C’est l’économie stupidePodcast: Play in new window | Download (Duration: 20:24 — 11.7MB)
DOW – 30 = 20,547
SPX – 7 = 2348
NAS – 6 = 5910
RUT – 4 = 1379
10 Y – .01 = 2.24%
OIL – 1.17 = 49.54
GOLD + 2.20 = 1284.90
For the week, the Dow Industrials were down 3 days and up 2, but the 2 gainers were big. The S&P 500 managed to notch its first weekly gain in three. For the week, the Dow rose 0.5 percent, the S&P gained 0.8 percent and the Nasdaq advanced 1.8 percent, notching a record high along the way. Small caps in the Russell 2000 provided out-sized gains of 2.6% on the week.
Oil prices dropped more than 2 percent today, notching the biggest weekly decline in more than a month on mounting evidence that US production and inventory growth were offsetting OPEC’s attempts to reduce the global crude glut. WTI crude lost 6.7 percent for the week.
The U.S. Commodities Future Trading Commission showed total long positions in U.S. crude rose in the week to April 18 to their highest in more than a month at 355,077 contracts. But oil has sagged in recent days, much as it did in March. Many in the market still expect OPEC to renew its production cuts for another six months. Still, shipment data shows more oil transiting world oceans than when cuts were put in place.
According to AAA, 43 states have seen prices at the pump increase over the past week. The national average is $2.42 a gallon, which reflects an increase of 13 cents in the last month, and 30 cents (or around 14%) compared to last year. A bump in gas prices is typical around this time of year, as oil refineries switch over from their winter blend to the summer blend.
The United States currently has an oversupply of gas, and as the weather warms up, demand will likely rise in June, sapping up supply and pushing prices up. AAA expects the national average for gas to peak at around $2.70 a gallon in June. In 2016, summer gas prices peaked at an average of $2.38 a gallon.
Johnson says that a handful of states will even see gas prices over $3 a gallon this summer, especially on the West Coast. In fact, two states already hit that benchmark this week: Hawaii ($3.06) and California ($3.01). The cheapest gas in the nation can currently be found in South Carolina ($2.13).
Of the 95 companies in the S&P 500 that have reported earnings through Friday morning, about 75 percent have topped expectations, according to Thomson Reuters data, above the 71-percent average for the past four quarters. Overall, profits of S&P 500 companies are estimated to have risen 11.2 percent in the quarter, the most since 2011.
Markets were hesitant today, in advance of Sunday’s French elections; this is just the first round of elections, winnowing a field of 11 candidates down to 2, who will face off in 3 weeks. Still, a lot is at stake. We’ll dive into details in just a bit.
President Trump told the Associated Press he’ll unveil a tax-reform package next week and promised a “massive tax cut” for individuals and businesses. He said it would be released “Wednesday or shortly thereafter” but declined to give details. He said the cuts will be “bigger I believe than any tax cut ever.”
The Tax Policy Center in Washington says, “The plan would cut taxes at every income level, but high-income taxpayers would receive the biggest cuts, both in dollar terms and as a percentage of income.”
Treasury Secretary Steven Mnuchin reiterated the administration is planning to unveil its tax reform plan in the near future. He said the administration is “very close” to releasing a proposal. Mnuchin said corporate inversions will be part of an overall review of tax regulations. Inversions involve US firms that move their legal address abroad to cut their tax bills through mergers with foreign companies.
President Trump’s budget director Mick Mulvaney said the administration plans to include $200 billion for new infrastructure spending in its full fiscal year 2018 budget. In a moderated discussion at the Institute of International Finance conference, Mulvaney said this is all the money needed to fund $1 trillion in projects, if leveraged properly. Mulvaney said there will not be any specific votes on infrastructure spending until the fall.
The White House ordered federal agencies to begin preparations for a potential partial government shutdown; it shouldn’t come to that but they need to be prepared. The White House said it wants to see money for Trump’s border wall included in the spending bill Congress must pass next week.
Democrats are opposed to the wall and consider including it in the budget bill to be something of a poison pill. The Senate needs 60 votes to pass the budget. Look for a possible short-term extension while they work it out. The push to reach an agreement on spending is complicated by White House efforts to try again for a House vote on replacing Obamacare next week.
If ongoing congressional budget battles force a government shutdown next week, home-buyers and sellers could be subject to more headaches than usual before their deals close. That’s because buyers looking for mortgage approval could hit paperwork roadblocks if the shutdown furloughs workers at the IRS or Social Security Administration.
That’s what happened in October 2013, the last time budget gridlock forced a 16-day shutdown that sent millions of government workers on furlough and gummed up the works of the U.S. housing market.
The National Association of Realtors says existing-home sales ran at a seasonally adjusted annual rate of 5.71 million, a 4.4% monthly increase. That was the strongest selling pace since February 2007 and was 5.9% higher than a year ago.
Tight inventory is still the biggest factor in the marketplace: supply was 6.6% lower compared to a year ago. That nudged the national median sales price to $236,400 – a 6.8% gain compared to a year ago. March’s price increase marks the 61st consecutive month of year-over-year gains.
Unemployment rates were lower in March in 17 states and stable in 33 states. Colorado had the lowest unemployment rate in March, 2.6 percent. New Mexico, at 6.7%, had the highest state unemployment rate. Arizona’s seasonally adjusted unemployment rate decreased from 5.1% in February to 5.0% in March.
The U.S. seasonally adjusted unemployment rate decreased from 4.7% in February to 4.5% in March. A year ago, the Arizona seasonally adjusted rate was 5.4% and the U.S. rate was 5.0%. The Private Sector gained 11,200 jobs; government cut 2,400 jobs, for a net gain of 8,800. The sector with the strongest growth was Leisure and hospitality.
Federal Reserve Vice Chairman Stanley Fischer isn’t worried about the economy. In an interview today, Fischer said weak growth in the US economy in the first quarter will likely be temporary and interest-rate hikes should be able to proceed as planned. The Fed has penciled in two more rate hikes this year and Fischer said this remains his forecast, depending on data, of course.
In the past few years, the economy has shown weakness in the first quarter, followed by stronger growth in the second and third quarters. First quarter growth was probably running at 1%. The government will release an advance estimate of first-quarter GDP April 28. Economists expect a rebound to a 2.7% rate in the second quarter.
The United States will not make an exception for American companies, including Exxon Mobil, seeking to drill in areas prohibited by U.S. sanctions on Russia. The United States and European Union imposed economic sanctions on Russia over its annexation of the Crimea region in 2014 and its role in the conflict in eastern Ukraine.
The sanctions forced Exxon to wind down drilling in Russia’s Arctic in 2014. Exxon had asked for and received in 2015 and 2016 waivers to operate a joint venture with Russian oil producer Rosneft in Russia. European Union sanctions do not keep European oil companies from operating in Russia, a point of annoyance for Exxon.
In recent months, Exxon applied for a Treasury Department waiver to drill with Rosneft – and today the waiver request was denied.
A federal judge in Detroit sentenced Volkswagen to three years’ probation for the German automaker’s diesel emissions scandal as part of a $4.3 billion settlement announced in January. The plea agreement called for “organization probation” in which the company would be overseen by an independent monitor.
General Electric reported quarterly sales and adjusted earnings results that beat analysts’ estimates, but its shares fell on concerns about some of its industrial businesses and its $1.6 billion in negative cash outflow. Adjusted earnings of 21 cents a share were unchanged from a year ago and beat analyst estimates of 17 cents. Revenue fell 1 percent to $27.66 billion. GE down 2.4%.
Subway Restaurants closed 359 U.S. locations in 2016, the first time that Subway had a net reduction. The store count dropped 1.3 percent to 26,744, but Subway remains the nation’s most ubiquitous eatery. Subway is coping with sub-par sales in the U.S., made worse by the emergence of newer fast-casual rivals and the industry’s heavy reliance on discounts and promotions.
Subway also has lost some of its luster as a healthier-food option. Sales fell 1.7 percent last year to about $11.3 billion. Subway is still growing internationally, though. Last year, sales outside the U.S. rose 3.7 percent to $5.8 billion as it continued to open locations.