In Portfolioticker today
Today at the stock market
“The S&P 500 fell a tiny bit on Wednesday, with Microsoft and other technology stocks making modest gains but not quite offsetting losses in energy shares after oil prices dropped more than 2%.
Fueled by strong earnings growth and optimism that President Donald Trump will cut corporate taxes, the S&P 500 has surged 17% in 2017. The index is trading at 18.4 times expected earnings, the multiple’s highest level since 2002, according to Thomson Reuters Datastream. But many investors expect steep corporate tax cuts to boost earnings, thereby making stocks relatively less expensive.
It was the index’s fourth straight negative session, the first such streak since March, underscoring investor uncertainty as U.S. Senate Republicans attempt to reconcile their version of a tax-cut bill with that of the House of Representatives.
“It’s hard to speculate on what the final bill is going to say,” said Sean O‘Hara, director at Pacer Financial Inc.
The bill passed on Saturday by Republican senators included a last-minute change to retain the corporate alternative minimum tax, or AMT, which had initially been removed.
Including the AMT could negate parts of the bill seen as beneficial to tech companies and other corporations.
Shares of Microsoft, Facebook and Google-parent Alphabet rose more than 1% as the technology sector recovered from a recent selloff.
Oil prices hit two-year lows after a surprise rise in U.S. inventories of refined products suggested demand may be flagging.
Schlumberger, Exxon and Chevron fell between 0.6% and 2.17%.
“Energy has had a mini-surge over the past month or so, and so I think this inventory build is being viewed as an opportunity to take some profits,” said Mike Baele, managing director at U.S. Bank Private Client Wealth Management in Portland, Oregon.
During Wednesday’s session, Home Depot slipped 1.12% after the home improvement retailer announced a $15 billion share repurchase plan.
H&R Block surged 10.27% after the tax preparation service provider reported better-than-expected revenue.” Reuters
^ Market indices today (mouseover for 12 month view) Chart: Google Finance
|Index||Ticker||Today||Change||31 Dec 16||YTD|
|S&P 500||SPX (INX)||2,629.27||-0.02%||2,238.83||+17.43%|
^ USD and AUD denominated indices over the past 52 weeks Chart: Bunting
|Index||Currency||Today||Change||31 Dec 16||YTD|
Portfolio stock prices
|Stock||Ticker||Today||Change||31 Dec 16||YTD|
^ Bloomberg Dollar Spot Index (DXY) movements today (mouseover for 12 month view) Chart: Bloomberg
“The Bloomberg Dollar Spot Index (DXY) rose 0.3%.
The EUR fell 0.2% to USD 1.1799.
Britain’s GBP fell 0.4% to USD 1.3389.
Japan’s JPY rose 0.4% to 112.19/USD.” Bloomberg
^ AUD movements against the USD today (mouseover for 12 month view) Chart: xe.com
Oil and Gas Futures
Prices are as at 15:46 ET
- NYMEX West Texas Intermediate (WTI): $55.93/barrel -2.93% Chart
- ICE (London) Brent North Sea Crude: $61.20/barrel -2.64% Chart
- NYMEX Natural gas futures: $2.91/MMBTU -0.24% Chart
AU: GDP. Q3/2017
Press Release Extract [ser_au_gdp]
Economy grows 0.6 per cent in September quarter
The Australian economy grew 0.6 per cent in seasonally adjusted chain volume terms in the September quarter 2017, according to figures released by the Australian Bureau of Statistics (ABS) today.
Chief Economist for the ABS, Bruce Hockman, said: “Increased activity in both private business investment and public infrastructure underpinned broad growth across the industries.”
Compensation of employees (COE) increased in all states and territories, resulting in a national quarterly growth of 1.2 per cent and growth of 3.0 per cent since the September quarter 2016. Despite higher household income, household consumption was weak at 0.1 per cent, in line with the retail trade estimates. This weak household spending combined with growth in household income resulted in an increase in the household saving ratio for the first time in five quarters.
Mr Hockman added: “The increase in wages was consistent with the stronger employment and hours worked data that has been reported in the labour force survey.”
Net exports contribution to growth was flat this quarter despite higher Mining production and exports of coal and iron ore. The terms of trade fell 0.4 per cent on the back of lower export prices.
17 out of 20 industries recorded positive growth this quarter driven by Professional, Scientific and Technical Services, Health Care and Social Assistance and Manufacturing.”
Press Comment: AFR [Extract]
“Consumers have wound back their spending to GFC levels and the economy grew at a weaker-than-expected pace in Q3/2017. In short, consumer spending, which just posted its weakest quarter since Q3/2008, is still getting squeezed by the dangerous combination of no wage growth and rising costs.
It means the AUD will remain under the pump for most of 2018. While other major central banks worldwide are in a position to hike interest rates, the RBA can only talk about doing it some time down the track. For sure, local (FX) traders have got a rise in the official cash rate to 1.75% priced in, so the next move looks to be up, but it’s not slated to happen until the second quarter of 2019. In contrast the Federal Reserve is slated to hike next week with another 3 moves tipped for 2018. It’s that difference in monetary policy that will give (FX) traders a reason to sell the AUD.
If there is a positive from the latest set of national accounts, it is the robust level of business investment that is doing all the heavy lifting right now. Companies, across all industries, are spending. Indeed, the 4.5% quarter-on-quarter rise in private investment was the largest in 4 years and for the first time since 2013, business investment growth will be positive in 2017.
One reason companies are so confident is their wages bill. It is still very low despite some reports that firms are finding it tougher to find workers with the right set of skills.
In the end, GDP rose 0.6% in Q3/2017 just below expectations of a 0.7% rise. The year-on-year rate came in at 2.8%, much higher than the previous annual rate of 1.8%, which was very close to the slowest rate since Sep 2009, but well below the 3% that most economists had expected.
Economic fundamentals are not exactly sturdy. The annual growth rate is the best since June 2016 and it might just match the RBA’s forecast of 2.5% by the end of 2017. But can it get to the bank’s 3% forecast in 2018? This latest set of national accounts suggests that’s a tough assignment.
During the past 3 years consumers have been happy to dip into their savings to help them deal with not getting a decent pay rise, their record-high debt levels and rising electricity prices. But it seems they’re not so happy to do that now. The savings rate has dropped from almost 8% in 2014 to just over 3% in Q3/2017. That’s a slight increase from Q2/2017, and implies consumers don’t really want to dip into their savings any more.
A drop in Melbourne and Sydney house prices is behind that change in spending habits. That means consumer spending growth is likely to remain weak in 2018. If the housing market continues to cool and wage growth stays low then getting a 3% annual growth rate is going to be very tough.”
Phillip Baker, [Extract from] “GDP September-quarter figures show consumer spending is still getting squeezed“, 6 Dec 2017 AFR
US: ADP National Employment Report. Nov 2017
Press Release Extract [ser_us_adp]
Private sector employment increased by 190,000 jobs from October to November according to the November ADP National Employment Report®
Total U.S. Nonfarm Private Employment: 190,000
By Company Size
- Small businesses: 50,000
- 1-19 employees 14,000
- 20-49 employees 36,000
- Medium businesses (50-499 employees): 99,000
- Large businesses: 41,000
- 500-999 employees 10,000
- 1,000+ employees 31,000
- Goods-producing: 36,000
- Natural resources/mining 0
- Construction -4,000
- Manufacturing 40,000
- Service-providing: 155,000
- Trade/transportation/utilities 36,000
- Information -13,000
- Financial activities 7,000
- Professional/business services 47,000
- Professional/technical services 8,000
- Management of companies/enterprises 2,000
- Administrative/support services 38,000
- Education/health services 54,000
- Health care/social assistance 31,000
- Education 23,000
- Leisure/hospitality 25,000
- Other services -2,000
“The labor market continues to grow at a solid pace,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Notably, manufacturing added the most jobs the industry has seen all year.
As the labor market continues to tighten and wages increase it will become increasingly difficult for employers to attract and retain skilled talent.”
Mark Zandi, chief economist of Moody’s Analytics, said, ‘The job market is red hot, with broad-based job gains across industries and company sizes. The only soft spots are in industries being disrupted by technology, brick-and-mortar retailing being the best example. There is a mounting threat that the job market will overheat next year.’ ”
ADP Research Institute, “ADP National Employment Report. Nov 2017“, 6 Dec 2017 More
US: Productivity and Costs Q3/2017
Press Release Extract [ser_us_productivity]
Nonfarm business sector labor productivity increased 3.0 percent during the third quarter of 2017, the U.S. Bureau of Labor Statistics reported today, as output increased 4.1 percent and hours worked increased 1.1 percent.
The productivity increase was the largest since the third quarter of 2014, when output per hour increased 4.4 percent. (All quarterly percent changes in this release are seasonally adjusted annual rates)
From the third quarter of 2016 to the third quarter of 2017, productivity increased 1.5 percent, reflecting a 3.0-percent increase in output and a 1.5-percent increase in hours worked.
Unit labor costs in the nonfarm business sector declined 0.2 percent in the third quarter of 2017, as the 3.0-percent increase in productivity was greater than a 2.7-percent increase in hourly compensation. Unit labor costs decreased 0.7 percent over the last four quarters.
Manufacturing sector labor productivity fell 4.4 percent in the third quarter of 2017, as output decreased 1.1 percent and hours worked increased 3.5 percent. This was the largest quarterly decline in manufacturing sector productivity since the fourth quarter of 2008 (-5.4 percent). Productivity decreased 4.7 percent in the durable goods manufacturing sector and 4.4 percent in the nondurable goods sector in the third quarter of 2017. Over the last four quarters, total manufacturing sector productivity increased 0.3 percent, as output increased 1.5 percent and hours worked increased 1.2 percent. Unit labor costs in manufacturing increased 4.8 percent in the third quarter of 2017 and rose 0.3 percent from the same quarter a year ago.
Preliminary third-quarter 2017 measures of productivity and costs were announced for the nonfinancial corporate sector. Productivity was unchanged in the third quarter of 2017 and increased 0.2 percent over the last four quarters. Unit labor costs increased 2.5 percent in the third quarter of 2017 and increased 0.6 percent over the last four quarters.
In the third quarter of 2017, nonfarm business labor productivity increased 3.0 percent—the same as the preliminary estimate; output and hours worked were both revised up by 0.3 percentage points. Unit labor costs were revised from a 0.5-percent increase to a 0.2-percent decline for the third quarter of 2017. In the manufacturing sector, productivity decreased 4.4 percent rather than declining 5.0 percent as previously reported, as an upward revision to output was greater than an upward revision to hours worked. Unit labor costs increased 4.8 percent, a smaller increase than the preliminary estimate.”
Bureau of Labor Statistics, “Productivity and Costs Q3/2017 Revised“, 6 Dec 2017 (08:30) More
^ JPY movements against the USD over the past month (mouseover for inverse) Chart: xe.com
Stockmarket: Nikkei 225
^ Nikkei N225 movements over the past week Chart: Google Finance
^ CNY movements against the USD over the past month (mouseover for inverse) Chart: xe.com
^ Shanghai CSI300 movements over the past week Chart: Google Finance