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Tuesday, September 27, 2016
Markets advance after presidential debate
Dow climbed 133 (closing near the highs), advancers over decliners 4-3 & NAZ added 48. The MLP index fell 2+ to the 309s & the REIT index was off 3+ to the 359s. Junk bond funds were higher along with stocks & Treasuries advanced. Oil sank to the 44s & gold dropped 13 to 1330.
Fed Vice Chair Stanley Fischer said low interest rates
have helped deliver US labor market gains that are feeding thru to
higher wages. “With unemployment now below 5 percent we’re
beginning to see the fruits of a higher-pressure labor market,” Fischer
said. “So, we’ve been getting there, and again, it’s
pressure keeping, keeping interest rates low, that helps cause this to
happen.” Fischer said the move in wage inflation from about 2%
last year to about 2.5% this year provides evidence the
connection between unemployment & inflation, which looked less
convincing over the past decade, still exists. “We think that 3 percent is a rate that’s consistent with a reasonable rate of inflation,” he said. Confidence
that gains in employment will bring inflation back toward the Fed’s 2% target will be central to policy makers' debate over when to
raise interest rates next. Fed officials are divided over the question. Most
members have indicated that they expect to raise interest rates before the end of the
year if the economy continues to improve modestly. Investors
see a roughly 50% chance of a move at the Dec
meeting.
Fischer said he wasn’t comfortable, on an “abstract” level,
with the use of zero or near-zero interest rates. “I don’t like it, but I
don’t want to raise the interest rate too much,” he added. “There’s
also a problem in going to a zero interest rate in the sense that it
says capital isn’t very productive,” He said. “We’d be better off
if there is a price for using money, for not investing in terms of
monetary returns.”
Cisco, a Dow stock, plans to spend as much as $4B in Mexico
over the next couple of years, upgrading its factories & increasing
production thru contract manufacturers. The biggest maker of equipment that runs the
internet will announce the plans
shortly. The spending figure, which may not be publicly
disclosed with the announcement, includes contracts with manufacturers,
as opposed to money spent directly on factories & includes spending
that had already been planned. Routing is the company's 2nd-largest revenue source. The timing
could be delicate for CSCO, 6 weeks after the company announced job cuts &
a day after the presidential debate. The stock rose 41¢. If you would like to learn more about CSCO, click on this link: club.ino.com/trend/analysis/stock/CSCO?a_aid=CD3289&a_bid=6ae5b6f7
Stiff competition from rival brands make some investors wary about Nike's (another Dow stock) short-term outlook, even as its overall business remains strong. NKE, which is aiming to hit $50B in revenue by
the year 2020, has struggled across several divisions. The company
shuttered its golf equipment business this summer due to sagging
revenue. Sales of its expensive performance basketball sneakers,
endorsed by the likes of NBA stars LeBron James & Kevin Durant, have
disappointed as consumer tastes shift toward different fashion styles. While most fans remain confident that the company is on track to meet
its long-term revenue goals, increased competition from other brands &
foreign headwinds have led others to temper their near-term
expectations for the brand. The company's stock has underperformed
significantly in 2016. The stock gained 94¢ today. If you would like to learn more about NKE, click on this link: club.ino.com/trend/analysis/stock/NKE?a_aid=CD3289&a_bid=6ae5b6f7
Markets rose, but without conviction. Breadth was weak, all considered. Dow remains stuck in the sideways trading pattern as does oil, a key driver for stocks this year. The bulls are happy it has not broken thru the 18K floor. Earnings season begins shortly & nervousness is restraining the bulls.
![Live 24 hours gold chart [Kitco Inc.]](http://www.kitco.com/images/live/gold.gif?0.5431921134778934)
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