All posts in "Market Update"

Thursday: Unemployment Claims, ISM non-Mfg Index

 

Thursday: Unemployment Claims, ISM non-Mfg Index

by Bill McBride on 11/02/2016 07:16:00 PM

 From Tim Duy at Fed Watch: Fed Remains On The Sidelines, Excerpt:

As expected, the Federal Reserve left policy unchanged this month. The statement itself was largely unchanged as well. …

We get two employment reports before the December meeting; for the Fed to stay on the sidelines yet again, we probably need to see both reports come in weak. The first one – for October – comes Friday morning. ADP estimates that private payrolls will be up 147k – not surging, but still easily sufficient for the Fed to justify a rate hike. If this comes to pass, we would probably need a deluge of soft numbers to keep the Fed on hold again.

Bottom Line: Fed is looking past the election to the December meeting for its second move in this rate hike cycle. Probably need some unlikely softer numbers to hold them back again

. Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 255 thousand initial claims, down from 258 thousand the previous week.

• At 10:00 AM, Manufacturers’ Shipments, Inventories and Orders (Factory Orders) for September. The consensus is a 0.2% increase in orders.

• Also at 10:00 AM, the ISM non-Manufacturing Index for October. The consensus is for index to decrease to 56.1 from 57.1 in August.

Read more at http://www.calculatedriskblog.com/2016/11/thursday-unemployment-claims-ism-non.html#3ksEkLyCZzd3Ti5O.99

by Bill McBride on 11/02/2016 07:16:00 PM

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Published at Wed, 02 Nov 2016 23:16:00 +0000

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Update: The Endless Parade of Recession Calls

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Update: The Endless Parade of Recession Calls

by Bill McBride on 11/02/2016 10:42:00 AM

 It was almost a year ago that I wrote: The Endless Parade of Recession Calls. In that post, I pointed out that I wasn’t “even on recession watch”. Here is a repeat of that post with a few updates in italics.

Note: I’ve made one recession call since starting this blog.  One of my predictions for 2007 was a recession would start as a result of the housing bust (made it by one month – the recession started in December 2007).  That prediction was out of the consensus for 2007 and, at the time, ECRI was saying a “recession is no longer a serious concern”.  Ouch.

For the last 6+ years [now 7+ years], there have been an endless parade of incorrect recession calls. The most reported was probably the multiple recession calls from ECRI in 2011 and 2012.

In May of [2015], ECRI finally acknowledged their incorrect call, and here is their admission : The Greater Moderation

In line with the old adage, “never say never,” [ECRI’s] September 2011 U.S. recession forecast did turn out to be a false alarm.

I disagreed with that call in 2011; I wasn’t even on recession watch!

And here is another call [last December] via CNBC: US economy recession odds ’65 percent’: Investor

Raoul Pal, the publisher of The Global Macro Investor, reiterated his bearishness … “The economic situation is deteriorating fast.” … [The ISM report] “is showing that the U.S. economy is almost at stall speed now,” Pal said. “It gives us a 65 percent chance of a recession in the U.S.

Here is the report Pal is referring to from the Institute for Supply Management: November 2015 Manufacturing ISM® Report On Business®
ISM PMIClick on graph for larger image.

Here is a long term graph of the ISM manufacturing index [from last November].

The manufacturing sector has been weak, and contracted in the US in November due to a combination of weakness in the oil sector, the strong dollar and some global weakness.  But this doesn’t mean the US will enter a recession.

The last time the index contracted was in 2012 (no recession), and has shown contraction a number of times outside of a recession.
ISM PMI[Here is an update through October 2016. Manufacturing was weak due to the sharp decline in oil investment, but now the ISM index is showing expansion again.]

Looking at the economic data, the odds of a recession in 2016 are very low (extremely unlikely in my view).  [a recession in 2017 is very unlikely]. Someday I’ll make another recession call, but I’m not even on recession watch now.

[Still not on recession watch!]

Read more at http://www.calculatedriskblog.com/2016/11/update-endless-parade-of-recession-calls.html#bVQlsOgEhIC9Ol4T.99

by Bill McBride on 11/02/2016 10:42:00 AM

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Published at Wed, 02 Nov 2016 14:42:00 +0000

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U.S. Light Vehicle Sales increase to 17.9 million annual rate in October

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car-718781_1280By niekverlaan from Pixabay

U.S. Light Vehicle Sales increase to 17.9 million annual rate in October

by Bill McBride on 11/01/2016 02:30:00 PM

 Based on a preliminary estimate from WardsAuto (estimate for Ford), light vehicle sales were at a 17.9 million SAAR in October.
That is down about slightly from October 2015, and up 1.3% from the 17.65 million annual sales rate last month.

From Erin Sunde at WardsAuto October 2016 U.S. LV Sales Thread: Automakers Hit 17.9 Million SAAR

U.S. automakers delivered 1.36 million light vehicles last month, resulting in 17.90 million SAAR, the highest SAAR of any month this year. The daily sales rate of 52,458 over 26 selling days was 15-year high for the month, beating prior-year by 1.5% (28 days).

Ford postponed reporting due to a fire at its headquarters.

Vehicle Sales
Click on graph for larger image.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for October (red, light vehicle sales of 17.90 million SAAR from WardsAuto).

This was above the consensus forecast of 17.7 million SAAR (seasonally adjusted annual rate) and the best sales month for 2016.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.
Vehicle SalesNote: dashed line is current estimated sales rate.

Sales for 2016 – through the first ten months – are up slightly from the comparable period last year.

After increasing significantly for several years following the financial crisis, auto sales are now moving mostly sideways …

Read more at http://www.calculatedriskblog.com/2016/11/us-light-vehicle-sales-increase-to-179.html#otvud67ucUB1eK3T.99

by Bill McBride on 11/01/2016 02:30:00 PM

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Published at Tue, 01 Nov 2016 18:30:00 +0000

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Wednesday: FOMC Announcement, ADP Employment

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Wednesday: FOMC Announcement, ADP Employment

by Bill McBride on 11/01/2016 08:47:00 PM

 A few excerpts from a piece by Goldman Sachs economists Zach Pandl and Jan Hatzius

• We expect the statement [the] FOMC meeting to remain relatively upbeat about US growth prospects … However, the committee is very unlikely to raise the funds rate. …

• To keep markets on notice for a possible rate hike in December, we expect the statement to indicate that the committee is considering action “at its next meeting”—although this is a close call. The statement will likely again say that risks to the economic outlook are “roughly balanced”.

• A statement along these lines should keep the committee on track to raise the funds rate at the December meeting. We see a 75% chance of an increase, roughly in line with market expectations. The remaining uncertainty relates to incoming economic data and financial conditions … conditional on decent data and stable markets, a December rate hike looks very likely.

Wednesday:
• 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 170,000 payroll jobs added in October, up from 154,000 added in September.

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

Read more at http://www.calculatedriskblog.com/2016/11/wednesday-fomc-announcement-adp.html#7LPeBtsxqGvqe4I2.99

by Bill McBride on 11/01/2016 08:47:00 PM

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Published at Wed, 02 Nov 2016 00:47:00 +0000

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U.S. consumer spending ends third-quarter with strong momentum

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arrows-1574173_1280By geralt from Pixabay

U.S. consumer spending ends third-quarter with strong momentum

By Lucia Mutikani
| WASHINGTON

U.S. consumer spending rose more than expected in September as households boosted purchases of motor vehicles and inflation increased steadily, which could bolster expectations of an interest rate hike from the Federal Reserve in December.

The Commerce Department said on Monday that consumer spending, which accounts for about 70 percent of U.S. economic activity, increased 0.5 percent after dipping 0.1 percent in August. Last month’s rise in consumer spending offered a fairly strong handoff from the third quarter to the current quarter.

The report was published ahead of the start of the Fed’s two-day policy meeting on Tuesday. The U.S. central bank is not expected to raise rates at this meeting, which comes about a week before the Nov. 8 presidential election, but is expected to do so in December.

“The latest data should be of comfort to the Fed. Spending continues to underpin growth and, combined with positive developments on the labor market and inflation, should enable the Fed to tighten policy in December,” said Greg Daco, head of U.S. macroeconomics at Oxford Economics in New York.

Economists had forecast consumer spending rising 0.4 percent last month. When adjusted for inflation, consumer spending rose 0.3 percent after falling 0.2 percent in August.

The spending figures were incorporated into last Friday’s report on third-quarter gross domestic product. Consumer spending increased at a 2.1 percent annual pace after advancing at a robust 4.3 percent rate in the prior period.

A separate report on Monday showed factory activity in the U.S. Midwest hit a five-month low in October amid declining production and weak growth in new orders. The report from the Institute for Supply Management-Chicago suggests prolonged weakness in manufacturing as the sector continues to deal with the aftermath of a dollar rally and lower oil prices.

U.S. stocks were trading marginally higher as investors showed caution ahead of next Tuesday’s elections. The dollar .DXY rose against a basket of currencies, while U.S. Treasury yields fell.

INFLATION TICKING HIGHER

Consumer spending combined with a spurt in soybean exports and a turnaround in inventory investment to boost economic growth to a 2.9 percent pace in the third quarter. The economy grew at a 1.4 percent rate in the April-June quarter.

Rising wages due to a tightening labor market should help support consumer spending. With consumer spending firming, inflation continued to gain steadily last month. The personal consumption expenditures (PCE) price index increased 0.2 percent after a similar gain in August.

In the 12 months through September the PCE price index rose 1.2 percent, the biggest gain since November 2014, after advancing 1.0 percent in August.

Excluding food and energy, the so-called core PCE price index rose 0.1 percent after advancing 0.2 percent in August. In the 12 months through September the core PCE rose 1.7 percent after a similar increase in August.

The core PCE is the Fed’s preferred inflation measure and is running below its 2 percent target.

“Overall inflation is accelerating as energy prices and the U.S. dollar have stabilized since the spring. Stronger wage growth from the tight labor market will also help push up inflation over the medium term,” said Gus Faucher, deputy chief economist at PNC Financial in Pittsburgh.

Consumer spending last month was lifted by a 1.3 percent surge in purchases of long-lasting manufactured goods such as automobiles. Spending on services rose 0.3 percent.

Personal income increased 0.3 percent in September after rising 0.2 percent in August. Wages and salaries advanced 0.3 percent after edging up 0.1 percent the prior month. Savings fell to $797.8 billion from $820.5 billion in August.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

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Published at Mon, 31 Oct 2016 16:30:58 +0000

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Personal Income increased 0.3% in September, Spending increased 0.5%

 

piggy-bank-1056615_1280by Joshua_Wilson from Pixabay

Personal Income increased 0.3% in September, Spending increased 0.5%

by Bill McBride on 10/31/2016 08:36:00 AM

 The BEA released the Personal Income and Outlays report for September:

Personal income increased $46.7 billion (0.3 percent) in September according to estimates released today by the Bureau of Economic Analysis … Personal consumption expenditures (PCE) increased $61.0 billion (0.5 percent).

Real PCE increased 0.3 percent. The PCE price index increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.1 percent.

On inflation: The PCE price index increased 1.2 percent year-over-year due to the sharp decline in oil prices (This was up from 1.0% year-over-year in August). The core PCE price index (excluding food and energy) increased 1.7 percent year-over-year in September (the same as in August).

by Bill McBride on 10/31/2016 08:36:00 AM

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Published at Mon, 31 Oct 2016 12:36:00 +0000

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Hammer Time – Again

 

Hammer Time – Again

by THE MOLE OCTOBER 31, 2016

No worries, I am going to spare you the MC Hammer video today as I think you guys have suffered enough lately. But it is time to swing the hammer as the iron looks pretty damn hot to me. Of course given the market limbo we are still facing with nine more days to go until the election it is quite possible that this setup will once more find itself on the ash heap of trading history. But we just don’t know, do we? You may just take a look at the current configuration a few weeks from now and after a facepalm lament why the heck you didn’t go short here. Or the perhaps opposite – this was nothing but another sideways correction – I knew it! Yes, in hindsight it usually all makes total sense. Unfortunately until Stewie gives me back my time machine we’ll just have to trade the tape right in front of us.

2016-10-31_emini

So let’s do just that, shall we? What I’m seeing on the ST panel over the past few sessions is a series of lower highs and lower lows. I love those as it makes my life extremely easy from an entry perspective. Meaning – go short after a spike high with a stop above the previous spike high. Done – nothing much to say about it UNTIL that previous spike high has been breached. If that happens we are actually in good shape to be long with a stop below the recent spike low. And so on – this is how we navigate the mess, by using the churn in our favor. Sideways markets can be hell yes – but the whipsaw does produce context over time we can use to our advantage. It’s all a matter of perspective – and trading capital

In case you’re wondering, I’m still short from last Monday but if I wasn’t then this is where I would swing my own hammer as this is irresistible from a purely technical perspective. Yes, I’m of course concerned with event risk but if that’s your worry then you’re better of not trading until the election is over (and neither of the candidates is calling for an investigation of voter fraud).

2016-10-31_gold_update

It’s difficult to predict what gold is going to do here but what is clear is that it has continued to coil up since we took that entry near 1257 and the general trend seems to be pointing higher. The more context we produce above that the better for us of course. If I wasn’t long here already then I’d most definitely pull the trigger now but my stop would have to be where I currently have it below 1250. I do maintain however that once this one takes off it’ll be a beauty to behold.

2016-10-31_crude_perspectives

A lot of folks are so captivated by the recent churn in crude that they seem incapable of seeing the forest for all the trees. On a long term basis the recent gyrations are actually extremely positive as they will – on a later date – provide a solid base from which to launch long positions. Now that may be soon or it may be some time next year – another drop lower is definitely in the cards. But in either scenario all the nonsense we experience now will be of value later down the line. Yes, the Mole most definitely prefers the long con…

2016-10-31_6e_update

The subs and I nailed a pretty nice entry on the Euro last Thursday but it seems another revisit of the 100-hour SMA is now in the cards. So if it descends back below 1.096 then don’t be shy – you know what to do.

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Published at Mon, 31 Oct 2016 12:15:14 +0000

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Sunday Night Futures: Gasoline Prices up Slightly Year-over-year

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https://pixabay.com/en/users/jp26jp-308026/By jp26jp from Pixabay

Sunday Night Futures: Gasoline Prices up Slightly Year-over-year

by Bill McBride on 10/30/2016 06:24:00 PM

Monday:
• At 8:30 AM ET, Personal Income and Outlays for September. The consensus is for a 0.4% increase in personal income, and for a 0.5% increase in personal spending. And for the Core PCE price index to increase 0.1%.

• At 9:45 AM, the Chicago Purchasing Managers Index for October. The consensus is for a reading of 54.3, up from 54.2 in September.

• At 10:30 AM, the Dallas Fed Survey of Manufacturing Activity for October. This is the last of the regional Fed surveys for October.

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

Oil prices were down over the last week with WTI futures at $48.70 per barrel and Brent at $49.71 per barrel.  A year ago, WTI was at $47, and Brent was at $48 – so oil prices are UP slightly year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.20 per gallon – a year ago prices were $2.18 per gallon – so gasoline prices are up slightly year-over-year.

Read more at http://www.calculatedriskblog.com/2016/10/sunday-night-futures-gasoline-prices-up.html#zmzGlRUOmewhCKr0.99

by Bill McBride on 10/30/2016 06:24:00 PM

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Published at Sun, 30 Oct 2016 22:24:00 +0000

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Schedule for Week of Oct 30, 2016

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Schedule for Week of Oct 30, 2016

by Bill McBride on 10/29/2016 08:12:00 AM

 The key report this week is the October employment report on Friday.
Other key indicators include the October ISM manufacturing and non-manufacturing indexes, October auto sales, and the September trade deficit.

The FOMC meets on Tuesday and Wednesday, and no change to policy is expected.

—– Monday, Oct 31st —–

8:30 AM ET: Personal Income and Outlays for September. The consensus is for a 0.4% increase in personal income, and for a 0.5% increase in personal spending. And for the Core PCE price index to increase 0.1%.

9:45 AM: Chicago Purchasing Managers Index for October. The consensus is for a reading of 54.3, up from 54.2 in September.

10:30 AM: Dallas Fed Survey of Manufacturing Activity for October. This is the last of the regional Fed surveys for October.

—– Tuesday, Nov 1st —–
 

ISM PMI

10:00 AM: ISM Manufacturing Index for October. The consensus is for the ISM to be at 51.6, up from 51.5 in September.

Here is a long term graph of the ISM manufacturing index.

The ISM manufacturing index indicated expansion at 51.5% in September. The employment index was at 49.7%, and the new orders index was at 55.1%.

10:00 AM: Construction Spending for September. The consensus is for a 0.6% increase in construction spending.
Vehicle Sales

All day: Light vehicle sales for October. The consensus is for light vehicle sales to decrease to 17.6 million SAAR in October, from 17.7 million in  September (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the September sales rate.

—– Wednesday, Nov 2nd —–

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

8:15 AM: The ADP Employment Report for October. This report is for private payrolls only (no government). The consensus is for 170,000 payroll jobs added in October, up from 154,000 added in September.

2:00 PM: FOMC Meeting Announcement. No change to policy is expected at this meeting.

—– Thursday, Nov 3rd —–

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 255 thousand initial claims, down from 258 thousand the previous week.

10:00 AM: Manufacturers’ Shipments, Inventories and Orders (Factory Orders) for September. The consensus is a 0.2% increase in orders.

10:00 AM: the ISM non-Manufacturing Index for October. The consensus is for index to decrease to 56.1 from 57.1 in August.

—– Friday, Nov 4th —–

8:30 AM: Employment Report for October. The consensus is for an increase of 178,000 non-farm payroll jobs added in October, up from the 156,000 non-farm payroll jobs added in September.

The consensus is for the unemployment rate to decline to 4.9%.
Year-over-year change employment

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

In September, the year-over-year change was 2.45 million jobs.

A key will be the change in wages.
U.S. Trade Deficit

8:30 AM: Trade Balance report for September from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through July. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is for the U.S. trade deficit to be at $38.9 billion in September from $40.7 billion in August.

Read more at http://www.calculatedriskblog.com/2016/10/schedule-for-week-of-oct-30-2016.html#eHMWWWMWZDEcYmuD.99

by Bill McBride on 10/29/2016 08:12:00 AM

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Published at Sat, 29 Oct 2016 12:12:00 +0000

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October 2016: Unofficial Problem Bank list declines to 177 Institutions

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October 2016: Unofficial Problem Bank list declines to 177 Institutions

This is an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for October 2016.

Changes and comments from surferdude808:

Update on the Unofficial Problem Bank List for October 2016.  During the month, the list fell from 177 institutions to 173 after five removals and one addition.  Assets dropped by $562 million to an aggregate $54.9 billion.  A year ago, the list held 264 institutions with assets of $79.2 billion.

Actions have been terminated against Horry County State Bank, Loris, SC ($383 million  Ticker: HCFB) and Heritage Community Bank, Greeneville, TN ($89 million).  Finding merger partners were Landmark Community Bank, National Association, Isanti, MN ($80 million); Citizens State Bank, Kingsland, GA ($56 million); and Home Savings Bank, Jefferson City, MO ($24 million).  Added this month was The First National Bank of Lacon, Lacon, IL ($70 million).

In a change, the OCC released an update on its enforcement action activity today, the last Friday of the month.  Historically, the OCC has issued its update on the first Friday following the 15th of the month.  While the FDIC provides a release on the last Friday of the month as well; however, it only includes action changes for the preceding month, so their information has a longer lag time.  Conversely, the Federal Reserve releases individual action changes as they occur instead of waiting to accumulate them in a monthly release.

Read more at http://www.calculatedriskblog.com/2016/10/october-2016-unofficial-problem-bank.html#MdAq8E6FbruHRaup.99

by Bill McBride on 10/29/2016 02:45:00 PM

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Published at Sat, 29 Oct 2016 18:45:00 +0000

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Q3 GDP: Investment

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Q3 GDP: Investment

by Bill McBride on 10/28/2016 02:05:00 PM

 The graph below shows the contribution to GDP from residential investment, equipment and software, and nonresidential structures (3 quarter trailing average). This is important to follow because residential investment tends to lead the economy, equipment and software is generally coincident, and nonresidential structure investment trails the economy.
In the graph, red is residential, green is equipment and software, and blue is investment in non-residential structures. So the usual pattern – both into and out of recessions is – red, green, blue.

The dashed gray line is the contribution from the change in private inventories.

Investment ContributionsClick on graph for larger image.

Residential investment (RI) decreased at a 6.2% annual rate in Q3.  Equipment investment decreased at a 2.7% annual rate, and investment in non-residential structures increased at a 5.4% annual rate.

On a 3 quarter trailing average basis, RI (red) is unchanged,  equipment (green) is slightly negative, and nonresidential structures (blue) is slightly positive.

I’ll post more on the components of non-residential investment once the supplemental data is released.

I expect investment to pick up going forward, and for the economy to grow at a steady pace.
Residential Investment
The second graph shows residential investment as a percent of GDP.

Residential Investment as a percent of GDP has generally been increasing, but is only just above the bottom of the previous recessions – and I expect RI to continue to increase for the next few years.

I’ll break down Residential Investment into components after the GDP details are released.

Note: Residential investment (RI) includes new single family structures, multifamily structures, home improvement, broker’s commissions, and a few minor categories.
non-Residential InvestmentThe third graph shows non-residential investment in structures, equipment and “intellectual property products”.  Investment in equipment – as a percent of GDP – has declined a little recently..  Investment in nonresidential structures – as a percent of GDP – had been moving down due to less investment in energy and power, and is now moving sideways.

Still no worries – residential investment will pickup (still very low), and non-residential will also pickup.

Read more at http://www.calculatedriskblog.com/2016/10/q3-gdp-investment.html#Aa6MiDtPSzFs3vRs.99

by Bill McBride on 10/28/2016 02:05:00 PM

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Published at Fri, 28 Oct 2016 18:05:00 +0000

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Wall St. rises amid robust earnings, GDP data

 

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., October 17, 2016.REUTERS/Lucas Jackson

Wall St. rises amid robust earnings, GDP data

By Chuck Mikolajczak | NEW YORK

U.S. stocks declined in a volatile session on Friday but were able to partially recover from a sharp drop spurred by news the FBI will review more emails related to Democratic presidential candidate Hillary Clinton’s private email use.

Each of the three major indexes on Wall Street fell to session lows, with the S&P 500 dropping 1 percent in an hour, after FBI Director James Comey said in a letter to several congressional Republicans the agency had learned of the existence of emails that appeared to be pertinent to its investigation. The U.S. election is scheduled to take place in 11 days, on Nov. 8.

“The headline hit, everyone panicked for a second that it was going to affect the outcome of the election,” said Stephen Massocca, chief investment officer at Wedbush Equity Management LLC in San Francisco.

The benchmark S&P 500 index fell as much as 0.6 percent on the session, hitting a low of 2,119.36 before recovering.

“People calmed down and considered what it really meant, that in all likelihood it really isn’t going to impact the election,” Massocca said.

Earlier in the session, the S&P 500 had risen as much as 0.4 percent after economic data showed the U.S. economy grew 2.9 percent in the third quarter, its fastest pace in two years, and upbeat earnings from Google parent company Alphabet Inc (GOOGL.O).

Alphabet shares were up 0.3 percent at $819.56.

While the economic data supported the case for an interest rate hike, the Federal Reserve is unlikely to make a move at its meeting next week, as it falls just days ahead of the U.S. presidential election. Many market participants are instead expecting a rate hike in December.

Investors also digested the latest wave of earnings reports with the hope the quarter snaps a year-long earnings recession.

Nearly 73 percent of the S&P 500 companies that reported have topped Wall Street expectations, with growth for the quarter now expected to be 3 percent, according to Thomson Reuters I/B/E/S. The quarter had been expected to show a decline of 0.5 percent at the start of October.

On the negative side, Amazon.com (AMZN.O) suffered its worst day in nearly nine months, down 5.2 percent to $776.32 after the online retailer warned heavy investments in the crucial holiday quarter would hurt profits. The stock was the top drag on the S&P 500 and the Nasdaq.

The Dow Jones industrial average .DJI fell 8.29 points, or 0.05 percent, to 18,161.39, the S&P 500 .SPX lost 6.6 points, or 0.31 percent, to 2,126.44 and the Nasdaq Composite .IXIC dropped 25.87 points, or 0.5 percent, to 5,190.10.

For the week, the S&P 500 dipped 0.7 percent and the Nasdaq lost 1.3 percent, while the Dow managed a 0.1 percent gain.

Declining issues outnumbered advancing ones on the NYSE by a 1.49-to-1 ratio; on Nasdaq, a 1.41-to-1 ratio favored decliners.

The S&P 500 posted 10 new 52-week highs and 10 new lows; the Nasdaq Composite recorded 45 new highs and 129 new lows.

About 7.31 billion shares changed hands in U.S. exchanges, compared with the 6.34 billion daily average over the last 20 sessions.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski and Meredith Mazzilli)

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Published at Fri, 28 Oct 2016 16:47:25 +0000

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Bond yields up, stocks sag on enhanced U.S. rate hike prospects

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People are reflected in a board showing market indices in Tokyo July 28, 2015.REUTERS/Thomas Peter

Bond yields up, stocks sag on enhanced U.S. rate hike prospects

By Hilary Russ and Chuck Mikolajczak | NEW YORK

Wall Street recovered some losses on Friday but still closed lower, with U.S. stocks and the dollar falling after the Federal Bureau of Investigation said it would probe additional emails related to Democratic presidential candidate Hillary Clinton’s use of a personal email server while secretary of state.

The dollar slipped against major currencies, including the Euro and the yen, but rose to three-week highs against the Mexican peso.

The markets, which have been pricing in a likely Clinton win against Republican candidate Donald Trump, were initially spooked by news that could be an advantage to Trump.

Stocks recovered some ground, however, once investors digested the FBI announcement, said Stephen Massocca, chief investment officer, Wedbush Equity Management LLC in San Francisco.

“People calmed down and considered what it really meant, that in all likelihood it really isn’t going to impact the election,” he said.

The Dow Jones industrial average .DJI fell 8.49 points, or 0.05 percent, to 18,161.19, the S&P 500 .SPX lost 6.63 points, or 0.31 percent, to 2,126.41 and the Nasdaq Composite .IXIC dropped 25.87 points, or 0.5 percent, to 5,190.10.

The political uncertainty dented the U.S. dollar, which was down 0.56 percent against a basket of major currencies .DXY after earlier hitting an eight-day low of 98.242. The dollar index was set to post a weekly decline of about 0.4 percent.

The greenback fell about 0.7 percent against the yen to a session low of 104.49 yen JPY= after hitting a three-month high of 105.53 earlier.

The dollar jumped more than 1.3 percent, however, against the Mexican peso to a three-week high of 19.1002 pesos MXN= before paring gains. A Trump victory has been viewed as a key risk for the Mexican currency given Trump’s promises to clamp down on immigration and redraw trade relations with the country.

Oil prices settled below $50 to mark their biggest weekly loss in six weeks on concerns OPEC will not fully carry out a planned crude output cut, even as data showed U.S. oil drillers removed rigs from production for the first time since June.

Brent crude futures LCOc1 fell 76 cents, or 1.5 percent, to $49.71 a barrel, after earlier hitting a session low of $49.31.

U.S. West Texas Intermediate CLc1 crude fell $1.02, or 2 percent, to $48.70 a barrel. It hit a low of $48.42.

The latest investigation into Clinton’s emails also pushed U.S. Treasury two-year note yields US2YT=RR down from five-month peaks to trade flat. Yields on other short-dated U.S. notes were also lower on the day.

However, the yield on 10-year Treasury notes US10YT=RR rose slightly to 1.848 percent. Earlier, 10-year yields reached five-month highs of 1.879 percent.

Stronger-than-expected growth in the world’s biggest economy boosted bets on an imminent U.S. interest rate increase and had earlier sent government bond yields broadly higher.

An estimate of U.S. second-quarter gross domestic product showed annualized economic growth of 2.9 percent, the fastest rate in two years. But the boost came largely from a recovery in inventories and a jump in agricultural exports after poor soy harvests in Argentina and Brazil this year benefited sales by American exporters.

Meanwhile, business investment in equipment contracted for a fourth straight quarter and personal consumption growth slowed to 2.1 percent from 4.3 percent.

Treasury yields were also supported by surging British gilt and German bund yields DE10YT=TWEB. Bond yields have risen recently amid concerns the ultra-easy policies of major central banks could have their limits and may not be continued indefinitely.

Europe’s index of leading 300 shares .FTEU3 closed down 0.35 percent; Germany’s DAX slipped by 0.19 percent .GDAXI and the STOXX 600 fell 0.27 percent.

(Additional reporting Gertrude Chavez-Dreyfuss, Sam Forgione and Ethan Lou in New York; Editing by Dan Grebler and Meredith Mazzilli)

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Published at Fri, 28 Oct 2016 06:08:28 +0000

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Stocks dip as earnings pour in, consumer discretionary lags

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 24, 2016.REUTERS/Brendan McDermid
By Chuck Mikolajczak | NEW YORK

U.S. stocks dipped in a choppy session after the latest round of earnings reports, as a decline in the consumer discretionary sector and interest-rate sensitive stocks outweighed gains in healthcare names.

The S&P 500 healthcare index .SPXHC rose 0.53 percent to help keep the S&P 500 near the unchanged mark, buoyed by strong results and forecasts from Bristol-Myers (BMY.N), up 5.4 percent and Celgene (CELG.O), up 6.4 percent. The two drugmakers were the top boosts to the S&P 500.

Profits at S&P 500 companies have largely exceeded analysts’ estimates for the third quarter so far, setting up the first profit growth since the second quarter of 2015. Thomson Reuters I/B/E/S data shows third-quarter earnings are now expected grow 2.6 percent, up from the 0.5 percent decline anticipated at the start of October.

Sectors linked to interest rates weighed, however, as yields on benchmark 10-year Treasury notes US10YT=RR touched a five-month high of 1.87 percent.

The S&P real estate sector .SPLRCR was down 2.5 percent, its worst decline in nearly six weeks, while utilities .SPLRCU shed 0.5 percent.

“If we can continue to see actual growth in revenue and growth in EPS, we may see this four-quarter drop in earnings growth come to an end. That would be really positive but we are too early in the earnings season to say that,” said Peter Kenny, senior market strategist at Global Markets Advisory Group in New York.

“To the extent that the 10-year has popped, that is also providing a bit of a headwind for equities.”

Comcast (CMCSA.O) was among the top drags on the S&P 500 and Nasdaq, falling 1.7 percent after Barclays and Deutsche Bank cut their price targets and cited increased competition from AT&T-owned DirecTV Now. The stock is down nearly 6 percent over the past three sessions.

Comcast, along with O’Reilly Auto (ORLY.O), whose quarterly earnings missed expectations, were the primary drags on the consumer discretionary index .SPLRCD, which lost 0.9 percent. O’Reilly shares touched a five-month low and were on pace for their worst day in over four years.

The Dow Jones industrial average .DJI fell 29.65 points, or 0.16 percent, to 18,169.68, the S&P 500 .SPX lost 6.39 points, or 0.3 percent, to 2,133.04 and the Nasdaq Composite .IXIC dropped 34.29 points, or 0.65 percent, to 5,215.97.

After the market close, Google parent Alphabet (GOOGL.O) rose 2.3 percent, while online retailer Amazon.com (AMZN.O) tumbled more than 6 percent after their quarterly results.

Declining issues outnumbered advancing ones on the NYSE by a 2.61-to-1 ratio; on Nasdaq, a 1.99-to-1 ratio favored decliners.

The S&P 500 posted 16 new 52-week highs and 11 new lows; the Nasdaq Composite recorded 65 new highs and 120 new lows.

About 7.2 billion shares changed hands in U.S. exchanges, above the 6.35 billion daily average over the last 20 sessions.

(Reporting by Chuck Mikolajczak; Editing by Nick Zieminski)

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Published at Thu, 27 Oct 2016 20:33:44 +0000

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Amazon forecast for holiday seasons disappoints as investment rises

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Amazon.com’s logo is seen at Amazon Japan’s office building in Tokyo, Japan, August 8, 2016.REUTERS/Kim Kyung-Hoon
By Jeffrey Dastin and Anya George Tharakan

Amazon.com Inc on Thursday said high spending on warehouses and video production would drag on profits in the holiday quarter, disappointing investors who are weary of roller coaster results from the e-commerce giant and sending its shares down 6 percent.

Amazon is racing to ship packages as quickly as possible by building out its own delivery system. It is making heavy U.S. investments as well as pouring funds into foreign markets, and it also is building out its home electronics and video businesses, aiming to make it difficult for customers to leave.

As a consequence, the Seattle-based company projects operating income in the fourth quarter would range from nothing to $1.25 billion, a wide span that is considerably below Wall Street’s $1.62 billion, according to market research firm FactSet StreetAccount.

“Investments are going to be lumpy,” Chief Financial Officer Brian Olsavsky said on an analyst call. “The second half of this year looks like a big step up compared to the first half – and it is.”

Long known for heavy spending and losses, Amazon has come to turn a profit consistently, partly thanks to selling computer storage and services in the cloud. Companies globally are turning to Amazon, the market leader, and rival Microsoft Corp to host their data. In the just-ended third quarter, Amazon’s cloud business grew sales by 55 percent from a year earlier.

But investors are focused on rising costs for the company’s retail operation.

 

Amazon grew its workforce by 38 percent in the third quarter.

In addition, the company has nearly doubled its spending on the creation and marketing of movies and TV shows in the second half of 2016. Amazon’s hope is that people will sign up for its Prime service to watch these videos – and in turn buy more goods from Amazon to make the $99-per-year subscription worth it.

“Amazon tends to flex investment up and down somewhat unpredictably from time to time in order to drive growth, and that’s what’s challenging for investors,” said analyst Jan Dawson of Jackdaw Research. “Some investors thought the new era of higher margins was here to stay permanently, and this quarter has likely taught them (otherwise).”

But investment is necessary to be competitive, particularly in video if established media companies withhold their content from the likes of Amazon, Dawson added.

Amazon’s income tripled in the third quarter to $252 million, or 52 cents per share, marking the company’s sixth straight profitable quarter. But analysts on average expected 78 cents, according to Thomson Reuters I/B/E/S.

Amazon forecast net sales would rise as much as 27 percent in the current quarter to $45.5 billion.

“Even if it reaches the top end of these forecasts, this would still represent the worst performance in growth terms of this fiscal year,” Neil Saunders, head of retail research firm Conlumino, wrote in a note.

“That said, over the longer term Amazon’s investment in physical should help it get a tighter grip on fulfillment costs,” he added. “Amazon is playing the long game.”

Shares of the company were down at $772 in late trade.

(Reporting by Anya George Tharakan in Bengaluru; Writing by Peter Henderson; Editing by Ted Kerr, Bernard Orr)

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Published at Thu, 27 Oct 2016 21:17:19 +0000

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Oft-divided SEC speaks with one voice when suing corporations: records

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The U.S. Securities and Exchange Commission logo adorns an office door at the SEC headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst

The U.S. Securities and Exchange Commission logo adorns an office door at the SEC headquarters in Washington, June 24, 2011.REUTERS/Jonathan Ernst

Oft-divided SEC speaks with one voice when suing corporations: records

By Sarah N. Lynch | WASHINGTON

The U.S. Securities and Exchange Commission has released a collection of internal voting records, long held secret, that reveal it to be less divided than is commonly thought.

The new data reveal that the agency’s commissioners vote unanimously almost every time they take companies and executives to federal court, in contrast to the public and sometimes bitter disagreements they exhibit when debating regulatory matters.

Details of the votes are significant because they give agency watchers a window into how commissioners handle cases they take to court.

The cases that were brought unanimously – 94 percent of the total since April 2013, when Mary Jo White became the agency’s chair – included high-profile defendants such as the City of Miami, Wells Fargo (WFC.N) and pharmaceutical executive Martin Shkreli.

The fact that so many are decided unanimously belies the public belief that the SEC is fractious, said James Cox, a law professor at Duke University who closely tracks the agency.

In recent years, commissioners have dissented over many policy issues, such as whether to grant regulatory waivers to big banks and how to interpret rule-making requirements of the 2010 Dodd-Frank Wall Street reform law.

An SEC spokeswoman did not respond to a request for comment.

Legal experts expressed differing views on the significance of the uniformity of the votes.

Donald Langevoort, a professor at the Georgetown University Law Center, said there is less disagreement on whether to sue companies because those decisions tend to turn on individual facts and circumstances, instead of policy views.

Defense attorney Stephen Crimmins of Murphy & McGonigle said commissioners might be agreeing quickly because their heavy caseload does not allow enough time for deep study of each case.

The SEC decision to publish its voting records on these cases came four years after Reuters filed a Freedom of Information Act request for the data. The SEC, which historically has made public its voting on cases it handles administratively, had resisted release of internal voting records it deemed privileged.

“The release of this data is a huge breakthrough for the public, said Bradley J. Bondi, an attorney with Cahill Gordon & Reindel LLP, who said it would provide insight into whether some alleged misconduct could be considered a “clear violation” or a “close call” in the eyes of the SEC.

It covers slightly more than 1,400 defendants in 414 cases filed in federal courts from April 11, 2013, through August 26, 2016. Only four of those cases actually received a vote against bringing the case – all of which were from Michael Piwowar, a Republican.

In one high-profile case, Piwowar voted against charging the Royal Bank of Scotland (RBS.L) with misleading investors in subprime mortgage securities.

The case still won a majority of support from the two other commissioners who participated in the vote, and the bank settled the charges.

Some 21 other cases received partial dissents, meaning the commissioners agreed to proceed with the case but disagreed on matters like whether to require shareholders to bear the costs of paying a corporate penalty, or whether the evidence justified specific charges.

(This version of the story corrects the 11th paragraph to say that there were only four cases in which there was a complete dissent about bringing a case, not five)

(Reporting by Sarah N. Lynch; editing by Linda Stern and Jonathan Oatis)

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Published at Thu, 27 Oct 2016 15:29:11 +0000

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Wall St. lower, Apple set for worst day in six months

 

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 25, 2016.REUTERS/Brendan McDermid
By Rodrigo Campos

Wall St. lower, Apple set for worst day in six months

Quarterly results were the main driver for Wall Street on Wednesday as a decline in Apple shares weighed on the S&P 500 and Nasdaq, while the price-weighted Dow Industrials was buoyed by gains in Boeing.

Apple, the world’s largest exchange-traded company, fell 2.2 percent after it acknowledged that strong demand for its iPhone 7 Plus caught the company off-guard and it was struggling to keep up.

On the other hand, Boeing shares hit their highest level since Dec. 31 after the planemaker reported a jump in quarterly profit despite slower sales. Boeing closed up 4.7 percent at $145.54.

S&P 500 earnings have so far surprised on the upside, with the blended growth estimate at 2.2 percent, from a 0.5 percent decline expected at the start of this month. Of the companies that have reported, 74 percent have beaten analyst expectations – above the 70 percent beat rate over the past four quarters, according to Thomson Reuters I/B/E/S.

“There’s an expectation that when we finish the season that the earnings recession will be abated and that should be positive for the market going forward,” said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

She said, however, that a number of earnings misses left the market in a tight range and in search of a stronger catalyst.

“The market looks tired,” Krosby said. “Breadth has been narrowing and that has a number of (technical analysts)telegraphing caution.”

The number of weekly 52-week highs on the New York Stock Exchange has diminished sharply from the year’s peak in late June, at more than 1,500, to less than 400 last week and just 262 so far this week.

The Dow Jones industrial average rose 30.06 points, or 0.17 percent, to 18,199.33, the S&P 500 lost 3.73 points, or 0.17 percent, to 2,139.43 and the Nasdaq Composite dropped 33.13 points, or 0.63 percent, to 5,250.27.

About 6.6 billion shares changed hands in U.S. exchanges, above the 6.4 billion daily average over the last 20 sessions.

Chipotle Mexican Grill shares slumped 9.3 percent after the restaurant chain operator reported a bigger-than-expected drop in quarterly sales at established restaurants.

Edwards Lifesciences was the biggest loser on the S&P 500, falling 17.1 percent after the medical device maker’s third-quarter sales missed expectations.

On the positive column, Mondelez added 3.6 percent to $44.32 after its quarterly profit beat estimates and it raised its profit forecast for the year.

Earlier, economic data showed new home sales unexpectedly rose and both wholesale and retail inventories increased in September, while the goods trade deficit narrowed sharply, suggesting a stronger pickup in economic growth in the third quarter than is currently anticipated.

Declining issues outnumbered advancing ones on the NYSE by a 1.83-to-1 ratio; on Nasdaq, a 2.21-to-1 ratio favored decliners.

The S&P 500 posted 9 new 52-week highs and 5 new lows; the Nasdaq Composite recorded 55 new highs and 77 new lows.

(Reporting by Rodrigo Campos; Editing by Nick Zieminski)

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Published at Wed, 26 Oct 2016 14:06:51 +0000

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U.S. funds downbeat on AT&T even before Time Warner deal

 

Traders work on the floor near the post where telecoms company AT&T is traded at the New York Stock Exchange (NYSE) in New York City, U.S., October 24, 2016.REUTERS/Brendan McDermid

U.S. funds downbeat onAT&T even before Time Warner deal

By Tim McLaughlin and Ross Kerber | BOSTON

Many actively managed U.S. mutual funds were cool toward AT&T Inc even before the telecom giant’s planned $85.4 billion acquisition of Time Warner Inc.

The chilly attitude from professional stock pickers partly explains the lackluster reception for AT&T’s planned takeover of Time Warner.

Large-cap growth funds, for example, prefer tech companies whose operations require less capital than a regulated telecom operator like AT&T.

Even a major benefit to owning AT&T – its juicy 5 percent-plus dividend yield – is a cause for investor concern as higher interest rates may make the return look less attractive.

“There will be more options available for other, higher-yielding assets if rates are going up,” said Carrie Tallman, director of research at Parsec Financial, a North Carolina financial adviser that owns shares of AT&T and Time Warner.

Approval of AT&T’s proposed takeover has provoked broad skepticism as the deal faces some of the toughest regulatory scrutiny in recent U.S. history of mergers and acquisitions.

“We are committed to our dividend and to maintaining the financial flexibility for the board to consider future growth in the dividend,” AT&T spokeswoman Emily Edmonds said in email. “On Saturday we announced we’ll increase our quarterly dividend for the 33rd straight year, even as we announced we’ve secured a $40 billion bridge facility to finance our acquisition of Time Warner.”

HUNT FOR YIELD

Meanwhile, seven out of AT&T’s 10 largest fund investors are passive index funds, which are obligated to buy the stock because they track the S&P 500 Index, or other benchmarks that count AT&T as a component.

Overall, more than 600 index funds own nearly 13 percent of AT&T’s shares, according to Thomson Reuters data. That is more than actively managed income, value and growth funds combined, which hold about 8 percent of AT&T shares.

By contrast, those types of actively managed funds hold nearly 18 percent of the shares of rival Verizon Communications Inc, according to Thomson Reuters data.

Large-cap growth portfolio managers like Fidelity Contrafund’s Will Danoff see AT&T as a regulated, capital intensive, slow growth company. Danoff, who oversees about $109 billion for the fund, does not own any AT&T shares, telling investors in recent commentary he has largely avoided telecom stocks.

Only 21 out of 181 large-cap growth funds tracked by Lipper Inc held AT&T shares. During the first half of this year, not owning AT&T hurt these funds’ relative performance to the S&P 500 because the stock surged 26 percent.

Retail investors piled into AT&T as the hunt for yield intensified against a backdrop of historically low interest rates. AT&T’s current dividend yield is 5.3 percent on an annualized basis.

Matthew Benkendorf, chief investment officer of Vontobel Asset Management, a subadviser to Virtus mutual funds, said low rates have undoubtedly driven increased interest in stocks like AT&T.

But in recent months, as higher U.S. interest rates appear more likely, AT&T shares have been under pressure. The stock is off 14 percent in the past three months, reflecting interest rate concerns and Saturday’s announcement of the Time Warner deal.

Questions for investors now include whether Time Warner’s TV and film assets can deliver meaningful growth for AT&T, and whether the new conglomerate will continue to satisfy an important base of investors with a healthy dividend payout.

Vontobel’s Benkendorf said an added wrinkle to those questions is the sustainability of the dividend AT&T is paying. “That is a real question for them,” he said.

(Reporting By Tim McLaughlin and Ross Kerber in Boston; Editing by Bill Rigby)

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Published at Tue, 25 Oct 2016 21:40:18 +0000

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Wall Street set to open flat as investors assess earnings

 

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 24, 2016.REUTERS/Brendan McDermid
By Rodrigo Campos | NEW YORK

Wall Street set to open flat as investors assess earnings

U.S. stocks slipped from two-week highs on Tuesday as results and forecasts from companies in sectors including housing and consumer products failed to live up to expectations.

Apple (AAPL.O), the largest U.S. company by market capitalization, posted after the bell better-than-expected iPhone sales that however continued a declining trend and shares fell about 2 percent, briefly dragging S&P 500 futures ESc1 to session lows.

During the regular session, Whirlpool (WHR.N), down 10.8 percent to $152.09, cited soft demand as it posted lower-than-expected earnings and gave an underwhelming forecast. Sherwin Williams’ (SHW.N) outlook also disappointed Wall Street and shares fell 10.9 percent to $247.61.

Both were an indication to some analysts that the housing sector may be cooling.

“Lackluster results from Whirlpool and Sherwin Williams may indicate a slowing in the housing cycle,” said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

She said those results could be weighing on Home Depot (HD.N), which was down 3.5 percent at $123.34 as the largest points decliner on the S&P 500. Lowes Cos (LOW.N) fell 3.5 percent to $68.47.

Consumer products company Procter & Gamble (PG.N) rose 3.4 percent to $86.97 after reporting a better-than-expected quarterly profit, while sportswear maker Under Armour (UA.N) fell 13.2 percent to $32.89 after it reported its slowest quarterly sales growth in six years.

“We had a rally (Monday) and haven’t been able to sustain it, due to weaker-than-expected numbers from some names,” said Peter Jankovskis, co-chief investment officer at OakBrook Investments in Lisle, Illinois, calling the day’s earnings a “mixed bag.”

Overall, annualized third-quarter earnings from S&P 500 companies are expected to have risen 1.7 percent, effectively putting an end to an earnings recession, according to Thomson Reuters I/B/E/S.

Of the 150 companies that have reported so far, 75.3 percent have beaten analyst expectations, above the long-term average of 63.5 percent.

The Dow Jones industrial average .DJI fell 53.76 points, or 0.3 percent, to 18,169.27, the S&P 500 .SPX lost 8.17 points, or 0.38 percent, to 2,143.16 and the Nasdaq Composite .IXIC dropped 26.43 points, or 0.5 percent, to 5,283.40.

Futures were also pressured after the bell by a late decline in oil prices CLc1 LCOc1 after data showed a bigger-than-expected build in U.S. crude inventories.

3M (MMM.N) fell 2.9 percent to $166.23 after the maker of Scotch tape and Post-it notes trimmed its full-year revenue and earnings forecasts for the second time.

Caterpillar (CAT.N) lost 1.8 percent after a downbeat forecast, while General Motors (GM.N) fell 4.2 percent amid fears regarding future profits.

Declining issues outnumbered advancing ones on the NYSE by a 1.53-to-1 ratio; on Nasdaq, a 2.17-to-1 ratio favored decliners.

The S&P 500 posted 11 new 52-week highs and nine new lows; the Nasdaq Composite recorded 67 new highs and 73 new lows.

About 6.39 billion shares changed hands in U.S. exchanges, in line with the 6.4 billion daily average over the last 20 sessions.

(Reporting by Rodrigo Campos; Editing by Nick Zieminski and James Dalgleish)

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Published at Tue, 25 Oct 2016 12:59:19 +0000

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S&P hits two-week high on strong earnings; M&A supports

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 24, 2016. REUTERS/Brendan McDermidTraders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., October 24, 2016. REUTERS/Brendan McDermid

S&P hits two-week high on strong earnings; M&A supports

By Rodrigo Campos
| NEW YORK –

The S&P 500 hit a two-week high on Monday on the back of strong earnings, while a flurry of acquisitions indicated corporate America continues to see untapped value in the market.

Annualized third-quarter earnings from S&P 500 components are expected to have risen 1.1 percent last quarter, following four quarters of contraction, according to Thomson Reuters I/B/E/S data. Of the 120 companies that have reported so far, 78 percent have beaten analyst expectations, above the long-term average of 63.5 percent.

Microsoft, which handily beat expectations last week, rose 2.2 percent and Apple, due to report on Tuesday, rose 0.9 percent.

“Consensus is earnings are going to continue to improve in part due to favorable energy prices and to strong consumption patterns here in the U.S.,” said Chad Morganlander, portfolio manager at Stifel Nicolaus in Florham Park, New Jersey.

Wall Street signaled skepticism that AT&T (T.N) would be allowed by regulators to purchase Time Warner Inc (TWX.N) for a planned $85.4 billion.

Shares of both companies fell as analysts scrutinized the deal, with AT&T (T.N) down 1.7 percent at $36.86 and Time Warner Inc (TWX.N) down 3.1 percent at $86.74.

But competitor T-Mobile US (TMUS.O) jumped to its highest since August 2007 after it raised its forecast for customer additions for the year and said the AT&T-Time Warner deal could help T-Mobile carve out more market share.

T-Mobile shares ended up 9.5 percent at $51.19.

The Dow Jones industrial average .DJI rose 77.32 points, or 0.43 percent, to 18,223.03, the S&P 500 .SPX gained 10.17 points, or 0.47 percent, to 2,151.33 and the Nasdaq Composite .IXIC added 52.43 points, or 1 percent, to 5,309.83.

TD Ameritrade (AMTD.O) fell 4.4 percent to $35.46 after it said it would buy privately held Scottrade Financial Services [SCTRD.UL] in a deal valued at $4 billion.

B/E Aerospace (BEAV.O) jumped 16.4 percent to $58.89 after aircraft component maker Rockwell Collins (COL.N) said it would buy the company in a deal valued at $6.4 billion plus the assumption of $1.9 billion in debt. Rockwell was down 6.2 percent at $79.21.

“Overall merger and acquisition activity will continue, due in part to low debt financing costs,” said Stifel’s Morganlander.

The S&P 500 posted 18 new 52-week highs and 4 new lows; the Nasdaq Composite recorded 110 new highs and 45 new lows.

About 5.8 billion shares changed hands in U.S. exchanges, below the 6.4 billion daily average over the last 20 sessions.

(Reporting by Rodrigo Campos; Editing by Nick Zieminski)

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Published at Mon, 24 Oct 2016 20:17:07 +0000

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