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Wall Street slips, led by healthcare decline

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 10, 2016. REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 10, 2016.REUTERS/Brendan McDermid

Wall Street slips, led by healthcare decline

By Sinead Carew | NEW YORK

U.S. stocks ended lower on Friday, with healthcare stocks leading the declines, as investors cashed in on a post-election rally and waited for clarity on the next administration’s policies.

Wall Street equities took a breather after rising dramatically since Donald Trump’s surprise victory in the presidential election last week.

While the three major indexes closed higher for the second week in a row, the rally lost some steam this week as investors awaited more information to support their bets that Trump could succeed in passing proposals to lift infrastructure spending and reduce taxes.

“I see the market kind of churning here because it’s had a very decent move,” said Ken Polcari, director of the NYSE floor division at O’Neil Securities in New York. “Trump’s policies continue to be just rhetoric because none of it has been enacted.”

The Dow Jones industrial average .DJI fell 35.89 points, or 0.19 percent, to 18,867.93 while the S&P 500 .SPX dropped 5.22 points, or 0.24 percent, to 2,181.9.

The Nasdaq Composite .IXIC slipped 12.46 points, or 0.23 percent, to 5,321.51 after hitting a record of 5346.8.

The Nasdaq’s biggest drags came from technology companies such as Alphabet Inc (GOOGL.O) and drug firms including Amgen (AMGN.O).

Six of the 11 major S&P 500 sectors closed lower. Losses in shares of Allergan Plc (AGN.N) and Merck (MRK.N) were the biggest drags on the S&P health sector .SPXHC, which led the decliners. The health index pared its post-election lift but was still 1.8 percent higher than Nov. 8, even after Friday’s drop of 1.2 percent. Only five of the indexes stocks ended higher.

Consumer staples .SPLRCS fell 0.4 percent, weighed down by a 1.3 percent fall in Procter & Gamble (PG.N). The S&P Energy sector .SPNY was the second best performer with a 0.5 percent increase as producers added to rig count, suggesting that they might be expecting a demand boost, Polarci said.

Traders are pricing in an 83 percent chance for the Federal Reserve to raise interest rates in December, according to Thomson Reuters data.

The S&P financial sector .SPSY ended up 0.08 percent, and has risen 10.8 percent since the U.S. election, boosted by prospect of higher interest rates and lighter regulation.

St. Louis Fed President James Bullard said Friday he was leaning toward supporting a December increase and that the real question would be the Fed’s rate path in 2017.

Kansas City Federal Reserve Bank President Esther George said that while she supports raising rates, the U.S. central bank must do so only gradually. The comments added to Fed Chair Janet Yellen’s Thursday statement that the rate hike could come “relatively soon.”

Declining issues outnumbered advancing ones on the NYSE by a 1.10-to-1 ratio; on Nasdaq, a 1.18-to-1 ratio favored advancers.

The S&P 500 posted 32 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 253 new highs and 30 new lows.

About 6.69 billion shares changed hands U.S. exchanges, well below the 8.02 billion average for the last 20 sessions.

(Reporting by Tanya Agrawal and Anya George Tharakan; Editing by Nick Zieminski and David Gregorio)

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Published at Fri, 18 Nov 2016 22:59:58 +0000

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Investors bet Trump stimulus will boost U.S. stocks

U.S. President elect Donald Trump arrives to address supporters with his son Barron and wife Melania  at election night rally in Manhattan, New York, U.S., November 9, 2016. REUTERS/Brendan McDermid

U.S. President elect Donald Trump arrives to address supporters with his son Barron and wife Melania at election night rally in Manhattan, New York, U.S., November 9, 2016. REUTERS/Brendan McDermid

Investors bet Trump stimulus will boost U.S. stocks

By David Randall and Jonathan Stempel
| NEW YORK

U.S. voters’ decision to install Donald Trump in the White House may extend the life of the aging, seven-year bull market in U.S. stocks.

That is the consensus of prominent investors attending this week’s Reuters Global Investment Outlook Summit.

Expectations that Trump will successfully engineer massive new infrastructure spending, slash corporate and some personal income taxes, and wipe out a slew of regulations may boost prospects for U.S. stocks, and end what some investors call a three-decade bull market in bonds.

“The earnings impact of President-elect Trump will outweigh whatever increase in bond interest rates comes about,” said Steven Einhorn, vice chairman of hedge fund Omega Advisors Inc, which invests about $4 billion.

Einhorn expects U.S. stocks to return as much as 8 percent in 2017, including dividends. “The risks are to the upside for the (Standard & Poor’s 500) rather than the downside,” he said.

As the post-election, double-digit percentage surge in bank stock prices suggests, investors expect Trump to bolster that sector by reducing its regulatory burdens.

They also said infrastructure spending could boost old-line sectors such as coal and steel.

“I do think that Donald will do an excellent job,” said Carl Icahn, the billionaire activist investor and one of Trump’s earliest Wall Street supporters.

But even Icahn, who left what became Trump’s victory party in the early morning on Nov. 9 to make a nearly $1 billion stock bet, expressed near-term caution about stock markets, citing concern about the overall economy.

“It has run ahead of itself,” he said. “There are going to be bumps along the road. You know, this is a big ship that you’ve got to really turn around. You’ve got to get this economy back on track, and I don’t think it is.”

 

ONE-NIGHT STAND?

Investors are betting that will change and poured a net $23.6 billion into U.S. stock funds in the latest week, according to Lipper data.

Such enthusiasm may in part reflect investors’ bad habit of chasing recent performance.

Or, it may reflect their desire for a longer-term commitment to stocks.

“The first question is whether they’ve actually fallen in love, or whether it’s sort of a one-night stand,” said Richard Bernstein, chief executive of Richard Bernstein Advisors LLC in New York. “Right now it’s more of a one-night stand… You haven’t seen the lasting shifts in asset allocation.”

Bruce Richards, chief executive of hedge fund Marathon Asset Management, which invests $13 billion, said Trump’s victory could boost gross domestic product growth by 1 percentage point, and has made him bullish on “the whole steel complex.”

The Republican sweep of Congress may also bode well.

“I don’t think the market would have done this with a split Congress,” said Jason Karp, who runs the $3.8 billion hedge fund Tourbillon Capital Partners LP in New York. He said financial stocks could rise 50 percent more, despite their recent gains.

But Dawn Fitzpatrick, global head of equities, multi-asset and the O’Connor hedge fund businesses at UBS Asset Management, said there could be a near-term pullback, especially if more regulations survive than some hope.

Several guests also questioned how thoroughly Trump would, or would want to, follow through on his tough-on-trade rhetoric.

“You’re going to hurt 70 percent of the economy” with big new trade barriers, Bernstein said. “Do you really want to pay $1,000 for your big screen TV instead of $250? I don’t think you’re going to find too many people who want to do that.”

 

BACKING OFF BONDS

Many summit attendees said investors need to take a fresh look at how bonds fit into their portfolios, and to steel themselves for possible losses in 2017.

“We have a set of investors that has been trained to buy bonds for capital appreciation, and buy equities based on yield,” Fitzpatrick said. “That behavior is going to have to be unlearned.”

Higher yields, and lower prices, are likely for many bond classes, ranging from U.S. Treasuries to junk bonds.

Some of that has already occurred, with the yield on the benchmark 10-year U.S. Treasury note surging above 2.3 percent from 1.86 percent on Nov. 8, and below 1.4 percent in July.

Kathleen Gaffney, who helps run investment-grade fixed income at Eaton Vance Management in Boston, which oversees $343 billion, said she is holding an above-average 11 percent cash stake to guard against volatility.

Josh Brown, chief executive of Ritholtz Wealth Management in New York, said investors should focus on building “durable” portfolios to ride out whatever happens.

“Behavior is going to be more determinative of our clients’ returns,” he said. “We can’t control the markets, we can’t control what the Fed’s going to do, we can’t control who’s elected, but we can control our responses.”

(Additional reporting by Lawrence Delevingne, Sam Forgione, Svea Herbst-Bayliss and Trevor Hunnicutt; Editing by Jennifer Ablan, Bernard Orr)

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Published at Fri, 18 Nov 2016 21:05:03 +0000

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Goldman: “Market expectations of quick fiscal expansion may be running ahead of political and legislative realities”

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by PredragKezic from pixabay

Goldman: “Market expectations of quick fiscal expansion may be running ahead of political and legislative realities”

by Bill McBride on 11/17/2016 04:41:00 PM

 A few brief excerpts from analysis by Goldman Sachs economist Alec Phillips: A Fiscal Boost in 2017: How Much, How Fast?

Tax reform has political momentum, which is likely to increase the budget deficit... In light of the election result, we assume that the deficit will increase by more than previously expected. Specifically, we assume that fiscal policy choices under the next Congress will increase the budget deficit by around 0.75% of GDP, or around $150bn, in 2018, and similar amounts over the next few years.

but the market is more focused on fiscal “stimulus” than Congress is. There are risks in both directions to our fiscal assumptions, but we note that financial markets appear to be more focused on fiscal “stimulus” than lawmakers are. …

Both sides support some type of infrastructure program, but neither side seems enthusiastic. Although President-elect Trump has highlighted infrastructure among the priorities he hopes to address, the reaction from Congressional Republicans has been tepid. While some believe the inclusion of an infrastructure plan in the tax legislation that Congress is expected to consider in 2017 could increase Democratic support for the combined package, others are wary of proposals to use the proceeds from taxing the unrepatriated profits of US multinationals to pay for it. Instead, Republican lawmakers appear more inclined to use the bulk of the proceeds from taxing those overseas earnings to offset the budgetary effects of reducing statutory tax rates.

Obamacare “repeal” seems unlikely to change the fiscal picture for 2017 or even 2018. Congress will face a number of challenges in reforming the ACA in 2017, and we would expect that the process to devise a replacement plan will take until late 2017, if not 2018. We would also expect whatever replaces the current system to take effect after the midterm congressional elections, in 2019. This could lead to uncertainty regarding the changes that might be made, but we expect that whatever changes to the ACA might ultimately occur, they would probably not take effect until 2018 at the earliest and more likely 2019.

CR Note: The “infrastructure” proposal that many investors are focusing on is really a proposal for about $100+ billion in tax credits to spur private investment in infrastructure (I’ve seen some people talking about $1 trillion in infrastructure investment – but that is the projected size of the private investment, not the proposed government spending).  This proposal is actually very modest in terms of a fiscal boost.   More analysis to come when we see the actual proposals, but I think analysts might be overestimating the boost from government spending in 2017.

Read more at http://www.calculatedriskblog.com/2016/11/goldman-market-expectations-of-quick.html#1ct7XBvck8GdhhGh.99

by Bill McBride on 11/17/2016 04:41:00 PM

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Published at Thu, 17 Nov 2016 21:41:00 +0000

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Stock Market Air Pocket Due

 

Stock Market Air Pocket Due


The stock market is in a position where it should see a 2-3% air pocket Friday November 18th and possibly early into early Monday the 21st. The SPX has a downside target of 2120’s to the 2140’s. Monday is the ten week low from Sept 12.

The pattern is bullish after the sell-off with another higher high due late next week. The Jupiter aspects are strongly bullish into about the Thanksgiving Holiday.

The overall Wave 4 (since late 2014) of 5 (since 2009) of V (since 1942) of [V] (since about 1776) current viewpoint is still intact. Wave 2’s and 4’s can have all kinds of nuances in the internal wave counts. R.N. Elliott, himself, said he preferred to stay out of trading during these times.

As far as the current, very short term outlook is concerned, there are some troublesome developments, but the outcome looks bullish once complete.

Current astro is topping, bearish:

Nov 17, 2016 5:10 PM Neptune 9 Pisces 15 opposition True Node 9 Virgo 15
Nov 18, 2016 9:58 AM Mercury 9 Sagittarius square True Node 9 Virgo 11
Nov 18, 2016 11:04 AM Mercury 9 Sagittarius 12 square Neptune 9 Pisces 15

The 8 TD low +/- 10 TD’s plus the 5 week low is due in this time frame.

We have an irregular top on top of another irregular top on the SPX with negative money flow and momentum divergences, along with inter market bearish divergences. On Saturday we have Neptune turning stationary direct, which is a reversal signature.

Bottom line is I expect Friday to be down hard into the 2120’s/40’s SPX, but then I turn bullish Monday.


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Brad Gudgeon

Brad Gudgeon
BluStar Market Timer

BluStar Market Timer Investment Philosophy: The stock market is currently in a technical Elliott Wave Bear Market Rally. It has been exhibiting A-B-C type waves instead of the normal 5 Waves since the market topped in 2000. According to “The Original Works of R.N. Elliott”, we are due for a move down to about the S&P 500 442/443 area in the next few years. In my opinion, this is no longer a buy and hold market, but a traders’ market. We mainly swing trade the market with funds and ETF’s, but otherwise trade according to the market’s disposition and to the traders’ discretion. For the year 2014, BluStar Market Timer is rated #1 according to Timer Trac. http://www.blustarmarkettimer.info

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Published at Thu, 17 Nov 2016 21:40:03 +0000

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Key Measures Show Inflation close to 2% in October

 

Key Measures Show Inflation close to 2% in October

by Bill McBride on 11/17/2016 11:19:00 AM

 The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.1% annualized rate) in October. The 16% trimmed-mean Consumer Price Index also rose 0.2% (2.2% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.4% (4.4% annualized rate) in October. The CPI less food and energy rose 0.1% (1.8% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed released the median CPI details for October here. Motor fuel was up 122% annualized in October!
Inflation MeasuresClick on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.5%, the trimmed-mean CPI rose 2.0%, and the CPI less food and energy rose 2.1%. Core PCE is for September and increased 1.7% year-over-year.

On a monthly basis, median CPI was at 2.1% annualized, trimmed-mean CPI was at 2.2% annualized, and core CPI was at 1.8% annualized.

Using these measures, inflation has generally been moving up, and most of these measures are close to the Fed’s 2% target (Core PCE is still below).

Read more at http://www.calculatedriskblog.com/2016/11/key-measures-show-inflation-close-to-2.html#q6owcHUEQmOSc9rg.99

by Bill McBride on 11/17/2016 11:19:00 AM

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Published at Thu, 17 Nov 2016 16:19:00 +0000

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UBS’s head of U.S. wealth management bullish about growth

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File Photo – Former Swiss bank UBS Chief Financial Officer Tom Naratil attends the company’s second quarter 2011 results news conference in Zurich July 26, 2011.REUTERS/Christian Hartmann

UBS’s head of U.S. wealth management bullish about growth

By Elizabeth Dilts | NEW YORK

For the first time since UBS Group AG bought PaineWebber 16 years ago, the world’s largest wealth manager’s U.S. business has a smaller workforce than an independent rival, Raymond James Financial.

But does Tom Naratil, president of UBS’s Wealth Management Americas, care?

“No. We don’t,” Naratil told Reuters on Wednesday. “For six years, we’ve said it was all about the productivity of advisers and not the number of advisers.”

In June, Naratil launched plans to cut the firm’s costly recruiting efforts by 40 percent, streamline broker’s compensation and eliminate some middle management.

The cuts are part of a broader effort to boost lagging revenue. Some of the money saved from recruiting will go to pay existing advisers bonuses for growing their business.

It is already working, Naratil said, pointing to the record revenues, income and pre-tax profit margins reported in the third quarter.

There are costs to leaving the recruiting game amid a decade-long trend of advisers moving from Wall Street brokerages to independent outfits, like Raymond James. St. Petersburg, Florida-based Raymond James reported it had 7,146 advisers across its employee and independent channels in the third quarter, compared to UBS’s 7,087.

“We don’t need to wake up every morning and pray for the independent adviser model to fail in order for us to succeed,” said Naratil, who took on the top job in January.

The cuts, combined with an expected increase in the Federal Reserve’s interest rate in December will help the firm reach its goal of 15-25 percent pre-tax profit margins, Naratil said.

Additionally, the uncertainty for some investors created by the surprise election of Republican Donald Trump as U.S. president is also good for business, said the former PaineWebber bond trader.

A UBS survey of 1,200 wealthy investors found that half missed money-making opportunities because they raised cash or moved into conservative investments ahead of the election.

“Any kind of uncertainty that people have as a result of geopolitical events or domestic events is good for the advice markets,” said Naratil, who declined to say whether UBS had been in touch with Trump’s transition team.

Naratil also declined to comment on the firm’s plans to comply with the Labor Department’s Fiduciary Rule, which is designed to protect retirement savers by requiring that brokers put their clients’ best interests ahead of their own bottom line. It is set to take effect in April. Rival firms like Morgan Stanley and Bank of America’s Merrill Lynch announced their plans last month.

It is unclear if Trump will try to delay implementation of the rule.

Regulators have also narrowed in on the securities industry since the sales scandal at Wells Fargo & Co’s retail bank, which opened 2 million accounts for customers without their knowledge.

Groups like the Financial Industry Regulatory Authority have ordered brokerages to hand over information about bonuses that brokers can earn for meeting sales targets.

Naratil said UBS has examined its sales goals and bonuses.

“We don’t see anything similar” to what went on at Wells Fargo’s retail bank, Naratil said. “I don’t think it is a problem across the wealth management industry as a whole.”

(Reporting By Elizabeth Dilts; Editing by Leslie Adler)

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Published at Thu, 17 Nov 2016 12:07:47 +0000

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A post-Trump SEC could shake up current policy

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A general exterior view of the U.S. Securities and Exchange Commission (SEC) headquarters in Washington, June 24, 2011.REUTERS/Jonathan Ernst

A post-Trump SEC could shake up current policy

By Sarah N. Lynch | WASHINGTON

It will be a new day at the U.S. Securities and Exchange Commission after President-elect Donald Trump installs his choice to run the agency.

With Trump’s transition team already in regulatory-relief mode and promising to revamp the Dodd-Frank financial reform legislation, some rules already are marked for death or dialback.

Expected on the chopping block soon after Trump takes the oath of office is a proposal that would require companies to disclose pay ratios between their CEOs and employees. Another would require companies to disclose whether their products contain conflict minerals — minerals that were mined in a war-torn region of Africa.

Dead for now is any prospect of the SEC approving a tough fiduciary rule for financial advisers, say policy experts.

Trump’s decision to tap former Republican SEC Commissioner Paul Atkins to help manage the Trump team’s transition efforts at the SEC and other financial agencies offers a window into some other changes that could be in store. Atkins, the founder of the regulatory consulting firm Patomak Global Partners, is viewed by some to be a top contender for the position of SEC chairman itself, though as the transition head he could also recommend someone else for that job.

Atkins’ well-known conservative views on everything from enforcement penalties to corporate governance are likely to be reflected in the SEC’s agenda.

Here are five policy areas likely to change.

CORPORATE AUDITING RULES COULD GET LOOSER

Paul Atkins was a staunch critic of the Public Company Accounting Oversight Board (PCAOB), a body created after the Enron accounting scandal to police and write new rules for corporate auditors.

Atkins raised concerns about the board’s budget and high salaries, and advocated against prescriptive accounting rules that he felt constrained auditors from making professional judgments.

Recently, Republicans have criticized the PCAOB for taking on more progressive causes, such as proposing companies rotate auditors to reduce conflicts or requiring accounting firms to disclose the name of individual partners working on company audits.

The PCAOB’s chairman Jim Doty, who advocated for the controversial reform measures, will almost certainly not be re-appointed by the incoming SEC chair.

“I expect that a new Chair will refocus the Board’s standard-setting agenda on the core audit function,” said Hunton & Williams Partner Scott Kimpel. “I would expect a return to the basics.”

PENALTIES COULD SHRINK; PEOPLE COULD PAY

The topic of whether to impose corporate penalties against a company would come under scrutiny.

During his time at the SEC, Atkins advocated for an enforcement approach that he said did not unduly punish corporate shareholders that had already suffered from the misconduct. He called for the SEC to carefully weigh who had profited from the bad behavior, and urged the SEC to hold individuals accountable for their actions.

STOCK MARKET TRADING WOULD GET SECOND LOOK

Atkins has long opined that the SEC’s rules requiring “best price” execution of stock trades actually skews the market by causing fragmentation and harming price discovery by directing orders away from traditional stock exchanges into “dark pool” trading platforms.

As a commissioner, Paul Atkins was critical of the rule called Regulation National Market System (NMS), saying it could impede true price discovery and encourage gaming of the system.

In January 2016 he wrote an opinion piece in the Wall Street Journal calling for the SEC to do major surgery on the rule, allowing considerations beyond ‘best price’ and speed to determine order flow.

WHISTLEBLOWERS COULD FACE MORE HURDLES

The Dodd-Frank law gave the SEC newfound powers to reward whistleblowers who come forward with tips of corporate malfeasance.

From August 2011 through fiscal year 2015, the SEC has received more than 14,000 tips, and by August of 2016, the program had given out more than $100 million in rewards.

But corporate America has long disliked the part of the rule that protects whistleblowers from having to report wrongdoing to their own companies before they tip off the government.

In 2011, Atkins urged the SEC to require whistleblowers to report internally first, saying a failure to do so could undermine compliance programs.

Whether this will change remains to be seen, especially in the wake of the Wells Fargo & Co scandal, where employees who reported internally about the opening of unauthorized accounts were fired.

Atkins “cares deeply about the commission and its enforcement program,” said Jordan Thomas, a whistleblower attorney at Labaton Sucharow who previously worked in the SEC’s enforcement division during Atkins’ tenure.

“I find it very hard to believe that he would support undermining such a successful program.”

CAPITAL FORMATION COULD GET A BOOST

Atkins was a strong proponent of the 2012 Jump Start Our Business Startups Act, which scaled back some SEC rules to help smaller companies raise capital.

In testimony on Capitol Hill, Atkins advocated for additional steps to be taken to help smaller companies, including rules to help create venture exchanges for mid-cap stocks and broadening efforts to exempt private capital-raising rules from regulation by states.

(Reporting by Sarah N. Lynch; editing by Linda Stern and Diane Craft)

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Published at Wed, 16 Nov 2016 09:35:06 +0000

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Strong U.S. retail sales reinforce December interest rate hike

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tags
By Couleur from Pixabay

Strong U.S. retail sales reinforce December interest rate hike

By Lucia Mutikani
| WASHINGTON

U.S. retail sales rose more than expected in October as households bought motor vehicles and a range of other goods, pointing to sustained economic strength that could allow the Federal Reserve to raise interest rates next month.

The Commerce Department said on Tuesday retail sales increased 0.8 percent last month, also boosted by demand for building materials, likely as households cleaned up and made repairs in the wake of Hurricane Matthew.

“This is just the kind of data the Fed doves need to see to convince them to hike rates in December. The economy is doing pretty well, this data is bullish for the economic outlook in the months ahead,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.

Adding to the report’s strong tone, September retail sales were revised up to show a 1.0 percent increase instead of the previously reported 0.6 percent rise. The combined September and October sales gain was the largest two-month rise since early 2014. Sales were up 4.3 percent from a year ago.

Excluding automobiles, gasoline, building materials and food services, retail sales jumped 0.8 percent last month after an upwardly revised 0.3 percent gain in September.

These so-called core retail sales, which correspond most closely with the consumer spending component of gross domestic product, were previously reported to have risen 0.1 percent in September.

Economists had forecast overall retail sales increasing 0.6 percent and core sales advancing 0.3 percent last month.

The strong sales report is a good omen heading into the holiday shopping season. Last week, Macy’s and Kohl’s Corp expressed optimism about the holiday shopping season, despite reporting a decline in sales in the third quarter.

U.S. stocks were trading mostly higher, while the dollar was little changed against a basket of currencies. U.S. Treasuries rose after declining for five straight trading sessions.

SUSTAINED STRENGTH

September’s upward revision to core retail sales suggests that the economy’s 2.9 percent annualized growth rate in the third quarter could be raised when the government publishes its second GDP estimate later this month.

Coming on the heels of data this month showing a rapidly tightening labor market and signs of a turnaround in the manufacturing sector, the upbeat retail sales report implied a pickup in economic activity early in the fourth quarter.

The Atlanta Fed lifted its fourth-quarter GDP growth estimate by two-tenths of a percentage point to a 3.3 percent rate after Tuesday’s data.

The report also reinforced views that the Fed will raise interest rates at its Dec. 13-14 policy meeting.

Rate hike prospects have also been boosted by a rally in U.S. stocks in the wake of the last week’s election of Republican candidate Donald Trump as the next president, despite a lot of hand-wringing over his proposed policies.

The Fed this month left interest rates unchanged but said its monetary policy-setting committee “judges that the case for an increase in the federal funds rate has continued to strengthen.” The U.S. central bank raised its benchmark overnight interest rate last December and has held it steady since, largely because of concerns over low inflation.

But inflation is creeping higher. A separate report on Tuesday from the Labor Department showed import prices increased 0.5 percent in October after gaining 0.2 percent in September. In the 12 months through October, import prices fell 0.2 percent, the smallest decrease since July 2014, after declining 1.0 percent in September.

Retail sales last month were driven by a 1.1 percent increase in auto sales and a 1.5 percent surge in receipts at online retailers. Online retailers like Amazon have been grabbing market share from traditional department chains like Macy’s and Kohl’s.

Sales at building material stores increased 1.1 percent following a 1.8 percent rise in September. The strength in this category was reflected in Home Depot’s robust third-quarter profit and sales reported on Tuesday.

Receipts at sporting goods and hobby stores rose 1.3 percent. Sales at restaurants and bars, however, fell 0.7 percent, likely as the stormy weather kept people at home.

Households also spent more on clothing, groceries and grooming last month, but cut back on furniture. Receipts at service stations advanced 2.2 percent on rising gasoline prices.

“As uncertainty over the election outcome remains elevated, October’s retail sales performance provides some comfort that the primary driver of U.S. GDP growth remains on solid footing,” said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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Published at Tue, 15 Nov 2016 19:40:36 +0000

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NY Fed: November “General business conditions index climbed eight points to 1.5”

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NY Fed: November “General business conditions index climbed eight points to 1.5”

NY Fed: November “General business conditions index climbed eight points to 1.5”

by Bill McBride on 11/15/2016 10:33:00 AM

 Earlier from the NY Fed: Empire State Manufacturing Survey

Business activity stabilized in New York State, according to firms responding to the November 2016 Empire State Manufacturing Survey. The headline general business conditions index climbed out of negative territory for the first time in four months, rising eight points to 1.5.

Both employment indexes remained negative in November. The index for number of employees dropped six points to -10.9, a sign that employment levels were contracting, and the average workweek index, little changed at -10.9, pointed to a decline in hours worked.

Indexes for the six-month outlook suggested that respondents were somewhat less optimistic about future conditions than they were last month. … Indexes for future employment and the future average workweek, at 10.9 and 10.0, respectively, indicated that firms expected to expand employee rolls and hours worked in the months ahead.

This was above the consensus forecast of -2.3, and suggests manufacturing expanded in the NY region in November.

Read more at http://www.calculatedriskblog.com/2016/11/ny-fed-november-general-business.html#8gUxbjpu2S96pry3.99

by Bill McBride on 11/15/2016 10:33:00 AM

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Published at Tue, 15 Nov 2016 15:33:00 +0000

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Retail Sales increased 0.8% in October

Retail Sales increased 0.8% in October

by Bill McBride on 11/15/2016 08:38:00 AM

 On a monthly basis, retail sales increased 0.8 percent from September to October (seasonally adjusted), and sales were up 4.3% from October 2015.
From the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for October, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $465.9 billion, an increase of 0.8 percent from the previous month, and 4.3 percent above October 2015. … The August 2016 to September 2016 percent change was revised from up 0.6 percent to up 1.0 percent.

Retail SalesClick on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales ex-gasoline were up 0.7% in October.

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.
 

Year-over-year change in Retail SalesRetail and Food service sales ex-gasoline increased by 4.5% on a YoY basis.

The increase in October was above expectations and the previous two months were revised up; a very strong report.

Read more at http://www.calculatedriskblog.com/2016/11/retail-sales-increased-06-in-october.html#c8VgrHwV0dgA7ymC.99

by Bill McBride on 11/15/2016 08:38:00 AM

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Published at Tue, 15 Nov 2016 13:38:00 +0000

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Wall Street falls as tech drags; investors eye Trump policies

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 10, 2016. REUTERS/Brendan McDermid

Wall Street falls as tech drags; investors eye Trump policies

By Sinead Carew

U.S. stocks closed little changed on Monday after rising dramatically the week before and a decline in the technology sector offset a steep rise in financial stocks as investors bet on higher interest rates.

After choppy trading late in the session, the Dow ended at a record high while the S&P 500 and the Nasdaq Composite dipped.

“I think all we’re doing is trimming our sails a little from the violently positive rally we had post-election results last week,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

The tech-heavy Nasdaq Composite has been under pressure since the Nov. 8 election as investors poured money into sectors such as financials, industrials and energy, which are seen benefiting from President-elect Donald Trump’s policies.

The financial index rose 2.3 percent, with banks including Bank of America JPMorgan providing the biggest boost. The index has risen 10.8 percent since the election on hopes of deregulation and higher interest rates.

While the financial rally gained steam, the S&P technology index closed down 1.7 percent, leading the decliners. The index has fallen 3 percent since the election.

Apple fell 2.5 percent and weighed the most on the Nasdaq and the S&P 500, followed by Facebook and Microsoft.

Since technology valuations have soared in recent years, investors are switching money to sectors such as banks, which has been relatively cheaper but should now benefit from rising interest rates, said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

Investors have been betting technology will look relatively less attractive if Trump lives up to his promise to review regulation in healthcare and financial sectors and to increase government spending on infrastructure to boost economic growth.

“If growth becomes more even and available, we may see a continuation of rotation into lower-valuation, more cyclical businesses and out of high-valuation growth stocks like technology,” said James Abate, chief investment officer at Centre Asset Management in New York.

The Dow Jones industrial average closed up 21.03 points, or 0.11 percent, to 18,868.69, the S&P 500 lost 0.25 points, or 0.01 percent, to 2,164.2 and the Nasdaq Composite dropped 18.72 points, or 0.36 percent, to 5,218.40.

The U.S. Federal Reserve is widely expected to raise interest rates at its December meeting, with traders pricing in a 91-percent chance, according to CME Group’s FedWatch tool.

The industrial index finished up 0.4 percent, buoyed by prospects for increased infrastructure outlays.

Harman International rose 25.2 percent to $109.72 after Samsung Electronics announced an $8 billion deal to buy the company.

Advancing issues outnumbered declining ones on the NYSE by a 1.10-to-1 ratio; on Nasdaq, a 1.44-to-1 ratio favored advancers.

The S&P 500 posted 82 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 423 new highs and 31 new lows.

About 10 billion shares changed hands on U.S. exchanges on Monday, far above the 7.7 billion average for the previous 20 sessions.

(Additional reporting by Tanya Agrawal; Editing by Saumyadeb Chakrabarty and Nick Zieminski)

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Published at Mon, 14 Nov 2016 18:08:05 +0000

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Market Efficiency and Trading With Market Cycles

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Market Efficiency and Trading With Market Cycles

Above is a real time screenshot of the ES futures, with 15-minute bars.  It’s a nice chart, because it illustrates an important trading principle:  that of the efficiency and inefficiency of the market’s price behavior.

In an efficient market, a given amount of buying or selling activity yields a significant degree of price change.  In an inefficient market, a given amount of buying or selling activity leads to relatively little price change.  

Think of an idealized market cycle.  At the peaks and troughs, we have topping and bottoming activity.  Notice, for instance, the bottoming of the ES market at the left hand side of the chart and the topping on the right.  At market turning points, we have selling and buying activity, but now that selling and buying finds interest on the other side.  That leads to back-and-forth movement that comprises the bottoming or topping of the cycle.

Between these bottoming and topping processes, we see rather efficient market behavior.  The buying in the middle of the chart moves prices relatively steadily higher.  These cycle dynamics occur across multiple time frames, including intraday as noted above.  For an example over a long time horizon, think about the SPX market during 2007 and early 2008 (topping) and late 2008 to early 2009 (bottoming), with efficient selling between the two and efficient buying afterward.

These cycle dynamics help to explain why trading is so challenging.  During those transitional times of topping and bottoming (inefficient markets), fading strength and weakness will work as a strategy.  During the efficient periods, we want to ride trends.  If we understand cycle dynamics and can assess the transitions between greater and lesser efficiency, we’re in a stronger position to adapt our trading to the supply/demand situation of the marketplace.

It’s when we’re locked into a single mode of trading, whether it’s “mean reversion” or “trending”, that we court frustration, as we’re ill-prepared to trade with market cycles.  As I’ve noted in the past, if we’re going to dance with the market, we have to let it lead; otherwise, we’ll find ourselves in a ballroom waltz when the music turns hip-hop.

Further Reading:  The Dynamics of Stock Market Cycles

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Published at Mon, 14 Nov 2016 11:27:00 +0000

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Sunday Night Futures

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Sunday Night Futures

by Bill McBride on 11/13/2016 07:25:00 PM

 Weekend:

Schedule for Week of Nov 13, 2016

Goldman: “Economic Implications of the Trump Agenda”

Monday:
• No major economic releases scheduled

From CNBC: Pre-Market Data and Bloomberg futures: S&P futures are up 7 and DOW futures are up 50 (fair value).

Oil prices were down over the last week with WTI futures at $43.56 per barrel and Brent at $44.94 per barrel.  A year ago, WTI was at $41, and Brent was at $42 – so oil prices are up year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.16 per gallon – a year ago prices were at $2.18 per gallon – so gasoline prices are mostly unchanged year-over-year.

Read more at http://www.calculatedriskblog.com/2016/11/sunday-night-futures_13.html#e6iwkRrwwoHRD6zA.99

by Bill McBride on 11/13/2016 07:25:00 PM

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Published at Mon, 14 Nov 2016 00:25:00 +0000

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Finding Opportunity and Threat in Post-Election Markets

 

Finding Opportunity and Threat in Post-Election Markets

It’s all too easy to see things through the lenses of our own preferences, positions, and emotions.  This is particularly the case in the wake of the recent election.  Few people have neutral reactions to the outcome, and few have neutral views as to the implications for the economy and financial markets.

There is a fair amount of talk about a big economic stimulus package to be launched by the new administration.  There is also observation that many of the people on the transition team are of a conservative leaning that normally tends to avoid government debt and spending.  How this might play out could have important implications for the economy and for monetary policy.  My base case is that we get a large stimulus packaged as a jobs-and-infrastructure-building initiative that could pay for itself with increased growth.  I’m skeptical of that latter part, which means that we could see not only rising inflation from fiscal stimulus, but also stagflation.

The important point is that we don’t really know at this moment and the best we can do is make ourselves aware of various potential outcomes and continually update the odds of those occurring.  This is why I’ll be watching interest rates, the U.S. dollar, commodities, and stocks very closely.  I’ll be viewing those in relative terms–as they compare with rates, currencies, and equities globally.  I want to view the world through multiple lenses to best handicap the likelihood of growth versus stagnation, disinflation versus inflation.  Those outcomes will depend upon policies and developments overseas, not just in the U.S.  After all, despite our hyperfocus on the recent election, perhaps 2017 will not about the U.S.; perhaps it will be more about China or geopolitical turmoil in the Middle East.  Perhaps it won’t be about bull or bear markets, but volatile ones.

It takes an open mind and flexible perception to not become too locked into one way of viewing the world.  Looking at multiple markets in multiple regions, in relative as well as outright terms, helps us change our lenses and perceive fresh opportunity–and threat.  I encourage readers to check out my latest post on how we can approach the world more creatively.  There is a three-step process that we can actually practice and cultivate that enables us to see opportunities and threats that others miss.  Adapting to changing markets starts with asking the right questions and making ourselves open to a variety of possible answers.  

Ultimately, the best way to see the right thing in markets is to begin by seeing many things.

Further Reading:  How to Cultivate Our Creativity

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Published at Sun, 13 Nov 2016 12:31:00 +0000

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Goldman: “Economic Implications of the Trump Agenda”

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Goldman: “Economic Implications of the Trump Agenda”

by Bill McBride on 11/13/2016 10:19:00 AM

 A few excerpts from an analysis piece by Goldman Sachs economists Sven Jari Stehn and Alec Phillips:

• President-elect Trump’s proposals, if enacted, would have significant implications for the US economic outlook over the next few years, some positive and some negative. The positive fiscal impulse from his tax reform and infrastructure proposals could provide a near-term boost to growth and, depending on the specifics, could have positive longer-run supply side effects.

• However, other proposals could lead to new restrictions on foreign trade and immigration, which could have negative implications for growth, particularly over the longer term. …

• We expect scaled-down versions of the tax reform and infrastructure policies to be enacted. We do not anticipate significant changes on immigration policy, but incremental restrictions seem likely. Mr. Trump’s monetary policy views are still unclear, but slightly more hawkish appointments appear likely at this stage. Trade policy is the greatest unknown, but we expect that Mr. Trump would follow through on at least some of the trade policies he has outlined.

• Keeping in mind that our simulations are subject to considerable uncertainty, we draw three main conclusions. First, Mr. Trump’s policies could boost growth in 2017 and 2018, but are likely to weigh on growth thereafter if trade and immigration restrictions are enacted, or if Fed policy turns more restrictive. Second, core inflation and the funds rate are likely to be higher for the next few years in almost all scenarios. Third, the risks around our base case appear asymmetric: a larger fiscal package could boost growth moderately more in the near term, but a more adverse policy mix would likely lead to a significant slowdown, higher inflation and tighter policy in subsequent years.
emphasis added

CR Note: No one knows exactly what Mr. Trump will propose. As an example, Trump has promised his supporters that he would not touch Social Security and Medicare, but House Speaker Paul Ryan has already suggested that cuts to Medicare are on the table. And note that Goldman does not “anticipate significant changes on immigration policy”, yet that was Trump’s initial campaign proposal. We have to wait and see what the exact proposals will be.

Read more at http://www.calculatedriskblog.com/2016/11/goldman-economic-implications-of-trump.html#JFrehQvMERHd47mK.99

by Bill McBride on 11/13/2016 10:19:00 AM

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Published at Sun, 13 Nov 2016 15:19:00 +0000

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In wake of Trump win, focus may drift back to Fed and inflation

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U.S. President elect Donald Trump speaks at election night rally in Manhattan, New York, U.S., November 9, 2016.REUTERS/Mike Segar/File Photo

In wake of Trump win, focus may drift back to Fed and inflation

By Sumanta Dey | BENGALURU

After Donald Trump’s unexpected victory in the U.S. presidential election, investors may refocus in the coming week on the health of the world economy and any signs that years of rock-bottom interest rates and fiscal austerity are coming to an end.

Trump’s victory poses a major challenge to the conventional wisdom on the global economy, which for years has relied on brisker cross-border trade and migration flows for growth.

Apart from a nearly across-the-board rise in sovereign bond yields, however, the markets have so far mostly shrugged off the election result – despite previous fears of a meltdown in the event of victory for Trump, who espoused fiercely protectionist positions on trade in his campaign.

Even the long-held view that the Federal Reserve will raise rates next month, a year after its initial step in that direction, hasn’t budged at all. Fed Chair Janet Yellen’s testimony to Congress on Thursday may set the stage for a year-end hike, despite the mild tightening in financial conditions in the past week.

Everything is up for reassessment.

“It will take time to gauge the global economic consequences of Donald Trump’s surprise victory,” JP Morgan’s chief global economist Bruce Kasman wrote in a note.

“Forthcoming policy changes are likely to generate growth cross-currents, but they should reinforce the tilt toward global reflation.” Trump’s proposals represent both a negative supply shock from curbs on trade and immigration as well as a positive demand shock from new fiscal spending, he added.

With the U.S. economy close to full employment – the jobless rate was 4.9 percent in October – Trump’s election promise to cut taxes and upgrade the country’s aging infrastructure could provide a big boost to both growth and inflation.

Official U.S. data on Thursday will likely show consumer price index inflation picked up slightly last month, up 0.4 percent on the month and 1.6 percent on the same month last year. Core inflation, which strips out food and energy, is expected to hit 2.2 percent.

That follows pre-election news of a pickup in average pay growth to 2.8 percent, the highest since June 2009. Retail sales data due out on Tuesday are expected to have lost a little steam last month.

INFLATION AHOY

Sovereign bond markets are already out of the blocks in pricing in a rise in inflation expectations in the United States followed by the rest of the world.

The 10-year U.S. yield US10YT=RR rose to 2.15 percent, almost 30 basis points above its levels around 1.86 percent just before the U.S. election on Tuesday. The surge has strengthened the dollar against the euro and yen, which would ultimately help raise import costs in the euro zone and Japan.

If inflation moves higher from here, supported by fiscal stimulus and rising energy prices, the current back-up in bond yields across the developed world is set to continue, possibly suggesting an end to a three-decade trend of falling yields.

It is still early days, however. Starting on Monday, it will become clearer how industrialized economies such as the euro zone, Germany, Italy, and Japan fared in the third quarter – before the U.S. political earthquake.

Reuters polls show growth largely held steady in the euro zone despite a slowdown in Germany, and picked up slightly in Japan. Inflation was probably 0.5 percent in October in the euro area, similar to a preliminary reading but above recent lows.

The gradual rise in inflation in recent months will be welcome news for the European Central Bank which, after printing more than a trillion euros since March 2015 and cutting deposit rates to -0.4 percent, is fast seen running out of policy tools.

The ECB’s Governing Council next meets on Dec. 8 to decide policy. Economists expect it to extend its asset purchase program beyond the planned end date of March 2017.

YELLEN’S FUTURE

A snap Reuters poll conducted in the 24 hours after the U.S. election result indicated no change at all in the expected future path for the policy rate.

A series of Fed policymakers are scheduled to speak in the coming week and are likely to reinforce the view that the fed funds rate will move up 25 basis points to a range of 0.50-0.75 at the Dec. 13-14 meeting.

Crucial too for the rate trajectory is the future of Janet Yellen, appointed by President Obama as Fed Chair. A Reuters poll a few days ago found a majority of economists expect Yellen to serve out the remainder of her term until early 2018 but don’t think she will be reappointed.

“What is relatively clear is that there will be conflicts between a Trump administration and Fed Chair Janet Yellen after Trump had severely attacked Yellen in his election campaign. The bridges between both of them appear to have been burnt,” Jorg Kramer, chief economist at Commerzbank, wrote to clients.

Britain’s Prime Minister Theresa May is scheduled to travel to Berlin on Nov. 18, a trip in which she possibly hopes to get preliminary talks underway that would help the UK smoothly navigate the process of leaving the European Union.

(Editing by Ross Finley and Hugh Lawson)

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Published at Sat, 12 Nov 2016 01:10:32 +0000

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U.S. banks’ post-election rally may be just an appetizer

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 10, 2016.REUTERS/Brendan McDermid

U.S. banks’ post-election rally may be just an appetizer

By Sinead Carew | NEW YORK

The U.S. banking sector’s dramatic rally post Election Day is likely just a taste of bigger gains to come, as investors expect banks to reap huge benefits from rising interest rates and lighter regulation under a Donald Trump presidency.

In recent years, bank stocks have been held back by heavy regulation and historically low interest rates which have sapped the earnings potential of their massive cash holdings.

But optimism about the sector’s outlook is growing. Interest rates are rising and investors are betting that Trump will follow through on his campaign promise to review the increased number of regulations put on the banking system after it nearly keeled over in the 2008 financial crisis.

The S&P 500 bank subsector rose 10.2 percent in the three days following Trump’s victory in the U.S. presidential election. This was the index’s best three-day performance since August 2009.

In those three days, Wells Fargo Co shares rose 13.6 percent, JPMorgan Chase & Co climbed 9.5 percent and Bank of America gained 11.9 percent.

Some investors and analysts watching banks say the stocks are likely not near the end of their run.

“They are not close to being expensive yet,” said Peter Kenny, senior market strategist at Global Markets Advisory Group in New York.

The S&P 500 banks are currently trading at about 11.2 times forward earnings estimates as a group, up from about nine times in February, when the index hit its lowest since May 2013.

Valuation is still well off peak levels of over 33 times earnings estimates in May of 2009, though it trades near levels seen between 2002 and 2008, before many current regulations were put in place.

If rates continue to rise and the Trump administration gives some clarity on how regulations will change, then bank valuations “certainly can move higher,” Piper Jaffray analyst Kevin Baker said.

Baker stopped short of giving a specific P/E estimate but he pointed to the higher valuations of banks that are not designated as systemically important financial institutions, commonly referred to as “too big to fail”.

Today, the minimum asset threshold for too-big-to-fail designated banks is $50 billion. If this threshold is lifted to $250 billion in a regulatory overhaul it would give a lot more flexibility that could likely boost valuations of banks operating in that range, Baker said.

Valuations for too-big-to-fail designated banks are at around 12.5 times forward earnings compared with multiples of 13 to 15 for banks outside of this category, according to Baker.

Ed Keon, managing director and portfolio manager of QMA, a multi-asset manager owned by Prudential Financial, said he has been buying into the Financial Select Sector SPDR Fund, the ETF that tracks the S&P financial sector, in the last couple of weeks.

He is betting on higher interest rates and a pick-up in economic growth. The potential for lighter regulation added to his enthusiasm for the sector.

“Of course, no one yet knows exactly what policy changes will occur and exactly how much they will help profits, but I think the benefit might be solid enough that I am maintaining my overweight holdings in the sector,” Keon said.

(Reporting by Caroline Valetkevitch, Chuck Mikolajczak and Sinead Carew; Writing by Sinead Carew; Editing by Daniel Bases and James Dalgleish)

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Published at Sat, 12 Nov 2016 01:20:56 +0000

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Preliminary November Consumer Sentiment increases to 91.6

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By geralt from pixabay

Preliminary November Consumer Sentiment increases to 91.6

by Bill McBride on 11/11/2016 10:50:00 AM

 The preliminary University of Michigan consumer sentiment index for November was at 91.6, up from 87.2 in October.

The Sentiment Index in early November erased the small October decline to climb to its highest level since mid 2016 and rise slightly above the 2016 average of 91.1. The recent gain in sentiment was driven by an improved outlook for the economy. The most striking finding in early November was that both near and long-term inflation expectations jumped to 2.7% from last month’s record matching lows of 2.4%. These increases must be replicated before they can be taken to indicate a troublesome development; thus far, the data has simply repeated the March 2016 peaks. Nonetheless, it may be viewed as added justification for next month’s expected interest rate hike. The expected small increase in interest rates had little impact on favorable buying attitudes, and still supports a 2.5% increase in real consumer spending during 2017. Unfortunately, the November data must be accompanied by the proviso that it was collected before the result of the Presidential election was known late Tuesday.
emphasis added

Consumer Sentiment
Click on graph for larger image.

Read more at http://www.calculatedriskblog.com/2016/11/preliminary-november-consumer-sentiment.html#X0dObJ0Zebipfc5M.99

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Trump bets blast Dow to new high, bank sector hits 2008 levels

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graph-163509_1280graph-163509_1280
graph-163509_1280

 by publicdomainpictures at pixabay

graph-163509_1280Trump bets blast Dow to new high, bank sector hits 2008 levels

By Noel Randewich

U.S. banking sector shares on Thursday surged to levels not seen since the midst of the 2008 financial crisis, pushing the Dow to an all-time high, while technology shares sank as Wall Street rearranged its bets to benefit from Donald Trump’s presidency.

The S&P 500 financial sector .SPSY surged 3.70 percent to its highest since the 2008 financial crisis, bringing its gain since Trump’s surprise victory in Tuesday’s election to 7.9 percent, its biggest two-day gain since 2011.

Shares of Wells Fargo & Co (WFC.N) jumped 7.58 percent to their highest since January, and have now erased all of the losses incurred in the wake of a scandal over fake accounts opened by its employees. Bank of America (BAC.N) surged 4.40 percent and JPMorgan Chase (JPM.N) rallied 4.64 percent to a record high.

Trump has sided with leading conservatives in calling for the repeal of the 2010 Dodd-Frank Financial Reform Act largely opposed by banks.

“The Trump campaign did say it would repeal Dodd-Frank. Rates are higher and the yield curve is steeper. Those are all good things for the banks,” said Warren West, principal at Greentree Brokerage Services in Philadelphia.

Apple (AAPL.O) dropped 2.79 percent while Amazon.com (AMZN.O) fell 3.82 percent and the S&P 500 technology index .SPLRCT fell 1.59 percent.

The Dow Jones industrial average .DJI jumped 1.17 percent to end at 18,807.88, smashing through its previous record high set in August by almost 1 percent.

The S&P 500 .SPX rose 0.2 percent to 2,167.48 while the Nasdaq Composite .IXIC dropped 0.81 percent to 5,208.80, hurt by losses in tech shares.

With Thursday’s gain, the Dow is up 8 percent in 2016 and the S&P 500 is up 6 percent.

High-dividend sectors utilities .SPLRCU, telecom services .SPLRCL and consumer staples .SPLRCS sold off by more than 2 percent as bond yields rose due to expectations of higher interest rates.

The market got a lift after St. Louis Federal Reserve President James Bullard said the Republican sweep of the White House and Congress could break the current gridlock over national policy in a potential boon to the U.S. economy.

Industrials .SPLRCI trailed the financials with a 2.05 percent advance.

Macy’s (M.N) rose 5.6 percent after the department store operator raised its full-year sales forecast and announced a partnership to monetize some of its real-estate assets.

After the bell, Nordstrom (JWN.N) reported quarterly results that sent its shares 5 percent higher while Walt Disney’s (DIS.N) quarterly report pushed its stock down 2.6 percent.

Declining issues outnumbered advancing ones on the NYSE by a 1.15-to-1 ratio; on Nasdaq, a 1.58-to-1 ratio favored advancers.

The S&P 500 posted 84 new 52-week highs and seven new lows; the Nasdaq Composite recorded 336 new highs and 48 new lows.

About 12.3 billion shares changed hands on U.S. exchanges, far above the 7.3 billion daily average over the last 20 sessions.

(Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by James Dalgleish)

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Published at Thu, 10 Nov 2016 21:46:06 +0000

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The Future is still Bright!

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by Geralt at pixabay

The Future is still Bright!

by Bill McBride on 11/09/2016 02:53:00 PM

 In January 2013 I wrote The Future’s so Bright …. In that post I outlined why I was becoming more optimistic. I updated that post earlier this year (with a discussion of demographics).

For new readers: I was very bearish on the economy when I started this blog in 2005 – back then I wrote mostly about housing (see: LA Times article and more here for comments about the blog). I predicted a recession in 2007, and then I started looking for the sun in early 2009, and I’ve been fairly positive since then (although I expected a sluggish recovery).

I’ve also been optimistic about next year (2017), with most economic indicators improving – more jobs, lower unemployment rate, rising wages and much more – and with more room to run for the current expansion.   Also the demographics in the U.S. are becoming more favorable (see here for more on improving demographics).

Now Mr. Trump has been elected President.  How does that change the outlook?

In the long term, there is little or no change to the outlook.  The future is still bright!  Although I’m concerned about the impact of global warming.

In the short term, there is also no change (Mr Obama will be President until January, and it takes time for new policies to be implemented).

The intermediate term might be impacted. The general rule is don’t invest based on your political views, however it is also important to look at the impact of specific policies.

I will probably disagree with most of Mr. Trump’s proposals for both normative reasons (different values), and for positive reasons (because Mr. Trump rejects data that doesn’t fit his view – and that is not good).

With Mr. Trump, no one knows what he will actually do.  He has said he’d “build a wall” along the border with Mexico, renegotiate all trade deals, cut taxes on high income earners, repeal Obamacare and more.   As an example, repealing the ACA – without a replacement – would lead to many millions of Americans without health insurance.  And those with preexisting conditions would be uninsurable.   This seems politically unlikely (without a replacement policy), but it is possible.

Since Trump is at war with the data (he rejects data that doesn’t fit his views), I don’t expect evidence based policy proposals – and that almost always means bad results.   However bad results might mean higher deficits with little return – not an economic downturn.  Until we see the actual policy proposals, it is hard to predict the impact.  I will not predict a recession just because Trump is elected.  In fact, additional infrastructure spending might give the economy a little boost over the next year or two.   On the other hand, deporting 10+ million people would probably lead to a recession.  We just have to wait and see what is enacted.

In conclusion: The future is still bright,  but there might be a storm passing through.

Read more at http://www.calculatedriskblog.com/2016/11/the-future-is-still-bright.html#Z2UTYkjKg41ylVR8.99
board-1647323_1280

board-1647323_1280board-1647323_1280

by Bill McBride on 11/09/2016 02:53:00 PM

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Published at Wed, 09 Nov 2016 19:53:00 +0000

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