Market Minutes for October 30th:
“A clear conscience is usually the sign of a bad memory.” – Steven Wright
Here is what I am thinking: 1.) It looks like President Trump has now picked Jerome Powell as the new Fed chairman. Powell is a moderate when it comes to monetary policy. He is a former investment banker and Treasury official. He will be the first Fed chairman in three decades without a Ph.D. in economics. 2.) Last Friday, it wasn’t only the shares of Amazon that caused the market to rise by 2.2%. Shares of Google, Microsoft and Intel put in huge moves. Collectively, the surge added $146 billion to the market value of those companies which eclipsed the total market value of IBM at $143 billion. 3.) The DJIA was up 4.2% in October, the best move since February. Five stocks made up 61% of the move: Intel 17%, Microsoft 13%, Wal-Mart 11%, Caterpillar 10% and 3M 10%. 4.) The S&P 500 was up 2.2% in October and technology stocks accounted for 72% of that gain. Without tech, the S&P 500 would have been up 0.50%. Facebook, Amazon, Apple, Google and Microsoft combined to make up 52% of the gain. 5.) Think about that for a moment, 1% of the S&P 500 made up 52% of the gains. 6.) Think European investors are starved for yield? Italian telecom company Wind Tre last week closed the largest euro junk debt sale on record when they borrowed €7.325 billion. The deal was oversubscribed 3.5 to 1 with €25 billion of demand for the bonds. 7.) Peter Boockvar: “This boat is now standing room only.” He is referring to the latest Investors Intelligence report that shows Bulls up to 63.5%…the highest reading in 30 years. It peaked at 65 in the fall of 1987. Hmmm. 8.) The AAII (American Association of Individual Investors) bullish sentiment rose 5.4 points to 45.1, the highest level since January. 9.) Jerome Powell, “meet the new boss, same as the old boss!?” He is very similar to Janet Yellen in terms of mind set about monetary policy. 10.) Wow, Apple just keeps hitting the ball out of the park.
The Dallas Fed Manufacturing Survey for October came in at 27.6 vs an estimated 21.3.
The Atlanta Fed’s GDPNow initial forecast for 4th quarter GDP growth moves up to 4.5%.
The Commerce Department said that U.S. consumer spending recorded it biggest increase in more than 8 years in September, likely due to households in Texas and Florida replacing flood-damaged goods. The increase was included in the 3rd quarter GDP.
The Commerce Department also reported that the American savings rate fell to 3.1% in September, the lowest level since December 2007. A lower savings rate can be interpreted as a sign that consumer confidence in the economy continues to grow along with wages.
Payroll service ADP said that 235,000 private sector jobs were created in October vs. 110,000 in September.
The Department of Labor said that the U.S. economy generated 261,000 non-farm jobs in October.
The Department of Labor reported that U.S. worker productivity rose 3.0% in the 3rd quarter, that is the fastest pace in 3 years.
The S&P CoreLogic Case-Shiller Home Price Index/Composite 20, rose by 6.8% in August, hitting an all- time high. Seasonally adjusted, 9 of the 20 cities reported price increases with Seattle, Las Vegas and San Diego reporting the biggest gains.
The Conference Board said that its consumer confidence index for October rose 5.1 points to 125.9, the highest reading since December 2000. Those that said jobs were “Plentiful” jumped by 3.6 points to the highest level since June 2001.
The Chicago Purchasing Manager’s Index for October rose 1 point month over month, 6 points better than the forecast and the best since March 2011. Bottom line, strength in all of the regional surveys have the ISM at just off the best level since 2004.
The Institute for Supply Management (ISM) said that the non-manufacturing sector reading fell slightly in October to 58.7 but within the report, construction spending increased by 0.3%.
From Caterpillar’s earnings call: “We’re seeing broad-based sales increases across a number of industries in all regions. We continue to see strength in China construction. Onshore oil and gas in North America is also strong. Construction activity in North America was up compared to last year, and we’re seeing increased order activity by mining customers.”
From the Texas Instruments earnings call: “Industrial demand remains strong…I would say that certainly the demand was broad based. If you look across our product lines, we’ve got 65 to 70 different product lines and the demand was very strong across those as well as strong across the region. So we had revenue up in three of the four regions year on year in Europe, Asia and the U.S., and it was about even in Japan.”
Baker Hughes said that the total drilling rig count in the U.S. fell by 4 to a total of 909 in the last week. Oil rigs rose by one and natural gas rigs fell by 5.
The Energy Information Administration said that U.S. crude oil exports hit an all-time high last week with 2.13 million barrels per day shipped out. U.S oil production hit 9.55 million barrels per day during the last week nearing a record set back in July 2015.
The labor shortage in the construction and home building industries has gotten so acute that Denver- based Oakwood Homes (owned by Berkshire Hathaway), has started the Colorado Homebuilding Academy to train people in the construction trades. The free not-for-profit school is funded by a foundation started by Oakwood Homes which donates $1,000 for each home it closes. This year, the company expects to close on 1,356 homes and will run 11 programs, training close to 200 potential construction workers.
43.3% of adults got a vaccine in the 2015-2016 flu season. During that season, an estimated 24.5 million were hit with the flu, resulting in 11 million medical visits, 308,000 hospitalizations and 12,000 deaths. The direct cost annually for outpatient visits and hospitalizations was roughly $10.4 billion.
The National Retail Federation said that Halloween spending could reach $9.1 billion this year with candy sales hitting $2.7 billion. Hershey says that the day before Halloween is the biggest sales day of the year for the company.
The National Retail Federation also found that a record number of adults, 48%, plan to dress up in a Halloween costume. CIT Bank, in a separate survey, found that Millennials are outspending other generations 2-to-1 when it comes to the Halloween holiday.
The Weinstein Company’s first film to be released since the Harvey Weinstein scandal broke is entitled “Amityville: The Awakening.” It stars Bella Thorne and Jennifer Jason Leigh and it was released in 10 locations over the weekend in a “One-Day Theatrical Release.” Total box office gross: $742 (seven hundred and forty-two dollars). Anybody want to buy a film production company on the cheap?
Billionaire Ken Griffin, founder of Citadel Asset Management, has donated $125 million to the University of Chicago Department of Economics. The donation is the second-largest in school history. The school’s economics department boasts associations with 29 scholars who have received the Nobel Prize for Economics. Not surprisingly, the school will now be named: Kenneth C. Griffin School of Economics.
General Motors said that overall car sales fell by 2.2% in October with consumer sales down 6.6% during the month. Ford sales were higher by 6.2% boosted by the F-Series pickup truck. Toyota sales were higher by 5.2% boosted by pickup truck and SUV sales. Nissan sales increase by 8.4% boosted by pickup truck, SUV and crossover sales. Fiat Chrysler reported a 13% sales decline led by fleet sales down 43%.
Last Friday, Amazon’s stock soared more than 13% on astounding earnings, representing a $61.7 billion gain in the company’s market value. FedEx, which delivers many of Amazon’s packages, is worth $61.8 billion as an entire company.
After last Friday’s 13% surge in share price, Amazon CEO Jeff Bezos became the richest man in the world with a net worth of $90 billion. Last Friday’s move alone added $7 billion to his account.
After the Whole Foods closing, Amazon said that it now employs more than 467,000 people, second only to Walmart. Nine years ago, Amazon employed 20,000 workers and 81,000 just five years ago.
Google has many mini-companies within parent company Alphabet, but the latest is a 60-person division called “Jigsaw” which is helping to lead the search giant’s charge against fake news. Jigsaw will take on the “toughest global security challenges facing the world,” including curbing online harassment and censorship.
Apple’s cash pile reached $268.9 billion the latest quarter. The company sold 46.7 million iPhones, 10.3 million iPads and 5.4 million Mac’s in the quarter.
Alibaba’s co-founder Joseph Tsai has reached an agreement in principal to buy 49% of the NBA Brooklyn
Nets. Sources told ESPN that the price of Tsai’s stake will be based on a $2.3 billion valuation of the team. Tsai was an avid pick-up basketball player during his undergraduate years at Yale.
Corona beer parent, Constellation Brands, is acquiring a 9.9% stake in Canada’s Canopy Growth Corp. (WEED) in an attempt to develop drinkable marijuana products to be sold in Canada as soon as it legalizes recreational marijuana, which is expected to happen next year. The U.S. cannabis market is still stymied by federal law that blocks access to banking and insurance for those companies.
According to CNBC Emerson Electric has made multiple offers to acquire Rockwell Automation. The latest offer was at $215 per share or $27 billion. Sources say that the offer was “met with a terse rejection.”
Vistra Energy has agreed to acquire Dynegy in an all-stock deal creating a combined enterprise value of over $20 billion.
Sources familiar with the deal tell CNBC that CVS Health will offer $200 per share to acquire Aetna as pharmacies and health insures look to vertically integrate.
Whole Foods said it aims to add 6,000 new employees at a National Hiring Day on November 2nd.
UPS says that it expects to ship 750 million packages during this holiday season. The company said that it also expects to ship 30 million packages per day, every day, for 17 of the 21 shipping days before Christmas.
Under Armour reports 3rd quarter earnings of $0.22 per share on revenue of $1.4 billion, a decline of 4.8% year over year.
MasterCard reports 3rd quarter earnings of $1.34 per share on revenue of $3.4 billion, an increase of 18.1% year over year.
Facebook reports 3rd quarter earnings of $1.59 per share on revenue of $10.33 billion, an increase of 47.4% year over year.
Tesla reports 3rd quarter earnings of -$2.92 per share on revenue of $2.98 billion, an increase of 29.6% year over year.
Starbucks reports 3rd quarter earnings of $0.55 per share on revenue of $5.69 billion, a decrease of 0.4% year over year.
Apple reports fiscal 4th quarter earnings of $2.07 per share on revenue of $52.6 billion, an increase of 12.3% year over year.
Yum Brands reports 3rd quarter earnings of $0.68 per share on revenue of $1.44 billion, a decrease of 5.3% year over year.
Alibaba reports 3rd quarter earnings of $1.29 per share on revenue of $8.29 billion, an increase of 60.7% year over year.
Next week: Earnings from: Priceline, TripAdvisor, Zillow, Coach, Marriott Intl., MGM, Wendy’s and Nordstrom. No economic reports.
WTI crude oil: $54.75 per barrel. 10-year U.S. Treasury note: 2.35%. 30-year mortgage: 4.10%.
Sources: CNBC, Real Money Pro, 361 Capital, Seeking Alpha, MarketWatch, Estimize.com., Bloomberg, The Wall Street Journal and ZeroHedge.
Disclosure: This publication shall not constitute an offer to sell or the solicitation of any offer to buy or sell any securities of the companies mentioned. This publication is solely a compilation of recent news releases from the sources cited above.
Ken Beach, President and Managing Partner of Cascade Investment Group, member FINRA & SIPC. Cascade Investment Group is not a tax or legal advisor. You should always consult with your tax advisor or attorney before taking any actions that may have tax consequences.