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Time to plan a trip abroad?


US Stocks saw their best gain in 2 weeks yesterday and turned positive in 2015 after the European Central Bank announced their long-awaited plan to initiate a bond buying program, in what has become affectionately known as Quantitative Easing, in an attempt to revive the slumping Eurozone economy.  The ECB announced they will start buying $60 billion euros worth of bonds from different Eurozone countries starting in March.  That news sent the Euro to a new low of $1.12 versus the dollar.

Shares of Starbucks traded sharply higher after the company reported earnings that were in-line with Wall St estimates.  Sales rose 13% over the same period last year and the company increased their forecast for 2015 earnings.  That news sent the stock 4.5% higher @ $86.50/share.

McDonald's is seeing their stock traded lower after the company reported earnings that were 21% lower over the same period last year, which ends a dismal year for McDonalds.  The company also announced they expect a slow January and plan to slow spending to improve their balance sheet.  McDonald's has been working to rejuvenate its business in recent months after posting some of the worst monthly sales figures in more than a decade.

Shares of GE are higher after the company posted higher than expected 4th quarter earnings.  GE has done the best job of any major industrial company managing lower oil prices and a slump in Europe and still growing earnings.

And speaking of Oil.  Crude inventories in the US are higher than they have been in over 80 years.  US supplies currently stand at 390mm barrels which is a big reason the price of crude oil is down 58% from its peak last summer.
 


European Central Bank in Spotlight


International investors are the most bullish they've been on the U.S. markets in more than five years according to Bloomberg. The poll says 54% of subscribers say the US will be among the markets offering the best returns over the next year. That's a five-point jump from the previous poll in November and the highest rating for any country since the survey began in October 2009.

Groundbreaking for US single-family homes rose in December to the highest level in more than 6-1/2 years and permits surged. Single-family housing starts, the largest part of the market, jumped 7.2% to an annual pace of 728,000-units - the highest level since March 2008. (Reuters)

Where did that gas savings go? Consumers increased their gas consumption by 6%, but even with that 2-gallon-per-month increase, the cost savings were real, $18 per month. That $18 did not go to  savings. Cardlytics' data showed overall spending was up 2.3%, with a 5.3% increase just in retail and restaurants. Consumers spent more in total even after spending all of their gas savings. The $18 in gas savings was more than offset by a $45 jump in all other spending. (CNBC)

Melvin Gordon, CEO of Tootsie Roll Industries recently died at age 95. He ran the company, with a $1.2 billion market cap, for 53 years. The company's other brands include DOTS, Charms, Junior Mints, Sugar Daddy and Charleston Chew. (AP)
 


Gold Shines Bright


IBM easily beat earnings expectations on Tuesday, but shares fell as the company handed in a disappointing outlook for 2015. The company posted fourth-quarter earnings of $5.81 per share, down from $6.13 a share in the year-earlier period. Revenue decreased to $24.11 billion from $27.70 billion. (CNBC)

December 2014 was a bad one for Oregon homeowners unable to hold onto their homes. According to Gorilla Capital, there were a total of 753 judicial and non-judicial foreclosures filed in December the second highest total in 2014.

For 2014, there were 7,075 foreclosures compared to 13,446 in 2013.

In a blow to the traditional TV viewing model a US district court judge has rejected 21st Century Fox's claims against Dish Network. Fox had been trying to prevent Dish from selling its "Hopper" DVR, which lets viewers skip past commercials. (Reuters)

Mortgage application volume jumped 14.2% last week. Total volume is now 41% higher than a year ago. Applications to refinance increased 63% from a year ago. Applications to purchase a home are 3% higher than one year ago. (Mortgage Bankers Association)
 


Earnings and Good Economic Data


Johnson & Johnson announced fourth quarter sales of $18.3 billion, a drop of 0.6% as compared to last year.  The negative impact of currency was 4.5%. Profits for the fourth quarter of 2014 were $2.5 billion.  

U.S. manufacturing output rose modestly in December by 0.3%. That marks the fourth straight month of growth. Mining output jumped by 2.2%, reflecting an increase in oil and gas extraction, although a drop in drilling and well-servicing activity tempered the gains. (Reuters)

Consumers started the year feeling very upbeat about the economy, with the sentiment index hitting its highest level since 2004. More consumers cited increases in their household incomes in early January than any time in the past decade, and more households reported unprompted references to favorable employment prospects. (CNBC)

Thai Union Frozen Products, the world's biggest producer of canned tuna, has agreed to buy US peer Bumble Bee Seafoods for $1.5 billion as part of a plan to double revenue through overseas acquisitions. The purchase will give Thai Union control of some of North America's most well-known seafood lines—including two of the three biggest canned tuna brands in the United States. Thai Union's Chicken of the Sea is the third-biggest tuna brand in the U.S. behind Bumble Bee. The top brand, Starkist, is owned by South Korea's Dongwon Industries. (Reuters)
 


Tame Inflation At All Levels


U.S. producer prices in December recorded their biggest fall in more than three years on tumbling energy costs. The producer price index declined 0.3% in December with wholesale energy prices dropping a record 6.6% after falling 3.1% in November.  For 2014 inflation at the manufacturing level increased 1.1%. (Reuters)

At the consumer level inflation fell 0.4% in December. For all of 2014 consumer inflation ran at 1.6%.

Accelerating the sell off this week is retail investors pulling $4.1 billion out of US stocks, the second straight week of net outflows.  (Lipper)

Cuts in the oil patch are taking a toll as Schlumberger cuts 9,000 jobs, or about 7% of its workforce. (Reuters)

The 10-year Treasury stands at extreme lows of 1.70% as investors flee to safety of the dollar.

The euro is just above an 11-year low at $1.159, to the dollar, as the European Central Bank looks to start large-scale bond buying.

Join us Saturday at 10 for Financial Focus Radio Saturday at 10 a.m. when our mortgage expert, Peri Henderson of Directors Mortgage will be our guest.


Uncertainty Reigns


CSX, the third-largest U.S. railroad, reported higher Q4 profits and expect a strong increase in its freight business and double-digit earnings growth during 2015. Profits rose on the back of an 11% rise in coal shipments and a 5% increase in agricultural, chemical and construction product shipments. CSX said the main driver for the rise in its chemicals business came from crude oil shipments to East Coast refineries due to increased supply of crude oil from domestic shale drilling activity. (Reuters)

Holiday sales rose 4.0% to $616.1 billion according to the National Retail Federation. It marked the first time since 2011 that holiday sales increased more than 4%. On average, holiday sales have grown 2.9% over the past 10 years.

US December retail sales fell 0.9% as gas prices plummet.  Declining gasoline prices weighed on service station sales, with receipts falling 6.5% the biggest decline since December 2008. (CNBC)

The yield on the U.S. 30-year Treasury bond fell to record low and the U.S. 10-year Treasury yield fell below October lows to hit a full-year low on Wednesday. The yield on the 10-year bond briefly touched 1.784%—its lowest level since May 2013. The yield on the government's 30-year bond fell to a record low of 2.395%, surpassing the previous record low of 2.443% set in July 2012. (Tradeweb)

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Stock Market Sell Off Continues


The stock markets dramatic reversal yesterday from a gain of as much as 1.5% to big losses reflected the lack of conviction and confidence among investors as crude oil’s unabated slide stoked fears of global deflation. The steep downdraft came as the market was enjoying a rally underpinned by better-than-expected earnings from Alcoa, and hopes that ECB is close to providing quantitative easing. (CNBC)

JPMorgan Chase, the biggest U.S. bank, reported a 6.6% drop in quarterly profits, hit by legal costs of nearly $1 billion. The bank's profits fell to $4.93 billion in Q4 from $5.28 billion last year. Revenue fell 2.8% to $22.51 billion. (Reuters)

The National Federation of Independent Business’s small-business optimism index increased in December to its highest point since October 2006.

The gain in December was broad-based with the only subindex to decline was expected business conditions. It fell after a big November gain. (Wall Street Journal)


All That Glitters is Gold


Earnings season is out of the gates as Alcoa swung a 4th quarter profit of $159 million after losing $2.34 billion last year, thanks to strong growth in its aerospace and automotive businesses and a rebound in prices for raw aluminum. Sales rose 14% to $6.38 billion. (Wall Street Journal)

Another sign the sun maybe close to setting. Salus Capital Partners is making an unsolicited offering to loan $500 million to RadioShack in a kind of debtor-in-possession loan used by companies to fund operations in bankruptcy. RadioShack, whose sales have been dropping since 2010, said in September that a bankruptcy filing was a possibility. (Wall Street Journal)

Burgers are the “largest dine-out segment” in the U.S., with more than $72 billion in sales last year. That makes it twice the size of the pizza market, the next largest category. Burgers are “the quintessential American meal,” but are also popular overseas, with an estimated global market size of over $135 billion. (Wall Street Journal)

Oil is down $1.41 at $44.63 a barrel.  The price fall is a result of rising output, especially of U.S. shale oil. At the same time, producers from the Organization of the Petroleum Exporting Countries (OPEC) have not cut output, instead offering discounts to customers in an attempt to defend market share. The downward pressure on prices is so big that even record Chinese crude imports for December. (Reuters)
 


Auto Loan Defaults Rise


Borrowers who took out auto loans over the past year are missing payments at the highest level since the recession. It’s clear that credit quality is eroding. More than 2.6% of car-loan borrowers who took out loans in the first quarter of last year had missed at least one monthly payment by November. The uptick comes amid an increase in subprime auto loans, raising concerns that car buyers may have taken on more debt than they can handle. (Wall Street Journal)

Some take aways from that big jobs report on Friday.
The U.S. added more jobs in 2014—an average of 246,000 per month—than in any since 1999.

Over the last 12 months, the 2.9 million jobs added is the most for a 12-month stretch since the middle of 2000.

The unemployment rate fell to 5.6% in December, down from 6.7% one year earlier.

Unemployment is 8.6% among those without a high school diploma, it’s only 5.3% among high school graduates, 4.9% among those with some college or an associate’s degree and 2.9% for college graduates.

Private-sector employees saw their average weekly earnings rise 2.5% from a year earlier as hours worked increased.

Payrolls grew 2.1% last year, led by gains in the private sector. State and local government hiring edged up 0.6% last year and federal payrolls edged down 0.6% last year. (Wall Street Journal)
 


Another Big Jobs Number


The US Labor Department says the US economy added 252,000 jobs in December.  That lowered the unemployment rate to 5.6%. Over 2.9 million jobs were added to the economy in 2014.

Coca-Cola plans to layoff about 1,800 employees globally in the next few months. The move is a part of the beverage giant's effort to cut $3 billion in costs. The world' largest soft drink company employs about 130,000 workers worldwide. (CNBC)

JC Penny gave another death shudder on Thursday announcing it will close about 40 stores in 2015.  About 2,250 jobs will be lost. The only Oregon store closing will be in North Bend. (Huffington Post)

Despite the improving economy and rising financial markets it turned out to be a lousy year for private pension funds. After gradual progress rebuilding the funds they need to pay retirees, the average private pension fund held about 80% of what it needs to cover those payments. That's down from 89% at the end of 2013 and represents an overall deficit among large corporate plans of about $343 billion, nearly double the shortfall a year earlier. (Reuters)

Join Tyler and me on Saturday at 10am for Financial Focus when our guest will be Don Klippenes of Health Insurance Strategies.  
 


Volatility in the markets is back!


The U.S. 10-year Treasury note yield climbed to 2% after closing at 1.95% on Wednesday, following December's Federal Reserve meeting minutes that indicated inflation would not have to climb from current levels for the central bank to begin raising interest rates. (CNBC)

The nature of work is radically changing. Millennials are poised to become largest demographic in the workforce in 2015 and will compromise 75% of all workers by 2030. This tech-savvy generation thinks differently about earning a living. They care more about the content and impact of their toils than how much money they earn. They want to pursue the work they’re interested in while maintaining flexibility. Indeed, a recent study shows that 79% of them would consider quitting their traditional job to freelance. (Forbes)

These are trends that could change economies. Global life expectancy has increased by about 6 years over the past two decades. The rise in life expectancy is the result of dramatic advances in health care. Global deaths from infectious disease dropped by about 25% while the number of deaths linked to noncommunicable diseases such as cancer, heart disease and diabetes has jumped by about 40%. (Wall Street Journal)

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Business News


The US Stock market endured another day of selling yesterday with the S&P 500 extending its losing streak to 5 straight days.  The DOW if off to its worst start to the year since the financial crisis in 2008.

The crude oil price collapse continued yesterday with WTI Crude closing below $48/barrel for the first time since April 2009.  Traders are concerned about a weakening economy in Europe, a stronger dollar, and a global supply glut all combining to push oil prices lower.

The payroll company ADP is out this morning with a look at the labor market in December.  According to ADP the private sector added 241,000 jobs in December which is a number that is much better than expected by economists.  The service sector added the most jobs, and ¾ of those jobs were created by small businesses, those with 50 or fewer employees.

And it looks like we are finally starting to see improving sales at JC Penney.  The company said sales increased 3.7% during the holiday season.  They also said they expect to hit the high end of their earnings range as they continue to focus on profitable sales growth.  Shares of JC Penney are trading over 20% higher on that news.
 


A Perceived Flight to Safety


The yield on the 10 Treasury fell below 2% in early trading and stands at 1.98%. Monday was the bonds sixth straight drop in yield as investors run to safety on increasing worries about Greece may possibly quit the euro zone. (Reuters)

2014 was a blockbuster year for the auto industry. According to TrueCar, combined new and used auto sales will rise 8.3% to $1.1 trillion in the U.S. alone. Americans purchased 54 million new and previously owned cars, trucks and crossovers. But it's not just volume that's driving the revenue boost. Thanks to a slowly improving economy and a drop in gas prices, automakers have been able to raise prices at a time of strong demand. (CNBC)

BMW is taking advantage of strong sales to raise prices for 2015. Given that it's selling luxury vehicles with prices to match, the increases are not likely to present much of a jolt to its well-heeled buyers. Prices will increase about 1.4%.  BMW calls them "modest inflationary" increase. (USA Today)

North Korean hackers may not be the biggest worry you should have in protecting your sensitive personal data.  Morgan Stanley has fired one of its stock brokers after accusing him of stealing account data on about 350,000 clients and posting some of that information online. (Wall Street Journal)
 


Oil Hits New Lows


The euro hit a nine-year low against the dollar last night trading below $1.20 for first time since June 2010.  The Euro slumped to as low as $1.186 last night, the weakest since March 2006. That is drop of 1.2%.  Your trip to Europe this spring just got a lot cheaper. (Bloomberg)

The merger between Greensboro-based RF Micro Devices and Hillsboro-based TriQuint Semiconductor was completed on New Years Day.  The merger is expected to create a top competitor in the wireless component industry. The combined company, Qorvo, is trading on the NASDAQ under the symbol QRVO. (Portland Business Journal)

The pace of growth in the U.S. manufacturing sector slowed more than expected in December. The Institute for Supply Management said its index of national factory activity fell to 55.5 from 58.7 the month before. A reading above 50 indicates expansion in the manufacturing sector. In a separate report, U.S. construction spending fell in November, held back by a drop in government outlays and by less money spent by businesses on projects other than homes.

Construction spending fell 0.3%, the first decline since June, to an annual rate of $975 billion. (CNBC)

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