Wednesday October 19 Daily Market Primer
Stocks
rose yesterday as earnings season continued to be better than expected. Netflix and GS
rose 19% and 3.6%, and health care stocks also had a good day, with UnitedHealth
up 6.9%. IBM disappointed and fell 2.6%. Morgan Stanley
reported this morning and beat expectations on strong trading income and wealth
management revenues. International markets mostly followed the US and
posted positive gains on Wednesday. China Q3 GDP came in at 6.7%,
in line with expectations. They seem on track to meet annual growth targets,
and hot spots in the economy include property , bank lending, and government
spending. S&P futures are pointing…up.
LAST
|
CHANGE
|
% CHANGE
|
|
18,161.94
|
75.54
|
0.42%
|
|
5,243.84
|
44.01
|
0.85%
|
|
2,139.60
|
13.10
|
0.62%
|
|
Russell
2000
|
1,217.30
|
7.16
|
0.59%
|
Global
Dow
|
2,446.36
|
4.94
|
0.20%
|
Japan:
Nikkei 225
|
16,998.91
|
35.30
|
0.21%
|
Stoxx
Europe 600
|
342.75
|
0.27
|
0.08%
|
UK:
FTSE 100
|
7,002.24
|
2.18
|
0.03%
|
CBOE
Volatility
|
15.19
|
-0.09
|
-0.59%
|
Australia:
S&P/ASX 200
|
5,435.40
|
24.60
|
0.45%
|
China:
Shanghai Composite
|
3,083.88
|
42.71
|
1.40%
|
India:
S&P BSE Sensex
|
27,984.37
|
-66.51
|
-0.24%
|
France:
CAC 40
|
4,509.83
|
0.92
|
0.02%
|
Germany:
DAX
|
10,630.95
|
-0.60
|
-0.01%
|
Italy:
FTSE MIB
|
16,970.88
|
4.27
|
0.03%
|
Spain:
IBEX 35
|
8,898.70
|
33.40
|
0.38%
|
0.34
|
0/32
|
||
0.827
|
-1/32
|
||
1.248
|
-3/32
|
||
1.761
|
-7/32
|
||
2.525
|
-12/32
|
||
-0.666
|
0/32
|
||
0.039
|
0/32
|
||
50.97
|
0.68
|
1.35%
|
|
52.32
|
0.64
|
1.24%
|
|
3.57
|
-0.069
|
-1.90%
|
|
377.38
|
1.82
|
0.48%
|
|
2134.5
|
2.5
|
0.12%
|
UK
unemployment held at 5.9%. Saudi Arabia floated an international bond
yesterday which was showed strong demand and will raise about $17.5 billion in five, 10,
and 30 year tranches. The issue is oversubscribed with $67 billion in
demand. They are trying to plug a $98 billion budget gap caused by lower
oil prices. Yahoo reported and earnings drop of 14%, but beat on
profit, but didn’t even have a conference call since they are merging with
Verizon. Verizon could walk away from the deal after the big hack, but
since it was two years ago I don’t think that will happen.
The
third presidential debate is tonight and the Dodgers won last night, so with
that, here’s the news:
China GDP
Third quarter growth in China rose 6.7 percent, signaling the country is
in line to meet the government's projection for full year GDP expansion of
between 6.5 and 7.0 percent. Growth was led by retail sales, which gained 10.7
percent, while industrial output missed estimates, with a rise of 6.1
percent. The Shanghai Composite Index closed virtually unchanged on the day, remaining
close to a six-week high. Yesterday, the U.S. Treasury Department released data
showing that China's holdings of U.S. Treasuries have fallen to the lowest level since November 2012.
Clinton lead
Democratic presidential nominee Hillary Clinton has a nine point lead over Donald Trump in the
latest Bloomberg Politics national poll. Some are already calling the race
effectively over, with bookmaker Paddy Power yesterday paying out more than $1 million on bets that Clinton
would win the race to the White House.
U.K. unemployment
The jobless rate in the U.K. remained at 4.9 percent, an 11-year low. Real basic pay
growth slowed to 1.7 percent, and firms are already reporting cuts to hiring
and investment plans. The pound rallied above $1.23 after the data was released. The
pound's rally over the past couple of days has done little to mitigate the
collapse in the currency since the Brexit vote, however, a drop that is either
good or bad news, depending on who you ask
Markets steady
Overnight the MSCI Asia Pacific Index added 0.3 percent while Japan's Topix
index rose less than 0.1 percent in thin trading ahead
of earnings. In Europe, the Stoxx 600 Index was 0.2 percent lower at 6:19 a.m. ET. S&P
500 futures were little changed. In fixed income markets, the
big event today is the Saudi Arabian sovereign bond offering which is expected
to total $17.5 billion, according to a
person familiar with the matter.
Coming up...
It's Bank of Canada decision day,
with Governor Stephen Poloz expected to keep interest rates unchanged when the
announcement is made at 10:00 a.m. ET. In the U.S., housing starts data
are due at 8:30 a.m. while the latest Beige Book is expected at 2:00
p.m. This evening, permanent Federal Reserve voting member Bill Dudley is due
to give a speech at 7:45 p.m. in New York.
The Fruits of Labor
U.S. labor unions are plowing money into the 2016 elections at an unprecedented rate, largely in an effort to help elect Hillary Clinton and give Democrats a majority in the Senate. Unions spent about $108 million on the elections from January 2015 through the end of August, a 38% jump from the same period leading up to the 2012 election. Nearly 85% of their spending this year has supported Democrats. Unions have put few dollars behind Donald Trump’s campaign, but two unions, one representing U.S. Border Patrol agents and another representing police officers, have endorsed him in recent months. And Mr. Trump has drawn significant support in key states from union households. Meanwhile, Democrats are eyeing big gains in House seats, though likely not enough to shift control of the chamber. And tonight’s debate represents a last big chance for Mr. Trump to recast the presidential race. We offer a guide to keeping calm during the slugfest with political yoga.
U.S. labor unions are plowing money into the 2016 elections at an unprecedented rate, largely in an effort to help elect Hillary Clinton and give Democrats a majority in the Senate. Unions spent about $108 million on the elections from January 2015 through the end of August, a 38% jump from the same period leading up to the 2012 election. Nearly 85% of their spending this year has supported Democrats. Unions have put few dollars behind Donald Trump’s campaign, but two unions, one representing U.S. Border Patrol agents and another representing police officers, have endorsed him in recent months. And Mr. Trump has drawn significant support in key states from union households. Meanwhile, Democrats are eyeing big gains in House seats, though likely not enough to shift control of the chamber. And tonight’s debate represents a last big chance for Mr. Trump to recast the presidential race. We offer a guide to keeping calm during the slugfest with political yoga.
Staying Home
China, long the world’s factory floor, is taking control of a bigger portion of the world’s supply chains, causing a shift in global trade patterns by buying less from abroad. The No. 2 economy after the U.S. pulls in huge volumes of raw materials and components, from aluminum to microchips. We report that now those flows are shrinking, which is pummeling China’s trading partners, slowing global growth and providing further ammunition for politicians including Mr. Trump who question the benefits of global trade. Exports to China, which had risen nearly every year since 1990, fell 14% last year, the largest annual drop since the 1960s. Meanwhile, China’s drifting economy steadied in the third quarter, clocking in 6.7% growth fueled by easy credit, a hot property market and other stimulus measures that economists say come at the expense of needed restructuring.
It's
the 29th anniversary of Black Monday. On October 19, 1987, the
Dow Jones Industrial Average crashed 508 points, or 22.6%. While the event was
scary and wiped away a good deal of wealth, people often forget how resilient
the US economy was in the event's aftermath, as growth never turned negative.China, long the world’s factory floor, is taking control of a bigger portion of the world’s supply chains, causing a shift in global trade patterns by buying less from abroad. The No. 2 economy after the U.S. pulls in huge volumes of raw materials and components, from aluminum to microchips. We report that now those flows are shrinking, which is pummeling China’s trading partners, slowing global growth and providing further ammunition for politicians including Mr. Trump who question the benefits of global trade. Exports to China, which had risen nearly every year since 1990, fell 14% last year, the largest annual drop since the 1960s. Meanwhile, China’s drifting economy steadied in the third quarter, clocking in 6.7% growth fueled by easy credit, a hot property market and other stimulus measures that economists say come at the expense of needed restructuring.
China's GDP was in line. The Chinese economy grew at a 6.7% year-over-year clip in the third quarter, causing some economists to suggest it's a sign the Chinese economy is stabilizing as it's the third straight quarter with 6.7% YoY growth.
Britain's jobs report looked good. Data from the Office for National Statistics showed Britain's unemployment rate held at 4.9% while those claiming benefits for the first time rose by just 700 from August to September, well shy of the 3,000 claimants that economists were expecting. The British pound is up 0.1% at 1.2308 versus the dollar.
Google hit an all-time high. Shares climbed to a record high of $801 on Tuesday after a slew of positive reviews for Google's first smartphone, the Pixel. The company will report its quarterly results on October 27.
Yahoo's sale is on track despite the massive security breach. That's according to CEO Marissa Mayer, who said in a statement accompanying Yahoo's third-quarter results: "We are busy preparing for integration with Verizon. We remain very confident, not only in the value of our business, but also in the value Yahoo products bring to our users' lives." As for the Yahoo's earnings, core revenue tumbled 14%.
Intel missed on guidance. The chipmaker beat on both the top and bottom lines, earning $0.69 a share on revenue of $15.8 billion, but its fourth-quarter revenue guidance of $15.7 billion was below analyst estimates of $15.86 billion. The stock was down nearly 4% in after-hours trade.
Starbucks is planning a major push in China. The coffee giant named Belinda Wong CEO of Starbucks China and says it plans to more than double its presence in the country to 5,000 stores by 2021, Reuters reports.
Stock markets around the world trade mixed. Overnight, Hong Kong's Hang Seng (-0.4%) lagged while Australia's ASX (+0.5%) outperformed. In Europe, Germany's DAX (-0.2%) trails the pack. S&P 500 futures are down 1.00 points at 2,131.00.
Earnings reporting is heavy. Halliburton and Morgan Stanley report ahead of the opening bell while American Express and eBay are among the names releasing their quarterly results after markets close.
US economic data is moderate. Housing
starts will cross the wires at 8:30 a.m. ET before the Department of Energy's
energy inventories and the Fed's Beige Book are released at 10:30 a.m. ET and 2
p.m. ET. The US 10-year yield is unchanged at 1.74%.
Broken indicators mean it's growing harder to spot troubles in the market.
Saudi Arabia says many nations will join OPEC's output cuts.
Meet Russia's incredible vanishing middle class.
Family offices scoop up talent escaping embattled hedge
funds.
Europe is letting the ECB's gift of time slip away.
Investors' cash holdings are near levels not seen since 9/11.
Here's why productivity won't save the world.
The aviation industry has long warned about a pilot shortage - the
worry being that as a generation of pilots with extensive air force experience
retires, the world will face a shortage of capable captains. I sometimes wonder
if the vast changes that have overtaken the financial industry in recent years
have left us in a similar situation - with a complicated infrastructure
increasingly devoid of the people who created it, and at the same time wracked
by dramatic post-crisis change. While many of the reform measures imposed since
2008 have been aimed squarely at making the financial system safer, the
interplay of new rules and the loss of a generation of old Wall Street hands
could make it tougher to spot troubles on the horizon. It's a question that's
underscored by today's Bloomberg article
by Luke Kawa and Andrea Wong. They point out that reform efforts, market
evolution and central bank stimulus have combined to - in effect - neuter the
predictive power of a series of once-reliable gauges and indicators including
the VIX, Libor-OIS and the yield curve. Without new ones to fill their place,
we could well be flying blind.
Source:
Bloomberg, BI, WSJ, CFAI Fin. Newsbrief
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