Wed 29 Nov 2017


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In Portfolioticker today

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  • Today at the stock market Opinion
  • The portfolio today Opinion
  • News
  • flag_japan Japan Update
  • flag_china China Update
  • Today at the stock market

    bull/bearThe Nasdaq posted its biggest one-day drop in more than three months on Wednesday as investors fled high-flying technology stocks and shifted to banks and other pockets of the market that could benefit from improving economic conditions, lower regulations and taxes as well as higher interest rates.

    • The S&P 500 index fell 0.97 point, or 0.04%, to 2,626.07
    • The Dow Jones Industrial Average rose 103.97 points, or 0.44%, to 23,940.68
    • The Nasdaq Composite index dropped 88.02 points, or 1.27%, to 6,824.34.
    • About 8 billion shares changed hands in U.S. exchanges, well above the daily average of roughly 6.5 billion over the last 20 sessions.

    Gains in financial, industrial and healthcare stocks boosted the Dow industrials, giving the blue-chip index another record closing high, and they helped the benchmark S&P 500 index finish near flat. The S&P tech sector, which has propelled the market’s record-setting rally this year, shed 2.6% for its biggest daily decline in over 5 months.

    Shares of Amazon.com, Apple, Google parent Alphabet and Facebook fell between 2% and 4%. Among the year’s other high fliers, Netflix slid 5.5% and the Philadelphia semiconductor index dropped 4.4%.

    Financials rose 1.8%, adding to Tuesday’s gains and resulting in their biggest two-day rise since just after the 2016 U.S. election of President Donald Trump. JP Morgan rose 2.3% and Wells Fargo rose 2.0%.

    The industrial sector rose 0.9%, led by transportation stocks such as Southwest Airlines, railroad Union Pacific and package delivery company UPS.

    “We are certainly seeing a change in leadership at least for today in that we are taking profits from technology and redistributing those profits to areas that will benefit from lower taxes, less regulation, higher interest rates and kind of later stages of the economic cycle,” said Michael Arone, chief investment strategist at State Street Global Advisors in Boston.

    While Amazon dropped, shares of other retailers posted sharp gains, including Target up 8.9% and Macy’s up 8.2%, as holiday shopping season has begun in earnest over the past week.

    “There may be a little bit of a thought that Amazon isn’t going to kill every retailer out there. We’re seeing some transportation stocks doing better in expectation that maybe this is going to be a pretty good holiday season with consumer confidence doing well and wage growth picking up a little bit”, said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

    Investors are keenly focused on tax-reform legislation in Congress, with hopes that a corporate tax cut would further fuel the record-setting rally in equities.

    Congressional Republicans scrambled to reformulate their bill to satisfy lawmakers worried about how much it would expand the federal deficit, as the measure moved toward a U.S. Senate floor vote later this week.

    In the latest batch of encouraging economic data, the U.S. economy grew faster than initially thought in the third quarter, notching its quickest pace of expansion in three years.

    Outgoing Federal Reserve Chair Janet Yellen told congressional leaders the U.S. economy has gathered steam this year and will warrant continued interest rate increases amid a strengthened global recovery. It was Yellen’s final scheduled testimony on Capitol Hill. Her nominated replacement, Jerome Powell, on Tuesday had defended plans to potentially lighten regulation of the financial sector.Reuters

    The Nasdaq 100 Index fell as much as 2.2% as signs of a rotation from the year’s leaders emerged anew. As tax legislation proceeded through the Senate, the FANG block of megacap tech shares that paced gains throughout the year fell the most in 22 months. All 15 members of the S&P 500 Semiconductor Index retreated, led by Micron Technology, Lam Research Corp. and Applied Materials Inc.

    “The large tech companies already have low effective tax rates because they were gaming the system. Any reform would have to close the loopholes, which obviously they’re trying to do, so they don’t benefit,” Michael O’Rourke, chief market strategist at JonesTrading Institutional Services LLC, said by phone.Bloomberg

    Market indices

    Market indices
    ^ Market indices today (mouseover for 12 month view) Chart: Google Finance

    Index Ticker Today Change 31 Dec 16 YTD
    S&P 500 SPX (INX) 2,626.07 -0.04% 2,238.83 +17.29%
    DJIA INDU 23,940.68 +0.43% 19,762.60 +21.14%
    NASDAQ IXIC 6,824.39 -1.28% 5,383.12 +26.77%

    Portfolio Indices

    USD and AUD denominated indices over the past 52 weeks (Chart: Bunting)
    ^ USD and AUD denominated indices over the past 52 weeks Chart: Bunting

    Index values

    Index Currency Today Change 31 Dec 16 YTD
    USD-denominated Index USD 3.052 -2.39% 2.105 +45.00%
    Valuation Rate USD/AUD 0.76245 -0.31% 0.72663 +4.92%
    AUD-denominated Index AUD 4.004 -2.09% 2.895 +38.29%

    Portfolio stock prices

    stocks_20171129

    Note that today’s price changes are based on revised (updated) close prices for yesterday (NASDAQ stocks only).

    Stock Ticker Today Change 31 Dec 16 YTD
    Alphabet A GOOGL $1037.38 -2.44% $792.45 +30.90%
    Alphabet C GOOG $1021.66 -2.46% $771.82 +32.37%
    Apple AAPL $169.48 -2.08% $115.82 +46.33%
    Amazon AMZN $1160.55 -2.77% $749.87 +54.76%
    Ebay EBAY $34.38 -3.16% $29.69 +15.79%
    Facebook FB $175.13 -4.00% $115.05 +52.22%
    PayPal PYPL $73.25 -5.84% $39.47 +85.58%
    Twitter TWTR $20.79 -4.77% $16.30 +27.54%
    Visa V $109.86 -3.09% $78.02 +40.81%
    VMware VMW $119.42 -6.22% $78.73 +51.68%

    FX: USD/AUD

    USD

    DXY movements
    ^ Bloomberg Dollar Spot Index (DXY) movements today (mouseover for 12 month view) Chart: Bloomberg

    The Bloomberg Dollar Spot Index (DXY) gained less than 0.05%.
    The EUR rose 0.1% to USD 1.1854.
    Britain’s GBP rose 0.5%t to USD 1.3412, the strongest in 2 months.
    Japan’s JPY sank 0.3% to 111.86 per USD.
    Bloomberg

    AUD

    AUD movements
    ^ AUD movements against the USD today (mouseover for 12 month view) Chart: xe.com

    Oil and Gas Futures

    Futures prices

    Prices are as at 15:49 ET

    • NYMEX West Texas Intermediate (WTI): $57.37/barrel -1.07% Chart
    • ICE (London) Brent North Sea Crude: $63.28/barrel -0.52% Chart
    • NYMEX Natural gas futures: $3.17/MMBTU +1.47% Chart

    flag_europe EU: Economic Sentiment Indicator. Nov 2017

    Press Release Extract [ser_eu_esi]

    , the Economic Sentiment Indicator (ESI) for the euro area improved again, increasing slightly by 0.5 points to 114.6. The indicator for the EU remained broadly stable (+0.1 points to 114.3). The indicators reached the highest levels since October 2000 (euro area) and June 2007 (EU).

    eu_esi_20171129

    Euro area developments

    The increase of the ESI in the euro area resulted from improved confidence among consumers and in the construction sector, partly offset by a decrease registered in the retail trade sector; confidence in industry and services remained broadly unchanged. Amongst the largest euro-area economies, the ESI rose strongly in France (+1.9) and, to a lesser extent, in the Netherlands (+0.8) and Spain (+0.6), while it remained broadly unchanged in Italy (+0.2) and Germany (-0.1).

    Virtually unchanged industry confidence (+0.2) resulted from managers’ broadly stable assessment of the current level of overall order books and the stocks of finished products, while their production expectations increased slightly. Of the questions not included in the confidence indicator, both managers’ assessment of past production and their views on export order books improved. Broadly flat developments in services confidence (+0.1) resulted from managers’ slightly brighter demand expectations being offset by their slightly less optimistic assessment of the past business situation; their views on past demand remained broadly unchanged. Positive developments in consumer confidence (+1.2) reflected households’ more optimistic assessment of future unemployment, their savings expectations and, to a lesser extent, the future general economic situation and their future financial situation. The decrease in retail trade confidence (-1.3) resulted from a strong deterioration in managers’ views on the present business situation, while their assessments of the adequacy of the volume of stocks and the future business situation remained virtually stable. The rise in construction confidence (+1.2) was fuelled by upward revisions in managers’ assessment of the level of order books and, to a lesser extent, their employment expectations. Finally, the rise (+1.3) in financial services confidence (not included in the ESI) resulted from improved appraisals of both past demand and the past business situation, which were only partly offset by a deterioration in managers’ demand expectations.

    Employment plans saw significant upward revisions in retail trade and industry, both indicators reaching the highest levels in more than 30 years. In construction, employment plans improved more moderately, while also reaching a 10-year high. Employment plans worsened slightly in the services sector. Selling price expectations increased markedly in industry, while they decreased slightly in retail trade and services and remained virtually unchanged in construction. Also consumer price expectations increased in November.

    EU developments

    The headline indicator for the EU remained broadly stable (+0.1), reflecting slipping sentiment in the largest non-euro area EU economy (UK, -1.5), while sentiment in Poland improved slightly (+0.7). In line with the euro area, confidence improved among consumers and remained broadly stable in industry. However, EU confidence improved markedly in retail trade and fell in services and construction. Further in contrast with euro-area developments, EU confidence remained virtually unchanged in the financial services sector.

    As in the euro area, EU managers in industry and retail trade reported upward revisions in their employment expectations, while the latter decreased in services and construction. Price expectations in the EU increased strongly in retail trade and industry and, to a somewhat lesser extent, in the services sector, while they decreased markedly in construction.

    Industrial investment survey (conducted in October/November)

    According to the bi-annual investment survey carried out in October/November this year, real investment in the manufacturing industry is expected to increase by 2% in the euro area in 2017. This is a significant downward revision from the 5% growth managers had expected in the previous survey of March/April 2017. For 2018, managers expect an acceleration in investment growth to 4%. In the EU, real manufacturing investment in 2017 is estimated to grow more than in the euro area (+4%), unchanged from the March/April survey. As regards 2018, EU managers expect another increase in real investment by 4%.

    European Commission, DG ECFIN, “Economic Sentiment Indicator. Nov 2017“, 29 Nov 2017 More

    flag_europe EU: Business Climate Indicator. Nov 2017

    Press Release Extract [ser_eu_bci]

    In November 2017, the Business Climate Indicator (BCI) for the euro area increased slightly (+0.05 points to +1.49). Managers’ appraisals of both past and future production and, in particular, export order books improved. By contrast, managers’ assessment of the stocks of finished products and overall order books remained broadly unchanged.

    eu_bci_20171129

    European Commission, DG ECFIN, “Business Climate Indicator. Nov 2017“, 29 Nov 2017 More

    flag_usa US: GDP, Q3/2017 (second estimate), Corporate Profits, Q3/2017 (preliminary)

    Press Release Extract [ser_us_gdp]

    Real gross domestic product (GDP) increased at an annual rate of 3.3 percent in the third quarter of 2017, according to the “second” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 3.1 percent.

    us_gdp_20171129

    The GDP estimate released today is based on more complete source data than were available for the “advance” estimate issued last month. In the advance estimate, the increase in real GDP was 3.0 percent. With this second estimate for the third quarter, the general picture of economic growth remains the same; nonresidential fixed investment, state and local government spending, and private inventory investment were revised up from the prior estimate.

    Real gross domestic income (GDI) increased 2.5 percent in the third quarter, compared with an increase of 2.3 percent (revised) in the second. The average of real GDP and real GDI, a supplemental measure of U.S. economic activity that equally weights GDP and GDI, increased 2.9 percent in the third quarter, compared with an increase of 2.7 percent in the second quarter.

    The increase in real GDP in the third quarter reflected positive contributions from PCE, private inventory investment, nonresidential fixed investment, and exports that were partly offset by a negative contribution from residential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased.

    The acceleration in real GDP in the third quarter reflected an acceleration in private inventory investment, a downturn in imports, and smaller decreases in state and local government spending and in residential fixed investment that were partly offset by decelerations in PCE, in nonresidential fixed investment, and in exports.

    Current-dollar GDP increased 5.5 percent, or $259.0 billion, in the third quarter to a level of $19,509.0 billion. In the second quarter, current-dollar GDP increased 4.1 percent, or $192.3 billion.

    The price index for gross domestic purchases increased 1.8 percent in the third quarter, compared with an increase of 0.9 percent in the second quarter. The PCE price index increased 1.5 percent, compared with an increase of 0.3 percent. Excluding food and energy prices, the PCE price index increased 1.4 percent, compared with an increase of 0.9 percent.

    Corporate Profits Q3/2017

    Profits from current production (corporate profits with inventory valuation adjustment and capital consumption adjustment) increased $91.6 billion in the third quarter, compared with an increase of $14.4 billion in the second quarter.

    Profits of domestic financial corporations increased $60.6 billion in the third quarter, in contrast to a decrease of $33.8 billion in the second quarter. Profits of domestic nonfinancial corporations increased $12.5 billion, compared with an increase of $59.1 billion. Rest-of-the-world profits increased $18.6 billion, in contrast to a decrease of $10.8 billion. In the third quarter, receipts increased $23.1 billion, and payments increased $4.6 billion.

    US Bureau of Economic Analysis, “Gross Domestic Product, 3rd quarter 2017 (second estimate): Corporate Profits, 3rd quarter 2017 (preliminary estimate)“, 29 Nov 2017 (08:30) More

    flag_usa US: Pending Home Sales, Oct 2017

    Press Release Extract [ser_us_pendinghomesales]

    Pending home sales rebounded strongly in October following three straight months of diminishing activity, but still continued their recent slide of falling behind year ago levels, according to the National Association of Realtors®. All major regions except for the West saw an increase in contract signings last month.

    The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 3.5 percent to 109.3 in October from a downwardly revised 105.6 in September. The index is now at its highest reading since June (110.0), but is still 0.6 percent below a year ago.

    Lawrence Yun, NAR chief economist, says pending sales in October were primarily driven higher by a big jump in the South, which saw a nice bounce back after hurricane-related disruptions in September. “Last month’s solid increase in contract signings were still not enough to keep activity from declining on an annual basis for the sixth time in seven months,” he said. “Home shoppers had better luck finding a home to buy in October, but slim pickings and consistently fast price gains continue to frustrate and prevent too many would-be buyers from reaching the market.”

    According to Yun, the supply and affordability headwinds seen most of the year have not abated this fall. Although homebuilders are doing their best to ramp up production of single-family homes amidst ongoing labor and cost challenges, overall activity still drastically lags demand. Further exacerbating the inventory scarcity is the fact that homeowners are staying in their homes longer. NAR’s 2017 Profile of Home Buyers and Sellers – released last month – revealed that homeowners typically stayed in their home for 10 years before selling (an all-time survey high). Prior to 2009, sellers consistently lived in their home for a median of six years before selling.

    “Existing inventory has decreased every month on an annual basis for 29 consecutive months, and the number of homes for sale at the end of October was the lowest for the month since 19991,” said Yun. “Until new home construction climbs even higher and more investors and homeowners put their home on the market, sales will continue to severely trail underlying demand.”

    With two months of data remaining for the year, Yun forecasts for existing-home sales to finish at around 5.52 million, which is an increase of 1.3 percent from 2016 (5.45 million). The national median existing-home price this year is expected to increase around 6 percent. In 2016, existing sales increased 3.8 percent and prices rose 5.1 percent.

    The PHSI in the Northeast inched forward 0.5 percent to 95.0 in October, but is still 1.9 percent below a year ago. In the Midwest the index increased 2.8 percent to 105.8 in October, but remains 0.9 percent lower than October 2016.

    Pending home sales in the South jumped 7.4 percent to an index of 123.6 in October and are now 2.0 percent higher than last October. The index in the West decreased 0.7 percent in October to 101.6, and is now 4.4 percent below a year ago.

    National Association of Realtors, “Pending Home Sales Strengthen 3.5 Percent in October“, 29 Nov 2017 (10:00) More

    flag_japan Japan update

    Currency: USD/JPY

    JPY movements
    ^ JPY movements against the USD over the past month (mouseover for inverse) Chart: xe.com

    Stockmarket: Nikkei 225

    N225 movements
    ^ Nikkei N225 movements over the past week Chart: Google Finance

    flag_china China update

    Currency: USD/CNY

    CNY movements
    ^ CNY movements against the USD over the past month (mouseover for inverse) Chart: xe.com

    Stockmarket: CSI300

    CSI300 movements
    ^ Shanghai CSI300 movements over the past week Chart: Google Finance

    SNAP vs TWTR

    NYSE:SNAP

    SEC Form S-1 (Registration Document): Snap, Inc. Form S1

    First Day’s Trading on NYSE

    Gene Munster (Loup Ventures): “Snapchat hasn’t yet figured out that monetisation is really core to them and I think that is something that needs to be addressed.”
    Lloyd says: “Sounds like Twitter (NYSE: TWTR). No credible monetisation. NYSE: SNAP posted a loss of USD 515 million last year. And who likes tech stocks listed on NYSE (instead of NASDAQ)?”

    Financials

    snap_financials_form_s1

    Assessment

    NYSE: SNAP - Verdict (30 Jun 2017) Undecided ... keep watching

    NYSE: SNAP – Verdict (30 Jun 2017) – Not a Buy at this stage: Monitor

    Monitoring

    Historical Prices: NASDAQ
    2 Mar 2017: IPO: $17.00
    2 Mar 2017: Day 1 close: $24.48 (Market cap: $33 billion)
    3 Mar 2017: Day 2 close: $27.09 (Intraday high: $29.44)
    31 Mar 2017: $22.53
    28 Apr 2017: $22.55
    31 May 2017: $21.21
    30 Jun 2017: $17.77
    18 Jul 2017: $14.73 (Market cap: $17.37 billion)

    Opinion 16 Jun 2017: Jim Cramer says that he has a BUY limit order for NYSE:SNAP at $12.
    Opinion 13 Jul 2017: Morgan Stanley (one of the underwriters for SNAP’s IPO) drops its $28 price target set in Mar 2017 to $16 (below the $17 IPO price). Bloomberg

    warning_clear Price Warning: Lockup Ends 31 Jul 2017

    On 31 Jul 2017 and 31 Aug 2017 SNAP’s post IPO lockups expire on 1.2 billion SNAP shares, which JPMorgan recently estimated accounts for 84% of the shares outstanding. Investopedia
    This is likely to be a major SELL event, and a potential buy opportunity.

    SNAP vs Twitter since SNAP's IPO

    SNAP vs Twitter since SNAP’s IPO