DOW – 28 = 17,930
SPX – 9 = 2088
NAS – 47 = 5058
10 Y + .01 = 1.81%
OIL – 66 = 44.68
GOLD + 6.30 = 1303.80
Yesterday, the S&P 500 index posted its 7th consecutive loss; that has only happened 4 times in the last 20 years. Today the market made it 8 in a row, matching the longest losing streak – last seen in 2008 following the collapse of Lehman Brothers.
Still, this isn’t something we see often. Before 2008, we go back to 1980 for an 8-day string of losses. The current streak has been fairly tame; the index is down about 3% on low volume; and while the selloff has been persistent it has also been orderly. The next level of support is the 200-day moving average at 2082.
Crude oil has fallen about 14% from the most recent peak reached two weeks ago.
Today the Bank of England kept interest rates on hold and signaled there would be no further easing in 2016, citing stronger-than-expected economic data. The central bank’s policy makers voted unanimously to maintain the benchmark rate at a record low of 0.25% and keep its quantitative easing program at around $550 billion. No surprise.
Here’s the surprise – Dealing a blow to Prime Minister Theresa May’s plans, the U.K. High Court has ruled that the government cannot start negotiations to leave the EU without a vote from Parliament. The government could now be forced to get parliamentary approval to trigger Article 50, the formal mechanism that begins a two-year window for exit negotiations. At the very least, this casts uncertainty over the Brexit process. The government has said it will appeal the verdict. The pound jumped to a one month high against the dollar.
American firms and employees boosted their productivity at an annual 3.1% pace in the third quarter. That’s the first gain since the fall of 2015 and largest advance in two years. The improvement was triggered by a big jump in the number of goods and services produced even though the amount of time workers put in on the job barely rose. Output of goods and services — the stuff workers make or provide — shot up 3.4% in the third quarter.
The amount of time employees worked, however, only edged up 0.3%. Unit-labor costs, meanwhile, grew much more slowly in the third quarter: 0.3% vs. a revised 3.9% advance in the spring.
Last week’s first look at third-quarter GDP indicated an uptick in private fixed investment, bucking a long-running trend of declines in this measure. And so, on this basis it looks like the economic necessity of squeezing more productivity out of the existing pools of workers is playing out.
The increase in productivity is a positive development for corporate profits and as we work our way through earnings reports it looks like earnings for the S&P 500 turned positive year-over-year, the first time in five quarters America’s biggest companies had seen bottom-line growth.
Looking beyond the third quarter jump, productivity is still flat compared to last year. And with wages rising, unit labor costs could again shoot higher and cut off the prospects for a marked improvement in corporate profitability. One good quarter for productivity does not change the trend but it is a step in the right direction.
The Institute for Supply Management said its non-manufacturing index fell to 54.8% last month from 57.1% in September, which marked an 11-month high. Any reading over 50% signals that more businesses are expanding instead of contracting. Companies that offer services, such as health care and entertainment grew less rapidly in October and scaled back hiring plans, but executives described business as steady in a sign that the economy is still expanding at a moderate pace.
Factory orders rose by a seasonally adjusted 0.3%, and August’s orders were revised to show 0.4% growth instead of a previously reported 0.2% gain
The number of people who applied for unemployment benefits at the end of October rose by 7,000 to a three-month high of 265,000. Initial claims have been below the key 300,000 threshold for 87 straight weeks, a steak last accomplished in 1970.
Of course, tomorrow is the monthly jobs report from the Labor Department. Here’s what to expect: about 175,000 net new jobs in October, unemployment rate dropping from 5% to 4.9%, average hourly earnings up 0.3% month-on-month, average hourly earnings up 2.6% year-on-year, and average weekly hours worked at 34.4. Keep in mind that the jobs report could be influenced by Hurricane Matthew. But if the numbers come in solid, it may strengthen the case for the Federal Reserve to raise interest rates in December.
After the closing bell, Facebook reported profits soared in the third quarter and monthly active users topped 1.8 billion, but a warning about slowing ad-revenue growth pulled the stock down more than 5% today. Ad load will taper off in the second half of 2017 as Facebook gets close to maxing out the number of ads it can cram into news feeds without damaging its user experience.
Fitbit crashed 30% after missing on sales and slashing guidance. The company reported revenue of $504 million ($509 million expected), and guided both fourth quarter earnings per share and full-year revenue below Wall Street estimates.
Casino operator Wynn Resorts reported third quarter earnings that missed expectations, posting earnings per share of 75 cents on revenue of $1.1 billion. Wall Street was expecting earnings per share of 78 cents on revenue of $1.12 billion.
Whole Foods reported an EPS beat in its fiscal fourth quarter and raised its dividend. Whole Foods also announced John Mackey as the single CEO of the company. Walter Robb will remain on the board.
3D Systems reported mixed third quarter earnings, posting revenue of $156.36 million and earnings per share of 14 cents.
Prosecutors are bearing down on generic pharmaceutical companies in a sweeping criminal investigation into suspected price collusion. Bloomberg reports the antitrust investigation by the Justice Department, begun about two years ago, now spans more than a dozen companies and about two dozen drugs, according to people familiar with the matter. The grand jury probe is examining whether some executives agreed with one another to raise prices, and the first charges could emerge by the end of the year.
Though individual companies have made various disclosures about the inquiry, they have identified only a handful of drugs under scrutiny, including a heart treatment and an antibiotic. Among the drug makers to have received subpoenas are industry giants Mylan and Teva Pharmaceutical. Other companies include Actavis, which Teva bought from Allergan in August, Lannett, Impax Laboratories, Covis Pharma, Sun Pharmaceutical, Mayne Pharma, Endo International’s subsidiary Par Pharmaceutical Holdings and Taro Pharmaceutical.
All these drug makers were slammed in trading today; between 4% and 23%. Although it isn’t illegal for companies to raise prices at the same time, it’s against the law for competitors to agree to set prices or coordinate on discounts, production quotas or fees that affect prices.
The federal government can prosecute companies for collusion and seek penalties and potentially send executives to jail. Charges could extend to high-level executives. Time will tell. Generic drugs account for 88 percent of prescriptions dispensed in the US, according to the Generic Pharmaceutical Association. Generics makers brought in about $70 billion in US sales in 2015, after discounts and rebates to payers.
Closing arguments were heard late Wednesday in a trial on whether UPS should be fined $872 million by New York state for allegedly delivering untaxed cigarettes from smoke shops on Native-American reservations. And it looks like UPS knew they were skirting tax laws. Tobacco retailers located on upstate reservations were given price discounts for shipping in volume. Delivery drivers could accept iPads and other gifts from shippers. Account executives, whose compensation was tied to keeping big accounts, ignored signs that some customers signing delivery contracts dealt in cigarettes.
The U.S. Energy Department announced 28 states, working with utilities and vehicle manufactures, including GM, BMW and Nissan, and EV charging firms have agreed to work together to build 48 national electric-vehicle charging networks on nearly 25,000 miles of highways in 35 U.S. states. One hurdle to the mass adoption of EVs has been the difficulty in finding places to recharge vehicles.
We all know about the election Tuesday but beyond presidential politics, 35 states and Washington, D.C., are considering 163 ballot measures this year, with 71 of those initiated by voters rather than legislators—the most since 2006. Voters in Arizona, California, Nevada, Maine, and Massachusetts will decide if they’ll join four states and Washington, D.C., in legalizing recreational marijuana use. If measures in all five states are approved, 75 million people would live in a state where recreational marijuana use is allowed.
Most states have a higher hourly minimum wage than the federal minimum of $7.25, and four states will vote whether to raise theirs again this year. Maine, Arizona, Colorado, and Washington could phase in a minimum hourly wage of $12 or more by 2020. South Dakotans will decide whether to create a second, lower minimum for teenage workers—purportedly to protect starter jobs for young people.
While federal law requires background checks on gun purchases from licensed dealers, eight states and Washington, D.C., require them for all purchases. According to polls, four states voting this year seem to strongly favor further restrictions on firearms. Ballot measures often have impact beyond the borders of the state that approves them—any could be fodder for federal activity or Supreme Court consideration.