Wed 14 Feb 2018


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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/bearWall Street surged on Wednesday as investors shrugged off stronger-than-expected inflation data and snapped up shares of Facebook, Amazon.com and Apple.

    The fourth straight day of gains in the S&P 500 saw a return to the “fear of missing out” mentality that accompanied Wall Street’s rally in recent months ahead of a slump last week into correction territory.

    Facebook jumped 3.7% while Amazon.com and Apple both rose more than 1.8% – collectively called the FAANG stocks – were major contributors to last year’s market rally, and all but Alphabet have weathered the recent selloff better than the broader market.

    “FAANG is still working. And people feel that because they held up during the downturn, you can come back to them and not get hammered if things turn down again,” said Thomas Martin, senior portfolio manager at Globalt Investments in Atlanta, Georgia. “There is still a fear of missing out.”

    Since Thursday, the S&P 500 has surged 4.56%, its strongest four-session performance since mid-2016. The index remains down about 6% from its record high on 26 Jan 2018.

    • The S&P 500 index rose 1.34% to finish at 2,698.63.
    • The Dow Jones Industrial Average rose 1.03% to finish at 24,893.49.
    • The Nasdaq Composite index 1.86 rose to 7,143.62.
    • The CBOE Volatility index (VIX) fell below 20 for the first time since 5 Feb 2018.
    • Advancing issues outnumbered declining ones on the NYSE by a 2.28-to-1 ratio; on Nasdaq, a 2.94-to-1 ratio favored advancers.
    • About 7.8 billion shares changed hands in U.S. exchanges, compared with the 8.4 billion daily average over the last 20 sessions.

    The VIX slipping below 20 is “a very good sign”, said Bucky Hellwig, senior vice president at BB&T Wealth Management. “It shows the volatility is getting priced out of the market.”

    Seven of the 11 major S&P 500 sectors rose, with financials rising 2.32% and information technology up 1.95%.

    Fossil surged 87.7% after the watchmaker’s strong holiday-quarter sales and a rush among short-sellers to cover their positions.

    Chipotle Mexican Grill jumped 15.4% after it hired Brian Niccol from Taco Bell as its next chief executive, which analysts said sparked hopes of a quicker turnaround.Reuters

    Market indices

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

    Index Ticker Today Change 31 Dec 17 YTD
    S&P 500 SPX (INX) 2,698.63 +1.34% 2,238.83 +0.93%
    DJIA INDU 24,893.49 +1.02% 19,762.6 +0.70%
    NASDAQ IXIC 7,143.62 +1.85% 5,383.12 +3.47%

    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 17 YTD
    USD-denominated Index USD 3.151 +2.04% 2.105 +2.72%
    Valuation Rate USD/AUD 0.79804 +0.89% 0.72663 +1.62%
    AUD-denominated Index AUD 3.951 +1.15% 2.895 +1.09%

    Portfolio stock prices

    :-) Amazon closed on a record high of $1,451.05 beating its 31 Jan 2018 record of $1,450.89

    Stock Ticker Today Change 31 Dec 17 YTD
    Alphabet A GOOGL $1,072.70 +1.76% $1,053.00 +1.87%
    Alphabet C GOOG $1,069.70 +1.67% $1,045.65 +2.30%
    Apple AAPL $167.37 +1.84% $169.23 -1.10%
    Amazon AMZN $1,451.05 +2.58% $1,169.54 +24.07%
    Ebay EBAY $42.44 +0.68% $37.76 +12.39%
    Facebook FB $179.52 +3.67% $176.46 +1.73%
    PayPal PYPL $77.27 +3.06% $73.61 +4.97%
    Twitter TWTR $33.75 +0.92% $24.01 +40.56%
    Visa V $120.83 +2.09% $114.02 +5.97%
    VMware VMW $124.42 +3.61% $125.32 -0.72%

    FX: USD/AUD

    USD

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

    The USD fell on Wednesday despite a report of stronger-than-expected inflation data and an increase in interest-rate expectations, raising the possibility that the USD is in a period of secular downturn.

    “We are in an environment where the dollar is weakening regardless of the move in interest rates,” said Alessio de Longis, a portfolio manager for the global multi-asset group at OppenheimerFunds in New York.

    The announcement that the U.S. core Consumer Price Index (CPI) posted its biggest gain in a year boosted expectations that price pressures may accelerate, prompting a faster pace of interest rate increases from the Federal Reserve. The possibility that the Fed would clamp down on inflation initially drove up Bloomberg’s Dollar Spot Index (DXY).

    But the DXY quickly pared those gains, falling to a session low of 88.94, even as traders added to their bets on Fed rate hikes after the inflation report. The DXY was last at 89.032.

    U.S. short-term interest-rate futures fell on Wednesday following the inflation report, adding to the conviction the Fed will raise rates twice this year, and increasing the chance of a third rate hike, based on a Reuters analysis of Fed funds futures contracts traded at CME Group.

    Analysts disagree on the reasons for the USD’s fall. De Longis argued that the USD is in a weakening cycle because of the increased supply of USD in foreign markets and foreign investors’ overweight positions in U.S. fixed income.

    John Doyle, vice president of dealing and trading at Tempus Inc in Washington, was not convinced of a secular downturn. The USD was the beneficiary of widening interest rate differentials while the Fed was the only major central bank raising rates. But “even though the U.S. Fed is outpacing other central banks, they are no longer the only guest at the policy tightening party,” he said. In that instance, the USD’s weakness on Wednesday could be because the riskoff trades that investors put on immediately after the CPI release “have come bouncing back, helped by equity resilience,” said Alan Ruskin, global head of currency strategy at Deutsche Bank in New York.

    As the USD weakened, both Britain’s GBP and the EUR recovered

    • The GBP was last at $1.40, up nearly 0.7% from Tuesday’s close.
    • The EUR was at USD 1.245, up half a percent from its last close, supported also by stronger-than-expected euro zone industrial production data for Dec 2017.
    • Japan’s JPY rose to a 15-month high against the USD at 106.70 JPY in the day. The Japanese currency was last at 107.03.Reuters

    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 15:47 ET

    • NYMEX West Texas Intermediate (WTI): $60.71/barrel +2.57% Chart
    • ICE (London) Brent North Sea Crude: $64.36/barrel +2.61% Chart
    • NYMEX Natural gas futures: $2.60/MMBTU +0.31% Chart

    flag_europe EU: Industrial Production. Dec 2017

    Press Release Extract [eu_production]

    In December 2017 compared with November 2017, seasonally adjusted industrial production rose by 0.4% in the euro area (EA19) and by 0.3% in the EU28, according to estimates from Eurostat, the statistical office of the European Union. In November 2017, industrial production rose by 1.3% in the euro area and by 1.2% in the EU28.

    In December 2017 compared with December 2016, industrial production increased by 5.2% in the euro area and by 4.8% in the EU28.

    The average industrial production for the year 2017, compared with 2016, rose by 3.0% in the euro area and by 3.3% in the EU28.

    eu_prod_20180212

    Monthly comparison by main industrial grouping and by Member State

    The increase of 0.4% in industrial production in the euro area in December 2017, compared with November 2017, is due to production of durable consumer goods rising by 2.7%, intermediate goods by 1.4%, energy by 1.3% and non-durable consumer goods by 0.7%, while production of capital goods fell by 1.1%.

    In the EU28, the increase of 0.3% is due to production of durable consumer goods rising by 2.6%, intermediate goods by 1.3% and non-durable consumer goods by 0.6%, while production of capital goods fell by 0.5% and energy by 0.3%.

    Among Member States for which data are available, the highest increases in industrial production were registered in Romania (+3.8%), Ireland (+3.0%) and Slovenia (+2.7%), and the largest decreases in Slovakia (-2.7%), Lithuania (-2.6%) and the Czech Republic (-1.5%).

    Annual comparison by main industrial grouping and by Member State

    The increase of 5.2% in industrial production in the euro area in December 2017, compared with December 2016, is due to production of capital goods rising by 7.6%, durable consumer goods by 7.4%, intermediate goods by 6.6%, non-durable consumer goods by 3.1% and energy by 0.6%.

    In the EU28, the increase of 4.8% is due to production of capital goods rising by 7.7%, durable consumer goods by 6.7%, intermediate goods by 6.0% and non-durable consumer goods by 2.5%, while production of energy fell by 0.1%.

    Among Member States for which data are available, the highest increases in industrial production were registered in Romania (+13.5%), Slovenia (+12.2%) and Sweden (+8.5%), and the largest decreases in Croatia (-2.5%), Luxembourg (-2.3%) and Denmark (-2.2%).

    Eurostat, “Dec 2017 compared with Nov 2017: Industrial production up by 0.4% in euro area, Up by 0.3% in EU28“, 14 Feb 2018 More

    flag_europe EU: Flash Estimate EU and Euro area GDP. Q4/2017

    Press Release Extract [eu_gdp]

    Seasonally adjusted GDP rose by 0.6% in both the euro area (EA19) and the EU28 during the fourth quarter of 2017, compared with the previous quarter, according to a flash estimate published by Eurostat, the statistical office of the European Union. In the third quarter of 2017, GDP grew by 0.7% in both zones.

    Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 2.7% in the euro area and by 2.6% in the EU28 in the fourth quarter of 2017, after +2.8% in both zones in the previous quarter.

    eu_gdp_20180214

    During the fourth quarter of 2017, GDP in the United States increased by 0.6% compared with the previous quarter (after +0.8% in the third quarter of 2017). Compared with the same quarter of the previous year, GDP grew by 2.5% (after +2.3% in the previous quarter).

    Over the whole year 2017, GDP grew by 2.5% in both zones.

    Eurostat, “Flash estimate for the fourth quarter of 2017: GDP up by 0.6% in both euro area and EU28 +2.7% and 2.6% respectively compared with the fourth quarter of 2016“, 14 Feb 2018 More

    flag_usa US: Real Earnings. Jan 2018

    Press Release Extract [us_realer]

    All employees

    Real average hourly earnings for all employees decreased 0.2 percent from December to January, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. This result stems from a 0.3-percent increase in average hourly earnings offset by a 0.5-percent increase in the Consumer Price Index for All Urban Consumers (CPI-U).

    Real average weekly earnings decreased 0.8 percent over the month due to the decrease in real average hourly earnings combined with a 0.6-percent decrease in the average workweek.

    us_realer1_20180214

    Real average hourly earnings increased 0.8 percent, seasonally adjusted, from January 2017 to January 2018. The increase in real average hourly earnings combined with a 0.3-percent decrease in the average workweek resulted in a 0.4-percent increase in real average weekly earnings over this period.

    Production and nonsupervisory employees

    Real average hourly earnings for production and nonsupervisory employees decreased 0.5 percent from December to January, seasonally adjusted. This result stems from a 0.1-percent increase in average hourly earnings offset by a 0.6-percent increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

    us_realer2_20180214

    Real average weekly earnings decreased 0.8 percent over the month due to the decrease in real average hourly earnings combined with a 0.3-percent decrease in average weekly hours.

    From January 2017 to January 2018, real average hourly earnings increased 0.1 percent, seasonally adjusted. The increase in real average hourly earnings combined with no change in the average workweek resulted in a 0.2-percent increase in real average weekly earnings over this period.

    Bureau of Labor Statistics, “Real Earnings. Jan 2018“, 14 Feb 2018 (08:30) More

    flag_usa US: Consumer Price Index. Jan 2018

    Press Release Extract [us_cpi]

    The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.5 percent in January on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 2.1 percent before seasonal adjustment.

    us_cpi_20180214

    The seasonally adjusted increase in the all items index was broad-based, with increases in the indexes for gasoline, shelter, apparel, medical care, and food all contributing. The energy index rose 3.0 percent in January, with the increase in the gasoline index more than offsetting declines in other energy component indexes. The food index rose 0.2 percent with the indexes for food at home and food away from home both rising.

    The index for all items less food and energy increased 0.3 percent in January. Along with shelter, apparel, and medical care, the indexes for motor vehicle insurance, personal care, and used cars and trucks also rose in January. The indexes for airline fares and new vehicles were among those that declined over the month.

    The all items index rose 2.1 percent for the 12 months ending January, the same increase as for the 12 months ending December. The index for all items less food and energy rose 1.8 percent over the past year, while the energy index increased 5.5 percent and the food index advanced 1.7 percent.

    Food

    The food index increased 0.2 percent in January. The index for food away from home increased 0.4 percent, its largest monthly increase since last January. The food at home index increased 0.1 percent. Major grocery store food group indexes were mixed, with two rising, one falling, and three unchanged. The index for fruits and vegetables rose 0.5 percent reflecting a 1.9-percent increase in the fresh fruits index and a 1.2-percent decline in the index for fresh vegetables. The index for cereals and bakery products rose in January, increasing 0.3 percent.

    The index for meats, poultry, fish, and eggs declined in January, falling 0.2 percent after rising in December. The indexes for dairy and related products, nonalcoholic beverages, and other food at home were all unchanged in January.

    Over the last 12 months, the index for food away from home increased 2.5 percent. The food at home index rose 1.0 percent, with four of the six major grocery store food groups rising over the span. The fruits and vegetables index increased the most, at 3.5 percent, while the indexes for dairy and related products and cereals and bakery products both declined over the last year.

    Energy

    The energy index rose 3.0 percent in January. The gasoline index increased 5.7 percent in January after falling in December. (Before seasonal adjustment, gasoline prices increased 3.2 percent in January.) The fuel oil index also increased in January, rising 9.5 percent. In contrast, the index for natural gas fell 2.6 percent in January and the electricity index decreased 0.2 percent.

    All the major energy component indexes increased over the past 12 months. The gasoline index rose 8.5 percent and the fuel oil index rose 22.5 percent. The electricity index rose more modestly, increasing 2.4 percent, and the index for natural gas increased slightly, rising 0.2 percent.

    All items less food and energy

    The index for all items less food and energy increased 0.3 percent in January. The shelter index increased 0.2 percent as the indexes for rent and owners’ equivalent rent both rose 0.3 percent, while the index for lodging away from home declined 2.0 percent over the month. The apparel index rose sharply in January, increasing 1.7 percent after falling in previous months. The medical care index increased as well, rising 0.4 percent. The index for hospital services increased 1.3 percent, and the physicians’ services index rose 0.3 percent; the index for prescription drugs, however, declined 0.2 percent.

    The index for motor vehicle insurance continued to rise in January, increasing 1.3 percent, its largest 1- month increase since November 2001. The personal care index rose 0.5 percent; this was its largest increase since January 2015. The used cars and trucks index also continued to rise, advancing 0.4 percent in January. The indexes for household furnishings and operations, education, and tobacco also increased in January.

    A few indexes declined in January, including airlines fares, which fell for the third consecutive month, decreasing 0.6 percent. The new vehicles index decreased 0.1 percent. The indexes for recreation, communication, and alcoholic beverages were all unchanged in January.

    The index for all items less food and energy rose 1.8 percent over the past year. The index for motor vehicle insurance rose 8.5 percent over the past 12 months, its largest 12-month increase since the period ending June 2003. The shelter index increased 3.2 percent over the last 12 months, and the medical care index rose 2.0 percent. The indexes for airline fares, new vehicles, used cars and trucks, and apparel declined over the past 12 months.

    “Not seasonally adjusted” CPI measures

    The Consumer Price Index for All Urban Consumers (CPI-U) increased 2.1 percent over the last 12 months to an index level of 247.867 (1982-84=100). For the month, the index increased 0.5 percent prior to seasonal adjustment.

    The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 2.1 percent over the last 12 months to an index level of 241.919 (1982-84=100). For the month, the index increased 0.6 percent prior to seasonal adjustment.

    The Chained Consumer Price Index for All Urban Consumers (C-CPI-U) increased 1.9 percent over the last 12 months. For the month, the index increased 0.5 percent on a not seasonally adjusted basis.

    Bureau of Labor Statistics, “Consumer Price Index. Jan 2018“, 14 Feb 2018 (08:30) More

    flag_usa US: Advance Monthly Sales for Retail and Food Services. Jan 2018

    Press Release Extract [us_cpi]

    Advance Estimates of U.S. Retail and Food Services

    Advance estimates of U.S. retail and food services sales for January 2018, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $492.0 billion, a decrease of 0.3 percent (±0.5 percent) from the previous month, but 3.6 percent (±0.7 percent) above January 2017. Total sales for the November 2017 through January 2018 period were up 4.9 percent (±0.5 percent) from the same period a year ago. The November 2017 to December 2017 percent change was revised from up 0.4 percent (±0.5 percent) to virtually unchanged (±0.3 percent).

    Retail trade sales were down 0.3 percent (±0.5 percent) from December 2017, but 3.9 percent (±0.7 percent) above last year. Nonstore Retailers were up 10.2 percent (±1.4 percent) from January 2017, while Gasoline Stations were up 9.0 percent (±1.6 percent) from last year.

    US Census Bureau, “Advance Monthly Sales for Retail and Food Services. Jan 2018“, 14 Feb 2018 (08:30) More

    flag_usa US: Manufacturing and Trade: Inventories and Sales. Dec 2017

    Press Release Extract [us_manufacturing]

    Sales

    The combined value of distributive trade sales and manufacturers’ shipments for December, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,431.3 billion, up 0.6 percent (±0.3 percent) from November 2017 and was up 6.7 percent (±0.4 percent) from December 2016.

    Inventories

    Manufacturers’ and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,902.2 billion, up 0.4 percent (±0.1 percent) from November 2017 and were up 3.2 percent (±0.3 percent) from December 2016.

    Inventories/Sales Ratio

    us_mtis_20180214

    The total business inventories/sales ratio based on seasonally adjusted data at the end of December was 1.33. The December 2016 ratio was 1.37.

    US Census Bureau, “Manufacturing and Trade: Inventories and Sales, Dec 2017“, 14 Feb 2018 (10:00)
    More

    flag_usa US: Weekly Mortgage Applications

    Mortgage applications fell from one week earlier as key interest rates hit three-year highs, the Mortgage Bankers Association reported this morning in its Weekly Mortgage Applications Survey for the week ending 9 Feb 2018.

    The Market Composite Index decreased by 4.1% on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased by 2% compared to the previous week.

    The Refinance Index decreased by 2% from the previous week. The refinance share of mortgage activity increased to 46.5% of total applications from 46.4% the previous week.

    The seasonally adjusted Purchase Index decreased by 6% from one week earlier. The unadjusted Purchase Index decreased by 3% compared to the previous week and was 4% higher than the same week one year ago.

    The FHA share of total applications decreased to 10.1% from 10.4% the week prior. The VA share of total applications remained unchanged at 10.1% from the week prior. The USDA share of total applications increased to 0.8% from 0.7% the week prior.

    “As the stock markets continued to swing, Treasury rates moved higher last week and as a result mortgage rates increased to their highest level since January 2014,” said MBA economist Joel Kan. “Both purchase and refinance activity fell over the week, decreasing to levels last seen at the beginning of this year. Refinance activity is continuing along a floor, while the drop in purchase may be related to short term stock market jitters. Purchase applications were still 4 percent higher than a year ago, and we still expect activity to pick up as we make our way into early spring.”

    The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) increased to its highest rate since Jan 2014, 4.57%, from 4.50%, with points increasing to 0.59 from 0.57 (including origination fee) for 80% loan-to-value ratio (LTV) loans. The effective rate increased from last week.

    The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $453,100) increased to its highest rate since January 2014, 4.55%, from 4.47%, with points increasing to 0.47 from 0.44 (including origination fee) for 80% LTV loans. The effective rate increased from last week.

    The average contract interest rate for 30-year fixed-rate mortgages backed by FHA increased to 4.54% from 4.47%, with points increasing to 0.73 from 0.69 (including origination fee) for 80% LTV loans. The effective rate increased from last week.

    The average contract interest rate for 15-year fixed-rate mortgages increased to its highest rate since Apr 2011, 4.00%, from 3.92%, with points increasing to 0.65 from 0.65 (including origination fee) for 80% LTV loans. The effective rate increased from last week.

    The average contract interest rate for 5/1 adjustable-rate mortgages decreased to 3.74% from 3.77%, with points decreasing to 0.37 from 0.42 (including origination fee) for 80% LTV loans. The effective rate decreased from last week. [Investopedia: A 5/1 adjustable rate mortgage has a fixed interest rate for the first 5 years, followed by an annual adjustable interest rate].

    The ARM share of activity increased to 6.3% of total applications.

    The survey covers more than 75% of all U.S. retail and consumer direct residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts.

    Mortgage Bankers Association, “Applications Down in MBA Weekly Survey“, 14 Feb 2018
    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 225 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