Morning in Arizona

Morning in Arizona
Rainbows over Canyonlands - Dave Stoker

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Friday, September 22, 2017

Monday, Maybe

Financial Review

Monday, Maybe


SPX + 1 = 2502
NAS + 4 = 6426
RUT + 6 = 1450
10 Y – .02 = 2.26%
OIL + .11 = 50.66
GOLD + 6.50 = 1298.10

Top Cryptocurrencies

Name Symbol Price USD Market Cap Vol. Total Vol. % Price BTC Chg. % 1D Chg. % 7D
Bitcoin BTC 3,625.6 $60.47B $1.18B 42.84% 1 +0.75% -1.90%
Ethereum ETH 263.70 $25.09B $405.81M 14.78% 0.0730023 +0.58% 3.57%
Bitcoin Cash BCH 410.63 $6.85B $226.51M 8.25% 0.113792 +0.40% -3.41%
Ripple XRP 0.17235 $6.61B $34.62M 1.26% 0.00004755 -0.35% -6.26%
Dash DASH 345.00 $2.61B $69.79M 2.54% 0.0951904 +1.07% 17.61%
Litecoin LTC 47.230 $2.52B $216.55M 7.89% 0.0130959 -1.21% -5.23%
NEM XEM 0.20813 $1.89B $2.88M 0.10% 0.00005792 +1.80% -3.43%
IOTA MIOTA 0.51489 $1.43B $8.98M 0.33% 0.00014143 +1.96% 3.79%
Monero XMR 87.75 $1.33B $27.17M 0.99% 0.0242851 +0.29% -13.39%
Ethereum Classic ETC 10.2433 $981.34M $29.54M 1.08% 0.00282523 +0.42% -3.95%

Is that true? Is it possible that the Dow Industrial Average went down for two consecutive sessions? It has been about a month since we have had back to back loses on the Dow. For the week, the Dow rose 0.4%, the S&P rose 0.1%, and the Nasdaq fell 0.3%.

Sen. John McCain announced today in a statement that he cannot “in good conscience” vote for the GOP’s latest plan to overhaul Obamacare, likely ending Republicans’ latest effort to repeal and replace the Affordable Care Act.

McCain wrote: “I believe we could do better working together, Republicans and Democrats, and have not yet really tried. Nor could I support it without knowing how much it will cost, how it will (affect) insurance premiums, and how many people will be helped or hurt by it. Without a full CBO score, which won’t be available by the end of the month, we won’t have reliable answers to any of those questions.”

McCain’s “no” vote means it is likely Republicans won’t be able to repeal and replace Obamacare before September 30, as Sen. Rand Paul of Kentucky said he would not back Graham-Cassidy and Sen. Susan Collins of Maine has said she is leaning “no” on the proposal. But there are still questions as to where Alaska Sen. Lisa Murkowski now.

Bottom line, 3 no votes kills the Graham-Cassidy bill but it won’t really die – not yet. Republicans can now write and pass another budget for fiscal 2018 that uses the same reconciliation procedure for health care legislation.

The trick would be combining it with a major tax overhaul, since the GOP is aiming to use reconciliation for that as well. Senate Finance Committee Chairman Orrin Hatch said today there’s “a chance” of combining the two efforts in a 2018 budget resolution.

McCain torpedoed the last GOP bill in July, returning to the Senate after being diagnosed with brain cancer only to cast a surprising and dramatic 50th vote against a limited-repeal of Obamacare offered by Majority Leader Mitch McConnell. But until today, he was officially undecided on the Graham-Cassidy proposal, apparently torn between his disgust for the party’s rushed, partisan legislative process and his famously close friendship with Graham, its most vocal salesman.

McCain acknowledged that his friendship with Graham put him in a difficult spot. “I take no pleasure in announcing my opposition. Far from it,” he said. “The bill’s authors are my dear friends, and I think the world of them. I know they are acting consistently with their beliefs and sense of what is best for the country. So am I.”

After the announcement, Graham tweeted: “My friendship with @SenJohnMcCain is not based on how he votes but respect for how he’s lived his life and the person he is.” Absolutely correct.

The latest repeal and replace defeat deepens doubt surrounding the GOP’s ability to get healthy on tax reform. The Senate’s late-July rejection of the initial push to repeal and replace Obamacare gave Republicans a chance to cut their losses. Congress could have begun a limited bipartisan effort to stabilize insurance marketplaces – which have grown in popularity during this year’s repeal battle — while the GOP moved on to the tax debate that unites the party more.

The much-anticipated tax plan crafted by the Trump administration and Republican congressional leadership is expected to be unveiled Wednesday, and that could provide positive momentum for stocks in the final week of the quarter. The S&P 500 is up 3.3 percent for the quarter so far. The Dow is up more than 4.6 percent for the quarter. The Nasdaq is up 4.7 percent for the quarter.

From what we have learned about the Graham-Cassidy bill, it wasn’t any better than earlier repeal efforts, and maybe worse. The ACA has plenty of problems but those problems would not be corrected by Graham-Cassidy. It probably didn’t help that all 50 Medicaid directors – that is every state – opposed the GOP’s latest health care bill, and a Brookings report indicated at least 21 million would lose insurance.

Have you heard that the world will end tomorrow? I am not making this up, someone else is. The Armageddon rumors sparked when a Christian numerologist called David Meade suggested Nibiru would plough into our planet on September 23. It’s all over the inter-webs.

Meade says Arizona is a good place to survive the collision. I don’t really know why that is. But I think, if there was a mystery planet headed for a collision with Earth, we might have seen it by now. So, will the world end tomorrow? Computer says… no.

But the People’s Democratic Republic of Korea might just blow up a hydrogen bomb in the Pacific Ocean. On Tuesday, during his speech at the United Nations, President Trump said his government would “totally destroy North Korea” if necessary to defend the United States or its allies.

On Friday, Kim Jong Un responded, saying North Korea “will consider with seriousness exercising of a corresponding, highest level of hard-line countermeasure in history.” The North Korean leader didn’t elaborate on the nature of this countermeasure, but his foreign minister provided a hint: North Korea might test a hydrogen bomb in the Pacific Ocean.

Atomic weapons are typically tested underground. An explosion on or above water would have nasty repercussions. More than 60 years after the United States tested a series of atomic bombs near Bikini Atoll in the Marshall Islands, the island remains “unlivable”.

There are signs that Mexico and Canada are increasingly less worried by the idea of the North American Free Trade Agreement (NAFTA) falling apart. Mexico’s foreign minister Luis Videgaray says “Mexico is much bigger than NAFTA,” arguing that an average 3% increase in tariffs that he thinks would come if NAFTA ended wouldn’t stop trade with the US. With negotiations among the US, Mexico, and Canada due to resume this weekend, he went further: “If NAFTA goes away…it’s not the end of the world.”

Shares of Sprint gained about 6% and T-Mobile gained about 1%, after Reuters said the companies are close to agreeing to tentative terms on a merger. Japan’s Softbank Group, Sprint’s majority shareholder, will own 40% to 50% of the combined entity. T-Mobile parent Deutsche Telekom will own a majority stake.

Apple launched its new line of smartphones and watches, and turned in their worst weekly performance for the week of a major product launch since the original iPhone was released back in 2007, following less-than-stellar product reviews.

There has been a tendency for Apple to slip after a product launch – buy the hype and sell the reality – but this week was particularly bad as Apple dropped 5%. That’s a loss of $50 billion dollars in market cap – Still, many investors are looking at it as a chance to buy.

On Tuesday, shares barely managed a gain after ho-hum iPhone 8 reviews. On Wednesday, shares dropped 1.7% after a few prominent Apple Watch Series 3 reviews complained about spotty connectivity, an issue Apple acknowledged it was seeking to solve. Thursday’s 1.7% decline followed an announcement that Google is spending $1.1 billion on a cooperation agreement with smartphone manufacturer HTC to produce the Pixel smartphone.

The FAANG companies – Facebook, Apple, Amazon.com, Netflix and Google holding company Alphabet have been able to put up stellar growth numbers for quite some time, without competing very much with each other. That’s starting to change.

Consider the case of Oracle, which announced fairly solid growth in its cloud business but offered up weak guidance – shares were slammed. It looks like Oracle might not have a big slice of the Cloud Pie. That leaves Amazon and Google, and maybe Microsoft to slug it out.

Google is investing in smartphones to battle it out with Apple. Facebook has been vying with Google over ad clicks. Amazon and Google are fighting over which device will power your home – Alexa or Google assistant. And how will you watch TV in the future? On YouTube, Apple TV, Amazon Instant video, or Netflix, which now comes complimentary with a subscription on T-Mobile.

The most amazing thing of all is that it has taken us the better part of two decades to arrive at a moment when tech companies actually see themselves as competitors. It will be very interesting to see how this new-found competition plays out because the future of the FAANGs is going to tell us a lot about the future of Wall Street, considering the FAANGs represent over $3 trillion in market capitalization — roughly 13% of the entire S&P 500.

London is one of Uber’s largest and most lucrative markets, with 40,000 drivers and 3.5 million people who use the app once every 90 days. But that number may soon be reduced to zero. The city’s regulator, Transport for London, said it denied the license because Uber’s “approach and conduct demonstrate a lack of corporate responsibility.”

Its license will expire on Sept. 30, although the company has 21 days to appeal—which it intends to do—and can carry on operating during the appeal process. The move is a win for taxis, but maybe not so much for customers.

The federal government told election officials in 21 states, including Arizona, that hackers targeted their systems last year, although in most cases the systems were not breached.

The government told The Associated Press last year that more than 20 states were targeted by hackers believed to be Russian agents before the 2016 elections. But for many states, the calls Friday from the Department of Homeland Security were the first official confirmation of whether their states were on the list.

Stocks Little Changed Amid Data and Geopolitical Developments

Charles Schwab: On the Market
Posted: 9/22/2017 4:15 PM EDT

Stocks Little Changed Amid Data and Geopolitical Developments
 
U.S. stocks finished nearly unchanged to round up the trading week as the markets grappled with flared up tensions in regard to North Korea and as international and domestic business activity reports painted a positive global growth picture. Treasury yields and the U.S. dollar pared a weekly advance, while gold was higher and crude oil prices were mixed. In equity news, Texas Instruments raised its dividend and CarMax rallied after topping quarterly expectations.

The Dow Jones Industrial Average (DJIA) decreased 10 points (0.1%) to 22,350, the S&P 500 Index added 2 points (0.1%) to 2,502, and the Nasdaq Composite ticked 4 points higher (0.1%) to 6,427. In light to moderate volume, 719 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq. WTI crude oil added $0.11 to $50.66 per barrel and wholesale gasoline was $0.02 higher at $1.63 per gallon. Elsewhere, the Bloomberg gold spot price increased $5.80 to $1,297.00 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly 0.1% lower at 92.18. Markets were mixed for the week, as the DJIA gained 0.4%, the S&P 500 Index ticked 0.1% higher and the Nasdaq Composite declined 0.3%.

Dow member McDonald's Corp. (MCD $159) announced a 7.0% increase to its quarterly dividend to $1.01 per share, while Texas Instruments Inc. ( TXN $88) reported that it will boost its quarterly dividend by 24.0% to $0.62 per share and a $6.0 billion addition to its share repurchase program. MCD dipped, while TXN gained solid ground.

CarMax Inc. (KMX $73) reported fiscal Q2 earnings-per-share (EPS) of $0.98, versus the $0.95 FactSet estimate, as revenues rose 9.7% year-over-year (y/y) to $4.4 billion, above the expected $4.3 billion. Q2 same-store sales of used autos grew 5.3% y/y, compared to the 5.0% increase that was expected. Shares are rallied.

Preliminary September business activity reports mixed but continue to signal growth

The preliminary Markit U.S. Manufacturing PMI Index showed expansion in output accelerated after rising to 53.0 in September, from August's 52.8 level, matching the Bloomberg expectation. The preliminary Markit U.S. Services PMI Index showed growth for the key U.S. sector this month slowed more than expected, declining to 55.1 from August's 56.0 level, versus forecasts calling for a dip to 55.7.

Readings above 50 for both reports denote expansion in activity and the data followed Markit's eurozone manufacturing and services growth that topped forecasts. All of the world's top 20 economies are growing this year, a rare occurrence over the last decade and a key component to our positive global outlook for earnings right now as discussed by Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, and Vice President of Trading and Derivatives, Randy Frederick in the video, Is An Optimistic Outlook for Global Equities Warranted?, on the Insights & Ideas page at www.schwab.com. Follow Jeff and Randy on Twitter: @jeffreykleintop and @randyafrederick.

Treasuries were mostly higher, with the yield on the 2-year note flat at 1.44%, while the yield on the 10-year note declined 2 basis points (bps) to 2.26% and the 30-year bond rate dipped 1 bp to 2.80%.
Bond yields and the U.S. dollar experienced volatility following Wednesday's decision by the Fed to hold interest rates steady, discussed by Schwab's Chief Investment Strategist Liz Ann Sonders in her latest commentary, The Fed's on the QT, on the Market Commentary page at www.schwab.com. Liz Ann notes that the Fed, as expected, left rates unchanged but announced it would start to shrink its balance sheet in October. On balance, the statement was seen as more hawkish than expected, with the majority of FOMC participants expecting at least one more rate hike this year. We continue to believe a December rate hike remains firmly on the table given continued strength in the labor market and some signs that inflation is getting a lift. In addition, since the Fed began raising interest rates in late-2015, financial conditions have actually loosened—giving the Fed the runway to continue tightening policy. Follow Liz Ann on Twitter: @lizannsonders.

North Korean concerns flared-up after the country issued a threat that it could test another hydrogen bomb over the Pacific. The threat comes as U.S. President Donald Trump offered some tough commentary toward the nation in his speech at this week's United Nations gathering. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, notes in his article, Missiles and Markets: An investor guide to geopolitical risks, investors should avoid overreacting to geopolitical developments and stick to their long-term financial plans. Read more on the International page at www.schwab.com, and follow Jeff on Twitter: @jeffreykleintop.

Europe mostly higher and Asia mostly lower amid geopolitical uneasiness
Most European equity markets finished higher, with some upbeat economic data in the region helping overshadow flared up risk aversion on new threats by North Korea. Markit's preliminary Eurozone Composite PMI Index—a gauge of activity in both the manufacturing and services sectors—improved to 56.7 in September from 55.7 in August, and versus the projected dip to 55.6. A reading above 50 denotes expansion and German manufacturing activity was a standout in the report as its index unexpectedly rose to a level above 60. The euro ticked higher versus the U.S. dollar following the data and as the greenback was hampered by the geopolitical uneasiness. The markets mostly shrugged off some political uncertainty ahead of this weekend's national election in Germany and as today's highly anticipated Brexit speech from U.K. Prime Minister Theresa May appeared to disappoint as it lacked details on the path to leave the European Union. The British pound saw pressure following May's speech. For analysis of the political front see Schwab's Jeffrey Kleintop's, CFA, and Vice President of Trading and Derivatives, Randy Frederick's video, Political Risk: How Should Investors Respond?, on the Insights & Ideas page at www.schwab.com, where you can also find our article, Brexit Begins: What's Next for the U.K.?.

Global monetary policy remained in focus as the Fed this week signaled a December rate hike remains in play, while the European Central Bank and Bank of England have offered hawkish signals as of late. Schwab's Jeffrey Kleintop, CFA, notes in his latest article, How the Shift by Central Banks May Affect the Stock Market, despite the coming shift by central banks towards trimming/tapering their balance sheets, we don't believe the bull market is at risk. Read more on the Market Commentary page at www.schwab.com, including Jeff's point that earnings, not easing, remain the key support for stock markets around the world. Bond yields in the region were relatively flat.

Stocks in Asia finished mostly to the downside amid a reversal as new bomb testing threats by North Korea caused geopolitical tensions to flare up and bolster risk aversion. Schwab's Liz Ann Sonders offers analysis of the tensions toward North Korea in her article, Twist and Shout: United States Takes on North Korea … Implications for Stocks, on the Market Commentary page at www.schwab.com. The yen rallied in the final hours of trading and Japanese equities declined. Shares trading in mainland China and Hong Kong fell, with the geopolitical uneasiness being met with a downgrade of China's credit rating by Standard & Poor's. South Korean stocks decreased and Indian equities dropped. However, strength in financials helped lift Australian securities higher.

Stocks mixed as a plethora issues persist

Stocks finished the week mixed but still remained near record high territory as the markets took a plethora of traditional market-moving events relatively in stride. The U.S. dollar spiked briefly and Treasury yields continued a recent rally on the heels of the Fed's perceived hawkish monetary policy statement. However, both pared gains in the second-half of the week as geopolitical concerns were revived after President Trump's stern warning at this week's UN gathering appeared to prompt a threat of another hydrogen bomb test by North Korea. Natural disasters remained in focus as U.S. homebuilder sentiment, housing construction activity, and existing home sales were impacted by Hurricanes Harvey and Irma, Maria hit the already ravaged Caribbean, and Mexico was rocked by a deadly earthquake.

Telecommunications stocks led to the upside, bolstered by merger chatter regarding T-Mobile US Inc. (TMUS $64) and Sprint Corp. (S $9), which appeared to ease heated up price competition concerns. Financials posted a solid gain on the rise in bond yields, and energy issues gained ground as crude oil prices posted a third-straight weekly gain. However, the rise in interest rates weighed on real estate and utilities issues, while technology issues declined on the choppiness in the U.S. dollar and pressure on Dow member Apple Inc. (AAPL $152) amid concerns following last week's new iPhone launch. Best Buy Co. Inc's (BBY $54) disappointing long-term outlook and Bed Bath & Beyond Inc's (BBBY $23) decisive earnings miss and lowered guidance hamstrung the consumer discretionary sector. General Mills Inc's (GIS $51) results preserved concerns toward the packaged foods market to hamper the consumer staples sector. Healthcare issues moved lower amid the volatile biotech sector as discussed by Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA, in his latest, Schwab Sector Views: Biotech Bonanza or Bust?, on the Insights & Ideas page at www.schwab.com.

Next week, the U.S. economic calendar will bring some key data points for the markets to digest, courtesy of Consumer Confidence, preliminary durable goods orders, personal income and spending, as well as the final look at Q2 GDP. A host of Fedspeak is poised to garner attention, headlined by Fed Chairwoman Janet Yellen's speech on inflation, uncertainty and monetary policy, which will include a Q&A segment. As noted in the latest Schwab Market Perspective: A Cat and Mouse Fall, volatility has ramped up a bit in the traditionally-slow final weeks of summer, which could be a preview of a bumpy fall for investors. Solid economic data and strong corporate earnings should allow the bull market to continue, but fiscal and monetary uncertainties present risks. Read more on the Market Commentary page at www.schwab.com, and follow us on Twitter: @schwabresearch.

International reports due out next week that deserve a mention include: China—Caixin China PMI Manufacturing Index and industrial profits. Japan—PMI Manufacturing Index, household spending, retail sales, industrial production and consumer price inflation. Eurozone—consumer price inflation estimate, along with German business confidence and retail sales. U.K.—Q2 GDP.