Year of the Rooster
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Financial Review by Sinclair Noe for 01-23-2017
DOW – 27 = 19,799
SPX – 6 = 2265
NAS – 2 = 5552
RUT – 4 = 1347
10 Y – .06 = 2.40%
OIL – .35 = 52.87
GOLD + 7.40 = 1217.40
President Trump is expected to sign an executive order as early as today – intended to renegotiate NAFTA, the free trade agreement between the United States, Canada and Mexico. Trump also signed an executive order pulling out of the Trans-Pacific Partnership (TPP).
In one of first Trump administration orders, the Department of Housing & Urban Development suspended reduction of FHA annual mortgage insurance premium rates. That was a quarter of a percent cut in the mortgage insurance premium for FHA loan holders, announced last week by the U.S. Department of Housing and Urban Development and set to go into effect next Friday, January 27. The reduction was estimated to save the average FHA borrower $500 this year.
The new White House rolled out several policy promises on its new website. The position page on jobs and the economy reads: “To get the economy back on track, President Trump has outlined a bold plan to create 25 million new American jobs in the next decade and return to 4 percent annual economic growth.”
So, now we have a baseline, even if it is improbable.
A group including former White House ethics attorneys filed a lawsuit today accusing President Donald Trump of allowing his businesses to accept payments from foreign governments, in violation of the U.S. Constitution. The lawsuit, brought by the Citizens for Responsibility and Ethics in Washington, alleges that the Constitution’s emoluments clause forbids payments to Trump’s businesses. It will seek a court order forbidding Trump from accepting such payments.
President Trump held meetings this morning with business and labor leaders, seeking to work quickly on his campaign promise to boost the American manufacturing sector and deliver more jobs. Trump repeated a campaign promise to cut regulations by at least 75%. He also said there would be advantages to companies to make their products in the US, suggesting there will be a substantial border tax on foreign goods entering the US. This afternoon he meets with labor leaders and U.S. workers.
Foxconn Technology Group is considering building a display-panel manufacturing facility in the United States in a joint venture with Apple that could create up to 50,000 jobs. Terry Gou, Taiwan-based Foxconn’s chairman and CEO, said the facility could cost $7 billion and create between 30,000 and 50,000 new jobs, and could include the production of TV screens in addition to smartphone displays. The U.S. has no TV-display factories, even though it is the world’s second-largest TV market.
Supermarket operator Kroger says it will fill 10,000 permanent positions in its supermarket divisions. Kroger, which had about 431,000 full- and part-time employees as the New Year, also said its total active workforce grew by more than 12,000 in 2016.
On the eve of a summit last month between technology executives and then President-elect Donald Trump, IBM Chief Executive Officer Ginni Rometty publicly pledged to hire about 25,000 U.S. workers and spend $1 billion on training over the next four years.
In late November, IBM
completed at least its third round of firings in 2016, according to former and current employees. They don’t know how many people have lost their jobs but say it’s probably in the thousands, with many of the positions shipped to Asia and Eastern Europe.
Rometty’s hiring pledge prompted current and former IBM workers to vent on message boards and Facebook groups. IBM’s re-organization inevitably meant some workers would lose their jobs. Automation wiped out some positions, and at the same time, IBM has sent thousands of jobs offshore.
This will be another busy week for earnings reports; later in the week we’ll hear from Alphabet and Microsoft. Intel is also set to report, along with telecom and media giants Verizon, AT&T, and Comcast. 3M, Caterpillar, Boeing, and Ford will give us a snapshot of the manufacturing and industrial sectors.
We’ll also see earnings from pharmaceutical companies like Johnson & Johnson and Biogen and oil giant Chevron. The major data release in the week is the advanced reading of fourth-quarter GDP. There is also some housing data, durable goods orders, and a look at consumer sentiment.
Yahoo reported earnings after the closing bell that beat estimates but the earnings are secondary. Verizon has agreed to pay $4.8 billion for Yahoo, and the factor that could change that price is not financial results but hacks – and who knew what and when. Yahoo said today the closing would be delayed until the second quarter, or as soon as practicable.
The SEC is investigating whether two massive data breaches at Yahoo should have been reported sooner to investors. Yahoo faces questions about exactly when it knew about a 2014 cyber-attack it announced in September that exposed the email credentials of half a billion accounts. In December, Yahoo said it had uncovered yet another massive cyber-attack, saying data from more than 1 billion user accounts was compromised in August 2013. Securities industry rules require companies to disclose cyber breaches to investors.
McDonald’s posted better-than-expected global same-store sales in the latest quarter, but its results in the U.S. declined as enthusiasm for its all-day breakfast options leveled off. For the quarter that ended in December, the burger chain’s global comparable sales increased 2.7%, well estimates. In the U.S., comparable sales fell 1.3%; the company blamed a challenging comparison to the prior-year launch of its all-day breakfast service.
Halliburton reported mixed fourth quarter fiscal 2016 earnings results. Despite a miss on the top line, which continue to suffer from weak demand, Halliburton’s overall results point to improvements in North America — its largest revenue region.
OPEC’s production fell by about 221,000 barrels a day to just over 33 million a day in December, per secondary sources data in the group’s monthly report published Jan. 18. The declines still leave output about 1.8 million barrels a day higher than the average of 31.3 million the group is targeting in the first half of the year, underscoring a need to press on with cuts. Saudi Arabia’s Minister of Energy said the first two weeks of January saw “very strong” compliance and most producers are already exceeding their pledged cuts.
The mega-merger between health insurers Aetna and Humana has been blocked by a federal judge. The deal, in which Aetna proposed to buy Humana for $37 billion, has been ruled anti-competitive. Aetna now owes Humana a $1 billion break-up fee, according to Bloomberg. Last summer, Aetna threatened to pull out of the Affordable Care Act exchanges, after the Department of Justice brought a lawsuit to block the merger.
Reuters last week reported that another healthcare tie-up, the Anthem-Cigna mega-merger, would be blocked by a federal judge. Former Attorney General Loretta Lynch argued in July when the suit was brought that both the Anthem-Cigna and Aetna-Humana mergers would hurt consumer choice and increase prices.
The City of Everett Washington has file suit against Purdue Pharma, alleging the drug manufacturer turned a blind eye to criminal trafficking of its OxyContin painkillers to “reap large and obscene profits” and demanding it foot the bill for widespread opioid addiction in the community.
In a first-of-its-kind lawsuit, city lawyers accused Purdue of gross negligence, creating a public nuisance and other misconduct and said the company should pay costs of handling the opioid crisis — a figure that the mayor said could run tens of millions of dollars — as well as punitive damages.
A computer problem forced United Airlines to ground all domestic flights for about an hour on Sunday evening, causing a cascade of delays and annoying customers throughout the United States. The “ground halt” was lifted after about one hour.
Cyber-attacks against banks have increased in numbers and sophistication in recent years, with criminals finding new ways to target banks. Last February $81 million was taken from the Bangladesh central bank when hackers broke into its system and gained access to the SWIFT international transactions network. The European Union is considering testing banks’ defenses against cyber-attacks, with an EU wide stress test.
Its lead may have narrowed over the past year, but South Korea still reigns supreme on Bloomberg’s Innovation Index, which ranks the world’s economies using metrics such as R&D spending and the concentration of high-tech public companies.
Hong Kong is the most expensive city in the world to live in. That’s according to the 13th Annual Demographia International Housing Affordability Survey, which says that Hong Kong’s housing market is the least affordable in the world.
All around the world, Chinese people are cleaning their houses, shopping for new clothes, and following several traditions leading up to and during the New Year to help usher in good luck and fortune. Roughly a sixth of the world will observe Chinese New Year. Starting January 28, celebrations to welcome in the year of the rooster will continue through February 2. This week also marks the world’s largest annual mass migration as millions of Chinese people travel back to their family homes for reunions ahead of the New Year celebrations.
Today also marks the start of tax filing season. Your taxes aren’t due until April 18th this year, but you can start filing as of today.
And for those of you still trying to cling to your New Year Resolutions, be warned – today marks the start of Girl Scout Cookie season and it also marks the 100th anniversary of Girl Scout cookie sales. I could tell you to just say no, but that wouldn’t work.
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