DOW + 29 = 21,703
SPX + 2 = 2428
NAS – 3 = 6213
RUT – 0.89 = 1356
10 Y – .01 = 2.18%
Oil – 1.11 = 47.40
Gold + 7.10 = 1292.30
Bitcoin – 2.81% = 3940.88 USD
Ethereum – 2.52% = 315.65
Since August 7, the Dow Industrials have given back 397 points or 1.7%. The S&P 500 has slipped 0.08%, and the technology-weighted NASDAQ has led the way lower with a 2.6% move. Second-quarter results from S&P 500 reporting companies have been solid with 65% beating expectations. Guidance has largely also been quite positive.
The recent price action in equities has left the uptrend under pressure but at this point it doesn’t look like anything more than a pause, at least for the big Blue-Chip names. Small caps are having a tougher time. The Russell 2000 index of small and mid-cap companies moved into negative territory year-to-date.
Most recent economic data suggest the US economy is on better footing that it was in the first half of the year; which seems to be part of a trend for the past few years. This week, the markets are waiting to hear from Fed Chair Janet Yellen; she delivers a speech at the Jackson Hole Economic Summit on Friday.
We know that the Fed has been raising rates and plans to trim holdings on its balance sheet, but last week’s minutes paint a picture of a cautious Fed. European Central Bank President Mario Draghi will also speak Friday. Don’t expect any big news on central bank policy.
The central bankers will be talking about economic growth and there will be plenty of discussions about low inflation. US inflation fell to 1.4 percent in June, based on the Fed’s preferred gauge, and consumer prices in the euro area, currently at 1.3 percent, have wavered since the start of the year.
Today, the Federal Reserve published a new survey providing extra detail on the labor market. The survey will be published 3 times a year. Survey says, workers see little hope for higher paychecks, and while they are increasingly searching for new jobs, they expect fewer offers to fall into their laps.
Survey respondents on average said in July that the lowest annual salary they would accept in a new job would be $57,960, down from $59,660 only four months earlier. This measure has declined since November, with most of the changes coming from older and higher-income Americans.
Asked what salary they expected in job offers over the next four months, the average response declined to $50,790 from $54,590 when the last survey was taken in March. The survey, conducted since early 2014 but published for the first time on today, also showed 22.7 percent of respondents searched for a job in the last four weeks, up from 19.4 percent in the previous report. Young people accounted for most of the increase.
The respondents saw a 22 percent likelihood of receiving at least one job offer in the next four months, down from an average response of 25 percent eight months ago.
A bit of hopeful news out of Washington today. Senate Majority Leader Mitch McConnell insisted the government will raise the debt ceiling and avoid defaulting on its debt. Treasury Secretary Steven Mnuchin has called for Congress to pass a bill to increase the borrowing limit by the end of September.
By then, the Treasury will have exhausted its so-called extraordinary measures to continue its borrowing authority and risks defaulting on its debt. The Treasury secretary has called for a “clean” debt-ceiling increase, meaning lawmakers would not attach spending cuts or other provisions to it.
Some conservatives, particularly in the House, have previously tried to pair measures to raise the debt ceiling with spending cuts. Mnuchin said the debt ceiling was his top priority when lawmakers return from recess next month.
Sempra Energy (NYSE:SRE) has placed a bid to buy Oncor for $9.45 billion in cash after majority owner Energy Future Holdings abandoned a deal to sell the Texas-based power transmission company to Warren Buffett’s Berkshire Hathaway (NYSE:BRKa). This represents a rare blow to Buffett, who avoids bidding wars for companies and had swooped in two months ago to buy Oncor after Texas regulators blocked two previous attempts by Energy Future to sell it.
Energy Future, which has been in bankruptcy since 2014, had initially planned to seek court approval today for the sale of Oncor to Berkshire for $9 billion over opposition from its biggest creditor, hedge fund Elliott Management. Instead, Energy Future will go with Sempra because of the value of the bid, a lower break-up fee and, most importantly, support from Elliott.
San Diego-based Sempra said it expected to own about 60 percent of a reorganized Oncor after it completes the transaction, which is valued at $18.8 billion, including debt. Energy Future owns 80 percent, but Sempra plans to sell some of that equity to other outside investors. A hearing on the revised reorganization plan and creditor support agreement was set for Sept. 6.
Total is buying Maersk’s oil and gas business in a $7.45 billion deal which the French energy major said would strengthen its operations in the North Sea and boost earnings and cash flow. For Danish company A.P. Moller Maersk, the sale of Maersk Oil, with reserves equivalent to around 1 billion barrels of oil, fits with a strategy of focusing on its shipping business.
Fiat Chrysler shares jumped almost 7% today after Great Wall Motors confirmed that it is interested in acquiring at least part of the company. The interest focuses on Fiat’s Jeep and Ram brands of off-road vehicles and trucks. Reports surfaced recently that a Chinese automaker was interested in placing a bid for the brands. Fiat Chrysler said in a statement it has not yet been approached by the Chinese automaker.
Johnson & Johnson (NYSE:JNJ) was ordered by a California jury to pay $417 million to a woman who claimed she developed ovarian cancer after using the company’s talc-based Baby Powder. The Los Angeles Superior Court jury’s verdict is the largest to date in lawsuits alleging J&J failed to adequately warn consumers about the cancer risks of talc-based products.
The verdict included $70 million in compensatory damages and $347 million in punitive damages. It followed 5 trials in Missouri state court; Johnson and Johnson lost 4 of those trials, resulting in more than $300 million in verdicts against J&J. The company says it will appeal today’s verdict.