T Minus One
…..ECB Day – no change. Day One tomorrow – lots of change. Jobless claims at 40 year low. Arizona unemployment rate 5%. Dec. housing starts jump. South Korea’s JY Lee not arrested. Brazil Supreme Court Justice dies in plane crash. Credit Suisse pays $5.28 billion for complete garbage. The strange tale of EpiPen and bizarre drug pricing. McCartney sues for his music.
Financial Review by Sinclair Noe for 01-19-2017
DOW – 72 = 19,732
SPX – 8 = 2263
NAS – 15 = 5540
RUT – 12 = 1345
10 Y + .07 = 2.46%
OIL + .33 = 51.41
GOLD + .50 = 1204.50
The Dow Industrials erased its gains for 2017 as it fell for the fifth day in a row. The Russell 2000 also turned negative year to date.
The European Central Bank left its quantitative-easing program unchanged at €60-billion-euro per month. Policy makers also kept the main refinancing rate at zero and the deposit rate at minus 0.4 percent. There is little sign that the Governing Council is ready to endorse more hawkish language just yet, even after a jump in inflation to 1.7 percent in Germany. The U.S. dollar rose against its major rivals, recovering off earlier weakness after ECB President Mario Draghi said he didn’t see any “convincing” pickup in Eurozone inflation. The ECB’s renewed commitment to stimulus comes a day after Federal Reserve chair Janet Yellen said the American economy is strong enough to warrant higher interest rates.
Trump’s pick for Treasury Secretary Steve Mnuchin began his confirmation process today. Meanwhile, Energy Secretary-designate Rick Perry also went before lawmakers. Trump has chosen former Georgia Gov. Sonny Perdue to lead the Department of Agriculture, rounding out the president-elect’s Cabinet selections. The Senate has not scheduled a single confirmation vote for Trump’s Cabinet. On Wednesday, retired Defense Secretary designate General James Mattis became the first nominee to win approval at the committee level. Senate Republicans still hope to confirm members of Trump’s national-security team on Friday, and the likeliest to receive votes are Mattis, retired General John Kelly as homeland security secretary, and Representative Mike Pompeo as CIA director. Elaine Chao, the nominee for transportation secretary, could also win Senate approval on Friday. So could Ben Carson, Trump’s pick for housing secretary, though he is considered less likely to get a Friday vote. None of the five have generated significant opposition from Democrats, and all of them more or less sailed through their confirmation hearings last week.
Trump may have more luck with the Senate than his immediate predecessors, and he has Democrats to thank. When they held the majority in 2013, they changed the rules so that executive-branch nominations are no longer subject to the 60-vote threshold for filibusters. That means Trump could conceivably win Senate approval of his entire Cabinet without a single Democratic vote.
In rally after rally, and speech upon speech, Donald Trump built a verbal skyscraper of campaign promises about what he would do on his first day in the White House. Begin building a wall at the nation’s southern border. End the “war on coal.” Label China a currency manipulator. The list went on and on. Tomorrow is Day One. During a break in inauguration festivities, Trump is poised to wield one of the most powerful tools of his office, the presidential pen, for executive actions that can be implemented without the input of Congress. Trump’s advisers vetted more than 200 potential executive orders for him to consider signing on healthcare, climate policy, immigration, energy and numerous other issues, but it was not clear how many orders he will initially approve.
The number of workers being laid off each week has plunged again back to a more-than-40-year low. Initial jobless claims sank by 15,000 to 234,000 in the week ended Jan 14, just a hair above the post-recession low. Initial claims have been under 300,000 for 98 straight weeks, a streak last replicated in 1970 and one that shows no sign of ending.
Arizona’s seasonally adjusted unemployment rate decreased two-tenths of a percentage point from 5.0% in November to 4.8% in December. The U.S. unemployment rate stands at 4.7% in December. A year ago, the Arizona unemployment rate was 5.9% and the U.S. rate was 5.0%. Arizona gained 6,300 jobs in December; breaking that down, 10,900 new jobs in the private sector, minus 4,600 jobs cut from government. Arizona employment grew by 1.2% (32,000 jobs) for the year. The Private Sector accounted for 33,100 jobs (1.4%). Government employment declined by 1,100 jobs. The sectors with the largest gains included Education and Health Services (14,300 jobs); Leisure and Hospitality (10,300 jobs); and Construction (6,300 jobs).
Builders broke ground on more homes in December, as confidence in the economy and demand for properties stays strong. Housing starts ran at a seasonally adjusted annual pace of 1.23 million in December, 11.3% higher than in November but about flat compared to the year-ago rate.
The federal control board overseeing Puerto Rico’s finances might accept a revised fiscal plan by Feb. 28 and extend a debt moratorium until May 1, which would give the U.S. territory more time to negotiate restructuring deals. Both requests will be taken up later this month, but would be conditioned on the government agreeing to turn over more financial information and not taking on extra liquidity loans.
A court in South Korea turned down prosecutors’ request to arrest Samsung’s Jay Y. Lee on alleged bribery, perjury and embezzlement, letting him stay in place atop the country’s most powerful company while they continue their investigation. The de facto head of the Samsung Group and vice chairman of Samsung Electronics is being investigated for allegedly providing tens of millions of dollars to benefit a close friend of South Korean President Park Geun-hye in exchange for approval of a merger between two Samsung affiliates. The deal helped Lee consolidate control over the sprawling conglomerate founded by his grandfather.
Brazilian Supreme Court Justice Teori Zavascki was killed in a plane crash today. Zavascki was overseeing a massive corruption investigation related to the state oil company, Petrobras. Dozens of politicians and some of Brazil’s wealthiest businessmen have been arrested as part of the inquiry, known as Operation Car Wash, over the past two years. The political crisis triggered by the Petrobras investigation eventually led to the impeachment of President Dilma Rousseff in September, on unrelated charges.
The US Justice Department announced a deal with a $5.28 billion settlement with the Swiss banking giant Credit Suisse, for misleading investors in residential mortgage-backed securities it sold in the run-up to the 2008 financial crisis. Credit Suisse will pay a $2.48 billion cash penalty and provide $2.8 billion in consumer relief, including loan forgiveness and financing for affordable housing. Credit Suisse has admitted that between 2005 and 2007 it knowingly deceived investors in the sale of complex securities derived from residential mortgages. Credit Suisse employees knowingly packaged poor quality loans for sale, referring to them in some instances as “utter, complete garbage” and “complete crap.”
Goldman Sachs is considering moving 1,000 workers in its London offices to Frankfurt because of concerns over Britain’s vote to leave the EU. Yesterday, UBS said that about 1,000 of the bank’s 5,000 employees based in London may be affected by Brexit, while HSBC announced it could relocate 1,000 staff to Paris.
American Express reports quarterly profit fell 8.2 percent to $825 million, or 88 cents per share, from 89 cents per share, a year earlier. Total revenue fell to $8.02 billion from $8.39 billion last year.
IBM forecast full-year earnings above Wall Street estimates and reported better-than-expected quarterly revenue, helped by growth in newer areas such as cloud-based services and analytics. Still, IBM’s revenues declined for the 19th straight quarter.
We’ve often heard we should be smart consumers when it comes to health care; we should shop for the best prices on things like medicine. So, here is a test. Suppose your family needs the EpiPen for emergency allergy treatment.
Mylan makes EpiPen but they raised the price more than 500% to $609 list price for a two-pack of the lifesaving treatments; that prompted a hearing in Congress last September. In response, Mylan began selling an authorized generic for about $300 for a two-pack.
Last week, CVS Health Corp. said it would sell a twin-pack of the Adrenaclick auto-injector, from Impax Laboratories Inc., for $110, and offer a $100 discount for low-income families.
Today, privately held Kaleo, the maker of the Auvi-Q injectors, said it would list a twin pack for $4,500. But there is a twist. Kaleo, Auvi-Q’s manufacturer, will charge patients who have commercial insurance $0 for the product, whether or not the insurance company pays for it. That means that for insured patients, Auvi-Q would be the cheapest option. It will also give the product away to families with an income of less than $100,000. For those paying cash who do not qualify to get Auvi-Q for free, the product will cost $360.
If all this sounds like a big pricing scam concocted in the laboratories of Drs. Jekyll and Moreau, well, that is a possibility.
Paul McCartney sued Sony’s music-publishing division seeking a judgment validating his efforts to take back his copyrights in Beatles songs he mostly co-wrote with John Lennon. McCartney began serving termination notices to Sony/ATV Music Publishing in 2008, intending to reclaim his copyright interests in the music catalog, composed between 1962 and 1971. The termination notices, which McCartney wants the court to validate, are supposed to take effect starting in October 2018.