STOCKS STALL AS BONDS RECOVER SLIGHTLY
- Asset positions in aftermath of Trump election victory come under pressure for first time.
- In recent sessions, investors have moved out of long-dated U.S. government bonds and bond-like stocks such as utilities, and strengthened positions in the dollar, expecting that President-elect Donald Trump will likely increase fiscal spending and lower corporate taxes, ultimately boosting growth and inflation.
- The yield on the 10-year U.S. Treasury note was recently at 2.230% after its largest five-day gain since 2009.
- The yield on 10-year Japanese government bonds rose above zero for the first time since September.
- Oil prices jumped more than 4%, bouncing back from multi-month lows on expectations that OPEC will agree later this month to cut production to reduce a supply glut.
- U.S. retail sales rose more than expected in October as households bought motor vehicles and a range of other goods.
- The central bank is widely expected to raise interest rates at its next meeting in December.
- Traders have priced in an 86% chance.
- Home Depot fell 2% after the No. 1 U.S. home improvement chain reported third-quarter results.
- Airline stocks were up, a day after Warren Buffett’s Berkshire Hathaway said it had bought shares in the airlines.
US FINANCIAL MARKET
- The yield on the two–year note is trading above 1%, rising to a fresh 10-month high.
- Robust consumer spending bolsters Fed’s case to raise rates in December.
- The yield on the benchmark 10-year Treasury note was 2.235%
- The 30-year bond was the best performer Tuesday, with its yield falling to 2.950% from 2.983% Monday.
- The dollar is now the best barometer of global investor risk appetite and financial market leverage, making its current surge potentially destabilizing for the global financial system.
- With the dollar, U.S. bond yields and expected path of U.S. interest rates all moving sharply higher since last week’s U.S. presidential election, the threat to global financial stability is rising too.
- The dollar on Monday hit its highest level of the year against the euro.
- Warren Buffett’s Berkshire said it has bought shares in the four biggest U.S. airlines: American Airlines, Delta Air Lines, Southwest Airlines and United Continental.
- The investments mark an unexpected reversal for Berkshire, which has avoided the airline sector for nearly two decades.
- According to a regulatory filing, Berkshire as of Sept. 30 owned 21.8 million American shares worth $797 million, 6.3 million Delta shares worth $249.3 million, and 4.5 million United shares worth $237.8 million.
- Home Depot posted continued sales growth in its third quarter, another indicator that the housing market continues to grow.
- Sales at Home Depot stores open at least a year grew 5.5%. Analysts were expecting 4.5% growth.
- The company reported a profit of $2 billion, up from $1.73 billion a year prior.
- Revenue climbed 6.1% to $23.15 billion.
- At the quarter’s end, Home Depot operated 2,276 retail stores in all 50 states, Canada and Mexico.
- Sales at established stores increased 5%, above expectations for growth of 2% to 3%, mostly driven by customer traffic.
- Over all, TJX reported a profit of $549.8 million, down from $587.3 million a year earlier.
- Revenue increased 6.9% to $8.29 billion. Analysts expected revenue of $8.22 billion.
- Teva reported acquisition-driven revenue growth in its latest quarter, but sales fell across much of its specialty-drug business.
- Teva cut its revenue guidance for the year to between $21.6 billion and $21.9 billion, from between $22 billion and $22.5 billion previously.
- During the quarter, the Israeli pharmaceutical company known for its generic-drugs business closed its $40.5 billion deal for Allergan’s generics business.
- Revenue in its generic medicine segment grew 32% to $2.9 billion, largely due to the Allergan deal.
- In its specialty segment, revenue fell 6% to $2.05 billion due to lower sales of its multiple sclerosis drug copaxone and sleepiness treatment nuvigil.
- For the quarter, Teva reported a profit of $412 million, up from $103 million the same quarter last year.
- Revenue grew 15% to $5.56 billion.
- United Continental said Tuesday that it would postpone receiving dozens of new Boeing jets to trim spending.
- The third-largest U.S. airline will defer 61 planes from a 65-jet order for 737-700s and convert them into the new Max model with yet-to-be-determined arrival dates.
- Boeing will switch the remaining four to the larger 737-800 model for delivery next year.
- U.S. cigarette maker Reynolds American is seeking a higher price from British American Tobacco after rejecting its $47 billion takeover offer.
- Last month, British American Tobacco, which already owns 42 percent of Reynolds American, offered to buy the remaining shares of the maker of Camel and Newport cigarettes to create the world’s biggest listed tobacco company.
US ECONOMY & POLITICS
- Retail sales in October logged their best growth rate in nearly two years, after dropping during the summer, a good sign as the holiday-spending season gets going.
- Retail sales in October rose 0.8% from September.
- The two-month spurt pushed the year-over-year growth rate to 4.3% – the highest in nearly two years.
- Import prices have been held down by low commodity prices and a strong dollar.
- Import-price index rose 0.5% in October from a month earlier.
- But a small rebound in oil prices is checking that trend.
- The price of imported petroleum rose 7.5% in October from a month earlier.
- It was up 4.5% from a year earlier, the first year-over-year increase since July 2014.
- Refiners around the country have been hurt by the loss of access to exceptionally cheap crude, which they churn into fuels that could be sold at prices linked to the global oil benchmark..
- But East Coast plants—squeezed by competition from abroad and from massive, efficient plants on the Gulf Coast—have always had thinner margins and have been hit hardest.
- The boost to the East Coast refinery business rescued plants in a part of the country where refineries had been shutting down because they were losing money.
EUROPE & WORLD
- A global selloff in government bonds following Donald Trump’s election has boosted yields.
- The yield on Japan’s 10-year government bond briefly rose above zero on Tuesday for the first time in nearly eight weeks.
- U.K. budget signals that earnings could decline again this year.
- England-based carrier’s profit nose-dived to £427 million pounds ($533 million) on a 0.4% fall in revenue to £4.7 billion as the airline carried 73 million passengers.
TODAY in HISTORY
The Continental Congress approved the Articles of Confederation, the precursor to the U.S. Constitution (1777)
Explorer Zebulon Pike spotted the mountaintop now known as Pikes Peak (1806)
The cornerstone of the Jefferson Memorial was laid by President Roosevelt (1939)
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