All posts in "Market Update"

This Indicator Points to a Top-Heavy Stock Market

 

This Indicator Points to a Top-Heavy Stock Market

The S&P 500 index reached new highs following President Trump’s speech to Congress that promised increased infrastructure spending, lower corporate taxes, and less red tape for the financial industry. At the same time, billionaire investor Warren Buffett suggested that stocks are comparatively cheap based on where interest rates are in an interview with CNBC, and FactSet’s Earnings Insights showed two-thirds of S&P 500 companies beating Q4’16 estimates.

Despite these positive developments, the CME Group’s FedWatch points to a 68.6% chance of a March interest rate hike and FactSet’s data shows that two-thirds of companies issued negative earnings guidance for Q1’17. The combination of rising interest rates and slower earnings growth could force valuations to move lower, especially with the index’s price-earnings ratio standing at 26.9x – significantly higher than its 14.65x mean.

Technical indicators seem to confirm that equity valuations have become frothy and a downturn could be a possibility over the coming weeks. In particular, more than 400 S&P 500 components are trading above their 200-day moving average, which is the highest level in at least a year. The last time these levels were reached in early-2015 and late-2015, equities moved significantly lower to more rational price points from a technical perspective.

The S&P 500 index’s relative strength index (RSI) of 81.86 is a further sign of an overextended market with 70.0 being the upper bound for the indicator. However, the moving average convergence-divergence (MACD) remains in a bullish uptrend dating back to early-February. The key levels to watch at this point are R1 resistance at 2,399.57 and R2 resistance at 2,435.50, which could prove to be near-term resistance to the rally.

Traders and investors may want to take a conservative approach to the market after the recent rally given both fundamental and technical factors pointing to overbought conditions.
Published at Wed, 01 Mar 2017 20:11:00 +0000

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U.S. Light Vehicle Sales at 17.5 million annual rate in February

 

By qimono from Pixabay

U.S. Light Vehicle Sales at 17.5 million annual rate in February

by Bill McBride on 3/01/2017 03:10:00 PM

Based on a preliminary estimate from WardsAuto, light vehicle sales were at a 17.47 million SAAR in February.

That is down about 1% from February 2016, and unchanged from last month.

Vehicle Sales
Click on graph for larger image.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for February (red, light vehicle sales of 17.47 million SAAR from WardsAuto).

This was below the consensus forecast of 17.7 million for February.

After two consecutive years of record sales, it looks like sales will mostly move sideways in 2017.

Vehicle Sales

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate.

Published at Wed, 01 Mar 2017 20:10:00 +0000

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What Wall Street wants to hear from Trump

What Wall Street wants to hear from Trump

  @mattmegan5

 President Trump’s pro-business promises have helped lift the Dow an incredible 2,500 points since the election.

Now Wall Street wants him to deliver.

Investors will be watching very closely when Trump addresses Congress on Tuesday night. They crave details about the timing and specifics of Trump’s plans to slash taxes, rip up regulations and unleash infrastructure spending.

On the other hand, signs that the Trump platform is being delayed or scaled back could leave Wall Street bummed.

The stock market has made the stakes clear: The Dow has closed at a record high 12 days in a row and is going for a 13th on Tuesday, a feat that has never happened before.

“Expectations are phenomenally high,” Peter Boockvar, chief market analyst at The Lindsey Group, wrote in a note to investors.

Here’s a guide to what investors want to hear from Trump.

Taxes, taxes, taxes, taxes…

A CNNMoney survey of economists on Monday found that what they want most is details on Trump’s tax plan: When will it happen? How big will it be?

Hopes for big tax cuts have been at the heart of the post-election rally. Wall Street is betting that enormous tax savings will translate to juicier profits.

“Unfortunately I’m going to have to torture myself and watch Tuesday night in search of some comments on tax reform,” Boockvar said, adding that he normally skips these types of speeches.

Border adjustment tax?

A big key will be whether Trump throws his weight behind an idea from House Republicans called the border adjustment tax as a way to bring jobs back to the United States.

The complex proposal would give tax breaks to American companies that ship products to other countries and strip tax breaks from American companies that import goods.

“What I hope to hear from Trump is some well-reasoned policy proposals, and not just more … babble about ‘winning’ or making ‘better deals,'” said Bernard Baumohl, chief global economist at The Economic Outlook Group.

dow trump rally election

 

Obamacare timing

The overhaul of the health care system is extremely important to many Americans, but investors are paying particular attention because of its implications for the rest of the Trump agenda.

Trump has said repealing and replacing the Affordable Care Act must come before taxes.

“This is a giant obstacle blocking the path to the rest of the president’s agenda,” Jaret Seiberg, analyst at Cowen & Co., wrote in a research report.

Fair trade, not trade wars

Economists and market strategists surveyed by CNNMoney say their biggest fear is that Trump will erect barriers to trade.

The new president has already withdrawn the United States from the Trans-Pacific Partnership and started renegotiating the NAFTA trade deal with Mexico and Canada. Economists’ concern is that Trumps will impose high tariffs that slow the economy and provoke a tit-for-tat response from trading partners.

“Wall Street is not opposed to reviewing trade deals, but Wall Street doesn’t want to see that turn into a trade war,” said David Joy, chief market strategist at Ameriprise Financial.

What happened to infrastructure spending?

Since he took office, Trump hasn’t focused much on his promise to spend $1 trillion on infrastructure. Investors hope Trump will follow through by releasing a plan to build or rebuild roads, bridges and airports. Infrastructure stocks like U.S. Steel(X) and U.S. Concrete(USCR) have soared since the election.

Will Trump give clues about the timing and structure of an infrastructure plan and how it can be paid for without blowing up the U.S. deficit?

Ripping up bank regulation

Big bank stocks like Goldman Sachs(GS) have skyrocketed, partly because of Trump’s promise to “do a big number” on the Wall Street reforms known as Dodd-Frank. But few specifics are known here, either.

Seiberg, the Cowen analyst, said one risk is that Trump will repeat a call for a 21st century version of the Glass-Steagall Act, which would force a separation between commercial banking and trading. That could be a signal that Trump wants to break up big banks.

Investors would probably react better if Trump said his focus is on allowing banks to lend more — even though they are already lending a ton.

What Wall Street doesn’t want to hear

Markets took a brief tumble in late January as investors grew concerned that controversy over Trump’s immigration order could derail the rest of his agenda.

Look for a similar reaction if Trump’s speech veers off course.

“If he focuses on the evil press or some other nonsense, markets may get impatient,” Michael Block, chief market strategist at Rhino Trading, wrote in a research note.

–CNNMoney’s Heather Long contributed to this report.
Published at Tue, 28 Feb 2017 18:44:48 +0000

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U.S. economy slowed in fourth quarter despite robust consumer spending

 

By Lucia Mutikani| WASHINGTON

The U.S. economy expanded at a slower pace in the fourth quarter, as previously reported, and appeared to remain on a moderate growth path as President Donald Trump took office with a promise to reinvigorate manufacturing and protect jobs.

Trump has pledged to boost annual economic growth to 4 percent through a mix of infrastructure spending, sweeping tax cuts and deregulation. He is expected to outline part of his program in a speech to Congress on Tuesday night.

Gross domestic product rose at a 1.9 percent annual rate in the fourth quarter, the Commerce Department said in its second estimate, as downward revisions to business and government investment offset robust consumer spending.

The estimate matched what was published last month. Output increased at a 3.5 percent rate in the third quarter.

The economy grew 1.6 percent for all of 2016, its worstperformance since 2011, after expanding 2.6 percent in 2015.

“The overall size and composition of the Trump economic stimulus is yet unknown. However, it is likely to contribute to further economic strength for the balance of this year and beyond,” said Sung Won Sohn, an economics professor at California State University Channel Islands in Camarillo.

Trump, who made his 4 percent GDP growth pledge during last year’s election campaign, has promised a “phenomenal” tax plan that the White House said would include tax cuts for businesses and individuals.

Details on the proposal remain vague, though Treasury Secretary Steven Mnuchin said on Sunday that Trump would use his speech to Congress to preview some aspects of his tax reform plans.

Economists polled by Reuters had expected fourth-quarter GDP would be revised up to a 2.1 percent rate on Tuesday.

In another report, the Commerce Department said the goods trade deficit jumped 7.6 percent to $69.2 billion in January. Inventories at wholesalers fell 0.1 percent last month, while stocks at retailers increased 0.8 percent.

However, retail inventories excluding automobiles, which go into the GDP calculation, were unchanged after increasing 0.3 percent in December. Economists said the wider goods deficit and weak inventories posed a downside risk to first-quarter GDP growth estimates, which are currently around a 2 percent rate.

“It now looks like trade will subtract over a half point from growth in the first quarter and inventories will be close to a neutral factor,” said Daniel Silver, an economist at JPMorgan in New York.

The trade deficit sliced off 1.70 percentage points from GDP growth in the fourth quarter, while inventories contributed 0.94 percentage point.

Expectations of moderate growth in the first quarter suggest the Federal Reserve is likely to maintain its gradual pace of interest rate increases.

U.S. government bond prices were trading higher on Tuesday, while the dollar .DXY fell against a basket of currencies. U.S. stocks were trading lower.

STRONG DOMESTIC DEMAND

Consumer spending, which accounts for more than two-thirdsof U.S. economic activity, was revised sharply higher to a 3.0 percent rate of growth in the fourth quarter. It was previously reported to have risen at a 2.5 percent rate. That left private domestic demand increasing at a brisk 3.0 percent rate.

Some of the rise in demand was met with imports, which subtracted from GDP growth. There is scope for consumer spending to rise further against the backdrop of a tightening labor market and surging confidence among households.

In a third report on Tuesday, the Conference Board said its consumer confidence index jumped 3.2 percent to 114.8, the highest reading since July 2001. Consumers remained upbeat about the labor market amid expectations of income gains.

Business investment was not as strong as initially thought in the fourth quarter. Spending on equipment increased at a 1.9 percent rate instead of the previously estimated 3.1 percent pace. Business investment contributed 0.17 percentage point to GDP growth, less than the 0.30 percentage reported last month.

Business spending has been partly hobbled by lower oil prices, which have crimped demand for machinery, but an acceleration is likely.

A fourth report on Tuesday from the Institute for Supply Management-Chicago showed its business index surged 7.1 points to a reading of 57.4 in February, the strongest level since January 2015. Companies in the Chicago area reported robust new order growth and production.

The ISM-Chicago report mirrored other regional surveys that have offered an upbeat assessment of the manufacturing sector, which had been stuck in a rut for more than a year.

The improvement has mostly been driven by rising oil prices, which have translated into a strong rebound in investment on mining exploration, wells and shafts. Spending on mining exploration, wells and shafts rose at a 23.6 percent rate in the fourth quarter after declining at a 30.0 percent pace in the prior period.

The increase in residential construction spending was lowered to a 9.6 percent rate from the 10.2 percent pace reported last month. A fifth report on Tuesday showed house prices surged 5.6 percent in December from a year ago after advancing 5.2 percent in November.

House prices are being driven by a shortage of properties for sale.

Government spending increased at a 0.4 percent rate in the fourth quarter, rather than the previously reported 1.2 percent pace of growth. There was no contribution to growth from government investment in the last quarter.

(Reporting by Lucia Mutikani; Editing by Paul Simao)
Published at Tue, 28 Feb 2017 17:51:57 +0000

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Target has terrible holiday and warns of awful 2017

Target has terrible holiday and warns of awful 2017

  @lamonicabuzz

Tar-jay is no longer in style.

Target missed the bullseye badly during the holidays, reporting earnings that were below forecasts. And the company’s outlook for this year was much worse than expected, sending the stock down 13% in early trading. Shares are down 20% this year.

The terrible numbers from Target(TGT) are just another sign of how tough it is for traditional retailers to compete against the online juggernaut that is Amazon(AMZN, Tech30).

“Our fourth quarter results reflect the impact of rapidly changing consumer behavior, which drove very strong digital growth but unexpected softness in our stores,” said Brian Cornell, chairman and CEO of Target.

To Target’s credit, the company has embraced e-commerce. Target said digital sales were up 34% from a year ago.

That’s higher than Amazon’s overall sales growth during the holidays and even outpaced the 29% jump in online revenue growth that Walmart(WMT) posted in the fourth quarter.

The problem is that online sales are not growing quickly enough to offset the sales declines in Target’s physical stores. Target said overall revenue fell more than 4% from a year ago.

Part of that was because of Target’s decision to sell its in-store pharmacies to CVS(CVS) in late 2015. But revenue was down at Target even after factoring in the absence of pharmacy sales from the fourth quarter of 2016’s results.

Consumers are increasingly shunning traditional retailers like Target and shopping online. Macy’s(M), Kohl’s(KSS), JCPenney(JCP) and Sears(SHLD) have also been hit hard by this shift in recent years.

Target seems to have been caught off guard by the magnitude of the change, though. The company had predicted a strong holiday quarter in November, but warned in January that its results would miss forecasts.

The numbers Target reported on Tuesday were even worse than what it forecast last month.

The company expects earnings for the first quarter and the full fiscal year will be lower than what Wall Street analysts were predicting.

And Target said same-store sales, which measures the performance of stores open at least a year, will fall in the first quarter and for the full year.

A decline in commodity prices has also led to problems in Target’s grocery division.

Many big supermarket chains like Kroger(KR) and Whole Foods(WFM) have warned that while lower food prices can be good news for consumers, they hurts profit margins for retailers.

Target said it plans to “transition to a new financial model.”

During a conference call with analysts Tuesday morning, executives talked about how Target will spend more to revamp existing stores, open new stores, upgrade its supply chain and inventory management and boost its digital operations.

“At a time when many others are shrinking, we are investing,” chief financial officer Cathy Smith said. She added that the company will look to lower prices and add a dozen exclusive brands.

Cornell tried to stress the positive aspects of Target’s new plan, saying that Target is “doubling down” while many of its competitors are struggling to survive. He also said the company will lower prices to be more competitive with other retailers.

But analysts are still worried.

Neil Saunders, managing director for GlobalDataRetail, said in a report: “Target should not chase Walmart on price, as it is a battle that cannot easily be won. We also believe that many of Target’s issues are not solely price related.”

Joleen Wroten, senior retail strategist with retail intelligence firm 360pi, agreed that Target would lose a price war with Amazon.

She wrote that Target has to “differentiate with exclusive, affordable ‘fresh’ product offerings coupled with clean and easy shopper experiences” and worry less about having lower prices than Walmart.

And Cowen analyst Oliver Chen said in a report that the company has a lot of work to do to win back market share and be more competitive against Amazon, Walmart and big supermarkets.

“The company needs to do a better job executing and attracting shoppers looking to just pick up a few items (vs. stocking up). We also believe food remains a work in progress,” Chen wrote.

Target’s woes are the latest setback for a company hit by a massive data breach in 2013. The credit and debit cards of about 40 million customers were stolen.

The problems led to the ouster of longtime CEO Gregg Steinhafel. Cornell, formerly an executive at Pepsi(PEP), took over in 2014 and had appeared to right the ship. Sales went back up.

But Cornell now faces another problem that might not be so easy to fix — convincing consumers there’s a reason to put their phones down and head back to the mall.
Published at Tue, 28 Feb 2017 13:39:30 +0000

{pixabay|100|campaign}

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13 in a row? Dow’s record streak could make history

 

Dow record streak continues
Dow record streak continues

The Dow could do something on Tuesday that it’s never done in its 120-year history.

It’s already closed at a record high for an incredible 12 days in a row. That’s only happened twice before.

And any gain on Tuesday for the Dow would make history as its first ever 13-day streak of all-time highs.

The ridiculous string of records comes as Wall Street gears up for President Trump’s speech at 9 p.m. ET to a joint session of Congress. Investors are craving more details about Trump’s pro-business agenda of tax cuts, deregulation and infrastructure spending.

Counting this week’s march higher, the Dow has now skyrocketed roughly 2,500 points since Trump’s victory.

The Dow is also just two days shy of matching its longest streak of up days (not record highs). That feat was set in 1897 when the index rallied 14 sessions in a row, according to Bespoke Investment Group.

“Needless to say, a lot of hope is built into this speech tonight,” Michael Block, chief market strategist at Rhino Trading, wrote in a note.

Block said that Wall Street could celebrate with a “big rally” if Trump talks “specific numbers” on tax reform, infrastructure spending and jobs programs.

But investors could be disappointed if Trump’s big prime time speech is too broad, lacking details about the timing and size of these proposals.

“Global markets have been somewhat patient and even resilient against the persistent Trump uncertainties,” Lukman Otunuga, a research analyst at FXTM, wrote in a note. “But the crack could start to show if nothing new is brought to the table.”

Even though stocks are on a long hot streak, the market hasn’t gone straight up lately. It’s been more of a slow grind higher.

The Dow is “only” up about 4% during the win streak, and is up 5% so far this year. And CNNMoney’s Fear & Greed Index has actually calmed down from “extreme greed” last week to simply “greed” this week.

While the current streak is “remarkable,” Bespoke analysts say the pace of gains has “not been outlandish or dramatic.”

Dramatic or not, the Dow is creeping closer to the 21,000 level. It’s less than 200 points away from that milestone, barely a month after racing above 20,000 for the first time.

Published at Tue, 28 Feb 2017 15:10:34 +0000

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Dow hits 12th record high close; Trump talks up infrastructure spending

Dow hits 12th record high close; Trump talks up infrastructure spending

By Caroline Valetkevitch | NEW YORK

U.S. stocks ended slightly higher on Monday and the Dow closed at a record high for a 12th straight session, as President Donald Trump said he would make a “big” infrastructure statement on Tuesday.

The Dow’s streak of record-high closes matches a 12-day run in 1987, with Boeing (BA.N) and UnitedHealth (UNH.N) among the biggest boosts for the Dow on Monday. The S&P 500 also closed at a record high. Energy gave the biggest boost to the S&P 500, with the energy index .SPNY up 0.9 percent.

Trump, who met with state governors at the White House, also said he is seeking what he called a “historic” increase in military spending of more than 9 percent, while he said his administration would be “moving quickly” on regulatory reforms.

The comments came ahead of Trump’s first address to a joint session of Congress Tuesday evening. Investors are looking for more specifics on Trump’s plans, given the hefty gains in the market since the Nov. 8 election.

“Things are moving along in terms of the Trump agenda, but we’ll get a clearer picture after tomorrow night so that might precipitate some buying or selling,” said Bucky Hellwig, senior vice president at BB&T Wealth Management in Birmingham, Alabama.

Hellwig and others said there’s potentially more upside than downside from the address, given how the market has reacted in recent weeks.

Traders work on the trading floor at the opening of the markets at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., February 27, 2017. REUTERS/Andrew Kelly
Shares of U.S. defense companies – Boeing (BA.N), Raytheon (RTN.N), General Dynamics (GD.N) and Lockheed Martin (LMT.N) – rose after Trump said he would seek to boost Pentagon spending by $54 billion in his first budget proposal.

Boeing was up 1.1 percent while UnitedHealth was up 1.4 percent.

The Dow Jones Industrial Average .DJI was up 15.68 points, or 0.08 percent, to close at 20,837.44, the S&P 500 .SPX gained 2.39 points, or 0.10 percent, to 2,369.73 and the Nasdaq Composite .IXICadded 16.59 points, or 0.28 percent, to 5,861.90.

In its 1987 12-day streak of record-high closes, the Dow rose 9.2 percent compared with just a 3.9 percent gain in the recent record run.

While the S&P 500 is up 10.8 percent since the Nov. 8 election, the pace of the rally has slowed this year.

Trump’s promise a few weeks ago of a “phenomenal” tax announcement helped rekindle the post-election rally, driving the main U.S. markets to record highs.

Time Warner (TWX.N) ended up 0.9 percent after news that the head of the U.S. Federal Communications Commission does not expect to review AT&T Inc’s (T.N) planned $85.4 billion acquisition of Time Warner.

AT&T slipped 1.3 percent.

Advancing issues outnumbered declining ones on the NYSE by a 1.55-to-1 ratio; on Nasdaq, a 1.87-to-1 ratio favored advancers.

The S&P 500 posted 63 new 52-week highs and one new low; the Nasdaq Composite recorded 143 new highs and 45 new lows.

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

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Merrill: “The undocumented economy”

by Unsplash from Pixabay

Merrill: “The undocumented economy”

by Bill McBride on 2/27/2017 04:45:00 PM

A few excerpts from a Merrill Lynch research note: The undocumented economy

Let’s consider three scenarios:

1.Improved border security and more aggressive deportations that lower the number of undocumented workers by 200,000 per year. This could be achieved by increasing annual deportations from about 400,000 to 500,000 and stopping 100,000 more people per year at the border.

2. Cut the number of undocumented workers in half over a four year period through tougher enforcement.

3. Effectively eliminate all undocumented workers over a four year period.

In the first scenario the economic impacts are likely to be very small. …  The story is very different under the second and third scenarios. Undocumented immigrants tend to specialize in certain kinds of jobs. Hence cutting the labor force in these areas could hurt the productivity of complementary workers causing indirect loses beyond the direct labor force reduction. … With full deportation an outright recession seems plausible, as output would be disrupted and as the Fed may be unwilling to act because a labor shortage would mean a surge in wage and price inflation.

Undocumented immigrants are a relatively small part of the overall labor force [and] our baseline is relatively benign, but we see significant downside risks to that baseline.

Read more at http://www.calculatedriskblog.com/#dzdy2gcvMFzvoz6W.99

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Trump budget plan boosts Pentagon, trims State Dept, EPA: officials

U.S. President Donald Trump makes a toast during the Governor’s Dinner in the State Dinning Room at the White House in Washington, U.S., February 26, 2017. REUTERS/Joshua Roberts

Trump budget plan boosts Pentagon, trims State Dept, EPA: officials

The White House will send federal departments a budget proposal on Monday containing the defense spending increase President Donald Trump promised, financed partly by cuts to the U.S. State Department, Environmental Protection Agency and other non-defense programs, two officials familiar with the proposal said.

One of the officials said Trump’s request for the Pentagon included more money for shipbuilding, military aircraft and establishing “a more robust presence in key international waterways and chokepoints” such as the Strait of Hormuz and South China Sea.

A second official said the State Department’s budget could be cut by as much as 30 percent, which would force a major restructuring of the department and elimination of programs.

The officials requested anonymity because the draft budget had not been made public yet.

Trump, in a speech to conservative activists on Friday, promised “one of the greatest military buildups in American history.”

Some defense experts have questioned the need for a large increase in U.S. military spending, which already stands at roughly $600 billion annually. By contrast, the United States spends about $50 billion annually on the State Department and foreign assistance.

The amounts that Trump is proposing to add to the Pentagon budget and trim elsewhere are not yet publicly known.

John Czwartacki, a spokesman for the White House’s Office of Management and Budget, said the budget blueprint would be released in mid-March.

“It would be premature for us to comment – or anyone to report – on the specifics of this internal discussion before its publication,” he said in a statement.

The budget plans that the White House is expected to send to departments and agencies on Monday are just one stage in a lengthy process.

The agencies can argue for more funding, and final spending plans must be approved by the U.S. Congress.

Trump’s budget assumes annual economic growth of 2.4 percent, the second official said. While campaigning for the presidency last year, Trump called for a “national goal” of 4 percent economic growth.

Treasury Secretary Steven Mnuchin, speaking on Fox News earlier on Sunday, said Trump’s budget would not seek cuts in federal social programs such as Social Security and Medicare.

(Reporting by Washington Newsroom; Additional reporting by Roberta Rampton.; Writing by Warren Strobel; Editing by Peter Cooney and Paul Tait)

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Schedule for Week of Feb 26, 2017

Schedule for Week of Feb 26, 2017

by Bill McBride on 2/25/2017 09:31:00 AM

The key economic report this week is the second estimate of Q4 GDP.

Other key indicators include the February ISM manufacturing and non-manufacturing indexes, February auto sales, and the Case-Shiller house price index.

—– Monday, Feb 27th —–

8:30 AM: Durable Goods Orders for January from the Census Bureau. The consensus is for a 1.8% increase in durable goods orders.

10:00 AM: Pending Home Sales Index for January. The consensus is for a 1.1% increase in the index.

10:30 AM: Dallas Fed Survey of Manufacturing Activity for February.

—– Tuesday, Feb 28th—–

8:30 AM: Gross Domestic Product, 4th quarter 2016 (second estimate). The consensus is that real GDP increased 2.1% annualized in Q4, up from advance estimate of 1.9%..
 

Case-Shiller House Prices Indices

9:00 AM ET: S&P/Case-Shiller House Price Index for December. Although this is the December report, it is really a 3 month average of October, November and December prices.

This graph shows the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the November 2016 report (the Composite 20 was started in January 2000).

The consensus is for a 5.4% year-over-year increase in the Comp 20 index for December.

9:45 AM: Chicago Purchasing Managers Index for February. The consensus is for a reading of 52.9, up from 54.6 in December.

—– Wednesday, Mar 1st —–

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

 

Vehicle Sales

All day: Light vehicle sales for February. The consensus is for light vehicle sales to decrease to 17.7 million SAAR in January, from 18.4 million in  December (Seasonally Adjusted Annual Rate).

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

8:30 AM: Personal Income and Outlays for January. The consensus is for a 0.3% increase in personal income, and for a 0.3% increase in personal spending. And for the Core PCE price index to increase 0.2%.
 

ISM PMI

10:00 AM: ISM Manufacturing Index for February. The consensus is for the ISM to be at 56.1, up from 54.7 in December.

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

The ISM manufacturing index indicated expansion at 56.0% in January. The employment index was at 56.1%, and the new orders index was at 60.4%.

10:00 AM: Construction Spending for January. The consensus is for a 0.2% increase in construction spending.

2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

—– Thursday, Mar 2nd —–

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 240 thousand initial claims, up from 239 thousand the previous week.

—– Friday, Mar 3rd —–

10:00 AM: the ISM non-Manufacturing Index for February. The consensus is for index to increase to 57.2 from 57.1 in December.

2:00 PM: Speech by Fed Chair Janet Yellen, Economic Outlook, At the Executives Club of Chicago, Chicago, Ill.

Read more at http://www.calculatedriskblog.com/2017/02/schedule-for-week-of-feb-26-2017.html#FjcF0wcPDOUQcKuT.99

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SEC’s acting chair scales back enforcement unit’s subpoena powers

Photo

 SEC’s acting chair scales back enforcement unit’s subpoena powers

By Sarah N. Lynch| WASHINGTON

Acting U.S. Securities and Exchange Commission Chairman Michael Piwowar has taken steps to limit the agency’s enforcement division’s powers to initiate investigations and issue subpoenas, according to people familiar with the matter.

Under the new policy, the enforcement division’s associate directors will no longer have authority to issue subpoenas or formally launch probes.

Instead, all such requests will be routed through the SEC’s Acting Enforcement Division Director Stephanie Avakian, according to the sources, who spoke anonymously because the change has not been publicly announced.

The new policy of routing subpoena requests through the enforcement director as opposed to associate directors is not expected to have a major impact on the division, and it is still less cumbersome than routing it through the commission itself, the sources said. Anything put for consideration before the full commission must also be reviewed by all of the SEC’s divisions, a time consuming process.

The change marks a departure from the policy unveiled by former SEC Chair Mary Schapiro in 2009 as a response to the agency’s failures to detect Bernard Madoff’s massive Ponzi scheme.

Schapiro’s policy, which was met with applause from SEC staff and defense attorneys at the time, delegated subpoena authority to a broader number of enforcement division managers to make the division more nimble and streamline the opening of cases.

Prior to that, the full five-member commission had to sign off first.

The SEC has the power to delegate various duties to senior staffers in its different divisions, whether it involves issuing subpoenas, approving corporate requests for regulatory waivers or granting regulatory relief.

The internal changes that Piwowar made in how these powers are delegated is not limited to the enforcement division, and apply to all other SEC divisions including Corporation Finance.

Piwowar, who joined the SEC as a commissioner in 2013, has been critical of that approach amid concerns it could lead to a lack of uniformity and undercut commissioners’ oversight.

“I question whether the processes currently in place are sufficient for the Commission to exercise the appropriate level of oversight of the formal order process,” Piwowar said in a 2013 speech.

SEC Commissioner Kara Stein, a Democrat, at times has also previously steered some decisions away from career staffers so they could be vetted by the full commission. She has focused questions about whether the SEC should be approving regulatory waivers to companies that break the law.

(Reporting by Sarah N. Lynch; editing by Linda Stern and Chizu Nomiyama)
Published at Thu, 16 Feb 2017 20:16:38 +0000

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Schedule for Week of Feb 19, 2017

by hzv_westfalen_de from Pixabay

Schedule for Week of Feb 19, 2017

by Bill McBride on 2/18/2017 08:11:00 AM

The key economic report this week are January New and Existing Home sales.

—– Monday, Feb 20th —–

All US markets are closed in observance of the Presidents’ Day holiday.
—– Tuesday, Feb 21st—–

No major economic releases scheduled.
—– Wednesday, Feb 22nd —–

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.Existing Home Sales10:00 AM: Existing Home Sales for January from the National Association of Realtors (NAR). The consensus is for 5.55 million SAAR, up from 5.49 million in December.

Housing economist Tom Lawler expects the NAR to report sales of 5.60 million SAAR in January.

During the day: The AIA’s Architecture Billings Index for January (a leading indicator for commercial real estate).

2:00 PM: FOMC Minutes for the Meeting of January 31-February 1, 2017

—– Thursday, Feb 23rd —–

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 240 thousand initial claims, up from 239 thousand the previous week.8:30 AM: Chicago Fed National Activity Index for January. This is a composite index of other data.

9:00 AM: FHFA House Price Index for December 2016. This was originally a GSE only repeat sales, however there is also an expanded index.

11:00 AM: the Kansas City Fed manufacturing survey for February.

—– Friday, Feb 24th —–

New Home Sales10:00 AM ET: New Home Sales for January from the Census Bureau.This graph shows New Home Sales since 1963. The dashed line is the December sales rate.

The consensus is for a increase in sales to 573 thousand Seasonally Adjusted Annual Rate (SAAR) in January from 536 thousand in December.

10:00 AM: University of Michigan’s Consumer sentiment index (final for February). The consensus is for a reading of 96.0, up from the preliminary reading 95.7.

Published at Sat, 18 Feb 2017 13:11:00 +0000

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With stocks at highs, investors eye consumer results

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 With stocks at highs, investors eye consumer results

By Saqib Iqbal Ahmed| NEW YORK

U.S. stock investors may look to a host of results from consumer-facing companies including Wal-Mart Stores Inc (WMT.N) next week for signs on whether the recent market rally has more room to run.

The consumer names are among the last major companies of the S&P 500 earnings season to report, but the results will also be watched for a read on spending as well as for commentary from executives on President Donald Trump’s proposal to tax imports.

Retail executives, some of whom met with Trump this week, have argued such a tax will raise consumer prices and hurt their businesses.

Besides Wal-Mart, Macy’s (M.N) and Home Depot Inc (HD.N) are among the heavyweights due to report next week.

Investors also will keep a close eye on housing-related data to gauge if a recent rise in consumer spending and inflation data is translating into higher home prices and a pick-up in home sales, market strategists said.

Wall Street ended the week on a high note, with all three major indexes registering record highs and the Dow reaching a seventh straight record close. [.N/C]

Investors were watching consumer names this week as Trump met with chief executives of Target Corp (TGT.N), Best Buy Co Inc (BBY.N) and six other major retailers.

Next week, investors may be looking for more clues about the impact of Trump’s proposals on retailers, with particular focus on Wal-Mart, JJ Kinahan, chief market strategist at TD Ameritrade in Chicago said.

“Maybe not so much what their earnings say as much as what their conference call will say about some of the president’s proposals around border taxes and immigration,” he said.

Results from some of the largest consumer-facing companies will also provide a read on whether improving consumer sentiment is reflected in actual results, said Steve Chiavarone, portfolio manager at Federated Investors.

“Does sentiment continue to work higher and eventually pull up actual results or can sentiment only take you so far until you have some follow-through in the real data? Those are the things that will be on our minds,” he said.

Results from small-cap retail companies will also be pored over as these companies have struggled from a profitability standpoint, said Steven DeSanctis, equity strategist at Jefferies.

“Though retail sales numbers have been good, profitability for a lot of the retailers has not been good,” he said.

“That’s going to be a big telltale sign for us. We’re overweight discretionary, thinking that was the cheapest group out there, and it still is the cheapest but… if the E drops out the PE, you run into a problem there,” he said, referring to price-to-earnings for the group.

 

(Reporting by Saqib Iqbal Ahmed; Additional reporting by Caroline Valetkevitch; Editing by James Dalgleish)
Published at Fri, 17 Feb 2017 22:44:46 +0000

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Wall Street slips as bank, health stocks weigh

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Wall Street slips as bank, health stocks weigh

The Dow and S&P 500 dipped on Friday, led by bank and healthcare stocks, as investors booked profits after a record-setting few days, while gains in Kraft Heinz help limit losses on the Nasdaq.

Since President Donald Trump vowed last week to announce a tax reform in the coming weeks, Wall Street has inched up to record intraday and closing highs in successive days in a rally where financials, mainly banks, outperformed other sectors.

But, with a strong fourth-quarter earnings season mostly complete, many investors say they need concrete signs of progress from Trump on his policy plans to justify more gains.

“While the markets have continued to melt up a little in the past two weeks, I’m not seeing depth, volume or conviction of the market that is looking to break out higher,” said Joe Brusuelas, chief economist at RSM US LLP.

“If anything I think we are setting up for a period of profit taking, while forward-looking investors await more signs from the White House.”

With a long weekend ahead due to the Presidents Day holiday on Monday, investors are unlikely to make too many new bets and trading volumes are likely to be thin.

At 11:04 a.m. ET (1604 GMT), the Dow .DJI was down 56.36 points, or 0.27 percent, at 20,563.41, the S&P 500 .SPX was down 4.75 points, or 0.20 percent, at 2,342.47.

The Nasdaq Composite .IXIC was down 0.68 points, or 0.01 percent, at 5,814.22.

Nine of the 11 major S&P sectors fell, with gains only in the defensive consumer staples .SPLRCS and real estate .SPLRCR sectors.

The S&P 500 financial index .SPSY, which has also gained on prospects of higher interest rates, was down 0.7 percent and the KBW Bank index .BKX fell nearly 0.8 percent.

The biggest drags were Bank of America (BAC.N) and Citigroup (C.N), which fell about 1 percent.

UnitedHealth (UNH.N) sank 3.7 percent to $157.55 after it was sued by the Justice Department over Medicare charges.

Other health insurers also fell, including Aetna (AET.N) by nearly 3 percent.

Kraft (KHC.O) jumped 8.2 percent to $94.45 after it said it would continue to pursue a $143 billion bid for Unilever (ULVR.L), despite being rebuffed. Unilever’s U.S.-listed shares (UL.N) surged 9.5 percent.

Declining issues outnumbered advancers on the NYSE by 1,886 to 904. On the Nasdaq, 1,624 issues fell and 1,041 advanced.

The S&P 500 index showed 23 new 52-week highs and one new lows, while the Nasdaq recorded 71 new highs and 15 new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D’Souza)
Published at Fri, 17 Feb 2017 16:39:30 +0000

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The Bull Market No One Believes In

The Bull Market No One Believes In

By: Clif Droke | Tue, Feb 14, 2017


The stock market continues to make new highs, yet none of the signs which
accompany a market bubble are evident. Investors are asking, “When will the
Dow finally correct?” By “correct” they mean “decline.” However, a market correction
doesn’t always entail a decline for the major averages and can sometimes take
the form of a lateral consolidation or trading range. That appears to be the
case for the 2-month period from December through early February when the Dow
and S&P made little headway.

In fact, in January the Dow Jones Industrial Average (DJI) recorded its tightest
trading range of only 1.1% in over 100 years. This continues a prolonged sideways
pattern in the Dow and other averages since mid-December when the post-election
rally reached a plateau. The question everyone was asking was whether this
plateau was merely a temporary “pause that refreshes” in an ongoing rally or
the end of the rally and the prelude to another market setback. The Dow provided
the answer to that with the last week’s breakout above the top of the trading
range ceiling. It has rallied each day since, putatively on the hopes generated
by President Trump’s forthcoming tax-related announcement.

Dow Jones Industrial Average Daily Chart

While the bull market in equities continues, a surprising number of investors
are either mistrustful of the rally or outright bearish. According to a recent
article in BBC News, there are a growing number of wealthy and politically
liberal U.S. citizens who are doing things in the wake of Donald Trump’s election
that were commonly seen by politically conservative citizens during the Obama
years. That is, they are buying guns, becoming survivalists, and preparing
for an impending catastrophe related to the Trump presidency, the article reported.

It was also reported that a number of wealthy Americans are preparing for
what they believe is the apocalypse. According to Business Insider,
some have purchased underground bunkers while other wealthy individuals are
planning to emigrate to New Zealand. “Saying you’re ‘buying a house in New
Zealand’ is kind of a wink, wink, say no more,” said Steve Huffman, CEO of
the Reddit web site. “Once you’ve done the Masonic handshake, they’ll be, like,
‘Oh, you know, I have a broker who sells old ICBM silos, and they’re nuclear
hardened, and they kind of look like they would be interesting to live in.”

The common denominator in these accounts is fear among the upper class. The
dread of an uncertain future which was pervasive among America’s middle class
for much of the last eight years has now been transferred to the upper class.
While it might be premature to ascribe this to the recent rush back into gold,
bond funds and other safe-haven investments, it would seem that there is just
enough uncertainty among the upper crust to account for the lack of movement
in the major stock market indices since December.

Tight, narrow trading ranges in the major indices are launching pads for major
moves in either direction. In the context of a bull market, they typically
represent rest and consolidation before the next move higher. The odds technically
favored this outcome, yet a substantial number of investors still don’t believe
in the strength of the bull market. This is reflected in the manifestations
of fear among the upper class mentioned above, as well as in the path the market
rally is taking.

There is talk among some observers that the market is undergoing a “melt-up”.
This is an erroneous application of that term. A classic melt-up is characterized
by a runaway, almost straight-up and sustained market rally on high volume
with widespread participation. The trajectory of the major indices since November
can hardly be described as “melting up.” Rather, the market’s path has been
measured and well-ordered, as the daily chart of the NYSE Composite Index (NYA)
attests.

NYA Daily Chart

The real melt-up phase of this bull market hasn’t even started yet. We’ll
know it has arrived when we see runaway stock prices coupled with increased
participation among the legion of retail investors still on the sidelines.
Even institutional investors are surprisingly tempered in their usual optimism,
as expressed in their collective 2017 forecasts. Melt-ups have a way of surprisingly
even the bulls in how high they carry the market averages before peaking.
For now, though, a combination of fear and cautious optimism holds sway among
investors and this alone is enough to argue that the bull market still has
legs.


Mastering Moving Averages

The moving average is one of the most versatile of all trading
tools and should be a part of every investor’s arsenal. Far more than a simple
trend line, it’s a dynamic momentum indicator as well as a means of identifying
support and resistance across variable time frames. It can also be used in
place of an overbought/oversold oscillator when used in relationship to the
price of the stock or ETF you’re trading in.

In my latest book, Mastering Moving Averages, I remove
the mystique behind stock and ETF trading and reveal a completely simple and
reliable system that allows retail traders to profit from both up and down
moves in the market.  The trading techniques discussed in the book have been
carefully calibrated to match today’s fast-moving and sometimes volatile market
environment. If you’re interested in moving average trading techniques, you’ll
want to read this book.

Order today and receive an autographed copy along with a copy
of the book, The Best Strategies For Momentum Traders. Your order also includes
a FREE 1-month trial subscription to the Momentum Strategies Report newsletter: http://www.clifdroke.com/books/masteringma.html


Clif Droke

Clif Droke
ClifDroke.com

Clif Droke is a recognized authority on moving averages and internal
momentum. He is the editor of the Momentum Strategies Report newsletter,
published since 1997. He has also authored numerous books covering the fields
of economics and financial market analysis. His latest book is Mastering
Moving Averages
. For more information visit www.clifdroke.com

Copyright © 2003-2017 Clif Droke

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com

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Published at Tue, 14 Feb 2017 11:25:43 +0000

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Wednesday: Yellen, Retail Sales, CPI, Industrial Production, Homebuilder Confidence, Empire State Mfg

 

Wednesday: Yellen, Retail Sales, CPI, Industrial Production, Homebuilder Confidence, Empire State Mfg

by Bill McBride on 2/14/2017 07:30:00 PM

Wednesday:

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

• At 8:30 AM, Retail sales for January will be released.  The consensus is for 0.1% increase in retail sales in January.

• Also at 8:30 AM, The Consumer Price Index for January from the BLS. The consensus is for 0.3% increase in CPI, and a 0.2% increase in core CPI.

• Also at 8:30 AM, The New York Fed Empire State manufacturing survey for February. The consensus is for a reading of 7.5, up from 6.5.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for January. The consensus is for no change in Industrial Production, and for Capacity Utilization to be unchanged at 75.5%.

• At 10:00 AM, Testimony by Fed Chair Janet Yellen, Semiannual Monetary Policy Report to the Congress, Before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.

• Also at 10:00 AM, The February NAHB homebuilder survey. The consensus is for a reading of  68, up from 67 in January. Any number above 50 indicates that more builders view sales conditions as good than poor.

• Also at 10:00 AM, Manufacturing and Trade: Inventories and Sales (business inventories) report for December.  The consensus is for a 0.4% increase in inventories.

Read more at http://www.calculatedriskblog.com/2017/02/wednesday-yellen-retail-sales-cpi.html#W5KD1mWkiagT4Tpu.99

Published at Wed, 15 Feb 2017 00:30:00 +0000

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As banks surge, will shareholders get their cut?: James Saft

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A computer screen showing stock graphs is reflected on glasses in this illustration photo taken in Bordeaux, France, March 30, 2016. REUTERS/Regis Duvignau

A computer screen showing stock graphs is reflected on glasses in this illustration photo taken in Bordeaux, France, March 30, 2016.REUTERS/Regis Duvignau

 As banks surge, will shareholders get their cut?: James Saft

By James Saft

That the Trump agenda is good for banks is self-evident; that shareholders will get their cut is a lot less likely.

Friday’s news of the resignation of Daniel Tarullo, the Federal Reserve official who served as quarterback of the effort to tame systemic risk in the banking system, touched off another leg in a sustained and powerful rally of U.S. bank shares, which are up nearly 30 percent since shortly before the election.

Coming just after Trump’s order to review and likely gut Dodd-Frank Act legislation, Tarullo’s exit, planned for April, cements the view that U.S. banks will be allowed to carry less capital. A move to delay implementation of the application of the Fiduciary Rule to retirement advisors is a good indicator that highly profitable but low-value (for clients) products will continue to generate revenues.

To an investor from Mars more revenue spread across less equity would seem to be a sure thing.

Those of us who’ve lived on Earth these past two decades should have our doubts. There is a reason banks, especially the largest and those which operate investment banks, trade at such low multiples of earnings, and it is not because they have a proud track record of rewarding shareholders.

Since February 1993 the KBW index of bank shares has returned only about 60 percent as much as the S&P 500 and done so while treating investors to teeth-rattling sell-offs in 1998, 1999, 2001, 2002, 2007, 2008 and 2009.

The winners? Well, bank employees of course, who’ve trousered serial fortunes at the expense of taxpayers and shareholders. A move to relax oversight or put the capital bar lower will set taxpayers up to fund a bailout once again, but probably not before we see a couple of explosive rallies and some just as explosive sell-offs in banking shares over the next three to five years.

Complexity will come back into vogue, creating more opportunities for banks to sell clients, and bankers their banks, risks they don’t understand. You can hardly blame them. Opportunities to take the upside when others own the risks are few and far between in this life.

Expecting Trump and his appointees to govern otherwise ignores the lessons his own business career teaches. Expecting bankers to police themselves is just silly.

 

SHORT TERM VS LONG TERM

Two elements in the Trump agenda are fundamentally positive for banking profitability: deregulation and reflation. While the former leaves shareholders as likely fall guys for self-interested risk-taking by insiders, the second is legitimately positive.

Fiscal stimulus and tax cuts pose a problem down the road but over the short term even their prospect has already driven interest rate expectations higher and increased the gap between short- and long-term interest rates. As the banking business model is predicated on borrowing short and lending long, a flat yield curve is bad news and negative interest rates, as seen in much of the world last year, are poison. A bit of inflation, even more than a bit, is just what banks need; it makes them more profitable and helps whet clients’ appetite for debt.

And don’t expect the Fed to spoil the party. With Tarullo’s exit Trump will be able to fill three of the seven governor positions at the Fed. If he does not offer Janet Yellen another term at chair next February he may get another.

So why, if they will only get shafted in the end, do investors persist in backing the banking sector follies? An insight from Paul Woolley, of the London School of Economics, about how asset managers are punished and rewarded helps to explain. (here)

Most fund managers are asked to beat a stock market index, or one which tracks other funds, without taking too many huge bets. Outperform, or at least stay close to the pack, and you will probably continue to draw a hefty pay packet. Trail the market badly and out the door you go.

That forces money managers to buy what is going up strongly, and as we are seeing few sectors can rally as explosively as banks when the going is good. Just as bankers have perverse incentives to make money while times are good, so do fund managers, whose performance is judged quarter to quarter or at best over three-year intervals.

We’ve seen this movie before, and though we may like the popcorn we won’t enjoy the ending.

 

(Editing by James Dalgleish)

 
Published at Mon, 13 Feb 2017 21:57:45 +0000

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Schedule for Week of Feb 12, 2017

 

Schedule for Week of Feb 12, 2017

by Bill McBride on 2/11/2017 08:01:00 AM

The key economic reports this week are Retail Sales, Housing Starts, and the Consumer Price Index (CPI).

For manufacturing, January industrial production, and the February New York, and Philly Fed manufacturing surveys, will be released this week.

Fed Chair Janet Yellen is scheduled to deliver the Semiannual Monetary Policy Report to the Congress.

—– Monday, Feb 13th —–

No major economic releases scheduled.
—– Tuesday, Feb 14th—–

6:00 AM ET: NFIB Small Business Optimism Index for January.8:30 AM: The Producer Price Index for January from the BLS. The consensus is for 0.3% increase in PPI, and a 0.2% increase in core PPI.

10:00 AM, Testimony by Fed Chair Janet Yellen, Semiannual Monetary Policy Report to the Congress, Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.

—– Wednesday, Feb 15th —–

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.Retail Sales8:30 AM ET: Retail sales for January will be released.  The consensus is for 0.1% increase in retail sales in January.

This graph shows retail sales since 1992 through December 2016.

8:30 AM: The Consumer Price Index for January from the BLS. The consensus is for 0.3% increase in CPI, and a 0.2% increase in core CPI.

8:30 AM ET: The New York Fed Empire State manufacturing survey for February. The consensus is for a reading of 7.5, up from 6.5.

Industrial Production9:15 AM: The Fed will release Industrial Production and Capacity Utilization for January.

This graph shows industrial production since 1967.

The consensus is for no change in Industrial Production, and for Capacity Utilization to be unchanged at 75.5%.

10:00 AM: The February NAHB homebuilder survey. The consensus is for a reading of  68, up from 67 in January. Any number above 50 indicates that more builders view sales conditions as good than poor.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for December.  The consensus is for a 0.4% increase in inventories.

10:00 AM, Testimony by Fed Chair Janet Yellen, Semiannual Monetary Policy Report to the Congress, Before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.

—– Thursday, Feb 16th —–

Total Housing Starts and Single Family Housing Starts8:30 AM: Housing Starts for January.The consensus is for 1.232 million, up from the December rate of 1.226 million.

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 246 thousand initial claims, up from 234 thousand the previous week.

8:30 AM: the Philly Fed manufacturing survey for February. The consensus is for a reading of 23.6, up from 19.3.

—– Friday, Feb 17th —–

No major economic releases scheduled.

Published at Sat, 11 Feb 2017 13:01:00 +0000

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San Francisco is taxing the rich to pay for free community college

by tpsdave from Pixabay

San Francisco is taxing the rich to pay for free community college

  @KatieLobosco

San Francisco will be the first city in the nation to offer free community college to all residents starting this fall, Mayor Ed Lee announced this week.

The city will pay for it by taxes on properties selling for more than $5 million.

The real estate transfer tax, as it’s called, was increased last year for both residential and commercial properties. The hike was approved by voters in November.

The tax starts at 2.25% and goes up to 3% for properties worth at least $25 million. It’s expected to bring in an average of $45 million a year, according to the city controller. But the money goes into the city’s general fund and is also expected to be used for affordable housing and senior support services.

The free tuition plan is expected to impact about 28,000 residents who currently take classes at City College of San Francisco and encourage more people to sign up. Chancellor Susan Lamb said the school has the capacity for 85,000 students.

It’s difficult to predict how many more people will enroll, and how much the free-tuition plan will end up costing. San Francisco has committed $5.4 million a year for the next two years, and then will have to reassess. That includes a one-time $500,000 stipend to City College to help handle an influx of students.

San Francisco’s tuition-free plan is more progressive than others round the country. First, everyone is eligible as long as they have resided in San Francisco for at least one year.

It covers the $46 cost per credit no matter how rich you are, “even to the children of the founders of Facebook,” said city lawmaker Jane Kim.

You don’t have to be enrolled full-time or be a recent high school graduate. This means that people who are seeking job retraining or want to take a few foreign language courses won’t have to pay for the cost of the credits.

Students will still be on the hook for the mandatory $17 per semester fee at City College and the cost of books, so college won’t necessarily be free.

What also sets apart San Francisco’s plan is that it offers the poorest students additional money to help pay for these other expenses. An individual has to earn less than $17,000 a year to qualify for the aid, or less than $37,000 for a family of four. Eligible full-time students will get $500 a year and part-time students will get $200 a year.

“We have the fastest growing income gap than any city across the nation,” Kim said on Monday at a press conference.

“Making city college free is going to provide greater opportunities for more San Franciscans to enter into the middle class and more San Franciscans to stay in the middle class if they currently are,” she said.

The push for free tuition is gaining support across the country. Tennessee started offering free community college to residents in 2015, and will expand the program this year to include adults returning to school. Lawmakers in New York are discussing a program that would make four-year and two-year public colleges tuition-free for residents who earn less than $125,000 a year. And Rhode Island’s governor is pushing for two free years at public colleges for recent high school graduates.

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Tough federal bank regulator calls it quits

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What does a Trump presidency mean for the Fed?
What does a Trump presidency mean for the Fed?

Tough federal bank regulator calls it quits

  @mattmegan5

President Trump’s efforts to unshackle America’s banks just got easier.

Daniel Tarullo, the point man on bank regulation at the Federal Reserve, announced on Friday he’s stepping down in April, more than four years ahead of schedule.

Tarullo spearheaded the Fed’s efforts to put banks under tighter scrutiny following the 2008 financial meltdown.

The departure will give Trump, who has promised to deregulate banks, a third vacant seat at the Fed to fill. The appointments will allow the new president to reshape the most powerful central bank in the world in his mold.

Tarullo, 64, did not explain why he’s resigning but noted that he’s served as a Fed governor for more than eight years. In a very brief letter addressed to the president, Tarullo said it’s been a “great privilege” to serve “during such a challenging period.”

Appointed by President Obama in 2009, Tarullo has emerged as one of the most powerful figures in the banking industry.

He served as chairman of the Fed’s committee on bank supervision, putting him in charge of enforcement and the stress tests that examine if lenders are prepared to weather the next economic storm.

News of Tarullo’s early resignation seemed to lift Wall Street’s spirits. Shares of big banks like Goldman Sachs (GS) and Citigroup (C) rose modestly following the announcement. The gains extend a post-election rally that’s been driven in part by Trump’s promises to roll back bank regulation.

But Jaret Seiberg, an analyst at Cowen & Co., wrote in a report that Tarullo’s departure is unlikely to spark “radical change in regulatory policy” and wasn’t a “political comment on Trump.”

It’s important to remember that Tarullo’s role as the Fed’s point man on bank regulation was expected to wane anyway. That’s because one of the vacancies Trump gets to fill is the position of vice chairman for supervision. That position was created by the 2010 Dodd-Frank Wall Street reform law but was never filled by Obama.

Big banks are obviously hoping Trump taps someone who shares his pro-business philosophy of lighter regulation. Trump has promised to “do a big number” on Dodd-Frank. Last week, he signed an executive order that sets the stage for rolling back parts of the law.

Press reports indicate Trump could fill the supervision role with David Nason, an executive at General Electric (GE)who served in the Treasury Department during the financial crisis.

Nason could appeal to the pro-business faction of the Trump administration, including the handful of Goldman Sachs veterans like top economic adviser Gary Cohn.

But Seiberg warned that the strong “populist forces” within the White House could encourage Trump to tap a vice chairman of supervision who wants to crack down on big banks. One idea is to encourage these mega banks to shrink themselves by imposing higher capital requirements.

During the campaign, Trump supported breaking up big banks, a sentiment that top White House strategist Steve Bannon may share.

“There is a risk that the replacement could be tougher on the biggest banks than Tarullo,” Seiberg wrote.

Fed chief Janet Yellen, whose term doesn’t expire until February 2018, has warned against gutting Dodd-Frank. After Trump’s election, Yellen credited financial regulation with making the system “safer and sounder” and said she doesn’t “want to see the clock turned back.”

Published at Fri, 10 Feb 2017 21:18:53 +0000

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