Here’s the Fed’s Statement
Posted by Eddy Elfenbein on February 1st, 2017 at 2:04 pm

Here’s today’s Fed statement:

Information received since the Federal Open Market Committee met in December indicates that the labor market has continued to strengthen and that economic activity has continued to expand at a moderate pace. Job gains remained solid and the unemployment rate stayed near its recent low. Household spending has continued to rise moderately while business fixed investment has remained soft. Measures of consumer and business sentiment have improved of late. Inflation increased in recent quarters but is still below the Committee’s 2 percent longer-run objective. Market-based measures of inflation compensation remain low; most 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. The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will rise to 2 percent over the medium term. Near-term risks to the economic outlook appear roughly balanced. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

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 1/2 to 3/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening 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; Charles L. Evans; Stanley Fischer; Patrick Harker; Robert S. Kaplan; Neel Kashkari; Jerome H. Powell; and Daniel K. Tarullo.

Poor Earnings Report from AFLAC
Posted by Eddy Elfenbein on February 1st, 2017 at 1:40 pm

After yesterday’s closing AFLAC (AFL) reported soggy results for Q4. The duck stock reported operating earnings of $1.46 per share. That was 17 cents below Wall Street’s estimate of $1.63 per share.

I have to discuss the important issue of the exchange rate because so much of AFLAC’s business is done in Japan. For the fourth quarter, the yen/dollar exchange rate averaged 109.1. That’s 11.4% stronger (meaning lower) than Q4 of 2015. The stronger exchange rate added eight cents per share to AFLAC’s Q4 bottom line. So after we adjust for currency, their EPS fell by 6.4%.

For the entire year, AFLAC had operating income of $6.79 per share. That’s up from $6.16 in 2015. However, the exchange rate added 34 cents per share. Adjusting for that, last year’s earnings were up by 4.7%.

CEO Dan Amos said:

“As we look to 2017, our guidance remains unchanged since our December outlook call. Our objective is to produce stable operating earnings per diluted share of $6.40 to $6.65, assuming the average exchange rate in 2016 of 108.70 yen to the dollar. As always, we are working very hard to achieve our earnings-per-share objective while also ensuring we deliver on our promise to policyholders.”

Wall Street is not pleased with the earnings report. Shares of AFLAC are currently down about 4%.

Morning News: February 1, 2017
Posted by Eddy Elfenbein on February 1st, 2017 at 6:35 am

Jaitley’s Union Budget For India Makes Income Tax More Progressive – A Good Idea

Japan’s Aso, Abe Reject Currency Restrictions On Trade Pacts

Theresa May is Trapped Between Brexit and Donald Trump’s America

Fed’s Message on Portfolio Trimming: Prepare, Don’t Fret

Trump Spoils Pharma Chiefs With No More Bad News on Drug Pricing

GE’s Immelt Talks Up Global Ties as Trump Pivots Away From Trade

Exxon Boosts Capital Budget But Takes $2 Billion Charge From XTO Deal

Walmart Just Undercut Amazon’s Most Valuable Perk

Amazon is Building Its Own Air Cargo Hub for $1.49 Billion

UPS’s Shipping Blues

Here’s Why Shares of Under Armour Are Plummeting Today

Ray Dalio Makes Clients $4.9 Billion in 2016 as Paulson, Soros Falter

Bosch, a Volkwagen Supplier, Agrees to Settle Over Diesel Scandal

Josh Brown: Protests vs. Stocks

Jeff Carter: Reading the Tea Leaves

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Danaher Earns $1.05 Per Share
Posted by Eddy Elfenbein on January 31st, 2017 at 10:41 am

This morning, Danaher (DHR) reported Q4 earnings of $1.05 per share. That beat estimates by two cents per share. Quarterly revenue rose 6% to $4.6 billion, and their “core revenue” was up by 3.5%. For all of 2016, DHR earned $3.61 per share which was up 21% over 2015.

Thomas P. Joyce, Jr., President and Chief Executive Officer, stated, “We are very pleased with our strong fourth quarter results, capping off a transformative year for Danaher. In 2016, the team delivered double-digit earnings growth, meaningful margin expansion, and strong free cash flow. We also executed on a number of strategically significant acquisitions during the year, including Cepheid and Phenomenex.”

Joyce added, “We believe that the strength of our portfolio, combined with the power of DBS, provides the foundation for enhancing our growth trajectory and delivering long-term outperformance.”

For Q1, Danaher sees earnings between 82 and 85 cents per share. For all of 2017, they forecast earnings of $3.85 to $3.95 per share. The stock is currently up 3.6% this morning.

Morning News: January 31, 2017
Posted by Eddy Elfenbein on January 31st, 2017 at 6:22 am

Euro-Area Inflation Surges to 1.8%, Intensifying ECB Debate

Deutsche Bank’s Bill for Russia Trades Reaches $629 Million

India IT Stocks Slip Amid Worries About Stricter H1-B Visas

Alarm Over the Fed’s $4.45 Trillion Balance Sheet Is Silly

Wall Street Falls the Most This Year as Trump Honeymoon Sours

Wall Street Reassures Employees, Without Wholly Rejecting Travel Ban

Republicans’ Paths to Unraveling the Dodd-Frank Act

How Toyota, Target, Best Buy Are Fighting Back Against Republican Border Tax Push

Wal-Mart Offers Free Two-Day Shipping in Latest Attempt to Compete With Amazon

Rite Aid: Discount, Aisle 1

Nintendo Returns to Quarterly Operating Profit But Cuts Full-Year Outlook

Tesla Gives the California Power Grid a Battery Boost

Shell Sells $4.7 Billion of Fields as Disposals Accelerate

Roger Nusbaum: The New Black Swan?

Howard Lindzon: Feed Mayo to the Tuna and Semiconductor Stocks

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75 Days in a Row Without a 1% Drop
Posted by Eddy Elfenbein on January 30th, 2017 at 9:23 pm

For a while, it looked like today could be the first 1% drop for the S&P 500 since October 11. We’ve now gone 75 days in a row without a 1% loss, which is the longest such streak in a decade.

Fortunately, the market recovered and the S&P 500 closed with a loss of 0.60%. At its low, the index was down 1.16% for the day.

Today was a decent day for our Buy List, which was only down 0.34%. However, Cognizant Technology Solutions (CTSH) was an outlier. The IT outsourcer lost 4.40% on the day, which was far more than any other Buy List stock. The loss is probably a result of President Trump’s Executive Order. Interestingly, all the major airline stocks were down as well.

The Energy and Materials sectors were especially hard hit today while many of the Defensive sectors were only down modestly. Energy stocks have been gradually sliding lower over the last seven weeks, but they got a lot of damage on Friday and into today. Chevron’s (CVX) earnings report was especially bad.

This morning, the government said that personal income rose by 0.3% last month, and spending rose by 0.5%. That’s not bad.

We have two earnings reports tomorrow. Danaher (DHR) is in the morning, and AFLAC (AFL) will be in the afternoon. The Fed also meets tomorrow and Wednesday. Don’t expect much. Maybe something in June.

Why a Gloomy February Could Be Ahead For Stocks
Posted by Eddy Elfenbein on January 30th, 2017 at 5:28 pm

Energy Stocks Tank
Posted by Eddy Elfenbein on January 30th, 2017 at 4:57 pm

Morning News: January 30, 2017
Posted by Eddy Elfenbein on January 30th, 2017 at 6:49 am

German Pride Shifts to Angst in Role as Europe’s Reflator

Spanish Economy Maintained Growth Momentum in Fourth Quarter

Oil Trades Near $53 as U.S. Drilling Accelerates Amid OPEC Cuts

U.S. Travel Ban Row Halts Dollar Recovery

Howls Over Import Tax Complicate Plans to Overhaul Code

Silicon Valley’s Ambivalence Toward Trump Turns to Anger

Starbucks CEO Schultz Plans to Hire 10,000 Refugees After Trump Ban

It’s Official: Volkswagen World’s Largest Automaker 2016. Or Maybe Toyota

Vodafone India Seeks Merger With Rival Idea Cellular as Price War Rages

Mobile and YouTube Drive Alphabet’s 4Q Growth

Toshiba Asset Sales After Chips Spinoff Will Cut to the Bone

FX Guru John Taylor Is Back, Minus the $12 Million-a-Year Salary

U.S. Brings Charges Over Ponzi Scheme, ‘Hamilton’ Tickets Fraud

Josh Brown: Swedroe’s Opus

Jeff Carter: Challenges of Smaller Funds vs. Being an Angel

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Real GDP Grew 1.9% in Q4
Posted by Eddy Elfenbein on January 27th, 2017 at 8:49 am

The government reported that real GDP grew at an annualized rate of just 1.9% in the fourth quarter. That’s not so great.