That’s a Print
Stocks slip. ECB steady. Home sales jump. LEI up. AZ unemployment jumps. Anthem & Cigna face antitrust suits. Beaucoup earnings news. Ailes out. Tesla’s super-secret plan (encoder ring included). Selfie fumblers. Printers in space.
Financial Review by Sinclair Noe for 07-21-2016
DOW – 77 = 18,517
SPX – 7 = 2165
NAS – 16 = 5073
10 Y – .01 = 1.56%
OIL – 1.19 = 44.56
GOLD + 15.40 = 1331.70
The stock market was probably a little tired. After 9 straight sessions with gains that pushed the Dow Industrials and the S&P 500 to record highs, the market takes a pause; and at this point that’s all we can say with certainty. Markets do not go up in a straight line, and it is very rare to see 9 consecutive up days. Remember that this market has been remarkably resilient.
The European Central Bank kept its interest rates and policy plans unchanged and said the immediate stress caused to markets by Britain’s shock vote to leave the European Union had been contained. ECB President Mario Draghi said it was too early to ascertain the full impact of Brexit, but he said the ECB was prepared to take more actions to lift inflation and economic growth if necessary. The bank kept its deposit rate at minus 0.4 percent and the main refinancing rate at 0.00 percent, both record lows.
The Federal Reserve will wait until the fourth quarter before raising interest rates, likely in December after the presidential election, according to a Reuters poll. Just over half the economists surveyed over the past week expect the Fed to raise its federal funds rate in the fourth quarter to 0.50-0.75 percent from 0.25-0.50 percent currently. The move is most likely to come in December as the November policy meeting is only days ahead of the Nov. 8 election.
Initial claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 253,000 for the week ended July 16, the lowest reading since April. Claims have now been below 300,000, a threshold associated with a healthy labor market, for 72 straight weeks, the longest stretch since 1973.
A couple of weeks after the nationwide jobs report we get updates on the individual states. Arizona lost 39,700 jobs in June, and the unemployment rate went up two-tenths of a percent to 5.6%. That compares to a 6.0% unemployment rate a year ago, but Arizona still lags the national average of 4.9% unemployment. In June, 40,700 government jobs were cut from Arizona’s payrolls, resulting in a net loss of 39.700 jobs in the state.
The National Association of Realtors says existing home sales increased 1.1 percent to an annual rate of 5.57 million units last month, the highest level since February 2007. Mortgage rates fell in June to their lowest levels since 2013 on bets the Federal Reserve would be cautious about raising short-term rates. First-time buyers made up 33 percent of sales in June, the biggest share in nearly four years.
The leading economic index for the U.S. rose 0.3% in June after declining in the prior month. A measure of current conditions increased 0.3%. A “lagging” index fell 0.1%. The LEI is a weighted gauge of 10 indicators designed to signal business-cycle peaks and valleys.
The Justice Department filed an antitrust lawsuit against Anthem and Cigna in federal court in Washington. The government will sue to block a pair of proposed deals that would consolidate the nation’s five biggest health insurers into just three: Anthem’s $48 billion takeover of rival health insurer Cigna and Aetna’s $37 billion bid for Humana. Three of the companies said they would fight the lawsuits, which could tie them up in months of litigation, dragging out deals that were announced about a year ago. Aetna did present two divestiture plans to the Justice Department in an effort to resolve the government’s concerns and allow the Humana deal to go forward.
Turkey’s President Erdogan declared a three-month state of emergency Wednesday night, allowing him to sidestep parliament in passing new laws against supporters of Friday’s coup. The Istanbul stock index is down 9.5% so far this week. Standard & Poor’s downgraded Turkey’s sovereign credit rating and lowered its outlook to “negative.”
General Motors reported second-quarter net income rose to $2.87 billion, or $1.81 a share, from $1.1 billion, or 67 cents a share, a year ago. GM also raised its forecast for full-year profits. Meanwhile, GM said it is recalling nearly 290,000 older Chevrolet Impala cars in the United States because the air bag may not deploy in the event of the crash. GM also said it may be forced by U.S. regulators to recall another 4.3 million vehicles for potentially defective Takata air bag inflators, a call-back that would cost it $550 million; this in addition to a 2,5 million vehicle recall announced in May and June.
Southwest Airlines experienced a tech outage, affecting multiple technology systems and grounding some planes. The airline said it expects to continue to move toward normal operations but that it will take time. Record revenue and cheaper fuel pushed Southwest Airlines’ second-quarter profit up by 35 percent, but that missed analysts’ expectations. However, investors are more concerned with the airline’s warning that it is expecting unit revenue to fall as much as 4% next quarter due to lower ticket prices and greater levels of competition.
Union Pacific dropped 2.8 percent after the No. 1 U.S. railroad posted a lower quarterly net profit, hurt by slumping freight volumes.
Southwest and Union Pacific dragged down the Dow Jones Transport index.
Unilever posted earnings results for the first half of fiscal 2016. The headline numbers met management’s forecast, but they were still marked by weak profit growth as demand for consumer products slowed across many key markets.
Swatch expects a recovery in the second half after net profit plunged 52% in the first half.
Roche confirmed its outlook for 2016 and reported results that exceeded expectations.
Lufthansa cut its full-year profit target, saying “terrorist attacks in Europe” weighed on its bookings.
The fears also hit Easyjet, with shares under pressure after weak third quarter revenues. Easyjet said the Brexit vote has already cost it $53 million, mainly from the drop in the value of the pound.
SABMiller’s net producer revenue grew 2% in the quarter. Meanwhile the Justice Department has approved the $107 billion merger with Anheuser-Busch InBev.
AT&T reported a 22 percent increase in quarterly operating revenue as it added television subscribers, helped by its acquisition of DirecTV. The company’s adjusted profit, however, was in line with the average analyst estimate.
Starbucks said global sales at company-owned cafes open at least 13 months rose 4 percent in the fiscal third quarter ended June 26 from the year-ago period. That was well short of the 5.6 percent gain analysts had expected.
Chipotle reported net income slumped to $25.6 million, or 87 cents per share, in the second quarter ended June 30, from $140.2 million, or $4.45 per share, a year earlier. Sales at restaurants open at least 13 months fell 23 percent. Revenue fell 16.6 percent. Which all sounds terrible, but they have been giving away free burritos and the loyalty program is working; sales inched higher in July. Still, that’s a lot of problems to overcome.
Roger Ailes has resigned as chairman and chief executive Fox News Channel following allegations of sexual harassment. The terms of Ailes’ exit package were not released. Former Fox News anchor Gretchen Carlson sued Ailes earlier this month, claiming sexual harassment. Ailes has denied the charges. Fox hired a law firm to conduct an internal investigation.
Paypal and Visa have announced a partnership which will allow Visa debit customers to move money instantly on Paypal and Venmo accounts. The agreement gives PayPal incentives for increased Visa card spending volumes from merchants and consumers. PayPal will join the Visa Digital Enablement Program to expand point-of-sale acceptance.
Tesla Motors unveiled its Secret Master Plan Part 2 in a blog post overnight. Highlights include an all-in bet on autonomous driving, ride sharing initiatives, urban transport concepts, and new models including pickups and heavy-duty trucks which are already in early development. The first order of business is solar power, that’s where the energy comes from. The pieces are already in place, almost: the Powerwall battery and Gigafactory battery plant, the pending acquisition of solar panel installation and financing firm SolarCity, and a fleet of Tesla vehicles with mobile batteries.
Selfie-fumblers rejoice: Corning just unveiled its newest version of Gorilla Glass, the chemically strengthened super glass that dozens of consumer electronics makers use in their devices. The new glass was formulated to improve drop performance from gadgets that fall onto rough surfaces from certain heights, and survives up to 80% of the time when dropped from 1.6 meters.
Space travel is unpredictable. We’re all familiar with the phrase, “Houston, we have a problem.” So much can go wrong, and it’s impossible to plan for and respond quickly to all of it. The International Space Station has its first 3D printer. If emergencies occur, astronauts can simply print the parts they need. Putting a 3D printer in orbit has huge implications for short- and long-term space travel. Until now, anything astronauts wanted either had to be sent up with them at launch, or delivered later during a resupply mission. Both options are expensive and can take days or weeks. In a dire situation, that’s not good enough. Now, instead of having to wait for a resupply or hack a tool from scraps, the crew can press a button and make one in a matter of hours.