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08Jan2018 Market Update: Wall Street Fractionally Higher, DOW Up 3 Points, WTI Trading Near 2015 Highs

Written by Gary

US equities markets set new historic highs, but jut barely (SPY +0.2%) stalling the strong rally that marked the start of 2018, pressured by losses in healthcare and bank stocks. Crude prices are little changed and the US dollar continues to trend higher.


Here is the current market situation from CNN Money

North and South American markets are higher today with shares in Mexico leading the region. The IPC is up 0.43% while Brazil's Bovespa is up 0.16% and U.S.'s S&P 500 is up 0.13%.

Traders Corner - Health of the Market

What Is Moving the Markets

Here are the headlines moving the markets.

Wall St. struggles to gain further as healthcare, bank stocks weigh

(Reuters) - The S&P 500 and the Dow struggled to edge higher on Monday, stalling the strong rally that marked the start of 2018, pressured by losses in healthcare and bank stocks.

U.S. bank gains from tax law start with red ink

NEW YORK (Reuters) - U.S. bank executives and investors expect a long-term boost from the new federal tax code, but the biggest lenders will first need to book multi-billion-dollar charges that will muddle fourth-quarter results.

Bitcoin drops below $15,000 as South Korea reviews accounts

NEW YORK (Reuters) - Bitcoin fell below $15,000 on Monday after South Korea's financial regulator said it and other agencies are inspecting six local banks that offer digital currency accounts to institutions.

Oil little changed as rising U.S. output offset OPEC worries

NEW YORK (Reuters) - Oil prices were little changed on Monday, trading near their highest since May 2015, as political concerns in some OPEC nations offset projections for higher U.S. oil production.

Rival airlines Emirates, Etihad step closer with security pact

DUBAI (Reuters) - Emirates [EMIRA.UL] and Etihad Airways signed a security pact on Monday to share information and intelligence, the first agreement between the two rival airlines based in the United Arab Emirates (UAE).

Exclusive: Bankers invited to Saudi Arabia to pitch for Aramco listing roles

LONDON/DUBAI (Reuters) - Saudi Aramco has invited banks pitching for roles in its stock market listing, including Citi and Goldman Sachs, for meetings in the kingdom in the coming weeks to make their case, according to three banking sources familiar with the matter.

Lululemon says holiday season sales better than expected

(Reuters) - Lululemon Athletica Inc said on Monday the holiday shopping season was even better than it had expected and raised its profit and revenue forecasts for the fourth quarter, sending the Canadian yogawear maker's shares to their highest since June 2013.

Airbus to boost China output as nears jet deal during Macron trip

PARIS (Reuters) - Airbus is set to boost production of narrowbody jets in China as it nears a new multi-billion-dollar deal to supply the world's fastest-growing aviation market during a visit by French President Emmanuel Macron, industry sources said.

Fiat Chrysler boosted by Jeep growth expectations

MILAN (Reuters) - Fiat Chrysler (FCA) shares hit a record high on Monday on growing expectations that the carmaker's coveted Jeep brand will unlock even greater value this year.

Hussman Questions Grantham's "Melt-Up" Thesis

Authored by Mike Shedlock via www.themaven.net/mishtalk,

Value investor Jeremy Grantham suggests "Bracing Yourself for a Possible Near-Term Melt-Up".

Grantham's 13-page synopsis Bracing Yourself for a Possible Near-Term Melt-Up suggests the bubble will burst and the consequences devastating, just not yet.

His key reasons center around an expected 3.5 year window that is typical of other bubbles coupled with advance decline ratios and acceleration that have not yet turned.

Acceleration

https://www.zerohedge.com/sites/default/files/inline-images/20180108_Mish1.jpg

Classic Bubble​

https://www.zerohedge.com/sites/default/files/inline-images/20180108_Mish2.jpg

Advance-Decline

GoPro Rebounds From Record Low On "Potential Sale" Headlines

Update: Having collapsed over 30% to record lows this morning, GPRO shares are ripping higher after CNBC headlines that the company has hired JPMorgan Chase to help it seek a potential sale, citing people familiar.

GoPro CEO Nick Woodman told CNBC earlier Monday the company would consider a sale or partnership with another company, though it plans to remain independent.

The machines loved the headline and ripped the stock back to unchanged from it halt...

https://www.zerohedge.com/sites/default/files/inline-images/20180108_gpro11.png

* * *

GoPro stock price is down over 30% this morning after a triple whammy of apparently bad news smashed the 'camera on a stick' company to record lows.

Whammy 1: GoPro says in filing COO Charles Prober is departing the company effective Feb. 16.

Whammy 2: GoPro Inc. said it's cutting more than 20 percent of its global workforce and putting an end to its drone business after a disappointing fourth quarter.

Whammy 3: The company said it now expects sales of about $340 million, well short of its own previous projection of as much as $480 million and the average analyst estimate of $472 million. Revenue took an $80 million hit due to discounting for its Karma drones, as well as its Hero line of cameras, over the holiday season, the company said.

And the result - Collapse... At today's lows of $5.04, GPRO is down over 94% from its record highs in Oct 2014.

Buffett's Berkshire To Reap $37 Billion Benefit From Trump Tax Cuts

For the most glaring example of Trump tax cuts benefiting the rich, look no further than Warren Buffett.

According to an analysis by Barclays analyst Jay Gelb, Buffett's Berkshire will be among the greatest beneficiaries of US corporate tax reform. The bank calculates that Berkshire Hathaway's 4Q book value could see a huge boost of as much as $37 billion (12% increase from 3Q 17 level) resulting from the US corporate tax reform due to a decline in its deferred tax liability (DTL). The one-time increase will result from Berkshire lowering its tax liability on appreciated investments.

We would view this magnitude of book value increase as favorable for BRK shares since it is generally valued based on price-to-book value. Based on substantial net unrealized equity investment gains during 2017 and a lowered US corporate tax rate, we estimate Berkshire's DTL could be $37bn lower (with a corresponding increase to its book value) than it would have been without tax reform.

While Barclays concedes that while a reduction in Berkshire's deferred tax liability would be a non-cash item, it notes that as of 3Q 17 Berkshire had $109bn of cash and equivalents, of which the bank views approximately $90bn as being immediately deployable for acquisitions not including potential additional debt capacity.

If Berkshire is able to acquire a large business in an all-cash deal, we would typically expect a transaction to be immediately accretive to Berkshire's EPS.

In other words, look for Berkshire to aggressively start purchasing companies in the coming months.

Furthermore, Barclays expect the company's operating earning power - the money made by subsidiaries such as Burlington Northern and Geico -to rise by around 12% in 2018 and beyond as a result of a reduced corporate US tax rate.

Barclays also points out that as ...

Two Of Apple's Largest Shareholders Urge Company To Address "iPhone Addiction" Among Kids

In an unusual move, two of Apple's largest shareholders, Jana Partners, a large activist hedge fund, and the California State Teachers' Retirement System (CalSTRS) penned a letter to the company over the weekend saying the smartphone maker needs to respond to what some see as a growing public-health crisis of youth phone addiction. Among other things, the pair, which control some $2 billion worth of Apple shares, urged the company to develop new software tools that would help parents control and limit phone use more easily and to study the impact of overuse on mental health.

By doing so, we believe Apple would once again be playing a pioneering role, this time by setting an example about the obligations of technology companies to their youngest customers. As a company that prides itself on values like inclusiveness, quality education, environmental protection, and supplier responsibility, Apple would also once again be showcasing the innovative spirit that made you the most valuable public company in the world. In fact, we believe that addressing this issue now will enhance long-term value for all shareholders, by creating more choices and options for your customers today and helping to protect the next generation of leaders, innovators, and customers tomorrow.

Adding to the extreme irony of the letter, Jana and CalSTRS go on to highlight a series of studies which suggest that Apple products are literally killing the kids who use them and/or resulting in extreme bouts of depression or physical ailments from a lack of exercise. All of which would typically send investors running for the hills but apparently not in this specific case.

A study conducted recently by the Center on Media and Child Health and the University of Alberta found that 67% of the over 2,300 teachers surveyed observed that the n ...

Why Everything Is Still Awesome in Global Markets

The calendar has rolled over but global markets are still thriving on the 2017 playbook. That means that big questions over why growth and inflation are so out of whack with each other remain unanswered.

The Price Gap That's Squeezing the Auto Market

The widening difference in prices between new and used cars augurs pain for auto-makers profits in the U.S.

China's Electric Car Market Has Grown Up

Beijing has offered the electric car market plenty of support, but there now appears to be solid demand from consumers to go green. That should give confidence to investors in the sector.

December 2017 Conference Board Employment Index Growth Rate Improves

Written by Steven Hansen

The Conference Board's Employment Trends Index - which forecasts employment for the next 6 months improved with the author's saying "The rapid improvement in the Employment Trends Index in recent months suggests that job growth is unlikely to slow down in the months ahead,".

Toyota thinks food trucks are the future of retail, and Amazon is in

Toyota Mobile Corp. is trying to combine autonomous vehicles and retail, and has convinced Amazon.com Inc. to help out.

Economist James K. Galbraith isn't celebrating Dow 25,000

James K Galbraith, a progressive economist at the University of Texas, believes mainstream economists are missing warning signs about the economy.

Will Trump make America read again?

Could Michael Wolff's "Fire and Fury: Inside the Trump White House," a blistering account of the first year of the Trump White House, be enough to get the president — and the rest of America — to turn off their TVs and open a book?

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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