DOW – 35 = 18,867
SPX – 5 = 2181
NAS – 12 = 5321
10 Y + .06 = 2.33%
OIL + .27 = 46.25
GOLD – 9.60 = 1,207
The dollar climbed to its highest level in almost 14 years. A rising dollar is a problem for some emerging economies that could see potentially destabilizing capital outflows. The stronger dollar could also create challenges for US companies exporting overseas, everything from technology to commodities.
The dollar index has been trading above 101.4. That has led to a repricing of assets in bond markets. The 10-Year Treasury yield is up almost 50 basis points in the past 2 weeks, the biggest rise in 13 years.
Global bond indices posted their biggest two-week loss in 26 years. The selloff has gone fast enough that it’ll probably pause before yields press higher in 2017. Money markets are starting to price in one or more rate hikes next year.
Yesterday, Federal Reserve chair Janet Yellen said we could see rate hikes “relatively soon.” This morning, St. Louis Federal Reserve President Bullard said he is “leaning towards” supporting a rate increase at next month’s FOMC meeting and the debate is now shifting toward the Fed’s rate path in 2017 and how Trump’s policies on taxes, infrastructure, spending and regulation will affect growth, productivity and ultimately Fed policy.
Today we get more Fedspeak, with speeches from Esther George, William Dudley, Robert Kaplan, Charles Evans and Jerome Powell for a total of 20 speeches from Fed policymakers this week.
Mario Draghi has sent a strong signal that the ECB will extend its €1.7-trillion-euro bond purchase program next month, warning that the Eurozone’s weak economy remains clouded by risks and heavily reliant on the central bank’s stimulus. Draghi said, “We cannot yet drop our guard. The ECB will continue to act, as warranted, by using all the instruments available” until inflation picks up sustainably.
Members of the Organization of the Petroleum Exporting Countries, which controls over a third of the world’s oil, are scheduled to meet Nov. 30 to try to agree on output quotas, although it is likely to be a challenging task, with some requesting exemptions. Preliminary talks are underway in Doha this week.
Don’t expect a quick outcome. The impact of any agreement between OPEC members to lower production could be offset by surging output from non-OPEC producers, such as Russia, where production hit a post-Soviet high of 11.2 million barrels a day in October.
The Obama administration has banned offshore drilling in the Arctic. The move by the Interior Department, part of a new five-year plan for energy development in federal waters, would put a temporary end to exploration off the Alaskan coast. It also dropped plans to allow companies to drill for oil and natural gas in the Atlantic Ocean off four southeastern states.
The areas off Alaska currently are considered by big oil companies to be too expensive to explore given low crude prices, the steep expenses of drilling in icy waters and the costly failure by Royal Dutch Shell (LON:RDSa) to discover oil in 2015 after years of preparation. Shell spent more than $7 billion, and in the end the hole it drilled was virtually dry.
Even if the economics of Arctic drilling improve and a Trump administration wants to reopen the area to exploration, both oil company officials and environmental groups say, Trump would be unable to toss out the five-year plan immediately. To undo the Obama administration’s ban, a new administration would have to prepare a supplemental report, which could take two years, followed by lease sales.
Residents of Pawnee Oklahoma have filed a class action lawsuit against 27 energy companies, claiming “reckless disregard for public or private safety,” by operating injection wells, injecting wastewater into the ground to aid in oil and gas extraction, which in turn causes earthquakes. Pawnee deals with earthquakes daily.
Oklahoma has become the most earthquake-prone state in the nation. The US Geological Survey concludes oil and gas production has produced earthquakes. The lawsuit seeks an unspecified amount for property damage and reduced value, plus emotional distress.
Meanwhile, leaders of Pacific Rim nations are gathering in Peru to salvage hopes for regional trade as prospects dwindle for the U.S-led Trans-Pacific Partnership. Discussions at the Asia-Pacific Economic Cooperation summit will be dominated by fears of rising anti-globalization sentiment in the West and China’s burgeoning role in global trade. Canadian Prime Minister Justin Trudeau and Mexican President Enrique Peña Nieto will meet on the sidelines to discuss the elephant in the room.
President-elect Trump’s administration is starting to take shape. Senator Jeff Sessions was selected for attorney general and Representative Mike Pompeo as CIA director. Retired Lieutenant General Mike Flynn was chosen as the president-elect’s national security adviser, a position that does not require U.S. Senate confirmation.
Mitt Romney is scheduled to meet with the President-elect this weekend to discuss the Secretary of State position, while Newt Gingrich confirmed he won’t serve in any official role in the Trump administration.
President-elect Trump will settle litigation surrounding the now-defunct Trump University by paying $25 million to victims, according to the New York Attorney General’s office Friday. In a statement, New York Attorney General Eric Schneiderman said “every victim will receive restitution and that Donald Trump will pay up to $1 million in penalties to the State of New York for violating state education laws.” The deal settles cases in both California and New York.
The U.S. House of Representatives has passed a bill that would block the sale of commercial aircraft to Iran, a bid to stop sales by Boeing (NYSE:BA) and Airbus Group (PA:AIR). The measure would prevent the Treasury Department from authorizing U.S. bank transactions for sales of aircraft to the Islamic Republic and would bar the U.S. Export-Import Bank from financing any exports to that country.
Volkswagen (DE:VOWG_p) is axing 30,000 jobs. The layoffs come as part of a restructuring program that aims to save the German automaker $3.9 billion annually over the next five years. VW and its labor unions have agreed to a turnaround plan that will fund a post-Dieselgate shift to electric and self-driving cars.
Volkswagen plans to build its own electric motors and batteries rather than to buy them from suppliers. The job cuts will be partly offset by 9,000 new jobs related to electric car production and other new technologies.
Tesla’s merger with SolarCity Corporation (NASDAQ:SCTY) has been given the green light. More than 85% of Tesla (NASDAQ:TSLA) shareholders voted in favor of the $2.6 billion deal. Tesla CEO Elon Musk owns about 20% of both companies and is chairman of SolarCity; he did not get a vote. Tesla will be absorbing SolarCity’s roughly $3 billion in debt as part of the merger.
Following the shareholder vote, Elon Musk dropped one of his famous bombshells, this time about the company’s new solar roof product. Musk said the company’s new roof would cost less than traditional rooftop shingles to make and install – that the roof generates electricity – that’s just a bonus.
Actually, Tesla’s solar shingles are expected to still be considered a premium product at roll-out; so the standard asphalt shingles are still cheaper initially. But solar shingles are lighter, resulting in lower shipping costs and no concerns about breakage that you would find with clay tiles, and they generate electricity. So, bonus.
DraftKings and FanDuel, the two market-share leaders in the daily fantasy sports industry, have announced they will seek to merge into one company. The two companies, which offer fantasy sports contests with daily (or weekly) drafts as a pick-up-and-play alternative to traditional season-long fantasy football, will continue to operate separately, and keep their names, until the merger is approved by regulators. That will take many months—perhaps even a full year. That means for now, nothing will change for customers. Terms of the deal were not disclosed.
Salesforce.com (NYSE:CRM) beats. The company beat on both the top and bottom lines, earning $0.24 a share on revenue of $2.14 billion.
In other earnings news: Marvell Technology Group reported Q3 adjusted EPS of 20 cents, well above consensus of 12 cents, and said it sees Q4 adjusted EPS between 17 cents-21 cents, higher than consensus of 13 cents.
Gap Inc (NYSE:GPS) reported Q3 comparable sales were down -3%.
Ross Stores (NASDAQ:ROST) reported Q3 EPS of 62 cents, higher than consensus of 56 cents and raised guidance on full-year EPS.
Applied Materials (NASDAQ:AMAT) said Q4 new orders fell -16% q/q and backlog fell -7% q/q.
Nike (NYSE:NKE) hikes its dividend. The athletic-apparel giant raised its quarterly cash dividend by 13% to $0.18 a share, the 15th consecutive year Nike increased its dividend.
Here’s one for the sneakerheads. Adidas (DE:ADSGN) has unveiled its Futurecraft Biofabric. A pair of sneakers made from synthetic spider silk. Natural spider silk itself is light, elastic, and incredibly strong.
AMSilk, a German manufacturer of a synthetic silk called Biosteel, estimates a web made of “pencil-thick spider silk fiber can catch a fully loaded Jumbo Jet Boeing 747 with a weight of 380 tons.” The synthetic silk is made of natural ingredients and is biodegradable; the first run is 7,000 pairs of Spidey shoes.
The glittery gown that Marilyn Monroe wore while singing “Happy Birthday” for President John F. Kennedy was sold at auction on Thursday for $4.8 million. Julien’s Auctions presented it in Los Angeles on a custom-made mannequin designed to match Monroe’s exact body measurements.
Ripley’s, Believe it or Not snagged the dress. The gown, encrusted with 2,500 hand-stitched crystals, perfectly matched Monroe’s skin tone, which made the actress appear nearly nude as she sang, “Happy Birthday, Mr. President,” in Madison Square Garden for Kennedy’s early 45th birthday celebration in 1962.
Three weeks after the Nobel Prize for Literature was awarded to Bob Dylan, the notoriously media-shy singer-songwriter finally tells the Nobel committee that "pre-existing commitments" prevent him from going to Stockholm for the awards ceremony.