Financial Review

Mixed

…Markets mixed. Earnings season looks strong. Saudi’s tangled web. Musk is Boring. Just throwing out tax cuts. Food recall. GE and Siemen’s split Iraq.

Food recall, Ford Ranger, tax cuts, Khashoggi, GE, Siemens, Iraq, Saudi, Mega Millions, 

 

DOW – 126 = 25,317
SPX – 11 = 2755
NAS + 19 = 7468
RUT  0.36 = 1542
10 Y + .01 = 3.20%
OIL +.13 = 69.25
GOLD – 4.80 = 1222.70

 

Technology sector gains limited losses on the S&P 500 and helped to lift the Nasdaq. The Dow swung between gains and losses of more than 100 points early in the session. The S&P 500 remained below its 200-day moving average. Monday also marked the fourth straight day of losses for the S&P 500, while the Nasdaq snapped a three-day slide. Wall Street is trying to rebound from steep losses this month. The major indexes are all down at least 4.3 percent through Monday’s close on fears of rising interest rates and a slowdown in the global economy.

 

The current earnings season is off to a good start. According to data from FactSet, 82 percent of the S&P 500 companies that have posted earnings have topped expectations.

 

Oilfield services provider Halliburton’s third-quarter profit edged past analysts’ estimates on Monday, helped by its international business. Halliburton, the largest provider of hydraulic fracturing services, has seen demand for its services soften as U.S. producers cut down on spending and transportation bottlenecks in the Permian basin of west Texas and New Mexico pushed the price of regional crude lower. The company had previously warned that slowing growth in the largest U.S. shale basin would impact its results. But while demand for its North American completions services has weakened, the firm’s international business is showing signs of recovery; international revenue rose 5% in the quarter.

 

Kimberley Clark reported adjusted quarterly profit of $1.71 per share, 8 cents a share above estimates. The company also gave a full-year forecast range that is largely above forecasts, however it said that foreign currency translation will have a larger-than-expected negative sales impact. Kimberley Clark also announced it Chief Operation Officer will become the new CEO.

 

Hasbro reported adjusted quarterly profit of $1.93 per share, missing the consensus estimate of $2.23 a share. Revenue also missed forecasts, with Hasbro citing lost revenue from the Toys “R” Us liquidation.

 

GE and Germany’s Siemens have both signed agreements to rebuild Iraq’s power infrastructure. The news is a victory for GE (GE) because Siemens was the frontrunner to land the milestone deal by itself. Both companies have been hurt from the shift away from fossil fuels in favor of solar, wind and other renewable energy. GE and Siemens have laid off thousands of power workers. GE recently ousted its CEO and warned of more financial pain from its power division. Blackouts have cost Iraqi businesses billions in lost revenue, handcuffed the oil industry and sparked protests from angry citizens. The problem gets even worse during the summer, when peak demand can exceed power supply by almost 50%. GE expects its work in Iraq will eventually add up to 14 gigawatts of power, create 65,000 direct and indirect jobs and help the government save the government $3 billion per year.

 

Ford resumed building the midsized Ranger pickup for the first time in seven years. The move is part of a plan to strengthen Ford’s historically robust presence in profitable trucks at a time when the automaker faces pressure from shareholders and an uncertain future. Ford shares are down more than 30 percent this year, and the automaker is contending with high costs for materials, threats from traditional competitors and disruptive tech companies, as well as a trade war. The second-largest U.S. automaker invested $850 million in the Michigan assembly plant to build the Ranger and the Ford Bronco. The Ranger was discontinued in the U.S. in 2011, but produced internationally, while the Bronco was discontinued in 1996.

 

Fiat Chrysler announced that its Magneti Marelli division is being bought by Japan’s Calsonic Kansei for $7.2 billion in a deal that will create one of the world’s largest auto parts suppliers. The sale will enable Fiat to focus more on the need to win a larger share of the Chinese market, the world’s biggest, and catching up with rivals in the development of electric and self-driving vehicles.

 

Elon Musk announced on Twitter Sunday night that his Boring Company tunnel, designed to ultimately skirt Los Angeles traffic, will open on Dec.10 and offer free rides to the public the following day. The two-mile tunnel, which was carved out underneath SpaceX’s Hawthorne headquarters, is basically a test-run of Musk’s grand vision to carry passengers below the ridiculously congested streets of Los Angeles. The top speed of the autonomously driven, car-carrying platforms is 155 miles an hour.

 

Stock action for airlines hasn’t been good this year, except for United Continental, which is up 30%. Earnings season for the group has already begun, but most are scheduled to report third-quarter results this week. The theme for airlines is obvious: Fuel costs have steadily increased as the price of West Texas Crude oil has risen 34% over the past year. The theme this week is for the airlines to increase revenue to recapture the rise in jet fuel costs.

 

Sandra Day O’Connor, the first woman on the Supreme Court, has stepped back from public life. For more than a decade after leaving the court in 2006, O’Connor kept up an active schedule: serving as a visiting federal appeals court judge, speaking on issues she cared about and founding her own education organization. But the 88-year-old, for more than two decades often the deciding vote in important cases, is now fully retired. She made her last public appearances over two years ago.

 

Treasury Secretary Steven Mnuchin met today with Saudi Arabia’s crown prince, Mohammed bin Salman, despite the ongoing outrage over the killing of journalist Jamal Khashoggi in the Saudi Consulate in Istanbul, Turkey. Mnuchin had announced Thursday that he would not be attending the Future Investment Initiative conference this week in Saudi Arabia. He had been under pressure to cancel his plans to attend in light of Khashoggi’s slaying. Meanwhile, Turkish officials are issuing increasingly bold statements implicating Saudi leadership in Khashoggi’s death.

 

Iranian sanctions are expected to remove about 1 million barrels a day from the global market by the end of the year, and some analysts had expected the price of crude to move higher ahead of the Nov. 5 sanctions. That was even before Saudi Arabia became a wild card. However, Saudi Arabia still has the confidence of oil markets for now, which have been reassured by Saudi Energy Minister Khalid al-Falih that Saudi will turn on the pumps to make up for less Iranian crude. Al-Falih said on Monday that Saudi can raise its output to 11 million barrels a day and that it will not use oil as a weapon. Saudi output has already increased to about 10.7 million barrels a day.

 

Trump repeated his unsubstantiated claim that Republicans plan to unveil a middle-class tax cut before the midterm elections a little over two weeks away. Congress is in recess until after the election, but Trump dismissed the idea that he would try to use an executive order. Congressional leaders and White House officials who have spoken to several news outlets in recent days have all said they know nothing about any plans for a tax cut before the midterm election. This is not least because neither chamber of Congress plans to return to Washington until after the election. In other words, you might not want to spend your tax rebate just yet.

 

Chinese government leaders have a message for American investors: They’re not afraid of a trade war with the United States. In Beijing today, Zhang Qingli, a leading member of a Chinese committee tasked with forging alliances with other nations, told a small group of U.S. business leaders, lobbyists and public relations executives that China refuses to be intimidated by an ongoing trade war with the Trump administration.

 

Goldman Sachs is going mainline. Goldman Sachs has big ambitions for its small-but-growing consumer finance business, Marcus, including: creating a new unit to house both its digital finance business and its investment management division. The goal is the next step in Goldman’s plan to take the Marcus platform from its consumer banking roots to a more full-service wealth offering for the masses.

 

You may want to think twice about those grab-and-go-food items. Millions of pounds of ready-to-eat salads and premade food items including entrees, burritos, wraps and pizzas at several big name retailers such as Harris Teeter, Kroger, Whole Foods, 7-Eleven, Trader Joe’s and Walmart have been recalled due to the potential risk of listeria and salmonella contamination. The recalls stem from those issued by a dozen food manufacturers including Bakkavor Foods, Envolve Foods and Ruiz Food Products. The food makers notified the U.S. Department of Agriculture about products they shipped that could include ingredients such as corn, diced onions and other vegetables possibly tainted with bacteria – all provided from a single company, McCain Foods

 

Tomorrow’s Mega Millions jackpot stands at a possible $1.6 billion and Wednesday’s Powerball’s at $620 million, for a potential lotto bonanza of $2.22 billion this week. If you happened to win them both (and not pay taxes on them, because I don’t want to do the math) you’d become about the 1,103rd richest person in the world.

 

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