October NFP +261,000; Unemployment 4.1%
Posted by Eddy Elfenbein on November 3rd, 2017 at 8:37 am

The U.S. economy created 261,000 net jobs last month. Economists were expecting 313,000. The unemployment rate dropped to 4.1%. Revisions added 90,000 jobs.

The jobless rate last month edged down to 4.1%, the lowest reading since December 2000. That low rate, however, reflects that fewer Americans were working or seeking work during the month. The labor-force participation rate slipped to 62.7% from 63.1% in September. The prior month’s reading was the highest in years—and the participation rate slipped in October back to a level recorded this spring.

Average hourly earnings slipped by a penny to $26.53 in October. It was disappointing showing for wages, which had appeared to break out the prior month. From a year earlier, hourly pay rose a lackluster 2.4% in October. Many economists are waiting to see wages rise at a faster pace given the historically low unemployment rate.

A broad measure of unemployment and underemployment known as the U-6, which includes people stuck in part-time jobs and others, was 7.9% in October. That was the lowest monthly reading since 2006.The rate has been declining this year in concert with the narrower unemployment rate, known to government statisticians as the U-3.

The unemployment rate is lower now than it was during the entire 70s, 80s and 90s. The only exceptions are January 1970 and December 1999.

Morning News: November 3, 2017
Posted by Eddy Elfenbein on November 3rd, 2017 at 7:04 am

As a Debt Deadline Looms for Venezuela, Maduro Is Defiant

Trump’s Risky Ecnomic Handoff

Under Powell, Wall Street Can Expect Steady Wins on Regulation

U.S. Weighs Suit Against AT&T’s Deal for Time Warner

T-Mobile and Sprint Haven’t Given Up on Their Potential Merger—Yet

EVs From Tesla and GM May Start Losing Their Tax Credits

Broadcom’s U.S. Homecoming Is Trumped Up

Starbucks Tanks on Revenue Miss, to Sell Tazo Tea Brand to Unilever

Apple CEO Cook Breathes New Life Into Old iPhones

Teva’s CEO Was $2.8 Billion Down on His Second Day on the Job

Tableau Plummets 12% as Shift to Subscriptions Hits Forecast

Chinese Buyer Told World’s Most Expensive Scotch Dram Was Fake

Howard Lindzon: Apple Is My Favorite Crypto Asset

Cullen Roche: Let’s Talk About Taxes and the Fed

Mark Hines: Stock Exchange: Pullback Fear? Consider Uncorrelated Stocks

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60 Years Ago in the New York Times
Posted by Eddy Elfenbein on November 2nd, 2017 at 4:40 pm

November 3, 1957:

To the Editor:

Atlas Shrugged is a celebration of life and happiness. Justice is unrelenting. Creative individuals and undeviating purpose and rationality achieve joy and fulfillment. Parasites who persistently avoid either purpose or reason perish as they should. Mr. Hicks suspiciously wonders “about a person who sustains such a mood through the writing of 1,168 pages and some fourteen years of work.” This reader wonders about a person who finds unrelenting justice personally disturbing.

Alan Greenspan, NY

Morning News: November 2, 2017
Posted by Eddy Elfenbein on November 2nd, 2017 at 7:01 am

A Disappearance in Berlin Clouds a Trade Deal in Vietnam

Powell to Lead Fed Overseeing Trump Economy Fraught With Risks

Bitcoin: What’s Coming in the Year Ahead

U.S. SEC Warns Over Crypto ICO’s & ‘Potentially Unlawful’ Celebrity Promotion

Amazon’s Cryptocurrency Domain Names

Even the Russians (Mostly) Can’t Slow Facebook’s Money Machine

Credit Suisse Posts Solid Q3 Profit, Plans Meeting With Activist RBR Capital

Shell Takes Exxon’s Cash-Flow Crown as Earnings Beat Estimates

Apple Market Value: We May Need a Bigger Chart

Yelp Drops 9%: Q3 Beats, Q4 Revenue View Misses

Does General Electric’s Stock Belong In The Teens?

Singapore Airlines to Bump Up A380 Seat Count in Revenue Push

Michael Batnick: A Closer Look at Ray Dalio’s 1937 Scenario

Joshua Brown: 99% of Small Cap Growth Funds Underperformed Benchmark Over 15 Years

Roger Nusbaum: Ditch That Nine to Five Now, While You Still Can!

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Today’s Federal Reserve Policy Statement
Posted by Eddy Elfenbein on November 1st, 2017 at 2:01 pm

The Fed didn’t raise rates. Here’s the Fed statement:

Information received since the Federal Open Market Committee met in September indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate despite hurricane-related disruptions. Although the hurricanes caused a drop in payroll employment in September, the unemployment rate declined further. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. Gasoline prices rose in the aftermath of the hurricanes, boosting overall inflation in September; however, inflation for items other than food and energy remained soft. On a 12-month basis, both inflation measures have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Hurricane-related disruptions and rebuilding will continue to affect economic activity, employment, and inflation in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term. Consequently, the Committee continues to expect 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 on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee’s 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained 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. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant 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 balance sheet normalization program initiated in October 2017 is proceeding.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Jerome H. Powell; and Randal K. Quarles.

Earnings from Cognizant and Ingredion
Posted by Eddy Elfenbein on November 1st, 2017 at 11:25 am

October was another up month for the S&P 500. This makes seven winning months in a row, and except for a very small loss, this was nearly our 12th-straight up month in a row.

This morning, we got the ISM report for October. I like this report because it comes out on the first business day of each month. For October, the ISM was 58.7, which was a little bit below expectations. Any reading above 50 means the manufacturing sector is expanding. The ISM for September was 60.8 which was the highest in 13 years.

The ADP payroll report said that 235,000 private sector jobs were added last month. That’s more than economists had been expecting. The ADP report is always a preview of the official jobs report, which comes out on Friday. Wall Street is expecting that 310,000 jobs were created in October. The issue here is that it reflected the rebound from the hurricane-impacted report for September.

We got two more Buy List earnings report this morning. First up, Cognizant Technology Solutions (CTSH) reported Q3 earnings of 98 cents per share. Previously, the company had told us to expect Q3 earnings of at least 95 cents per share.

CTSH also raised their full-year guidance from at least $3.67 per share to at least $3.70 per share. Now the bad news. That implies Q4 earnings of 95 cents per share which is below the 98 cents Wall Street had been expecting. Traders didn’t like that and the stock is down around 5% this morning.

“We are making consistent progress in executing the plan to accelerate our shift to digital services and solutions,” said Francisco D’Souza, Chief Executive Officer. “We’ve systematically built the significant capabilities needed to help our clients transform their business, operating, and technology models ̶ a transformation we call digital at scale. We believe our long-term relationships with clients and deep understanding of their priorities puts us in a privileged position to help them adapt, compete, and grow.”

On the revenue side, Cognizant expects revenues between $3.79 billion and $3.85 billion. Wall Street had been expecting $3.76 billion. I’m not concerned about this report. CTSH’s numbers are fine.

For Q3, Ingredion (INGR) reported Q3 earnings of $2.21 per share. That beat the Street by 19 cents and it’s a nice increase from $1.96 per share a year ago. The company raised the low-end of its full-year guidance by 15 cents per share. Ingredion now expects 2017 earnings of $7.65 to $7.80 per share. That implies Q4 earnings $1.67 to $1.82 per share. The stock is currently up 3.6%.

Morning News: November 1, 2017
Posted by Eddy Elfenbein on November 1st, 2017 at 7:03 am

Why the Dow Jones Industrial Average Crushed the S&P 500 in October

Consumer Confidence Highest In 17 Years

Fed Likely on Hold, but Could Give Clues on Possible December Rate Rise

Trump’s Trade Endgame Could Be the Undoing of Global Rules

The Financial Lessons Behind the Allegations Against Paul Manafort

The Daily Prophet: What Does CME Know That Jamie Dimon Doesn’t?

Buffett Streak of ‘Free’ Insurance Money May Be Ending

Under Armour: Down 67% Since June 2015

Walmart Wants You to Party in Its Stores This Christmas Season

Cognizant Beats Earnings Estimates on Digital Services Strength

Starbucks Releases a Color-It-In-Yourself Holiday Cup

Mylan Top Executive Engulfed in Alleged Price-Fixing Ring

Howard Lindzon: The Great Digital Pyramid Rally of 2017 – Bitcoin and Egypt at All-Time Highs

Jeff Carter: Where The Puck Is Going With Big Data

Ben Carlson: The Increasing Importance f the 401k

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Fiserv Earned $1.27 per Share
Posted by Eddy Elfenbein on October 31st, 2017 at 4:19 pm

Fiserv (FISV) reported Q3 earnings of $1.27 per share. That was four cents below Wall Street’s estimate.

“Fiserv continued to execute well, delivering double-digit adjusted earnings per share growth despite pressure from lower periodic revenue in the quarter,” said Jeffery Yabuki, President and Chief Executive Officer of Fiserv. “Sales were solid in the quarter, providing momentum for a strong close to the year.”

Fiserv narrowed their full-year guidance from $5.03 to $5.17 per share to $5.05 to $5.12. That represents growth of 14% to 16% over last year. That means Q4 earnings of $1.34 to $1.41. Wall Street had been expecting $1.36 per share.

“We expect to achieve our full-year financial outlook which includes strong fourth quarter revenue growth leading to internal revenue growth acceleration in 2018,” said Yabuki.

Noon Market Notes
Posted by Eddy Elfenbein on October 31st, 2017 at 12:02 pm

It looks like President Trump will nominate Jay Powell to be the next Fed chairman. I don’t have much to say about this choice except that Powell is very much an establishment pick.

He’s a registered Republican who was previously nominated by President Obama—twice, in fact. This would mean he’s been appointed to the Fed three times in five years.

Powell was approved in May 2012 by a vote of 74-21. He was approved again in June 2014 by a vote of 67-24. Given the two previous Senate votes, I think he’ll pass this time with ease.

The Federal Reserve meets today and tomorrow. Going by the futures market, there’s a 2% chance the Fed will hike rates now and a 98% chance they’ll hike in December.

This morning, the Conference Board reported that consumer confidence is at its highest level since 2000.

Consumer confidence rose to 125.9 in October, according to the Conference Board.

The index “increased to its highest level in almost 17 years,” Lynn Franco, Director of Economic Indicators at The Conference Board, said in a statement. That was in December 2000, when the index hit 128.6.

The economic weight of Hurricanes Harvey and Irma pulled down the spirits of U.S. consumers in September, when the index was relatively flat. In October, “consumers’ assessment of current conditions improved,” Franco said.

“[This was] boosted by the job market which had not received such favorable ratings since the summer of 2001,” Franco said.

The high level of confidence suggests the economy will continue to expand “at a solid pace” for the rest of 2017, Franco added.

Two quick stories to pass along. At InvestorPlace, Charles Payne says Snap-on (SNA) could reach $200 per share.

Also, Hormel Foods (HRL) bought Columbus Manufacturing for $850 million.

Columbus, which bills itself as a “millennial-focused brand,” makes premium salami and other meat products.

I’m not sure how salami can be millennial-focused, but there you go. Shares of HRL are up 3% today.

Finally, Fiserv (FISV) will report after the close.

Morning News: October 31, 2017
Posted by Eddy Elfenbein on October 31st, 2017 at 7:02 am

Is The UK About To Have Its First Rate Rise In A Decade?

Japan Central Bank Keeps Policy Intact, Cuts Price Outlook

Trump Is Expected to Name Jerome Powell as Next Fed Chairman

Xi Jinping Tells Apple and Facebook CEOs His Plans for Reforming China

Homebuilders’ Record Deal Belies Industry’s Anxiety About Taxes

Who’s in Charge Now, Samsung?

Amazon.com’s Advertising Business Just Had Its Best Quarter Ever

FCC Clears CenturyLink-Level 3 Combination

CVS-Aetna Deal Could Have Same Result as Telecom Mergers — Higher Prices

Waymo’s CEO Says Self-Driving Cars Are ‘Really Close’ to Being Ready For The Road — But Plenty of Challenges Remain

Burberry’s Christopher Bailey to Leave Before 2019

This Is the Tunnel Elon Musk Is Building Under Los Angeles

Roger Nusbaum: Get Ready For #MACtion

Michael Batnick: 10 Questions I’m Pondering At The Moment

Joshua Brown: QOTD: Vanguard in Defense of 401(k)s

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