Transitioning
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DOW + 218 = 18,807
SPX + 4 = 2167
NAS – 42 – 5208
10 Y + .04 = 2.12%
OIL – .91 = 44.36
GOLD – 19.20 = 1260.00
The Dow Jones industrial average hit a new all-time intraday high and a record high close. The Dow took out the old high from mid-August. Nearly every major tech stock was down. Apple, Google, Microsoft, and Amazon are all in the red, despite the broader market being up. Banks moved higher.
The Trump Transition website posted a statement: “The Financial Services Policy Implementation team will be working to dismantle the Dodd-Frank Act and replace it with new policies to encourage economic growth and job creation.”
Treasury yields haven’t been this high since the beginning of the year. Aggressive selling on yesterday ran Treasury yields up by more than 20 basis points at the long end of the curve and to their highest levels since January. That selling has carried over into today’s session with the 10-year yield up another 4 basis points at 2.12%. If Trump delivers on his pledge to give the U.S. economy a growth and inflationary shot in the arm from a multi-trillion-dollar package of tax cuts and infrastructure spending, the impact will likely be felt far beyond American borders. Bonds hate inflation.
The rise in the 30-year yield has been remarkable. It is up more than 30 basis points this week, on course for its biggest weekly rise since 2009 and among the biggest of the last three decades. This has led to a so-called “steepening” of the yield curve, where the gap between short and longer-dated yields widens. These shifts across global interest rate markets in response to the changing inflation outlook are being mirrored in commodity and equity markets too. Copper surged more than 5 percent to a 16-month high. Europe’s constructions and materials index hit a nine-year high.
St. Louis Federal Reserve President James Bullard today repeated his call that a single interest rate increase would be adequate for the foreseeable future. Bullard did not mention the U.S. election results or any possible effect on volatility or the economic outlook. In the current environment of low growth and low inflation, Bullard now feels a single rate increase would be appropriate, and the Fed could then remain on hold until growth, inflation, productivity and other aspects of the economy switch to a new “regime.”
The dollar index, which measures the U.S. currency’s performance against a basket of currencies, rose 0.3 percent to 98.8. The Mexican peso plunged 13% to the lowest levels in 2 decades, then pared losses, but officials held back from acting to support the currency. While Mexico’s Foreign Minister reiterated that Mexico will not pay for Trump’s proposed border wall, President Enrique Pena Nieto did call to congratulate him and agreed to meet before he takes office.
The election results sparked protests in several cities; marchers took to the streets in Philadelphia, New York, Chicago, Seattle, Oakland, and even Tempe; a dozen cities in total. More protests are planned.
Nevertheless, the transition has begun. Donald Trump met Barack Obama at the White House this morning to discuss the transition of power. The two men were scheduled to talk for about 10 minutes but ended up speaking, cordially, with each other for an hour and a half. Both were vague on details about what was discussed.
After the meeting, Obama said, “My number one priority in the coming two months is trying to facilitate a transition that ensures our president-elect is successful.” At the end of the meeting, Trump called Obama a “very good man.” Also, as part of the transition, Pence met with Biden; Melania met with Michelle. Trump also met with Vice President-elect Mike Pence and Speaker Paul Ryan to discuss how they can hit the ground running in a Trump administration. Kris Kobach, the Kansas secretary of state and an ardent opponent of immigration, has been added to Mr. Trump’s transition team.
Republican congressional leaders have confirmed what might seem obvious – Obama’s far-reaching trade agreement with 11 Pacific Rim nations is dead. The Senate majority leader, Senator Mitch McConnell of Kentucky, said flat-out “No” when reporters asked if the pending Trans-Pacific Partnership, the largest regional trade deal in history, would be considered in the lame duck Congress that convenes next week.
Speaking at a conference in New York, Mark Bertolini, Aetna’s chairman and chief executive said, “We started with a fresh piece of paper yesterday — we had no idea how to approach it.” When Aetna ran through post-election expectations, the idea that Trump would win the presidency and that Republicans would control both chambers of Congress seemed so implausible that it was not even in play. Bertolini says the health care firm is now working on the assumption that Obamacare will be repealed.
Still, he thinks a wipeout of the Affordable Care Act is unlikely. Twenty million people gained health care coverage through the law, and Bertolini said, “You can’t put them out on the street without insurance.” You may remember that this is the same Aetna insurance company that earlier this year sharply reduced its participation in the public marketplaces, pulling out of two-thirds of the counties in which it sold individual insurance. If only there was some way to make the system less reliant on corporations’ natural altruistic tendencies.
Obamacare enrollment had its best day yet on Wednesday with more than 100,000 enrollments. More than half a million people applied for coverage over the first four days, but not all of them followed through and selected a plan. Open enrollment started Nov. 1 and lasts until the end of January, or at least until January 20.
Pfizer is evaluating a potential sale or spinoff of its consumer health division that could value the unit at as much as $14 billion. Reuters reports an exit from the business, which includes Chapstick and Advil, would be one of the company’s biggest corporate moves since abandoning a $160 billion deal to buy Allergan earlier this year.
More spinoffs? Siemens is planning a public listing of its $15 billion healthcare business to refocus on its core strengths of electrification, automation and digitization. The German group announced the move as it reported fourth-quarter profits that comfortably beat expectations, but issued a cautious outlook for the current fiscal year as orders dropped amid geopolitical uncertainty.
ConocoPhillips, the largest U.S. independent oil producer, will sell up to $8 billion in natural gas assets and trim its capital budget by 4 percent next year. Conoco carries a $28.7 billion debt load.
Photoshop software maker Adobe Systems said it would buy advertising company TubeMogul for about $540 million, net of debt and cash, giving it a bigger presence in the rapidly growing online video market. Adobe’s $14 per share cash offer represents an 82.5 percent premium to TubeMogul’s Wednesday close.
Goldman Sachs is considering shifting some of its assets and operations from London to Frankfurt, according to Reuters, as it tries to secure access to the EU market when Britain leaves the bloc. Coming under the European Central Bank’s jurisdiction should allow it to continue selling its services to clients across the Eurozone and wider EU post-Brexit.
Navinder Sarao, the British financial trader accused of causing the 2010 “Flash Crash,” has become the second person convicted of criminally spoofing after pleading guilty in a Chicago court. Spoofing is rapidly placing orders with the intent to cancel them before they trade to trick other investors by creating the illusion of demand.
Shake Shack beats. The burger chain earned $0.15 a share on revenue of $74 million and said it expected full-year same-shack sales growth of 2% to 3%.
Shares of Taser up 13% on shockingly good earnings. Taser reported record revenue — up 43 percent from last year. Scottsdale based Taser reported net income of $3.8 million, or 7 cents per share, up from $1.5 million or 3 cents in the year ago period.
Mylan whiffs. The maker of the EpiPen announced a net loss of $119 million for the third quarter because of a proposed $465 million settlement with the US Department of Justice and other government agencies.
Some Yahoo employees were aware that a state-sponsored hacker had breached its network shortly after a massive hack in 2014, casting a larger shadow over Verizon’s $4.8 billion deal to acquire the company. Yahoo said in September that an investigation had uncovered the theft of personal information associated with at least a half billion accounts, the largest data breach in history.
The oil market risks running another surplus in 2017 without an output cut from OPEC, according to the IEA’s monthly oil market report, which warned of “another year of relentless global supply growth like that seen in 2016.” Global supply rose by 800,000 barrels per day in October, led by record OPEC production and rising output from non-OPEC members like Russia, Brazil, Canada and Kazakhstan. The IEA also raised its forecast for non-OPEC supply by 111,000 barrels a day, with the increase led by Russian production.
The number of Americans filing for unemployment benefits fell more than expected last week. Initial claims for state unemployment benefits dropped 11,000 to a seasonally adjusted 254,000 for the week ended Nov. 5. It was the 88th consecutive week that claims remained below 300,000, a threshold associated with a healthy labor market. That is the longest stretch since 1970.
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