Financial Review by Sinclair Noe for 03-01-2016
DOW + 348 = 16,865
SPX + 46 = 1978
NAS + 131 = 4689
10 Y + .09 = 1.83%
OIL + .14 = 33.89
GOLD – 6.60 = 1232.70
It was the best one-day percentage gain for the S&P 500 and the Dow since Jan. 29. The Nasdaq Composite saw its biggest one day gain since August. The S&P 500’s rally today leaves it lower by just 3% year-to-date, and the Nasdaq’s advance brings its loss for the year to 6.4%. Biotechnology, which underperformed by a huge margin yesterday, came to life today with the Nasdaq Biotechnology Index ETF (IBB) surging 4.4%. The small cap Russel 2000 broke through its own 50 day moving average for the first time since December 9. However, it rose 2.0% vs. the S&P 500’s 2.4% gain. Elsewhere, regional banks, cybersecurity, high-yield bond ETFs, and energy names also impressed. The Utilities sector, which is hurt by higher rates, was by far the worst performing S&P sector today.
Today is Super Tuesday. The polls will begin closing at 7 PM eastern time. A total of 595 Republican delegates are up for grabs in 11 states of the 1,237 needed to clinch the GOP nomination in 11 states; Donald Trump is expected to win 10 of the 11 states, with a close race in Texas, where Ted Cruz holds the lead. Sanders and Clinton are facing off in 11 states for 865 of the 2,383 delegates needed to win the Democratic race.
While Asia and Europe’s economic data remains on a downswing, things are still looking decent in the US. In the past 2 weeks, we’ve seen better-than-expected GDP, CPI, and PCE Deflator data, which has helped boost stocks at the expense of bonds. It also has more traders thinking the Fed will actually raise rates this year. Today, the momentum continued…
Finally some partially positive news from the US manufacturing sector: a score of 49.5 points in the ISM Manufacturing PMI. This is still in negative territory (under 50) but better than expected and with a better employment component.
Home prices nationwide, including distressed sales, increased annually by 6.9%, according to the CoreLogic home price index. Month-over-month, January increased by 1.3% from December 2015. Yearly price gains ranged from 11.6% in Washington to 0.1% in Maine. Only Mississippi and Louisiana saw declines.
The Census Bureau reported that overall construction spending increased 1.5% in January compared to December. Residential spending was flat in January, but 7.6% higher compared to a year ago. Nonresidential spending was 2.5% higher for the month, and 12.3% higher for the year. Highway and street construction was up 9.5% in December and 14.5% in January, a record two-month rise.
NY Fed President William Dudley sees downside risks to his U.S. economic outlook, an assessment that could flag a longer pause before the central bank’s next interest-rate hike. At a conference in China, Dudley said: “At this moment, I judge that the balance of risks to my growth and inflation outlooks may be starting to tilt slightly to the downside. On balance, I am somewhat less confident than I was before.” Dudley is a close ally of Fed Chair Janet Yellen and a permanent voter on U.S. monetary policy. Tomorrow the Federal Reserve will publish its Beige Book.
Brazilian federal police arrested a Facebook executive today after the company failed to turn over information from a WhatsApp messaging account that a judge had requested for a drug trafficking investigation. WhatsApp is owned by Facebook. In Brazil, Facebook has run into other hurdles with authorities in recent months over access to its information. Tuesday’s arrest comes less than three months after another judge ordered a temporary shutdown of WhatsApp in a similar case. An appeals court quickly overruled the shutdown.
The arrest comes as a debate over the access that law enforcement officials should get to tech companies’ data has escalated. In the United States, Apple is in a fight with the government over whether to build a special tool to help law enforcement break into an iPhone used by one of the attackers in a mass shooting in San Bernardino, last year. The U.S. government cannot force Apple to unlock an iPhone in a New York drug case, U.S. Magistrate Judge James Orenstein declared on Monday, a ruling that could affect a similar decision involving the San Bernardino shooter’s iPhone in California. Today, Apple and the FBI faced off before the House Judiciary Committee on Capitol Hill. FBI Director James Comey told a congressional panel that the FBI would seek to use the same statute it is trying to apply in the San Bernardino case to compel Apple to unlock other phones, “if (the statute) is available to us.” Members of the U.S. House of Representatives Judiciary Committee seized on Comey’s statement that the case could set a legal precedent allowing the agency access to any encrypted device.
ICE is thinking about buying the LSE. International Continental Exchange, the owner of the New York Stock Exchange is thinking about making a bid for the London Stock Exchange. The report comes just a week after the LSE confirmed it was in talks to combine with Deutsche Boerse. The possible size of a deal is unknown.
Ford Motor’s light vehicle sales increased 20 percent in February, while Fiat Chrysler deliveries climbed 12 percent as both far exceeded analyst estimates. Not everyone enjoyed the party. GM sales fell 1.5 percent. The average estimate for last month’s annualized selling rate, adjusted for seasonal trends, was 17.6 million vehicles.
Glencore Plc reported net income excluding some items fell 69 percent to $1.34 billion in 2015, as the company announced its biggest drop in profits since its IPO. Glencore was only able to report that profit due to the performance of its trading division; the mining division, as expected, made a loss. The company said that it planned to reinstate its dividend in 2017, once it has strengthened its balance sheet. Glencore’s CEO Ivan Glasenberg said he thinks commodity markets have hit the bottom and that cuts in spending by the world’s biggest mining companies will have a positive impact on prices in the future. Glasenberg said global copper inventories have dwindled, indicating a potential shortening in supply, and Glencore’s copper sales to China are strong. The upbeat remarks run counter to some other mining executives who’ve said they continue to expect more pain this year. Anglo American Chief Executive Mark Cutifani last month said 2016 could be worse than last year for commodities.
SunEdison is delaying filing its annual report due to ongoing internal investigations by the company, based on allegations made by former company executives concerning the accuracy of its expected financial position. The firm said that the audit committee has currently found no wrongdoing based on the allegations although the process is still underway.
Shares of Valeant Pharmaceuticals plunged 18% just before Monday’s closing bell after the drug maker said it faced a previously undisclosed probe from the SEC. The investigation is separate from a previous probe into Valeant’s 2015 purchase of Salix Pharmaceuticals. Moody’s also placed the firm’s credit rating on review for a downgrade as the company withdrew its previous financial guidance and postponed its fourth quarter earnings call.
Volkswagen is confident it will reach an agreement with the U.S. on a technical fix for diesel cars, auto buybacks and fines, CEO Matthias Mueller said ahead of the Geneva Motor Show, where he is pitching new vehicles and exuding confidence about a recovery. The DOJ has sued VW for up to $46 billion for violating American environmental laws, but there is still no fix for nearly 600,000 U.S. cars more than five months after the company’s emissions test-rigging scandal broke.
After logging millions of miles in autonomous-drive mode, one of Google’s self-driving cars hit a bus last month, the first time the company said its new technology is partly to blame for an accident. The Lexus SUV drove into the left side of a public bus on Feb. 14 as it was attempting to avoid some sand bags on a road in Mountain View, California.
According to a new Bankrate.com survey, Wyoming is the best state for retirees. The study examined six key factors: cost of living, taxes, healthcare, weather, crime and residents’ overall well-being. Wyoming’s neighbors South Dakota, Colorado and Utah rank second, third and fourth, respectively. The region boasts strong well-being scores and it also offers a low cost of living and below-average crime.
New York is the worst state for retirement, owing mostly to the nation’s highest tax burden and a very high overall cost of living. West Virginia, Oregon, Arkansas and Louisiana comprise the rest of the bottom five. Among traditional retirement hotspots, Arizona fared the best at No. 9. Florida came in 28th (dragged down by a high crime rate and below-average healthcare quality) and Hawaii 45th (largely because it has the nation’s highest cost of living).
Regardless of which state you call home, if you’re a woman, your chances of living in poverty when you pass 65 are alarmingly high, according to a study released by the National Institute on Retirement Security (NIRS). At age 65, females typically have income that is 25 percent lower than that of men. The average annual income from Social Security for a man in 2014 was $17,911; for women, it was $13,824. That and other unhappy facts make the odds of a woman over age 65 living in poverty 80 percent higher than those for a man, according to the NIRS study.
Meanwhile, a third report, this one a survey by Willis Tower, reveals that, man or woman, East Coast or West Coast, it just doesn’t matter: Most Americans are nervous about what quality of life they’ll have in retirement. Three out of four Americans with jobs don’t expect to live as well as their parents did in retirement, according to a survey of more than 5,000 by Willis Towers Watson, a human resources consulting firm. About 30 percent worry their savings will run out just 15 years into retirement. Fifty percent think their money will be gone within 25 years. And the report ranks America behind countries that include India, Mexico, China, and Australia in terms of satisfaction with personal finances.