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Wall Street heads lower, tax plan doubts weigh


Wall Street heads lower, tax plan doubts weigh

(Reuters) – Wall Street was set to open marginally lower on Tuesday as worries about Republican tax plans and the economy’s ability to deal with more rises in interest rates weighed on the mood among investors.

Shares in Home Depot held steady while those in off-price retailer TJX dipped after quarterly reports that bore the impact of a violent U.S. hurricane season.

Buffalo Wild Wings surged 26 percent after a report that the restaurant chain had received a takeover bid at about $2.3 billion from private equity Roark Capital Group.

With the quarterly earnings season winding down, the market has halted after its rally to record highs last week.

Investors were waiting for any signs of compromise on U.S. tax policy after Senate Republicans unveiled a plan last week that would cut corporate taxes a year later than a rival House of Representatives’ bill.

“You’re at the end of the earnings season, economic data is all distorted because of the hurricanes, I don’t think there is going to be any clear picture until we get a firm yes or no for the tax bill,” Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.

“We’ll see a bit of back-and-forth, the market’s got to breathe.”

At 8:32 a.m. ET, Dow e-minis were down 38 points, or 0.16 percent, with 27,263 contracts changing hands.

S&P 500 e-minis were down 5 points, or 0.19 percent, with 176,095 contracts traded.

Nasdaq 100 e-minis were down 5.25 points, or 0.08 percent, on volume of 29,520 contracts.

A Labor Department report showed producer prices increased 0.4 percent in October, after similar gains in September. Economists polled by Reuters had a expected a 0.1 percent rise.

In the 12 months through October, the producer price index jumped 2.8 percent, the largest rise since February 2012.

St. Louis Fed President James Bullard said on Tuesday the Fed should keep its benchmark interest rate at current levels until there is an upswing in inflation.

Investors are concerned that a tightening gap between short and long-term U.S. government bond yields suggests the Federal Reserve may be in danger of hiking rates too much and killing longer term inflation and growth.

Reporting by Sruthi Shankar in Bengaluru; Editing by Anil D’Silva


Published at Tue, 14 Nov 2017 14:01:48 +0000

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Is the stock market a bubble?

Is the stock market a bubble?

by Bill McBride on 11/09/2017 10:22:00 AM

Here are a few thoughts on “Is the stock market a bubble?”

First, as long term readers know, I rarely comment directly on the stock market (although I did post on the market in 2009 since that was a turning point).  I’ll be brief here.

Second, I write about the economy, and the stock market is not the economy.  This is usually my first comment to people when they ask about the market.  However – in general – the stock market does well when the economy is expanding, and poorly during economic downturns.

There are exceptions: in 1987, the economy was fine, but the stock market crashed in October 1987.  However the crash followed a very strong rally of over 30% from the beginning of 1987, and the market actually finished up for the year (although well off the peak). There were reasons for the crash – like portfolio insurance – that exacerbated the sell-off.  In addition, there weren’t any trading curbs (aka circuit breakers) in 1987, so the market could fall over 20% in one day.

Note: Some people say the 1987 proposed changes in the tax law – and a new Fed Chair – contributed to the 1987 crash.  Echoes of history?

Third, the general rule is don’t invest based on your political views.  Those who sold, or didn’t buy, because they didn’t like Obama missed an historical rally.  And those who sold, or didn’t buy, because they don’t like Trump missed solid gains this year.

Since I don’t think a recession is imminent, I’d generally expect further gains in the market over the next year. The PE ratio is high (around 25), and that is well above average. However it is typical for the PE ratio to expand during an economic expansion.

As I noted in the Are house prices in a new bubble?, a bubble requires both overvaluation based on fundamentals and speculation. It is natural to focus on an asset’s fundamental value (like the PE ratio), but the real key for detecting a bubble is speculation. Back in the late ’90s, stock speculation was obvious. Not only was margin debt high, but everyone was talking about investing in stocks – especially tech stocks. I knew the bubble was over when my mom called me and asked what “QQQ” stood for (NASDAQ ETF)? All her friends were buying it!  (My shoeshine boy story).

Another possible indicator of speculation is margin debt.

Real S&P500 and Margin DebtClick on graph for larger image.

This graph shows the real S&P 500 (inflation adjusted, right axis), and real NYSE margin debt (left axis).

The high level of margin debt might suggest too much leverage.

The bottom line is the U.S. economy is doing well (the global economy is doing well too).   There might be some speculation with margin debt, but everyone isn’t talking stocks (like in 1999).  So, in general, I don’t think this is a bubble.   Of course, as always, we could see a 10% to 20% correction starting at any time.  I’ll now go back to avoiding discussing the stock market.



Published at Thu, 09 Nov 2017 15:22:00 +0000

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Howard Schultz calls GOP tax plan ‘fool’s gold’


What's in the GOP proposed tax plan
What’s in the GOP proposed tax plan

Howard Schultz calls GOP tax plan ‘fool’s gold’


Many business leaders are cheering the corporate tax cuts proposed by President Trump and the GOP.

And then there’s Howard Schultz.

The Starbucks(SBUX) executive chairman slammed the House Republican tax proposal for being too heavily skewed toward tax cuts, instead of giving the outdated system much-needed reform.

“This is not tax reform. This is a tax cut. This is fool’s gold,” Schultz said on Thursday at the New York Times DealBook Conference in Manhattan.

Schultz, who stepped down as Starbucks CEO this year, said corporate America “does not need” the proposed corporate tax cut from 35% to 20%.

“The tax cut proposal is not going to create a more leveled playing field and a more compassionate society,” he said.

Of course, Schultz, a Democrat who backed Hillary Clinton in 2016, could merely be positioning himself for a long-rumored run for president.

Asked about a bid for the White House, Schultz said he’s “deeply concerned about the country,” but “not thinking today about running for president.”

The Starbucks exec isn’t the only one expressing skepticism about the tax plan. Barclays published a report Wednesday saying the GOP tax plan “is skewed in the direction of tax cuts over reform.” Barclays noted that “tax cuts tend to produce temporary effects, rather than permanent ones.”

The critical comments from Schultz come just hours after Gary Cohn, President Trump’s top economic adviser, talked up the tax plan’s support from big business.

“The most excited group out there are big CEOs,” Cohn told CNBC.

Pushing back against claims that the tax overhaul would only help business and the wealthy, Cohn predicted companies will return to the United States and workers will get a much-needed raise.

“We see the whole trickle-down through the economy, and that’s good for the economy,” he said.

The GOP tax plan has received strong support from the Business Roundtable, an influential group of CEOs that champions pro-business policy. On Tuesday, the organization released a national cable TV ad featuring an Illinois manufacturing company to press for tax reform.

But other powerful lobbying groups are trying to kill the GOP tax bill because it would close or limit deductions they covet. For instance, the real estate industry is warning that the housing market could be hurt by proposed limits on deductions for mortgage interest and state and local property taxes.

Yet Starbucks itself would seemingly benefit from tax cuts. The coffee giant’s effective tax rate last year was 33%, according to Howard Silverblatt at S&P Dow Jones Indices.

Asked what Starbucks would do with savings created by the proposed tax cuts, Schultz said at the DealBook conference that the company would not just add it to its profits.

“We will find other ways to create a contribution back to either the communities we serve, the many initiatives we have about veterans and obviously our people for benefits,” Schultz said.


Published at Thu, 09 Nov 2017 16:58:18 +0000

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Schedule for Week of Nov 5, 2017


Schedule for Week of Nov 5, 2017

by Bill McBride on 11/04/2017 08:11:00 AM

This will be a light week for economic data.

—– Monday, Nov 6th —–

No economic releases scheduled.

—– Tuesday, Nov 7th —–

Job Openings and Labor Turnover Survey

10:00 AM ET: Job Openings and Labor Turnover Survey for September from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings decreased in August to 6.082 million from 6.140 in July.

The number of job openings (yellow) were up 11% year-over-year, and Quits were up 2% year-over-year.

10:00 AM: Corelogic House Price index for September.

2:30 PM: Speech by Fed Chair Janet YellenAcceptance Remarks, At the presentation of the Paul H. Douglas Award for Ethics in Government, Washington, D.C.

3:00 PM: Consumer Credit from the Federal Reserve. The consensus is for consumer credit to increase $17.4 billion in September.

—– Wednesday, Nov 8th —–

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

—– Thursday, Nov 9th —–

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 232 thousand initial claims, up from 229 thousand the previous week.

—– Friday, Nov 10th —–

10:00 AM: University of Michigan’s Consumer sentiment index (preliminary for November). The consensus is for a reading of 100.0, down from 100.7 in October.



Published at Sat, 04 Nov 2017 12:11:00 +0000

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Friday: Employment Report, Trade Deficit, ISM non-Mfg


Friday: Employment Report, Trade Deficit, ISM non-Mfg

by Bill McBride on 11/02/2017 07:43:00 PM

• At 8:30 AM ET, Employment Report for October. The consensus is for an increase of 323,000 non-farm payroll jobs added in October, up from the 33,000 non-farm payroll jobs lost in September. The consensus is for the unemployment rate to increase to 4.3%.

• Also at 8:30 AM, Trade Balance report for September from the Census Bureau. The consensus is for the U.S. trade deficit to be at $43.4 billion in September from $42.4 billion in August.

• At 10:00 AM, the ISM non-Manufacturing Index for October. The consensus is for index to decrease to 58.7 from 59.8 in September.


Published at Thu, 02 Nov 2017 23:43:00 +0000

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Wednesday: FOMC Annoucement, ADP Employment, Vehicle Sales, ISM Mfg, Construction Spending

By geralt from Pixabay

Wednesday: FOMC Annoucement, ADP Employment, Vehicle Sales, ISM Mfg, Construction Spending

by Bill McBride on 10/31/2017 08:08:00 PM


• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:15 AM, The ADP Employment Report for October. This report is for private payrolls only (no government). The consensus is for 210,000 payroll jobs added in October, up from 135,000 added in September.

• At 10:00 AM, ISM Manufacturing Index for October. The consensus is for the ISM to be at 59.5, down from 60.8 in September. The PMI was at 60.8% in September, the employment index was at 60.3%, and the new orders index was at 64.6%.

• Also at 10:00 AM, Construction Spending for September. The consensus is for a 0.1% increase in construction spending.

• All Day, Light vehicle sales for October. The consensus is for light vehicle sales to be 17.5 million SAAR in October, up from 18.6 million in September (Seasonally Adjusted Annual Rate).

• At 2:00 PM, FOMC Meeting Announcement. The FOMC is expected to announce no change to policy at this meeting.


Published at Wed, 01 Nov 2017 00:08:00 +0000

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Stock Market Valuation and Sentiment at Extreme: SP 500 Total Earnings Same as 2013 and Index Up 40%

Stock Market Valuation and Sentiment at Extreme: SP 500 Total Earnings Same as 2013 and Index Up 40%

By: Jas Jain | Sun, Oct 29, 2017

Earnings per share for S&P 500 are up 6.6% since the end of 2013, all the gain is due to share buyback, while the total reported earnings are the same (see Fig. 1).

If the total earnings are the same as 3 years and 10 months ago without a recession we can say that we are operating in an essentially flat earnings environment. During the same period the index is up 40%. The only reason that earnings are up for the past 12 months is that earnings per share went down almost 20% since the end of 2014 to August 2016.

A much worse picture of market valuation emerges if we look at the Market Cap to GDP Ratio. Fig. 2 shows the ratio of total market cap of S&P 500 companies to the GDP. If we include all the public companies the ratio is between 140-150%. The only period when the market valuation was more extreme than today was during 1999-2000.

The sentiment with Bulls at 62.3 and Bears at 15.1 and VIX below 10 is at an all-time extreme in terms of bullishness. Fig. 3 shows the Complacency Index at a new high. All this doesn’t mean that the market will go down tomorrow or in a near future, but all it says is that risk has risen to a historically high level.

Major Indices Weekly Charts Chart
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Jas Jain, Ph.D.
the Prophet of Doom and Gloom

Copyright © 2004-2017 Jas Jain

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Published at Sun, 29 Oct 2017 17:53:01 +0000

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1987 Stock Market Crash Anniversary Predictions; Rubbish as usual


1987 Stock Market Crash Anniversary Predictions; Rubbish as usual

By: Sol Palha | Tue, Oct 24, 2017

Stubbornness does have its helpful features. You always know what you’re going to be thinking tomorrow.

Glen Beaman

Expert after expert is busy proclaiming that the world is about to come to grinding halt again. They never seem to let up on pushing this sewage onto the unsuspecting masses. This is a clear example of insanity in action; mouthing the same nonsense over and over again with the desperate hope that this time the outcome will be different.  The outcome will not be different this time, at least not yet. These guys should focus on writing fiction for reality seems to elude them completely. For years we have stated (and rightly so) that until the sentiment changes, this market will continue to soar higher and higher.

Here is a small sample of the flood of articles that were pushed out this month. If one simply glances through them, one would almost be compelled to think that the writers shared the same notes.  There is almost no originality in these articles. The theme is the same, just because it’s October the focus is on the disaster aspect of the 1987 crash. Almost no one mentions that it proved to be a monumental buying opportunity. The focus is oh the financial world came to a grinding halt. Only it did not, the only that came to a halt was the rubbish the predecessors of today’s experts were uttering back in 1987.  This reinforces the view that most financial writers have chosen the wrong profession.  One word sums all this nonsense “Rubbish.”

Could the 1987 stock market crash happen again? – Reuters

Black Monday anniversary: How the 2017 stock market compares with 1987 – Market Watch

Black Monday: 30 years after 1987 stock market crash… Wall Street raises fears of REPEAT-

Thursday marks 30th anniversary of the Black Monday stock market crash – courier-journal

Buy Climax at 30th Anniversary of 1987 Stock Market Crash – Money Show

The Crash of ’87, From the Wall Street Players Who Lived It – Bloomberg

Black Monday: Can a 1987-style stock market crash happen again? – USA Today

So are we stating that the stock market will never crash?

No that is not what we are stating.  The market will crash, but for the astute investor, “crash” is the wrong word to use. A strong correction is more likely as most astute investors got into this market a long time ago. It is the crowd that will eventually decide to embrace close to the top that will experience this crash that the experts have been hyping about for years.

This market will experience one strong correction before it crashes, but the moment the Dow sheds 1000 points or more these experts will crawl from the rocks they were hiding under and start screaming bloody murder. To which our response is, please scream as loud as you can; for it will push the markets lower creating a better buying opportunity for us.  This is exactly what we said in Aug of 2015 before Trump won and countless times before and after that.

This market is extremely overbought so a pullback ranging from 1500-3000 points should surprise no one and it certainly should not be construed as a crash but viewed as market releasing a well-deserved dose of steam. To state otherwise, would simply be disingenuous, which seems to be the only real qualification these so-called experts posses

Market Sentiment indicates that the crowd is far from Ecstatic

The Bullish sentiment has risen somewhat, and the crowd is not as anxious as it was at the beginning of this month or last month, but until the readings indicate this crowd is euphoric, a crash is unlikely. Many people state that most people don’t have money to invest in the markets. We beg to differ; look at whats going on in the Bitcoin market, now that is a market showing some signs of Euphoria; the stock market in comparison is at the lukewarm stage.


The only thing that is going to crash and has been crashing since 2008 is the egos of these “know it all” experts. If any of them had even listened to themselves half of the time; they would have bankrupted themselves several times over. The fact that they are still around chiming the same rubbish is clear proof that they don’t believe a word they are putting to print and therefore neither should you.

Why Not Try Something New For A Change

Make a list of stocks you would love to own at a discount. When the market lets out a nice dose of steam, instead of fleeing for the hills, you can purchase top quality stocks for a discount

The sheer volume of these articles validates our view that the masses are from bullish and a crash is unlikely.  Until the sentiment or the trend changes,  all strong corrections should be viewed through a bullish lens.

Obstinacy is the result of the will forcing itself into the place of the intellect.

Arthur Schopenhauer

By Sol Palha

Sol Palha

Sol Palha

Sol Palha is a market analyst and educator who uses
Mass Psychology, Technical Analysis and Esoteric Cycles to keep you on the
right side of the market. He and his partners are on the web at

The information contained herein is deemed reliable but
no guarantee is made about its completeness or accuracy. The reader accepts
this information on the condition that errors or omissions shall not be made
the basis for any claim, demand or cause for action. Any statements non-factual
in nature constitute only current opinions, which are subject to change. The
author/publisher may or may not have a position in the securities and/or options
relating thereto, & may make purchases and/or sales of these securities relating
thereto from time to time in the open market or otherwise. Neither the information,
nor opinions expressed, shall be construed as a solicitation to buy or sell
any stock, futures or options contract mentioned herein. The author/publisher
of this letter is not a qualified financial advisor & is not acting as such
in this publication. Investors are urged to obtain the advice of a qualified
financial & investment advisor before entering any financial transaction.

Copyright © 2004-2017 Sol Palha, All rights reserved.

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Published at Tue, 24 Oct 2017 15:39:32 +0000

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Stocks Move Further Into Record Territory


Stocks Move Further Into Record Territory

By Justin Kuepper | October 21, 2017 — 1:35 PM EDT

All of the major U.S. indexes moved higher into record territory over the past week, but the Dow Jones Industrial Average captured headlines by surpassing the 23,000 mark. While the manufacturing sector posted slower-than-expected growth, industrial production and capacity utilization both moved higher. Many investors remain concerned over the market’s valuation, which reached a 25.68x price-to-earnings multiple on Friday. These are the highest levels since the 2008 economic crisis and well above the 15.68x average.

International markets were mixed over the past week. Japan’s Nikkei 225 rose 1.42%; Germany’s DAX 30 moved marginally lower; and Britain’s FTSE 100 fell 0.21%. In Europe, investors have expressed concern over the slow pace of talks between Britain and the European Union ahead of Brexit. In Asia, Japan’s Nikkei 225 matched its longest winning streak ever as investors continue to buy into the country’s robust momentum. (See also: A Smart Way to Access Japanese Stocks.)

The SPDR S&P 500 ETF (ARCA: SPY) rose 0.85% over the past week, but it remains entrenched in overbought territory. After breaking out from upper trendline resistance earlier this month, the index broke out from R2 resistance at $256.34. Traders should watch for some consolidation at these levels or a breakdown below trendline support at around $254.00. Looking at technical indicators, the relative strength index (RSI) continues to trade at significantly overbought levels of 81.22, and the moving average convergence divergence (MACD) could be at risk of a near-term bearish crossover after topping out.

Technical chart showing the performance of the SPDR S&P 500 ETF (SPY)

The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) rose 1.92% over the past week, making it the best performing major index. After rising above R2 resistance at $228.56 earlier this month, the index broke out from upper trendline resistance last week. Traders should watch for some consolidation at these levels before a move higher or a breakdown below trendline support at $230.00. Looking at technical indicators, the RSI remains extremely overbought at 89.24, but the MACD remains in a robust uptrend. (For more, see: How Dow 26,000 Could Come Sooner Than You Think.)

Technical chart showing the performance of the SPDR Dow Jones Industrial Average ETF (DIA)

The PowerShares QQQ Trust (NASDAQ: QQQ) rose 0.25% over the past week, making it the worst performing major index. After rising to R2 resistance at $148.91 earlier this month, the index moved largely sideways last week. Traders should watch for a breakout from these levels to fresh highs or a move lower to R1 resistance at $147.18. Looking at technical indicators, the RSI appears lofty at 65.24, while the MACD could experience a near-term bearish crossover. (See also: Why Big Investors Are Doubling Down on Pricey Tech Stocks.)

Technical chart showing the performance of the PowerShares QQQ Trust (QQQ)

The iShares Russell 2000 Index ETF (ARCA: IWM) rose 0.41% over the past week. After breaking out from trendline resistance late last month, the index trended lower throughout October before rebounding from trendline support. Traders should watch for a move to R1 resistance at $151.66 or a breakdown from trendline support to the pivot point at $144.95. Looking at technical indicators, the RSI appear overbought at 70.40, and the MACD remains in a bearish downtrend dating back to mid-October.

Technical chart showing the performance of the iShares Russell 2000 Index ETF (IWM)

The Bottom Line

The major indexes moved further into record territory last week, but they appear top heavy on a technical level. Next week, traders will be closely watching several key economic events including new home sales on Wednesday as well as GDP and consumer sentiment data on Friday. Traders will also be closely watching any progress in passing tax reforms that could benefit equities, and in particular small caps in the Russell 2000. (For additional reading, check out: Trump’s Tax Reform Plan.)

Note: Charts courtesy of As of the time of writing, the author had no holdings in the securities mentioned.


Published at Sat, 21 Oct 2017 17:35:00 +0000

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Mnuchin to Congress: Cut taxes or market will dive

“There’s no question in my mind if we don’t get it done you’re going to see a reversal of a significant amount of these gains,” Mnuchin told Politico on Wednesday.

Mnuchin’s warning — a highly unusual one for a sitting treasury secretary — suggests he fears a drop of at least thousands of Dow points. The average has spiked almost 5,000 points since last fall’s election, a rally that President Trump often celebrates as evidence of his success.

Trump’s treasury secretary told Politico that the stock market has “baked into it reasonably high expectations of us getting tax cuts and tax reform done.” He predicted the market will go “up higher” if Congress succeeds on taxes.

It’s true that Trump’s economic agenda, including promises for “massive” tax cuts and deep deregulation, sent the stock market soaring in the weeks and months after the election.

But the market’s entire post-election rally is not based solelyon the anticipation of tax cuts or tax reform. Stocks have been supported by strong corporate profits, improved economic growth and extremely low interest rates.

If all markets cared about were tax cuts, then stocks should have plunged this spring and summer when Trump’s political stumbles threatened his agenda. Instead, investors dialed back their bets on tax cuts by selling “high tax” stocks that should benefit from tax reform. And the broader market kept going higher.

Lately, hopes of tax reform have returned, lifting potential tax cut winners like high-tax payers and small-cap stocks.

dow trump election stocks 1017

Sam Stovall, chief investment strategist at CFRA Research, said tax cut hopes have “boosted investor confidence,” but they didn’t alter the fundamentals that markets trade on: earnings estimates. Those projections haven’t budged because details on the tax deal aren’t available yet, Stovall said.

Only 32% of investors polled by E*Trade believe “President Trump and the current administration” is a leading factor behind the extended bull market in stocks. The survey respondents said that the top three drivers for stocks are: improving U.S. economy (61%), strong earnings (45%) and strong performance in certain sectors (40%).

Those positives are why Stovall isn’t worried about Congress setting off a market crash.

“Should tax cuts not materialize, a pullback or mild correction may ensue, but I don’t think it would trigger a new bear,” Stovall said.

Mnuchin’s comments raised eyebrows because normally the U.S. treasury secretary is counted on to instill financial and economic confidence, not sow doubt.

“That is fundamentally irresponsible. He has no understanding of the role of treasury secretary,” said Robert Shapiro, who served as a Commerce Department economic official under President Clinton and later advised Hillary Clinton.

“Part of the job of the treasury secretary is to maintain the stability of U.S. markets. Every other treasury secretary has recognized this. Apparently, it’s eluded Mr. Mnuchin,” said Shapiro, who is a senior fellow at Georgetown’s McDonough School of Business.

One parallel in recent history of a treasury secretary linking the health of the market to a single piece of legislation is Hank Paulson’s support for the TARP bailout in 2008. The former treasury secretary famously begged Speaker of the House Nancy Pelosi not to blow up the Wall Street rescue. The Dow plunged 777 points after the House of Representatives initially rejected the bailout.

Of course, that was a totally different time as the U.S. was grappling with the scariest financial crisis since the Great Depression. Now, big banks are healthy, unemployment is very low and markets are on the upswing — raising the question of how much the economy really needs tax cuts right now.

Besides, just because the notoriously-fickle market expects something, doesn’t mean it’s the best policy for the moment.

“To pinpoint or lever policy initiatives to the direction the stock market will take seems a little short-term oriented,” said Mark Luchini, chief market strategist at Janney Capital.

Ironically, Luchini said it’s possible the economic expansion is extended if there is no tax deal because it would keep the Federal Reserve from fearing the economy is overheating.


Published at Wed, 18 Oct 2017 16:03:42 +0000

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Wall St. ends up after economic data; S&P up for a fifth week


Wall St. ends up after economic data; S&P up for a fifth week

NEW YORK (Reuters) – U.S. stocks rose on Friday following upbeat economic data and gains in technology shares, pushing the Dow and the S&P 500 to a fifth straight week of gains.

Data showed U.S. retail sales jumped in September, and the University of Michigan’s consumer sentiment index hit its highest since January 2004.

Another report showed consumer prices recorded their biggest increase in eight months as hurricanes Harvey and Irma boosted demand but underlying inflation remained muted.

Netflix (NFLX.O) shares closed 1.9 percent higher after hitting an intraday record high at $200.82 on a slew of price target increases ahead of its earnings report on Monday.

Apple (AAPL.O), up 0.6 percent, gave the S&P 500 its biggest boost, while the S&P technology index .SPLRCT was up 0.5 percent. Shares of big banks were mixed following reports from Bank of America and Wells Fargo.

“We’re seeing a continuation of the strength in the market combined with low volatility. There seems to be money searching for stocks and looking for investments, simply because the momentum is still positive,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

“Also we’re entering a seasonal period where it’s difficult to fight the tape. So I imagine there’s cash coming in off the sidelines.”

The CBOE volatility index .VIX remains at historically depressed levels, closing at 9.61 on Friday.

The Dow Jones Industrial Average .DJI rose 30.71 points, or 0.13 percent, to end at 22,871.72, and the S&P 500 .SPX gained 2.24 points, or 0.09 percent, to 2,553.17.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., October 3, 2017. REUTERS/Brendan McDermid

The Nasdaq Composite .IXIC added 14.29 points, or 0.22 percent, to 6,605.80, a record closing high.

For the week, the Dow was up 0.4 percent and the S&P 500 was up 0.2 percent. The Nasdaq rose 0.2 percent for the week, registering a third week of gains.

Bank of America (BAC.N), the second-biggest U.S. bank by assets, rose 1.5 percent after the lender’s profit topped estimates due to higher interest rates and a drop in costs.

But Wells Fargo (WFC.N) tumbled 2.8 percent after it reported lower-than-expected revenue for the fourth straight quarter due to a decline in mortgage banking revenue.

The reports from the Wall Street banks kicked off the third-quarter earnings season, with investors hoping profit growth will help justify valuations after a rally that has sent the S&P 500 up about 14 percent so far this year.

Also limiting the day’s gains, the healthcare sector .SPXHC was down 0.3 percent as health insurers and hospital operators tumbled on news that President Donald Trump scrapped billions of dollars in Obamacare subsidies to private insurers for low-income Americans.

Centene (CNC.N) sank 3.3 percent, Molina Healthcare (MOH.N) dropped 3.4 percent and Anthem (ANTM.N) fell 3.1 percent.

Tenet Healthcare (THC.N) dropped 5.1 percent and Community Health System (CYH.N) declined 4 percent.

Advancing issues outnumbered declining ones on the NYSE by a 1.43-to-1 ratio; on Nasdaq, a 1.08-to-1 ratio favored decliners.

About 5.8 billion shares changed hands on U.S. exchanges. That compares with the 6.1 billion daily average for the past 20 trading days, according to Thomson Reuters data.

Reporting by Caroline Valetkevitch in New York; Editing by James Dalgleish


Published at Fri, 13 Oct 2017 22:16:15 +0000

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Weekly Initial Unemployment Claims decrease to 243,000


Weekly Initial Unemployment Claims decrease to 243,000

by Bill McBride on 10/12/2017 08:34:00 AM

The DOL reported:

In the week ending October 7, the advance figure for seasonally adjusted initial claims was 243,000, a decrease of 15,000 from the previous week’s revised level. The previous week’s level was revised down by 2,000 from 260,000 to 258,000. The 4-week moving average was 257,500, a decrease of 9,500 from the previous week’s revised average. The previous week’s average was revised down by 1,250 from 268,250 to 267,000.

Hurricanes Harvey, Irma, and Maria impacted this week’s claims.
emphasis added

The previous week was revised down.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 257,500.

This was below the consensus forecast.  The recent increase in claims is due to the hurricanes.


Published at Thu, 12 Oct 2017 12:34:00 +0000

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Bull market is 103 months old. Trump owns 11 of them


Is it too late to buy stocks?
Is it too late to buy stocks?

President Trump’s victory last November set off a massive party on Wall Street that is still going strong today.

The Dow has spiked an incredible 4,500 points since the election. As CNNMoney has reported frequently, that 25% surge is based in part on Trump’s promises to slash taxes and regulation.

Trump, who warned of a “big, fat, ugly bubble” before he took office, brags about the red-hot market now that he’s in charge. He did it again on Wednesday, cheering the “virtually unprecedented Stock Market growth since the election.”

The market’s cheerleader-in-chief never mentions that he inherited a bull market — one that began long before “Make America Great Again” hats started showing up on the campaign trail.

The bull market in stocks started in March 2009, near the end of the Great Recession. This market upswing is now 103 months old, making it the second-longest on record.

Trump can claim credit for 11 months at most, if you start counting after the election. The other 92 months of upward trajectory took place under President Obama.

bull market sp 500 1011

Taken as a whole, the Obama-Trump bull market is historic as well. The S&P 500 has soared 277% since bottoming in March 2009 thanks to the improving economy andextremely-low interest rates. That’s good for No. 2 among all bull markets, according to Bespoke Investment Group.

Of course, the vast majority of those gains occurred under Obama. The stock market more than tripled during Obama’s eight years in office as the U.S. economy recovered from the recession.

Nonetheless, Trump often points to record highs on Wall Street as a barometer of his success. “Stock Market hit an ALL-TIME high!” Trump tweeted on October 5.

He’s right that the Dow has never been higher. In fact, the Dow has notched 65 records since Trump’s election. The S&P 500 isn’t far behind with 52 records. Both have benefited from Trump’s promises of tax cuts as well as strength in corporate profits and the domestic and global economies.

dow trump election stocks 1011

No matter the cause, record highs were a regular occurrence during Obama’s second term — even as Trump was bashing the economic track record of the 44th U.S. president. In fact, the S&P 500 hit 127 all-time highs under Obama, according to Ryan Detrick of LPL Financial.

All-time highs were even more frequent during the economic booms of the 1980s and 1990s. The S&P 500 hit record highs 268 times under President Clinton and 154 times under President Reagan, according to LPL. (Trump has easily surpassed the nine S&P 500 records under President George W. Bush.)

None of those presidents talked up the day-to-day movements of the stock market like Trump has. That’s not just because Twitter didn’t exist during most of those presidencies.

The risk is that taking too much credit for the notoriously-fickle stock market will make it more difficult to avoid criticism when stocks eventually retreat.


Published at Wed, 11 Oct 2017 20:20:46 +0000

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S&P 500 breaks record run on jobs data, drug chain drop


S&P 500 breaks record run on jobs data, drug chain drop

NEW YORK (Reuters) – The S&P 500 eased on Friday, ending a six-day run of record highs as the first monthly decline in U.S. nonfarm jobs in seven years dampened sentiment and pharmacy shares fell on Amazon competition fears.

The Nasdaq ended up for a ninth straight day, however, and set its sixth straight record high close, its longest such streak since seven records in February.

Walgreens Boots Alliance (WBA.O) and CVS Health (CVS.N) fell and were among the biggest drags on the S&P 500 after a CNBC report that Amazon (AMZN.O) was close to a decision on selling prescription drugs. Walgreens shares dropped 4.9 percent and CVS was down 4.9 percent, while Amazon shares rose 0.9 percent.

The Labor Department’s closely watched jobs report showed nonfarm payrolls fell by 33,000 in September as hurricanes Harvey and Irma left displaced workers temporarily unemployed and delayed hiring. A bright spot was a better-than-expected rise in average wages.

“It’s been amazing how resilient our U.S. stock market has been, going up on no news or bad news, so there’s no surprise on a day where most people feel it was a mixed jobs report at best that the market actually is reacting in a way that makes sense,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.

“It’s a logical move for this illogical stock market.”

The Dow Jones Industrial Average .DJI fell 1.72 points, or 0.01 percent, to end at 22,773.67, the S&P 500 .SPX lost 2.74 points, or 0.11 percent, to 2,549.33 and the Nasdaq Composite .IXIC added 4.82 points, or 0.07 percent, to 6,590.18.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., October 3, 2017. REUTERS/Brendan McDermid

The benchmark’s slight decline follow a six-day run of record closing highs, its longest since 1997.

The CBOE Volatility index .VIX, Wall Street’s fear gauge, bounced sharply after setting a record low close in the previous session.

For the week, the S&P 500 rose 1.2 percent, the Dow added 1.6 percent and the Nasdaq gained 1.5 percent.

Adding to the day’s worries was a report that North Korea is preparing to test a long-range missile.

S&P energy index .SPNY declined 0.8 percent as oil prices CLc1 LCOc1 fell amid a bout of profit taking and the return of oversupply worries.

Shares of Costco (COST.O) dropped 6 percent after the warehouse club retailer reported a fall in gross margins. The stock was the biggest drag on the S&P 500 and the Nasdaq.

Declining issues outnumbered advancing ones on the NYSE by a 1.74-to-1 ratio; on Nasdaq, a 1.11-to-1 ratio favored decliners.

About 5.7 billion shares changed hands on U.S. exchanges. That compares with the 6.2 billion daily average for the past 20 trading days, according to Thomson Reuters data.

Additional reporting by Yashaswini Swamynathan and Gayathree Ganesan in Bengaluru; Editing by Nick Zieminski and James Dalgleish


Published at Fri, 06 Oct 2017 21:25:57 +0000

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Fed must hike rates in face of hot U.S. labor market: Rosengren


Fed must hike rates in face of hot U.S. labor market: Rosengren

MONTREAL (Reuters) – The Federal Reserve must respond to “very tight” U.S. labor markets by gradually raising interest rates or risk halting the economic recovery, a hawkish Fed official said on Saturday.

In prepared remarks that largely restated his views, Boston Fed President Eric Rosengren said he expects the labor market to improve further after U.S. unemployment dropped to 4.2 percent last month, its lowest level since 2001.

“Prudent risk management would argue for the continued gradual removal of monetary policy accommodation in order to minimize the risk of outcomes that might prematurely shorten the current economic recovery,” said Rosengren, who was speaking at the International Atlantic Economic Conference in Montreal, adding he expects the U.S. economy will likely continue to grow above its potential.

“Failing to respond to very tight labor markets with rates remaining negative in real terms could potentially risk unnecessarily shortening the economic recovery,” added Rosengren, who does not vote on policy this year but whose views often portend overall Fed policy.

The Fed has raised rates three times in less than a year and is expected to hike again in December. Below-target inflation has caused some more dovish Fed policymakers to want to wait.

Reporting by Nelson Wyatt in Montreal; Writing by Jonathan Spicer in New York; editing by Diane Craft


Published at Sat, 07 Oct 2017 15:54:36 +0000

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Schedule for Week of Oct 8, 2017


Schedule for Week of Oct 8, 2017

by Bill McBride on 10/07/2017 08:09:00 AM

The key economic reports this week are September retail sales and the Consumer Price Index (CPI).

—– Monday, Oct 9th —–

Columbus Day Holiday: Banks will be closed in observance of Columbus Day. The stock market will be open. No economic releases are scheduled.

—– Tuesday, Oct 10th —–

6:00 AM ET: NFIB Small Business Optimism Index for September.

—– Wednesday, Oct 11th —–

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

Job Openings and Labor Turnover Survey10:00 AM: Job Openings and Labor Turnover Survey for August from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased in July to 6.170 million from 6.116 in June.  This was the highest number of job openings since this series started in December 2000.

The number of job openings (yellow) were up 3% year-over-year, and Quits were up 4% year-over-year.

2:00 PM: FOMC Minutes, Meeting of September 19 – 20, 2017

—– Thursday, Oct 12th —–

8:30 AM ET: The initial weekly unemployment claims report will be released. The consensus is for 252 thousand initial claims, down from 260 thousand the previous week.

8:30 AM: The Producer Price Index for September from the BLS. The consensus is a 0.4% increase in PPI, and a 0.2% increase in core PPI.

—– Friday, Oct 13th —–

8:30 AM: The Consumer Price Index for September from the BLS. The consensus is for a 0.6% increase in CPI, and a 0.2% increase in core CPI.

Retail Sales8:30 AM ET: Retail sales for September be released.  The consensus is for a 1.9% increase in retail sales.

This graph shows retail sales since 1992 through August 2017.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for August.  The consensus is for a 0.6% increase in inventories.

10:00 AM: University of Michigan’s Consumer sentiment index (preliminary for October). The consensus is for a reading of 95.5, up from 95.1 in September.

—– Sunday, Oct 15th —–

At 9:00 AM ET, Speech by Fed Chair Janet YellenThe Economy and Monetary Policy, At the 32nd Annual G30 International Banking Seminar, Washington, D.C


Published at Sat, 07 Oct 2017 12:09:00 +0000

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September Employment Report: 33,000 Jobs Lost, 4.2% Unemployment Rate


September Employment Report: 33,000 Jobs Lost, 4.2% Unemployment Rate

by Bill McBride on 10/06/2017 08:46:00 AM


From the BLS:

The unemployment rate declined to 4.2 percent in September, and total nonfarm payroll employment changed little (-33,000), the U.S. Bureau of Labor Statistics reported today. A sharp employment decline in food services and drinking places and below-trend growth in some other industries likely reflected the impact of Hurricanes Irma and Harvey.

Hurricane Irma made landfall in Florida on September 10–during the reference period for both the establishment and household surveys–causing severe damage in Florida and other parts of the Southeast. Hurricane Harvey made landfall in Texas on August 25–prior to the September reference periods–resulting in severe damage in Texas and other areas of the Gulf Coast.

Our analysis suggests that the net effect of these hurricanes was to reduce the estimate of total nonfarm payroll employment for September. There was no discernible effect on thenational unemployment rate.

The change in total nonfarm payroll employment for July was revised down from +189,000 to +138,000, and the change for August was revised up from +156,000 to +169,000. With these revisions, employment gains in July and August combined were 38,000 less than previously reported.

In September, average hourly earnings for all employees on private nonfarm payrolls rose by 12 cents to $26.55. Over the past 12 months, average hourly earnings have increased by 74 cents, or 2.9 percent.
emphasis added

Payroll jobs added per monthClick on graph for larger image.

The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed – mostly in 2010 – to show the underlying payroll changes).

Total payrolls decreased by 33 thousand in September (private payrolls decreased 40 thousand).

Payrolls for July and August were revised down by a combined 38 thousand.


Year-over-year change employmentThis graph shows the year-over-year change in total non-farm employment since 1968.

In September the year-over-year change was 1.78 million jobs.  This is the smallest year-over-year gain since 2012.

The third graph shows the employment population ratio and the participation rate.


Employment Pop Ratio, participation and unemployment ratesThe Labor Force Participation Rate was increased in September at 63.1%. This is the percentage of the working age population in the labor force.   A large portion of the recent decline in the participation rate is due to demographics.

The Employment-Population ratio decreased to 60.4% (black line).

I’ll post the 25 to 54 age group employment-population ratio graph later.


unemployment rateThe fourth graph shows the unemployment rate.

The unemployment rate decreased in September to 4.2%.

This was below expectations of 95,000 jobs, and the previous two months combined were revised down. The headline jobs number was weak – mostly due to the impact of the hurricanes – but wages picked up and the unemployment rate declined further.



Published at Fri, 06 Oct 2017 12:46:00 +0000

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Hurricanes Harvey, Irma sink U.S. payrolls in September


Hurricanes Harvey, Irma sink U.S. payrolls in September

WASHINGTON (Reuters) – U.S. employment fell in September for the first time in seven years as Hurricanes Harvey and Irma left displaced workers temporarily unemployed and delayed hiring, the latest indication that the storms undercut economic activity in the third quarter.

The Labor Department said on Friday nonfarm payrolls decreased by 33,000 jobs last month amid a record drop in employment in the leisure and hospitality sector.

The decline in payrolls was the first since September 2010. The Department said its analysis suggested that the net effect of Harvey and Irma, which wreaked havoc in Texas and Florida in late August and early September, was to “reduce the estimate of total nonfarm payroll employment for September.”

“While nonfarm payrolls declined last month, investors will find solace in a whole host of other labor market indicators that reveal an underlying labor market that continues to show evidence of resilience and continued tightening,” said Scott Anderson, chief U.S. economist at Bank of the West in San Francisco.

Economists had forecast payrolls increasing by 90,000 jobs last month. Payrolls are calculated from a survey of employers, which treats any worker who was not paid for any part of the pay period that includes the 12th of the month as unemployed.

Many of the dislocated people will probably return to work. That, together with rebuilding and clean-up is expected to boost job growth in the coming months. Leisure and hospitality payrolls dived 111,000, the most since records started in 1939, after being unchanged in August.

There were also decreases in retail and manufacturing employment last month. Stripping out the effects of the hurricanes, the labor market remains strong. The government revised data for August to show 169,000 jobs created that month instead of the previously reported 156,000.

Harvey and Irma did not have an impact on the unemployment rate, which fell two-tenths of a percentage point to 4.2 percent, the lowest since February 2001. The smaller survey of households from which the jobless rate is derived treats a person as employed regardless of whether they missed work during the reference week and were unpaid as result.

The decrease in the unemployment rate reflected a 906,000 surge in household employment, which offset a 575,000 increase in the labor force.

The dollar was trading higher against a basket of currencies after the data, while prices for U.S. Treasuries fell. Stocks on Wall Street fell marginally.


A man walks through floods waters and onto the main road after surveying his property which was hit by Hurricane Harvey in Rockport, Texas, U.S. August 26, 2017. REUTERS/Adrees Latif

Underscoring the disruptive impact of the hurricanes, the household survey showed 1.5 million people stayed at home in September because of the bad weather, the most since January 1996. About 2.9 million people worked part-time, the largest number since February 2014.

The length of the average workweek was unchanged at 34.4 hours. With the hurricane-driven temporary unemployment concentrated in low-paying industries like retail and leisure and hospitality, average hourly earnings increased 12 cents or 0.5 percent in September after rising 0.2 percent in August.

That pushed the annual increase in wages to 2.9 percent, the largest gain since December 2016, from 2.7 percent in August.

The mixed employment report should not change views the Federal Reserve will raise interest rates in December. Fed Chair Janet Yellen cautioned last month that the hurricanes could “substantially” weigh on September job growth, but expected the effects would “unwind relatively quickly.”

“The Fed has been hyper-focused on wage growth, so the above-average increase will be a welcome relief, even if there is some storm impact embedded in the number,” said Marvin Loh, senior global markets strategist at BNY Mellon in Boston. “We think that the report strengthens the Fed’s December hike hand.”

The U.S. central bank said last month it expected “labor market conditions will strengthen somewhat further.” The Fed left interest rates unchanged in September, but signaled it expected one more hike by the end of the year. It has increased borrowing costs twice this year.

Annual wage growth of at least 3.0 percent is need to raise inflation to the Fed’s 2 percent target, analysts say.

The employment report added to August consumer spending, industrial production, homebuilding and home sales data in suggesting that the hurricanes will dent economic growth in the third quarter.

Economists estimate that the back-to-back storms, including Hurricane Maria which destroyed infrastructure in Puerto Rico last month, could shave at least six-tenths of a percentage point from third-quarter gross domestic product.

Growth estimates for the July-September period are as low as a 1.8 percent annualized rate. The economy grew at a 3.1 percent rate in the second quarter.

Private payrolls fell by 40,000 jobs, the biggest drop since February 2010. Manufacturing employment slipped by 1,000 jobs pulled down by declines at motor vehicle assembly and chemical plants as well as textile mills.

Retail employment fell by 2,900 jobs as food stores payrolls tumbled 6,900. There were also declines in employment at department stores. Construction payrolls rose 8,000 in September as a 3,900 drop in jobs at homebuilding sites was offset by increases elsewhere.

Reporting by Lucia Mutikani; Editing by Andrea Ricci


Published at Fri, 06 Oct 2017 14:53:08 +0000

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Dollar surges as Fed talk boosts Treasury yields


Dollar surges as Fed talk boosts Treasury yields

LONDON (Reuters) – The dollar soared on Monday as U.S. Treasury yields hit their highest level since mid-July, while Spanish borrowing costs rose and stocks fell as a violent police crackdown on an independence vote in Catalonia rattled investors.

Other European bourses rose and Wall Street looked set to open up 0.2 percent, according to index futures.

Firming expectations the U.S. Federal Reserve will raise interest rates for a third time this year and talk of a potentially more hawkish successor to Fed Chair Janet Yellen combined to push Treasury yields higher.

Ten-year yields topped 2.37 percent, up 4 basis points on the day, pushing the dollar half a percent higher against a basket of currencies.

“The dollar is stronger on higher Treasuries, and the market is seeming to play the idea that the Fed might become more hawkish when we look at the possible candidates for the board of directors,” said Antje Praefcke, FX strategist at Commerzbank.

Treasury yields later pulled back – the 10-year yield last stood at 2.34 percent, up just 1.3 basis points on the day, but the dollar index retained most of its gains.

The euro fell 0.7 percent to $1.1733, though traders said the Catalan referendum had only a limited impact on the single currency.

But in Spain, the IBEX stocks index fell 1.4 percent, underperforming the pan-European STOXX 600 index, which rose 0.3 percent.

The two biggest fallers on the IBEX index were Catalonia-based Banco de Sabadell and Caixabank, down 5.3 and 4.1 percent respectively.

Spanish 10-year government bond yields rose more than 7 basis points to 1.69 percent, taking the gap between them and German benchmarks to its widest in nearly four months.

The cost of insuring Spanish debt, as measured by five-year credit default swaps, rose to its highest in a month.

Catalan officials said 90 percent of voters in Sunday’s ballot favored secession, raising the possibility of a unilateral declaration of independence in the wealthy region.

“This issue is likely to complicate policy-making at a national level as opposition parties seek to gain political capital from what is arguably a gross PR error on the part of PM Rajoy’s government,” said Richard McGuire, head of rates strategy at Rabobank in London.

A general view shows the trading floor at the stock exchange in Frankfurt, Germany October 2, 2017. Zoomed image is taken on slow shutter speed. REUTERS/Kai Pfaffenbach

However, mainstream parties largely back premier Mariano Rajoy’s opposition to Catalan independence, even though he faces criticism over his handling of the issue.

Asian shares rose after upbeat economic data from China and Japan. MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.2 percent.

Japan’s Nikkei closed up 0.2 percent after a survey showed the mood among big manufacturers was its best in a decade.

China’s manufacturing activity grew at its fastest pace since 2012 last month. The official Purchasing Managers’ Index released on Saturday rose to 52.4 from 51.7 in August.

Chinese markets were closed for a week-long holiday.

The Japanese yen fell half a percent to 113.02 per dollar while sterling fell 0.6 percent to $1.3325.

The dollar has been on a roll since Fed chief Yellen said last week it would be “imprudent” to keep monetary policy on hold until U.S. inflation picked up to 2 percent.


Speculation President Donald Trump might choose former Fed Governor Kevin Warsh, who is considered more hawkish than Yellen, to replace her as head of the central bank also boosted the dollar.

The dollar notched up its best weekly performance of 2017 last week, lifted also by a revival of the “Trumpflation” trade on expectations Trump would deliver a stalled tax reform plan.

Oil prices fell after a Reuters survey found output from the Organization of the Petroleum Exporting Countries (OPEC) rose by 50,000 barrels a day last month.

Brent crude, the international benchmark, fell 91 cents a barrel to $55.88.

The strong dollar helped drag gold down to its lowest in almost seven weeks. The precious metal fell to as low as $1,270 an ounce before edging back up to $1,274, down 0.4 percent on the day.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=

Additional reporting by Wayne Cole in Sydney, Jemima Kelly, John Geddie and Claire Milhench in London; Editing by Matthew Mpoke Bigg

Our Standards:The Thomson Reuters Trust Principles.


Published at Mon, 02 Oct 2017 11:57:31 +0000

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Dow notches longest quarterly win streak in 20 years


Trump's shifting views on stock market highs
Trump’s shifting views on stock market highs

Dow notches longest quarterly win streak in 20 years


The stock market, undaunted by monster hurricanes, political tension and North Korea threats, keeps climbing to new heights.

The Dow soared another 5% during the third quarter, which ends for Wall Street on Friday.

The strong gains extend the Dow’s streak of winning quarters to eight. It’s the longest since an 11-quarter boom that ended in September 1997, according to FactSet stats. Back then, the U.S. economy was going gangbusters under President Bill Clinton at the start of the dotcom boom.

The current streak began during the final three months of 2015 and accelerated after last fall’s election. For those scoring at home, that’s five winning quarters on President Barack Obama’s watch and three under President Trump, who took office in January.

Trump, who claimed as a candidate that the market was in a “big, fat, ugly bubble,”brags about it now that he’s in charge. He did that again on Friday, cheering the “RECORD HIGH” for the S&P 500.

It’s true that the stock market soared after Trump’s victory. Wall Street cheered his promises to revamp the tax code, slash regulation and ramp up infrastructure spending. (The market largely ignored the administration’s less business-friendly trade and immigration policies.)

Stocks have continued climbing even though none of Trump’s economic policies have gotten through Congress. That’s because economic strength in the United States and overseas has kept corporate profits growing.

“The market is primarily up because earnings have been good. The tax reform proposal has been icing on the cake — but that’s not the ultimate reason,” said JJ Kinahan, chief market strategist at TD Ameritrade.

dow trump election stocks 4000

Wall Street has been largely unfazed by the turbulence of the past few weeks and months. The GOP’s repeated failure to repeal and replace Obamacare didn’t dent the market. Nor did the hurricanes that ravaged the Gulf Coast and Caribbean. And escalating tension between Trump and North Korean leader Kim Jong Un caused just fleeting concern among investors.

If anything, September was a bore for the stock market despite its history as a rocky month. The S&P 500 had its least volatile September going back at least to 1970, according to Ryan Detrick at LPL Financial. That’s based on how much the market moves from its high to its low each day.

The calendar ahead looks favorable for the stock market. Over the past 20 years, the Dow climbed 70% of the time during October, according to Bespoke Investment Group. The final three months of the year have historically been the best for the stock market.

That could change this year if Corporate America lets Wall Street down. Investors are hoping third-quarter results, set to begin streaming in later this month, will continue to show healthy profits.

Wall Street may also have to withstand bickering over the GOP’s plans to overhaul the tax system. Tax reform is complex, and many major questions remain unanswered.

“The bill’s announcement, and its eventual passing, are and will be bullish for stocks. But what comes in between is not bullish, and that starts right now,” Michael Block, chief market strategist at Rhino Trading Partners, wrote in a report.

Eventually, investors may grow impatient with Washington if it looks like the tax overhaul is being further delayed or watered down by politics.

“The markets are not going to ignore politics in 2018,” said TD Ameritrade’s Kinahan. “Washington has to get something done.”


Published at Fri, 29 Sep 2017 16:16:54 +0000

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