Picks of the Day December 13, 2017.
Yellen’s Thoughts on Fiscal Policy…
Trump may be grabbing headlines – from gropes to gripes – but what matters now more than anyone else in U.S. markets and international markets to boot is Janet Yellen. And now, it’s not what Trump thinks about Yellen, but the tables have turned, and Yellen today will get her final chance to give voice to her stance on Trump’s huge tax hikes. As reported by the Wall Street Journal, it’s not clear if the two chambers of Congress will set the corporate tax rate at 22%, but for the markets, even in the worst case scenario – if the bill goes through as expected – corporate tax rates will go down 37%. Just imagine if every month your salary stub, slip… (Call it whatever you want!) made note of the fact that you had 37% more cash to spend – because all that money U.S. corporations would have been giving to Uncle Sam will now be going to American companies’ stockholders in one form or another. Take your pick, higher dividends, stock buybacks, cash for capital investments, infrastructure and the like, Wall Street has been banking on this windfall ever since Trump was elected into office in a surprise landslide victory. And now, Yellen, after being passed over by Trump for Jerome Powell, the incoming Fed Chief, will have her opportunity to say what she has to say about the tax hike and its effect on everything from the safety net, to its economic viability.
That’s what the market wants to know today, i.e. Yellen’s thoughts! Morgan Stanley Investment Management portfolio manager and fixed income strategist, Jim Caron, put it simply. “The surprise we have to look for is how the Fed may interpret tax changes going forward. They’ve had three rate hikes for 2018. Does this move them to four? There’s a very low threshold to move up to four hikes. It just takes three voters. That’s really what people are going to focus on.”
Will the tax bill overheat the economy, pumping up inflation? The Fed’s dual mandate – interest rates and inflation – mean that these are the core topics that will be addressed today!
Market strategists seem to all be saying the same thing, i.e. “We want tax reform!” Ask E-trade Investment Strategy VP, Mike Loewengart. “As the markets eclipse yet another historic boundary, the message from investors is clear: Bring on tax reform and bring on a rate hike. The consensus on the street is that a rate increase is all but certain.” And what are the chances of the reform going through?! “Same with tax reform, despite some serious obstacles remaining. Dissent voiced by a prominent Senator today over federal debt limits illustrates there are more than a few skeptics, especially among the deficit hawk cohort. But that’s probably not enough to dissuade reform bulls that tax reform is in any way threatened.”
Market Summary: Yesterday, the S&P 500 and the Dow closed at record highs for the fourth session in a row. The NASDAQ, though, broke with the crowd, heading down. On the S&P 500, telecom and financial stocks led the gains, utilities and energy stocks underperforming. For the NASDAQ, it was semiconductor stocks that dragged it lower.
Boeing (BA) was up 2.4%, riding the wave of the aerospace giant’s announcement that it was boosting its dividends and share repurchase program. Mattel (MAT) took a spill, falling 4.9% after warning about a grim holiday season, noting that inventory write downs and steep discounts were likely. Comcast (CMCSA), withdrew its bid for the entertainment assets of 21st Century Fox (FOXA), making Walt Disney the only bidder for the Fox assets. CMCSA was up 2.78%, FOXA tacked on 1.31%, and DIS edged up 0.56%.
January bitcoin futures traded at $18,090, off 2.16% on their second full trading day. Bitcoin was off 3.02%, trading a smidgen above the $18,000 mark. Like always, we reiterate, “Buyer Beware!”
Today’s Economic Diary: The Consumer Price Index will be released at 8:30, followed by the EIA Petroleum Status Report at 10:30. The highlight of the day will come at 14:00 with the FOMC monetary policy announcement, the central bank’s forecasts to be released at the same hour. Then the Fed Chair Press Conference will take place at 14:30.
Wednesday’s Hot Stocks: STRM, CIVI, PAY, MDB
Have a great trading day!
|Tuesday||FOMC Meeting Begins|
|Tuesday||6:00||NFIB Small Business Optimism Index||104.2||Medium|
|Wednesday||8:30||Consumer Price Index||0.4 %||High|
|Wednesday||14:00||FOMC Meeting Announcement||High|
|Wednesday||14:30||Fed Chair Press Conference||High|
|Thursday||8:30||Jobless Claims||239 K||Medium|
|Thursday||8:30||Retail Sales||0.3 %||Medium|
|Thursday||8:30||Import and Export Prices||0.7 %||Medium|
|Thursday||10:00||Business Inventories||-0.1 %||Medium|
|Friday||8:30||Empire State Mfg Survey||-0.1||Medium|
|Friday||9:15||Industrial Production||0.3 %||Medium|
|CASY||Casey’s General Stores, Inc.||PM||Monday|
|PAY||VeriFone Systems, Inc.||PM||Tuesday|
|DVMT||Dell Technologies Inc.||AM||Thursday|
|COST||Costco Wholesale Corporation||PM||Thursday|
|ADBE||Adobe Systems Incorporated||PM||Thursday|
New York Strategy Swing