More DriftPodcast: Play in new window | Download (Duration: 13:15 — 7.6MB)
DOW – 47 = 21,136
SPX – 6 = 2429
NAS – 20 = 6275
RUT – 1 = 1394
10 Y – .03 = 2.15%
OIL + .58 = 47.98
GOLD + 14.30 = 1294.60
BITCOIN – 0.15% = 2909.82
ETHEREUM + 6.26% = 264.16
Once again stocks drifted aimlessly. We are not seeing a risk off trade, but nobody is going full hog, risk on. We are waiting for Thursday. It could be a big day.
First, we have the European Central Bank, which has remained committed to its ultra-loose monetary policy since March 2016, when it cut its key interest rate, the main refinancing operations, to zero per cent, meaning it does not charge interest to banks borrowing money.
The bank has come under sustained pressure to raise interest rates as inflation has recovered, with some economists expecting the ECB’s governing council to remove a reference to “lower” interest rates in the future.
Then there is a parliamentary election in the UK. Prime minister Theresa May squares off against Jeremy Corbin. The major issues in the election are the National Health Service (NHS), Brexit, terrorism and national security, income inequality, how much money Britain has and what it should be spent on…
I’m joking of course; the major issues are why Theresa May hates appearing in public and whether Jeremy Corbyn loves the IRA. May leads the Conservative party. Corbin leads the Labor Party. But wait, there’s more – parties that is; including: The Scottish National Party, UKIP and Liberal Democrats.
And even though Labor has closed the gap on Conservatives, there is a possibility nobody wins outright – and that might mean a coalition. Hopefully, we’ve all learned not to bet on British elections.
Back in the US, Thursday morning brings the James Comey testimony on Capitol Hill. The White House confirmed that Trump would not seek executive privilege to stop Comey from appearing before the Senate Intelligence Committee.
Comey is expected to face questions about whether Trump pressured him to cancel an investigation into former national security adviser Michael Flynn, whose links to Russia are under scrutiny. The former FBI chief will reportedly stop short of saying that Trump interfered with the agency’s probe into Flynn. Yet he is also likely to face questions about a loyalty pledge reportedly requested by Trump.
Elected on pledges to overhaul the healthcare system and slash taxes, Trump has yet to achieve a major legislative win, and time is running out before lawmakers leave Washington for the August break.
Today, he met with senior Republicans. Senate Majority Leader Mitch McConnell said Senate Republicans are “getting close” to a healthcare plan after he presented an outline at a lunchtime meeting but he declined to say when he might bring it up for a vote. Other senior Republicans, such as Senator Orrin Hatch, said they may vote by early July.
Anthem, one of the nation’s largest health insurers, announced that it will stop offering policies in the Ohio marketplace next year. While Anthem, which operates for profit Blue Cross plans in more than a dozen states, said it has not made any decision about its participation in other state’s exchanges.
Anthem has previously warned that it might leave the marketplaces because of the uncertainty over the future of the individual market and the struggle over federal law. The company said, “an increasing lack of overall predictability does not provide a sustainable path forward to provide affordable plan choices for consumers.”
The Pentagon renewed praise of Qatar for hosting a vital US air base and for its “enduring commitment to regional security,” sticking to a message of reassurance even as President Trump, via Twitter, applauded a decision by Arab powers to cut ties to the Gulf ally, calling the diplomatic isolation was just punishment for the country’s support of Islamic extremists.
He also said the action is proof that his meeting with Persian Gulf Arab leaders in Saudi Arabia earlier this month was “already paying off.” More than 11,000 US and coalition forces are deployed to or assigned to al Udeid Air Base, from which more than 100 aircraft operate.
The latest job openings and labor turnover survey — known as the JOLTS report — released by the Bureau of Labor Statistics on Tuesday showed there were 6.04 million jobs open in the US in April. In the same month, last year there were 5.64 million jobs open. This is the most ever for the series dating back to its inception in 2001.
The jump in job openings also came as hiring and firing declined slight in April. The number of unemployed workers who are new entrants to the workforce continues to fall, indicating that people like college grads who go from being out of the workforce altogether are quickly getting jobs.
The number of unemployed workers per job opening in the U.S. was at a record low of 1.2. This compares to there being more than six unemployed workers per job opening in the wake of the financial crisis.
Additionally, almost twice as many people are quitting jobs as getting laid off, a sign that workers are confident they’ll find another job. In April, the quits rate fell slightly to 2.1%, with the 3.03 million folks who quit jobs during the month coming in only slightly lower than 16-year high for total quits we saw back in January.
Scott Pruitt, administrator of the US Environmental Protection Agency, has a new favorite statistic. Pruitt claims that 50,000 coal jobs, or coal and mining jobs, had been created in the US since the fourth quarter of last year. He’s off by about 49,000.
There has been an increase of about 50,000 mining jobs since October, but that number includes oil and gas exploration and drilling, and metal mining jobs, and only about 30,000 of those were during the Trump administration, and only about 1,000 of those jobs are in coal mining.
The US coal-industry employs about 51,000 workers total. Last month, 400 coal jobs were added—not 7,000. Kansas City Power & Light announced it will shut down several generating units that burn coal. And since Octoberr of 2016, the general merchandise retail sector has lost just over 95,000 jobs, nearly twice as many jobs lost in retail as in the entire coal industry.
Meanwhile, one company – Tesla, has about 30,000 employees and they are hiring more all the time – 1,861 job openings in the US. And the company isn’t just looking for coders. These positions are blue-collar, white-collar, skilled, unskilled. And while they are generally concentrated in Tesla’s home state of California, there are openings all over the country.
The national home price index from data provider CoreLogic was 6.9% higher than a year ago, and 1.6% higher than in March. Washington was the hottest state for prices, notching a 12% annual gain. Arizona posted a 6% annual gain in home prices. CoreLogic forecasts national home price growth of 5.1% in the coming 12 months.
Stocks hit records on Friday but have been drifting lower this week. Meanwhile the bond market has been in rally mode, up about 4.7% year-to-date. If the year ended today, it would be the best annual performance since 2011. If the pace continues through December, it would be the best performance since 2003.
When we started the year, most people were expecting the Trump administration’s pro-growth policies would spark inflation and lead to higher rates. That hasn’t happened. Meanwhile, China is buying US Treasuries again, after halting purchases last year – a move that might help cushion the blow if the Federal Reserve starts unwinding its massive bond portfolio.
The Fed is expected to raise borrowing costs next week, narrowing the rate gap between the US and China and making American debt more attractive.
The S&P 500 just posted a third straight quarter of year-over-year earnings growth, but there is a trend of more and more companies that are not posting profits. About 10% of the companies in the S&P 500 have posted losses in the last 12 months, something we haven’t seen since 2010.
No surprise that energy companies made the list of losers. A small surprise is that tech and consumer stocks are also showing up on the list. Overall, the 51 companies lost $55 billion over the last year. Trailing 12-month earnings in the S&P total about $986 billion, or $113 per share, just below an all-time high reached in 2014.
Take out the companies losing money and the total hits $1.04 trillion, or $117 per share, the highest ever. The $4-a-share gap is the widest since 2011, a year when the S&P did nothing in terms of returns.
If you are trying to figure out where in the world to invest, well ... The Korean peninsula is dealing with political uncertainty; tensions in the Middle East; South Africa’s economy has dipped into recession; Brazil is up to its chin in political corruption.
But let’s follow the money. The Institute of International Finance reports emerging markets are enjoying steady growth in capital inflows that should top $1 trillion next year, for the first time since 2014. The group expects nonresident inflows to top $970 billion this years, up from$718 billion last year, led by China, India and Brazil.
The Amazon vs. Walmart battle continues with Amazon offering its Prime subscription at a discount for US customers on government aid. Both stocks were down today.
Macy’s warned its margins could shrink further. Shares dropped over 8%. The news hit other department stores: JC Penney down 4%, Sears down 2.5%, Nordstrom down 3.6%.
Uber has fired 20 employees following an investigation by a law firm into sexual harassment and other claims. The law firm investigated 215 harassment claims going back to 2012, acted in 58 cases and took no action in 100 more cases.