Archive for November, 2016

• Today’s Fed Statement
  Eddy Elfenbein, November 2nd, 2016 at 2:03 pm

  Here’s today’s Fed statement. They somehow went from three dissents to two. Eric Rosengren changed camps, possibly due to the closeness of the election.

  I still think it’s clear the Fed is going to hike next month.

  Information received since the Federal Open Market Committee met in September indicates that the labor market has continued to strengthen and growth of economic activity has picked up from the modest pace seen in the first half of this year. Although the unemployment rate is little changed in recent months, job gains have been solid. Household spending has been rising moderately but business fixed investment has remained soft. Inflation has increased somewhat since earlier this year but is still below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation have moved up but remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

  Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will strengthen somewhat further. Inflation is expected to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

  Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The Committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

  In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

  The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

  Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo. Voting against the action were: Esther L. George and Loretta J. Mester, each of whom preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

• Small-Cap Stocks Slide
  Eddy Elfenbein, November 2nd, 2016 at 10:45 am

• Morning News: November 2, 2016
  Eddy Elfenbein, November 2nd, 2016 at 7:17 am

  U.S. Election Angst Spreads as Stocks Drop, Bonds Rise With Gold

  Oil Majors Join Forces in Climate Push With Renewable Energy Fund

  German Joblessness Falls to Record Low as Economy Ploughs On

  YouTube Agrees to Pay Royalties, Ending German Music Dispute

  For Helping Immigrants, Chobani’s Founder Draws Threats

  Maersk Shares Sink After Profit Hit by Weak Freight Rates, Oil Prices

  Square Celebrates Full Year On The Public Market With Earnings Beat

  China Cautions Germany Over Aixtron-Deal Halt

  Geely, Volvo Have New Luxury Car

  Alibaba-Backed Lazada Buys Singapore Online Grocer

  Gannett Abandons Effort to Buy the Newspaper Publisher Tronc

  Allergan Revenue Rises 4.4%; Company Expands Buyback

  Wells Fargo to Pay $50 Million to Settle Home Appraisal Charges

  Cullen Roche: Have We Reached Peak Robo Advisor?

  Jeff Carter: Success Begets Easier Recruitment

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• Emerging Markets and Election Risk
  Eddy Elfenbein, November 1st, 2016 at 9:05 pm

• Cerner Earns 59 Cents per Share
  Eddy Elfenbein, November 1st, 2016 at 8:18 pm

  Earnings season is coming to a close for us. After the closing bell, Cerner (CERN) reported Q3 earnings of 59 cents per share. That was one penny below Wall Street’s consensus. Previously, Cerner said it was expecting 59 to 61 cents per share.

  “While Cerner’s third quarter results were slightly below our expectations, they were still solid and included the second highest level of bookings in our history,” said Zane Burke, Cerner President. “Our competitiveness remains strong and has been bolstered by over $2 billion of investments in research and development over the past four years. We believe these investments have strengthened our clinical, revenue cycle and population health solutions and position us for strong growth going forward.”

  For Q4, Cerner expects 60 to 62 cents per share, and revenue between $1.225 billion and $1.300 billion. They also gave preliminary guidance for next year of $2.50 to $2.70 per share. Wall Street had been expecting $2.69 per share.

  The stock was down 6% after hours.

• October ISM = 51.9
  Eddy Elfenbein, November 1st, 2016 at 11:05 am

  The ISM number comes out on the first business day of each month. It usually is a pretty good read of the manufacturing sector.

  For October, the ISM was 51.9. Any number above 50 means the factory sector of the economy is growing.

  U.S. manufacturing met economist forecasts of 51.9 for the month of October, according to The Institute for Supply Management, an increase of 0.4 percentage point from the September reading.

  The report said respondents had mostly positive comments and cited a “favorable economy and steady sales, with some exceptions.”

  These numbers come as economic activity in the manufacturing sector expanded in October. The overall economy grew for the 89th consecutive month, according to the report.

  This meshes with our overall theme — the economy is growing, but quite modestly.

• Emerson Electric Raises Its Dividend
  Eddy Elfenbein, November 1st, 2016 at 10:55 am

  Emerson Electric (EMR) just announced a very small dividend increase. The payout will rise from 47.5 cents to 48 cents per share. That’s usually not a big deal, but this will be (I believe), the company’s 60th annual dividend increase in a row.

  Here’s a chart of dividend increase (from Yahoo Finance) going back to 1972:

  

  I think they announced the tiny increase just to keep the streak alive. Still, it’s an impressive achievement.

• Morning News: November 1, 2016
  Eddy Elfenbein, November 1st, 2016 at 7:07 am

  Bets Are Off for Future RBA Rate Cuts, But Keep One Eye on China

  Japanese Shares Edge Higher After BOJ Maintains Monetary Policy

  Bank of England’s Mark Carney Extends Term to Stay On Through Brexit Talks

  Is The Economy Growing Too Fast: Interest Rates And The Fed

  Miami Trade Surplus Runs Counter to Trump’s View of U.S. Failure

  BP Posts Sharp Rise in Profit as Cost Cuts Offset Weak Oil Prices

  Shell’s Earnings Beat Exxon as Oil Majors Adapt to Low Prices

  Why Electric Cars Excite the World’s Biggest Mining Company

  Pfizer Quarterly Profit Falls 38%

  Ford Reaches Tentative Deal With Union in Canada

  Viacom Names Its Second Acting C.E.O. as Tumult Continues

  Valeant Ex-CEO, Ex-CFO Are a Focus of U.S. Criminal Probe

  Victims Seek Mercy for a Wall St. Scion Who Defrauded Them

  Josh Brown: Watch What They Do, Not What They Say

  Roger Nusbaum: Scandals Still Moving Markets

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