for the first time in three years. Quarterly operating profit also beat forecasts, rising 18% and helping Allianz reaffirm its full-year target.
J.C. Penney posted a decline in sales, citing softness in apparel, and lowered a key sales metric. The company’s same-store sales fell 0.8% in the quarter, down from 6.4% growth last year and well below estimates. For the quarter, Penney posted a loss of $67 million, or 22 cents a share. Revenue fell 1.4%.
Macy’s reported third-quarter sales and revenue that missed estimates. Macy’s also announced a series of real estate deals including the $250 million sale of the Union Square Men’s store in San Francisco – part of more than 100 planned store closures.
Saying it was too easy to spend their parents’ money, a judge in Seattle has set up a year-long process to reimburse customers whose children made Amazon in-app purchases without permission, but rejected an FTC request for a $26 million lump sum payout. The agency already settled similar cases against Apple and Google. All three companies now require a password for in-app purchases or an opt-in to enable purchases without a code.
Brazil has been plunged into a fresh bout of political uncertainty after lawyers for former president Dilma Rousseff presented evidence suggesting her successor, Michel Temer, accepted bribes from a construction company. If found guilty, Temer, a member of the Brazilian Democratic Movement Party, would also be removed from office.
Shari Redstone, vice chair of the board at CBS and Viacom now says: “I was never a great proponent of the split of the two companies,” adding “Scale will matter to your advertisers, who more than ever have to reach the consumer on a number of platforms.” A decade ago, Sumner Redstone decided to divide the two into separate companies, and while CBS has thrived, Viacom has wrestled with falling ratings and declining ad sales. CBS and Viacom are now looking at the prospect of a re-merger.
The largest, brightest full moon in nearly seven decades – what is known as a “Super Moon” – will be on display in the coming days. The full moon will come nearer to Earth than at any time since 1948. On Monday, the moon will pass within 216,500 miles of Earth’s surface, about 22,000 miles closer than average. If skies are clear, the upcoming full moon will appear up to 14 percent bigger and 30 percent brighter than usual. The next time a full moon comes as close to Earth will be in 2034.
Today, of course is Veterans Day, marking the Armistice, on the 11th hour of the 11th day of the 11th month of 1918 – the end of World War I, the war to end all wars. Veterans Day is intended to honor and thank all who served in the United States Armed Forces. I would like to give my thanks to all veterans. And I believe the best way to honor veterans is no more wars.