Closing Market Summary: Major Averages End Near Flat LinesThe major averages ended the first session of the abbreviated week above their flat lines, as pressure regarding global growth and lower oil prices weighed on the market's early rally. Today's session began sharply higher after a miss in China's Q4 GDP report invited speculation regarding potential stimulus from the People's Bank of China, but soon the realities of shrinking global growth and a persisting oil glut pressured the market lower. The Nasdaq (-0.3%) registered the largest decline while the Dow Jones Industrial Average (+0.2%) and the S&P 500 (+0.1%) outperformed.
Last night, China released its Q4 GDP report, which showed that quarter-over-quarter GDP growth came in at 1.6% while year-over-year GDP growth was reported at 6.8%. Additionally, China reported below-consensus Industrial Production (5.9% vs 6.0%) and Retail Sales (11.1% vs 11.3%) in December. This was the slowest GDP reading since 2009 and prompted heavy speculation that the People's Bank of China would institute new stimulus measures to combat the growth issues. To that point, a late afternoon report from China Securities Journal argued for a cut to the reserve requirement ratio.
European indices, U.S. futures, and pre-market crude oil trading were able to benefit from this speculation. Shortly after the U.S. open though the focus shifted to the resulting implications to global growth. On that note, the International Monetary Fund revised its global growth projection to 3.4% for 2016 and 3.6% for 2017 versus prior estimates of 3.6% and 3.8%, respectively. Shortly after the opening bell the major averages met resistance near the upper end of their trading ranges, retreating into the afternoon.
Rounding out the leaderboard, commodity-sensitive energy (-2.1%) and materials (-1.2%) were followed by health care (-0.1%) and technology (-0.1%) while countercyclical utilities (+1.5%), consumer staples (+1.2%), and telecom services ( +1.2%) lead.
Looking at the energy sector, independent oil and gas companies like ConocoPhillips (COP 36.40, -2.96) lead the retreat in the group with a decline of 7.5%. Increased pressure in oil companies came after WTI crude surrendered the $30.00/bbl price level. Oil was able to recover slightly, ending its pit session lower by 2.5% at $29.62/bbl. Elsewhere in the energy space, Dow components Chevron (CVX 81.51, -2.16) and Exxon Mobil (76.40, -1.18) paced the sector's decline.
In the health care space, UnitedHealth Group (UNH 112.58, +3.31) outperformed after the company reported an earnings beat with EPS at $1.40 and reaffirmed its FY 2016 guidance. UnitedHealth Group ended its day 3.0% higher. Fellow large-cap component Eli Lilly (LLY 83.23, +1.99) climbed 2.5% after the company affirmed its earning guidance for 2016 with EPS of $3.45-3.55. Elsewhere in the space, biotechnology showed relative weakness, evidenced by the 2.2% decline in the iShares Nasdaq Biotechnology ETF (IBB 277.84, -6.34).
Switching to financials (UNCH), the group was one of the early leaders until a sharp reversal knocked the sector to the middle of the board. Morgan Stanley (MS 26.26, +0.29) managed to outperforms the space, following a beat on Q4 earnings with EPS of $0.43 and a beat on revenue at $7.74 billion. Elsewhere, Bank of America (BAC 14.24, -0.22) declined 1.5% despite beating earnings estimates on in-line revenue.
In other earnings of note, Dow Jones Transportation Average (-0.5%) component Delta Airlines (DAL 45.96, +1.46) posted the largest advance in the complex after narrowly missing on earnings this morning; however, the carrier raised its Q1 operating margin guidance to 18-20% from 16-17%. Elsewhere in the composite, United Continental (UAL 45.18, -0.49) and JetBlue (JBLU 20.26, -0.43) declined 1.1% and 2.1%, respectively.
Treasuries fell to their lows during the morning rally but were able to move higher during the market pullback. Ultimately, the 10-yr note settled just below its flat line with its yield higher by a basis point at 2.05%.
Today's session saw heavy volume with more than a billion shares changing hands at they NYSE floor.
Today's economic data was limited to the NAHB Housing Market Index, which came in at 60, following a revised reading of 60 in December (from 61) consensus 61.0).
Tomorrow's economic data includes the weekly MBA Mortgage Index, which will be released at 7:00 ET, while December CPI (consensus 0.0%), December Core CPI (consensus +0.2%), December Housing Starts (consensus 1197k), and Building Permits (consensus 1200k) will cross the wires at 8:30 ET.
- Russell 2000 -12.3 YTD
- Nasdaq -10.6% YTD
- Dow Jones -8.1% YTD
- S&P 500 -8.0 YTD
SAUDI FOREIGN MINISTER REFUSES TO RULE OUT SEEKING A NUCLEAR BOMB IF IRAN MANAGES TO OBTAIN ONE
--> I am sure somebody near you will be 100% ok with that kind of investment
What’s the better investment: The S&P 500, gold, or an Hermès Birkin bag?
According to Baghunter, an online marketplace for buying and selling high-end bags, the average annual return rate for the Birkin bag actually outpaced that of both the S&P 500 and the price of gold over the last 35 years. Accounting for inflation, the S&P returned an average 8.7% a year, and gold -1.5%—while the resale value of a Birkin in pristine condition rose 14.2%, according to Baghunter’s number crunching.
The bag’s value also showed considerably less volatility than the stock market, Baghunter says, which could be good or bad depending on what type of investment you want. The figures above assume the investor purchased the item or stock and simply held it all those years, without actively trying to maximize profits by moving in and out of investments as the markets moved. In the timeframe examined, the S&P saw a high annual return of 37.2% in 1995 and a low of -36.6% in 2008. The Birkin, on the other hand, fluctuated between a high of 25% and a low of 2.1%, never falling in value. But an investor who timed the market just right could have made more from the S&P.
Baghunter tells Quartz that its figures for the S&P and gold start in December 1980, just before the Birkin’s conception in 1981, when actress Jane Birkin, in a chance encounter on a plane with the then-CEO of Hermès, said the company should offer a bag with pockets.
Evelyn Fox, the founder of Baghunter, which has an obvious stake in promoting the Birkin’s resale potential, told Luxury Daily the findings reflect the stability of the ultra-luxury market. Unlike the stock market and the regular old luxury market, which includes high-end but still relatively accessible goods from brands such as Burberry or Gucci, it fluctuates little, even in difficult economic times.
The comparison between “investing” in a bag and the stock market is somewhat apples-to-oranges, though in some ways that’s because of the very reason the Birkin is so valuable to begin with: The barrier to getting a Birkin is extremely high compared to buying stocks. To start, the average cost of a new Birkin is about $60,000, and they’ve reached as high as $223,000 at auction. Even a Class A share of Warren Buffett’s Berkshire Hathaway Inc. will only set you back $192,000 at present.
One reason for the Birkin’s lofty prices: Scarcity. The bags, a status symbol carried by celebrities from Victoria Beckham to Pharrell Williams, are infamously “sold out” almost constantly. Hermès says the lengthy process required to produce the bags, made of premium animal skins that take time to harvest before being hand-sewn by rigorously trained artisans in France, prevents it from meeting demand. But not everyone accepts that reasoning; there’s a lot of motivation for Hermès to create shortages to keep the bag’s value and prestige high.
Exclusivity also helps keep the Birkin’s value from pitching wildly. You don’t get a lot of people dumping $60,000 bags they waited years to buy and flooding the market. If the bags did go out of fashion, or more were suddenly available, their “investment” value would plummet.
Michael Tonello, author of Bringing Home the Birkin, tells Quartz the Birkin might have been a solid investment five years ago, but not any longer for precisely that reason. Despite the appearance of scarcity, the company has actually been producing far more bags than it used to, he says, and supply is now exceeding demand. He adds that the widely reported waiting lists of up to six years are a myth.
Of course, Baghunter doesn’t necessarily want you to buy new anyway. They would be happy to have you invest in your bag through them.
Update, Jan. 15, 1:30pm EST: Baghunter clarified that its calculation of the Birkin bag’s average annual return rate includes inflation. The post was changed to compare this figure with the inflation-adjusted returns for the S&P and gold. Quartz also added Michael Tonello’s co.
Congressional Budget Office (CBO) updated budget and economic outlook for 2016-2026; budget deficit to increase this year and grow over coming 10 years
In 2016, the federal budget deficit will increase, in relation to the size of the economy, for the first time since 2009, according to the Congressional Budget Offices estimates. If current laws generally remained unchanged, the deficit would grow over the next 10 years, and by 2026 it would be considerably larger than its average over the past 50 years, CBO projects. Debt held by the public would also grow significantly from its already high level.
CBO anticipates that the economy will expand solidly this year and next. Increases in demand for goods and services are expected to reduce the quantity of underused labor and capital, or slack, in the economy thereby encouraging greater participation in the labor force by reducing the unemployment rate and pushing up compensation. That reduction in slack will also push up inflation and interest rates. Over the following years, CBO projects, output will grow at a more modest pace, constrained by relatively slow growth in the nations supply of labor. Nevertheless, in those later years, output is anticipated to grow more quickly than it has during the past decade.
The 2016 deficit will be $544B, CBO estimates,$105B more than the deficit recorded last year (see Summary Table 1). At 2.9% of gross domestic product (GDP), the expected shortfall for 2016 will mark the first time that the deficit has risen in relation to the size of the economy since peaking at 9.8% in 2009. About $43B of this years increase in the deficit results from a shift in the timing of some payments that the government would ordinarily have made in fiscal year 2017, but that will instead be made in fiscal year 2016, because October 1, 2016 the first day of fiscal year 2017falls on a weekend. If not for that shift, the projected deficit in 2016 would be $500B, or 2.7% of GDP
The 2016 deficit that CBO currently projects is $130B higher than the one that the agency projected in August 2015. That increase is largely attributable to legislation enacted since August in particular,the retroactive extension of a number of provisions that reduce corporate and individual income taxes.
The deficit projected by CBO would increase debt held by the public to 76% of GDP by the end of 2016, the agency estimates about 2 percentage points higher than it was last year and higher than it has been since the years immediately following World War II
Media-Saturn founder wants Metro to co-finance capital injection - RTRS
19-JAN-2016 16:51:13
DUESSELDORF, Germany, Jan 19 (Reuters) - The founder of Europe's biggest electronics chain Media-Saturn sees the company in urgent need of a capital increase, and is calling on its majority owner, retailer Metro MEOG.DE, to use some of the proceeds from recent disposals.
Media-Saturn's billionaire founder, Erich Kellerhals, still owns a stake of close to 22 percent and has regularly clashed with Metro over its management of the business, most notably over the group's move into the fast-growing online market.
If Metro is not willing to inject more capital, Kellerhals remains interested in buying its stake, Ralph Becker, head of Kellerhals' investment firm Convergenta, told Reuters.
Metro said if Convergenta made a concrete, firm offer for the rest of Media-Saturn is would look at it. Also, it is not categorically opposed to a capital increase at Media-Saturn but did not believe it is necessary, a spokesman for Metro said.
CEO: not planning to go to bond market in the near term; will seek to return some cash to shareholders at least every other year
- hoping costs ex-fuel will continue their decline in the coming years