…..Fed minutes point to a hike “relatively soon”. Wells Fargo CEO John Stumpf is out immediately. Yemen rebels fire on a US ship. Qatar buys Boeing jetliners and fighters (maybe war does pay). OPEC oil output hits a high. Chromebooks are the back-to-school winner. Wal-mart hikes salaries to avoid overtime pay. Facebook gets out the vote.
Financial Review by Sinclair Noe for 10-12-2016
DOW + 15 = 18,144
SPX + 2 = 2139
NAS – 7 = 5239
10 Y + .02 = 1.79%
OIL – .24 = 49.94
GOLD + 2.50 = 1255.90
September’s Federal Open Market Committee meeting featured something not often seen since Janet Yellen took over as chair: honest-to-goodness dissent. Three of the FOMC’s 10 voting members opposed the final statement, even as the majority of central bank officials voted to keep its interest rate target anchored at 0.25 percent to 0.5 percent. The Fed said in a statement after its September meeting that the case for a rate increase had “strengthened.” Today we saw the minutes of the FOMC meeting and it looks like a rate hike could come “relatively soon” if the economy continues to advance at a reasonable pace. The account, released after a standard three-week delay, said some of the officials who voted to wait viewed the decision as a “close call.” Here’s a key quote from the minutes:
“It was noted that a reasonable argument could be made either for an increase at this meeting or for waiting for some additional information on the labor market and inflation. A couple of members emphasized that a cautious approach to removing accommodation was warranted given the proximity of policy rates to the effective lower bound, as the committee had more scope to increase policy rates, if necessary, than to reduce them.”
Today, New York Fed President William Dudley said, “I think we can be quite gentle as we go in terms of gradually removing monetary policy accommodation.” So, not much urgency there, but really it looks like rates will move higher.
Wells Fargo CEO John Stumpf will retire, effective immediately; which sounds more like he was fired than retired; or at least the writing was on the wall. The problem – Wells Fargo set up 2 million fake accounts to meet sales targets. Predictably, Wells Fargo directors deflected the blame from themselves and instead blamed rampaging hordes of renegade junior staff for opening up the unauthorized accounts to meet cross selling sales goals. Stumpf claimed 5,300 unscrupulous employees were fired for opening false accounts and he encouraged the good remaining employees to call an Ethics Hotline to report problems. One problem is that when employees called the hotline – they were fired. Wells Fargo got hit with a $185 million fine but more significantly investors are now worried that its business model is broken. WFC has pledged to the regulator that it will now scrap all product sales goals for its retail banking staff. The bank reports its third-quarter results on Friday.
The Bureau of Labor Stats monthly JOLT survey shows monthly jobs openings decreased in August to 5.4 million. The number of quits was essentially unchanged at 3.0 million in August. The quits rate was 2.1%. The numbers of hires was 5.2 million in August, also little changed from July. The hiring rate was 3.6%, unchanged from the prior month.
Total mortgage application volume fell 6 percent for the week ended Oct. 7. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 3.68 percent, from 3.62 percent.
Many Americans are dangerously at risk of being victims of credit card fraud and as many as 41 million U.S. adults have already had their identity stolen, according to a Bankrate survey. Another 49 million know someone who has been affected. Hacked credit card fraud will reach a record $4 billion this year.
A U.S. Navy destroyer was targeted on Wednesday in a failed missile attack from territory in Yemen controlled by Iran-aligned Houthi rebels, the second such incident in four days. The USS Mason fired defensive salvos in response to at least one missile which did not hit the ship.
The White House recently allowed the sale of F-15 fighter jets to Qatar; it’s a 36 jet deal valued at up to $4 billion, with options for up to 72 fighters. Now comes word Qatar Airways will buy 100 Boeing Jetliners in a deal worth $18.6 billion. The airliner deal includes the purchase of 30 787-9 Dreamliners and 10 777-ER aircraft, valued at $11.7 billion. Boeing builds the F-15 in St. Louis. Boeing builds commercial aircraft in Seattle. The deal could affect 104,000 jobs across America.
OPEC reported an increase in its oil production in September to the highest in at least eight years and raised its forecast for 2017 non-OPEC supply growth, pointing to a larger surplus next year despite the group’s deal to cut output.
Steel demand will improve in 2017. The World Steel Association says stronger-than-expected demand from China and emerging markets will boost global demand by 0.5% in 2017.
U.K. Prime Minister Theresa May accepted that Parliament should be allowed to vote on her strategy for taking Britain out of the European Union as lawmakers who want to keep closer ties to the bloc began to assert themselves. The pound climbed against all of its 31 major peers as May’s move was seen as a conciliatory gesture, calming investor concern that she was taking a gung-ho approach to negotiations with the EU.
The growing product safety crisis at Samsung prompted the company to cut its third quarter operating guidance by 33% to $4.6 billion. The South Korean company is also contending with a new report on an exploding washing machine in the US. So, if you were wondering how much the exploding Galaxy Note 7 problem was going to cost Samsung, the answer is $2.3 billion. But that’s just a starting point. The company’s market capitalization has plunged recently, and then there is the reputational damage.
Apple had a rough back-to-school season in personal-computer sales, while Alphabet’s low-price Chromebooks were a big hit for students. International Data Corp. and Gartner reported tabulations of PC sales for the third quarter, and both analyses showed huge drops for Apple’s Mac sales in the important back-to-school quarter – down about 13%. While Lenovo maintained its crown as the top PC manufacturer, its lead over HP narrowed in the third quarter, both studies found. IDC reported a near-tie between the two companies, with Lenovo holding 21.3% of the market and HP at 21.2%, up from 19.7% in the same quarter last year. Both studies also showed continuing consolidation of the PC market as those top manufacturers grow more dominant. IDC said the top three vendors controlled 58% of the market in the third quarter, up from 55% a year ago and 51% in 2014; Gartner noted the top six vendors in its survey enjoyed a record 78% of the market.
Deutsche Bank is raising more cash. Yesterday, the bank raised $1.5 billion through the sale of five-year notes. That comes after Friday’s offering that raised $3 billion. It sold the debt at a premium of 290 basis points, or slightly lower than the 300 bps seen at the Oct. 7 sale, but still twice that demanded in a public issue of similar notes back in August 2015. Elsewhere in the world of embattled European financials, Lloyds Banking Group is cutting 1,340 jobs.
Stanley Black & Decker announced a deal to buy Newell Brands’ tools business for $1.95 billion in cash. Stanley said it expects the acquisition, which is expected to close in first half of 2017, to add an adjusted 15 cents a share to earnings in the first year.
Wal-mart, the country’s biggest private employer hiked its minimum salary for store managers in anticipation of the Labor Department’s overtime rule, set to take effect December 1. The rule will double (to $47,476) the salary threshold under which virtually all workers are guaranteed time-and-a-half pay whenever they work more than 40 hours in a given week. Entry-level managers at Walmart were making $45,000 when the rule came out in May, but starting in September they made $48,500.
Jack Ma has ambitious plans to create a group trading platform for small businesses and farmers. The Alibaba chairman envisions an open e-commerce system that would include cross-nation agricultural trading. Ma says the long-term goal for Alibaba is to quintuple its user base to 2 billion by 2036.
For 4 days in September, Facebook posted a 17-word reminder for users to register to vote. It worked. In California, 123,279 people registered to vote or updated their registrations on Friday, Sept. 23, the first day that Facebook users were presented with the reminder. That was the fourth-highest daily total in the history of the state’s online registration site. Indiana recorded its third-highest daily online registration total ever. Minnesota broke its record for the most online voter registrations in a single week. In Connecticut, 14,883 people registered to vote in the first three days of the Facebook campaign, a more than 12-fold increase over the same period a week earlier. Now, let’s play a little game? We’ll try to guess your age and sex. Did you see the reminder from Facebook? If you answer “no”, you are probably an older male. If you answer “yes” you are probably between probably younger (ages 18-35) and female.