No Moral Equivalency
…..Trump’s business councils collapse. CEOs quit en masse. GOP denounces Trump. Fed minutes show concern for no inflation. Housing starts down.
Financial Review by Sinclair Noe for 08-16-2017
DOW + 25 = 22,024
SPX + 3 = 2468
NAS + 12 = 6345
RUT + 0.30 = 1383
10 Y – .04 = 2.23%
OIL + .03 = 46.81
GOLD + 11.70 = 1283.80
Fallout from Trump’s news conference yesterday resulted in the collapse of his business councils today. Six CEOs quit Trump’s manufacturing council in recent days: Richard Trumka, leader of the AFL-CIO; Thea Lee, an economist and former deputy chief of staff at the AFL-CIO; Scott Paul, head of the Alliance for American Manufacturing; Kenneth Frazier, Merck CEO; Kevin Plank, Under Armour CEO; Brian Krzanich, Intel CEO
This morning, the list of CEOs grew. Inge Thulin, the CEO of 3M, was the seventh executive to quit Trump’s manufacturing council. Here is part of his statement: “I joined the Manufacturing Jobs Initiative in January to advocate for policies that align with our values and encourage even stronger investment and job growth – in order to make the United States stronger, healthier and more prosperous for all people. After careful consideration, I believe the initiative is no longer an effective vehicle for 3M to advance these goals. As a result, today I am resigning from the Manufacturing Advisory Council.”
Denise Morrison, president and CEO of the Campbell Soup Company, resigned from the manufacturing council. Here’s part of her statement: “Racism and murder are unequivocally reprehensible and are not morally equivalent to anything else that happened in Charlottesville. I believe the President should have been – and still needs to be – unambiguous on that point.”
Jeff Immelt, chairman of GE, Alex Gorsky, CEO of Johnson & Johnson, and the CEO of United Technologies, Gregory Hayes, all announced they would leave the council, citing Trump’s recent statements as their reasoning.
Yesterday, Trump tweeted: “For every CEO that drops out of the Manufacturing Council, I have many to take their place. Grandstanders should not have gone on. JOBS!”
But nobody stepped up to be a replacement.
The strategy forum, which is led by Blackstone Group’s Stephen Schwarzman, held a conference call late Wednesday morning and the majority indicated they would leave the group, so a decision was reached to disband. In a statement from the strategy and policy forum, the group said it was breaking up amid the controversy. “The debate over forum participation has become a distraction from our well-intentioned and sincere desire to aid vital policy discussions on how to improve the lives of everyday Americans.”
Mary Barra, General Motors CEO, issued a statement saying: “Recent events … require that we come together as a country and reinforce values and ideals that unite us — tolerance, inclusion and diversity — and speak against those which divide us — racism, bigotry and any politics based on ethnicity.”
JPMorgan Chase CEO Jamie Dimon said: “The racist behavior on display by these perpetrators of hate should be condemned and has no place in a country that draws strength from our diversity and humanity.” Dimon is also chairman of Business Roundtable.
This afternoon, Trump tweeted: “Rather than putting pressure on the businesspeople of the Manufacturing Council & Strategy & Policy Forum, I am ending both. Thank you all!”
Except he didn’t end anything. You can’t fire these people after they already quit. In practical terms, the end of these groups may not make much difference. After all, Trump has achieved so few of his goals on economic policy that the executives’ absence can’t really hurt. It was never clear exactly what the councils were doing other than providing photo opportunities.
Republican leaders in Congress have little appetite for confronting Trump directly. But his sympathetic statements about the white supremacists and Nazis that marched in Charlottesville, Virginia, embarrasses them just like business leaders, and many spoke out today, or more specifically tweeted.
Arizona Senator John McCain tweeted, “There’s no moral equivalency between racists & Americans standing up to defy hate& bigotry. The President of the United States should say so”
Sen. Jeff Flake, a strong critic of Trump, tweeted, “We can’t accept excuses for white supremacy & acts of domestic terrorism. We must condemn. Period.”
Meanwhile, the 2012 Republican nominee Mitt Romney tweeted: “No, not the same. One side is racist, bigoted, Nazi. The other opposes racism and bigotry. Morally different universes.”
Sen. Lindsey Graham issued a statement: “Through his statements yesterday, President Trump took a step backward by again suggesting there is moral equivalency between the white supremacist neo-Nazis and KKK members who attended the Charlottesville rally and people like Ms. Heyer. I, along with many others, do not endorse this moral equivalency.” He continued: “Many Republicans do not agree with and will fight back against the idea that the Party of Lincoln has a welcome mat out for the David Dukes of the world.”
Former Presidents George H. W. Bush and George W. Bush joined the chorus of lawmakers speaking out to condemn the racist violence, saying: “America must always reject racial bigotry, anti-Semitism, and hatred in all forms. As we pray for Charlottesville, we are reminded of the fundamental truths recorded by that city’s most prominent citizen in the Declaration of Independence: we are all created equal and endowed by our Creator with unalienable rights.”
The New York Times’ Andrew Ross Sorkin reported on CNBC that “a number of people” on Wall Street and at Goldman Sachs have called chief economic advisor Gary Cohn to suggest that he resign from the administration. You also have to wonder if Treasury Secretary Steven Mnuchin might be considering longer-term reputational damage. Newly installed Chief of Staff John Kelly looked extremely uncomfortable during Trump’s remarks Tuesday.
The dollar turned lower against most major currencies.
Trump’s Charlottesville uproar overshadowed a GOP tax plan roadshow. Top Republican tax writers went to a national shrine for tax cutters — former President Ronald Reagan’s California ranch — hoping to make a sales pitch for a historic overhaul of the U.S. tax code. Republicans have said they want to spend August — usually a quiet month in Washington — building support for a tax overhaul among constituents at home. Representative Kevin Brady, the Texas Republican who chairs the House Ways and Means Committee said that despite the distractions, tax writers in the White House, Senate and House remain on schedule to produce a plan that can be voted on in 2017.
And Wall Street largely ignored the problems, with the exception of an early morning Trump tweet against Amazon. The tweet read: “Amazon is doing great damage to tax paying retailers. Towns, cities and states throughout the U.S. are being hurt – many jobs being lost!” Trump wrote. Trump has repeatedly targeted Amazon.com, whose CEO Jeff Bezos owns the Washington Post, one of several major media outlets that have been swept up in the president’s ongoing fight with the press. Amazon does collect state sales taxes in Washington, D.C., and 45 states that have such a levy.
The Federal Reserve released minutes of the July 25-26 FOMC meeting. Federal Reserve policymakers appeared increasingly wary about recent weak inflation and some called for halting interest rate hikes until it was clear the trend was transitory but it looks like they are ready to begin reducing the Fed’s $4.5 trillion portfolio of Treasury bonds and mortgage-backed securities. Last month’s meeting, which concluded with a unanimous decision to leave rates unchanged, was marked by a lengthy discussion about the recent soft inflation readings, the minutes showed. The central bank’s preferred inflation measure dropped to 1.5 percent in June from 1.8 percent in February and has remained below its 2 percent target for more than five years. The lack of inflation spurred concerns the Fed may have to cool its monetary tightening pace even though the economy is growing moderately and the unemployment rate fell to 4.3 percent in July, matching a 16-year low touched in May.
Meanwhile, in an interview published by the Financial Times, Fed Vice Chairman Stanley Fischer called efforts in Washington to rescind regulations put in place after the 2008 financial crisis “mind boggling.” Fischer told the Financial Times , “It took almost 80 years after 1930 to have another financial crisis that could have been of that magnitude, and now after 10 years everybody wants to go back to a status quo before the great financial crisis. And I find that really extremely dangerous and extremely shortsighted.” In a separate interview on CNBC, Atlanta Federal Reserve President Raphael Bostic said he doesn’t expect the U.S. to achieve the White House goal of 3% growth. The economy has grown around 2% annually since an expansion began in mid-2009.
Housing starts declined 4.8 percent to a seasonally adjusted annual rate of 1.16 million units, hurt by a drop in groundbreaking on single-family projects, The Commerce Department revised June’s sales pace down to 1.21 million units from the previously reported 1.22 million units. Building permits dropped 4.1 percent, with the multi-family segment recording a drop of 11.2 percent. Permits for single-family homes were unchanged.
Urban Outfitters shares were up more than 22% as the company reported earnings that beat estimates, but some analysts say the second-quarter earnings numbers should give investors pause. The chain reported a comparable sales decline of 7.9% and revenue declined from a year ago.
Cisco Systems reported fiscal fourth-quarter revenue and adjusted earnings in line with expectations but predicted another drop in revenue in the next quarter. Cisco dropped in after-hours trade.
Shares of Agilent climbed 4%, after the maker of scientific and medical equipment blew past estimates for its fiscal third quarter and raised guidance for the year.