Closing Market Summary: Averages End Mixed with Earnings and Fed in FocusThe stock market ended the Tuesday affair on a flat note as investors eyed an influx of quarterly reports and upcoming policy statements from the Federal Reserve and Bank of Japan. The major indices recovered from an early pullback, responding to a modest rebound in crude oil and sector leadership from heavily-weighted technology (+0.4%) and industrials (+0.7%). The Nasdaq Composite (+0.2%) finished ahead of the S&P 500 (UNCH) and the Dow Jones Industrial Average (-0.1%).
The major averages began the day on a modestly higher note, mirroring an early rebound in crude oil. The positive move in oil helped lift the broader market as the major indices notched early highs alongside the energy component. However, the rebound in oil proved to be short-lived as investors remained cautious ahead of inventory data from the American Petroleum Institute and the Department of Energy. The energy component pulled back mid-morning, bringing the broader market along with it.
The benchmark index inched off its low throughout the session as investors set their sights on the remainder of a busy macroeconomic week. Five sectors finished in the green as materials (+0.7%) and industrials (+0.7%) topped the leaderboard. The remaining gainers finished with upticks between 0.2% (financials) and 0.4% (technology). Conversely, defensively-oriented telecom services (-1.5%), utilities (-0.9%), consumer staples (-0.8%), and health care (-0.2%) rounded out the board. For its part, WTI crude ended its pit session lower by 0.5% ($42.91/bbl; -$0.22).
The heavily-weighted industrial sector (+0.7%) helped lead the broader market as United Technologies (UTX 107.89, +3.24) and Caterpillar (CAT 82.75, +4.06) outperformed. United Technologies jumped 3.1% after beating analysts' estimates for the quarter and raising its full-year earnings estimates. On the flipside, 3M (MMM 177.66, -1.97) underperformed after reporting a mixed quarter and lowering its local currency sales growth estimates. Separately, airlines outperformed alongside positive quarterly results from JetBlue Airways (JBLU 18.67, +1.39).
The high-beta chipmakers outperformed in the technology space (+0.4%), evidenced by the 3.8% gain in the PHLX Semiconductor Index. The index jumped alongside Linear Technology (LLTC 62.49, +14.02) after speculation mounted that Analog Devices (ADI 62.87, +2.34) was interested in the company. Additionally, Texas Instruments (TXN 71.42, +5.20) outperformed after reporting positive quarterly results. In the broader space, Apple (AAPL 96.67, -0.67) lagged ahead of this evening's earnings release.
In the consumer discretionary space (-0.2%), Dow component McDonald's (MCD 121.71, -5.69) finished at the bottom of the price-weighted index. The stock was under pressure as investors weighed a bottom-line beat against slower than expected second-quarter comparable store sales growth. Conversely, retail names outperformed as the sub-group traded higher in sympathy with Nordstrom (JWN 43.93, +1.19). The stock was upgraded to "Overweight" from "Neutral"at Piper Jaffray.
Biotechnology finished behind the broader health care (-0.2%) sector as the sub-group moved lower in sympathy with Gilead Sciences (GILD 81.05, -7.50). The drug maker fell 8.5% after lowering its full-year sales guidance. In the broader sector, Anthem (ANTM 137.59, -2.39) underperformed ahead of tomorrow morning's earnings report. Conversely, medical equipment names displayed relative strength as the group moved higher following positive earnings results from Baxter (BAX 48.01, +1.91) and Waters (WAT 155.09, +6.65).
The U.S. Dollar Index (97.14, -0.15) settled modestly lower as the pound, euro, and yen each gained against the greenback. Sterling ticked higher by 0.1% against the dollar (1.3134) while the single currency gained 0.1% against the buck (1.0988). Separately, the dollar fell 1.1% against the yen (104.63) amid jitters leading into Friday's policy decision from the Bank of Japan.
Treasuries settled higher as yields slipped throughout the complex. The yield on the 10-yr note finished lower by one basis point at 1.56%.
Today's trading volume was below the recent average as fewer than 803 million shares changed hands on the NYSE floor.
Today's economic data included the Case-Shiller 20-city Index for May, Consumer Confidence for July, and New Home Sales for June:
- The Case-Shiller 20-city Home Price Index for May fell to 5.2%, which was below the Briefing.com consensus of 5.4%. This followed the previous month's unrevised reading of 5.4%.
- The Conference Board's Consumer Confidence Index dipped to 97.3 in July from a downwardly revised 97.4 (from 98.0) in June.
- The consensus estimate for July was 96.0, so this report was better than expected.
- The slight change can be attributed entirely to the Expectations Index, which fell from 84.6 in June to 83.3 in July as consumers softened their stance somewhat on the outlook for business and labor market conditions.
- Conversely, the Present Situations Index rose from 116.6 to 118.3.
- Confidence levels contribute to the outlook for consumer spending, but ultimately, spending activity rests predominately on income trends.
- New home sales in June were at a seasonally adjusted rate of 592,000, up 3.5% from the revised May rate of 572,000 (from 551,000).
- The June number was well ahead of the consensus estimate of 560,000 and 25.4% above the same period a year ago.
- The strong year-over-year growth reflects a robust improvement in the context of the current economic environment.
- Still, there is a long way to go to get back to the peak rate of 1.389 million seen in July 2005 and, for that matter, the seasonally adjusted annual rate of 891,000 seen in January 2007 (i.e. pre-Great Recession).
- The gain in June was paced by a 10.9% increase in the West region and a 10.4% increase in the Midwest.
- The Northeast and the South saw sales declines of 5.6% and 0.3%, respectively.
- Notably, there was a large sales pickup in homes priced between $400,000 and $499,999, which accounted for 18% of sales versus 10% in May.
- The percentage of home sold at all other price points were either flat, or down, from the prior month..
- Altogether, homes priced under $300,000 accounted for 48% of homes sold (vs. 53% in May) while homes priced over $300,000 accounted for 52% of homes sold (vs. 48% in May).
- The median sales price was $306,700, up 6.1% year-over-year
- At the current sales pace, the inventory of new homes for sale is at a 4.9-months supply versus 5.1 months in May
Tomorrow's economic data will include the weekly MBA Mortgage Index, which will be released at 7:00 ET. Durable Orders for June (consensus -1.0%) and Pending Home Sales for June (consensus +1.1%) will be released at 8:30 ET and 10:00 ET, respectively. The day's data will be capped off with the FOMC's July rate decision, which will cross the wires at 14:00 ET.
- Russell 2000 +7.1% YTD
- S&P 500 +6.1% YTD
- Dow Jones +6.0% YTD
- Nasdaq Composite +2.1% YTD
Driverless Cars Threaten to Crash Insurers’ Earnings
The technology may be decades away, but firms are already scrambling to figure out how to deal with an expected decline in premium revenue as autos become safer
The insurance industry has a $160 billion blind spot: the driverless car.
Car insurers last year hauled in $200 billion of premiums, about a third of all premiums collected by the property-casualty industry. But as much as 80% of the intake could evaporate in coming decades, say some consultants, assuming crucial breakthroughs in driverless technology make driving safer and propel big changes in car ownership.
As the threat approaches, U.S. insurance executives are spending millions and embedding with car companies, testing the technology themselves, and wrestling with whether to lower prices as parts of the autonomous future hit America’s roads.
For the actuaries who set insurance rates, it is a puzzle like no other: How do they prepare for a world of so many fewer auto accidents? In the future, will underwriters be insuring drivers or computer code?
“Change is coming and we need to get ahead of it,” said Allstate Corp. Chief Executive Tom Wilson in an interview. The suburban Chicago insurer is spending millions on research for new products and services that involves more than 200 data scientists and tech experts at a company it founded called Arity.
“It isn’t going to happen tomorrow but it is going to happen soon,” he said.
So far, however, the industry hasn’t made dramatic changes to the way it prices car insurance. Truly autonomous cars are years away from dealer showrooms, and many insurers say there isn’t enough data to determine how much safer even some of the newest “semi-autonomous” gear makes America’s roads.
Highlighting the technological challenges still ahead for driverless-car makers, federal authorities in late June disclosed a probe into the May death of a 40-year-old who was killed while operating a Tesla Motors sedan on “Autopilot.”
For insurers, the key to determining how much to charge remains predicting the likelihood that accidents will happen and how much they will cost in repairs and medical care for the injured.
To get that figure, actuaries know how many billions of miles cars typically are driven and how that translates into accidents—currently estimated at one fatality for about every 90 million miles driven in America. They know that male and female drivers have different crash rates, and age matters. And they know that people who have caused wrecks or have certain traffic violations are riskier to insure.
The rates charged by car insurers are subject to approval by state regulators, who seek to ensure that most of each premium dollar goes to claims and claims-handling costs, not to excessive overhead or profits.
But in a future of autonomous cars, actuaries may have to replace calculations about individuals with issues such as: how often cars are hacked and which parts of the country have better satellite imagery. They’ll also have to identify the safety differences across driverless cars, from Google to Tesla, just as they now know that today’s auto makers have safety features of varying quality.
So far, Google’s self-driving cars have racked up more than 1.5 million miles of testing, while Tesla says Autopilot has topped 130 million miles.
In a report last year, KPMG actuaries estimated an 80% drop in the U.S. accident-frequency rate by 2040. Among its assumptions: By 2020, some fully autonomous cars will be available and authorities will be experimenting with upgrades to road infrastructure to help driverless cars navigate.
Data on semi-autonomous gear remains limited to a small subset of vehicles. One of the few insurers adjusting prices already is Liberty Mutual. The insurer gives discounts for some gear including automatic emergency braking, which halts a car to avert a front-to-rear crash. Liberty Mutual is conducting research on the features with the Massachusetts Institute of Technology, and said discounts vary by feature, state regulation and other factors.
Autonomous vehicles “will certainly drive down the cost of insurance as we think of it today, but…there will be other liabilities associated with intelligent cars that will need to be insured,” Liberty Mutual Chief Executive David Long said in an interview.
Consultants say car insurers such as Liberty Mutual that also sell property and liability policies for business customers may be best positioned. That is because many experts see responsibility for car crashes shifting to auto makers and suppliers if caused by equipment malfunction or hacked software.
As insurers debate the impact of a driverless future, timing remains one of the biggest questions.
KPMG forecasts fully autonomous vehicles to be widely available by 2025, while Deloitte Consulting expects proliferation in the late 2020s.
Deloitte forecasts approximately $200 billion in personal-car-insurance premiums to hold steady for seven or eight years, then slide to about $40 billion by 2040. It projects about $100 billion of this $200 billion could migrate to product-liability insurance and coverage bought by ride-sharing businesses.
Deloitte and KPMG stood by their research when reached after news of the Tesla fatality.
A system that monitors the environment for driving hazards gets a test drive at the University of Michigan’s 32-acre outdoor lab known as Mcity.
A system that monitors the environment for driving hazards gets a test drive at the University of Michigan’s 32-acre outdoor lab known as Mcity. PHOTO: PETER BAKER FOR THE WALL STREET JOURNAL
State Farm Mutual Automobile Insurance Co. has positioned itself to get an inside look at the technology as it is being developed. The country’s largest auto insurer is a founding partner at the University of Michigan’s Mobility Transformation Center, whose Mcity lab is a leading test site for driverless gear.
Just as air bags and seat belts did in generations past, increasingly common semi-autonomous equipment is expected to offer significant improvements in safety. Among the most effective is automatic braking, which is in fewer than 10% of cars now but will be standard on new cars by 2022, according to the insurance-industry funded Insurance Institute for Highway Safety.
The Highway Loss Data Institute, a sister organization to IIHS, last year found that 11 front-crash-prevention systems from six manufacturers showed 10% to 15% lower rates of claims for damaging other vehicles, compared with models without the gear.
Surprisingly, the institute found no consistent reduction in claim rates from “lane-departure warning” systems. Researchers had a hunch many drivers found the beeping annoying and were turning off the feature. So they visited Honda dealerships in Germantown, Md., and Alexandria, Va., to take a look at cars as they arrived for servicing.
Of 184 cars, only a third had the feature turned on.
While many in the insurance industry expect the new technologies to improve and proliferate, “we are still operating in an era when car makers are recalling millions of vehicles for the simplest of technology failures: ignition switches, floor mats and air bags,” said Robert Hartwig, president of trade group Insurance Information Institute.
He said many prognosticators with speedy timetables for driverless-car adoption “have drunk too much of the Silicon Valley Kool-Aid.”
16:33:13 RTRS - ITALY COUNTING ON MARKET SOLUTION TO HELP MONTE PASCHI, HOPEFULLY NO STATE INTERVENTION NEEDED -GOVT ADVISER BMPS.MI CRDI.MI
Airbus : quand l’objectif de livraison interne est beaucoup plus élevé que celui annoncé
Alors que le groupe avait indiqué viser 650 livraisons d'avions en 2016, il a fixé en interne un objectif de 690 appareils. C'est d'ailleurs ce dernier qui sert de critère pour le calcul d'une partie de l'intéressement annuel aux salariés.
Alors que la direction a annoncé en début d'année tabler sur plus 650 livraisons d'avions en 2016 (un volume supérieur de seulement 2% par rapport à 2015), l'avionneur a, selon nos informations, fixé à ses troupes un objectif beaucoup plus ambitieux : 690 livraisons. C'est d'ailleurs cet objectif qui est pris en compte dans le calcul de l'intéressement versé aux salariés. L'an dernier, ce critère a représenté 500 euros sur les 2.500 euros d'intéressement distribué aux salariés.
Des fournisseurs en difficulté
Cet objectif interne fait grincer des dents les syndicats. Car, les problèmes rencontrés par certains fournisseurs risquent de retarder la production. L'A320neo souffre des difficultés du motoriste Pratt&Whitney tandis que l'A350 tire lui aussi la langue en raison des difficultés d'approvisionnement des sièges et des toilettes de l'appareil.
Pour autant, cet objectif de 690 livraisons est encore jugé "atteignable" en interne si le motoriste parvient à livrer ses moteurs disposant de la solution technique mise en place pour résoudre le problème. Nouvelle encourageante, la livraison à Lufthansa du premier appareil équipé de tels moteurs est imminente. Pourra s'ensuivre la motorisation de la vingtaine d'A320neo en attente des moteurs à Toulouse et Hambourg et celle des autres appareils prévus d'ici à la fin de l'année.
Concernant l'A350, un programme d'heures supplémentaires a quant à lui était mis en place pour quelques mois.
Fin juin, Airbus totalisait 288 livraisons depuis le début de l'année.
SteelHouse countersues Criteo alleging over 50% of Company’s revenue comes from fraudulent sources
SteelHouse, an advertising software company, today filed suit in federal court in the Central District of California [case number 2:16-CV-04207 SVW (MRWx)] accusing Criteo SA (NASDAQ: CRTO), a Paris, France-based retargeting company, of false advertising, intentional interference with contract, intentional interference with prospective economic advantage and unfair competition.
In the suit, SteelHouse alleges that 52% of Criteos clicks, the primary source of the companys revenue, do not originate from any known website or publisher. SteelHouse uncovered these findings after analyzing third party customer data that showed the source of Criteos traffic for customers that were active with both SteelHouse and Criteo since January 2016.
Additionally, the lawsuit alleges Criteo inflates its performance through fraudulent click practices; as an example, 16% of Criteo clicks are from users clicking the same advertisement within a 30-minute period eight times the industry standard.
Criteo has an insatiable appetite for clicks to fuel its revenue model and growth, said Mark Douglas, SteelHouse President and CEO. Their average click rate is over four times the industry standard which is consistent with recent reports by U.S. Senators Charles Schumer (D-N.Y.) and Mark Warner (D-Va.) about fraudulent click practices in the industry.
The suit also states that Criteos arbitrage revenue model is inflating its profits at the expense of its customers. According to the suit, Criteos pricing model deceives customers into believing that an increased CPC bid will yield better performance for the customer. Instead, the increased bid results in no additional traffic for the advertiser.