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Business News Archives for 2019-08


Recession fears took hold yesterday as short-term Treasuries paid more than long-term notes, a warning sign that investors are rapidly shifting their money into bonds to shield against potential losses they could incur by holding stocks. A brief inversion could be just an anomaly (others have not preceded recessions), but it may depend on how long the condition lasts. Others argue the inversion occurred because of the Fed, which has kept its base short-term rate "too high," while some maintain the yield curve has been distorted by more than $15T worth of foreign bonds that pay negative interest rates. (SA)

 

The retail sector was hammered yesterday by weak guidance from Macy's as department stores continued to lose shoppers to newer forms of retailing. Shares tumbled 13% after the company lowered its full-year earnings outlook and missed profit expectations. Worries were also seen after Cisco's Q2 results, which showed struggles in China amid a continuing trade war. (CNBC)

 

Walmart reassured Wall Street over US consumer spending this morning as the retailer lifted its outlook for domestic full-year sales, but pointed to weakness in its stores abroad. The company, long considered a bellwether for middle-class spending, shrugged off turmoil elsewhere in the retail sector to post a 2.8 per cent rise in like-for-like domestic sales (FT).

 

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.
 



Stocks climbed yesterday after the U.S. decided to delay tariffs on certain Chinese goods. The United States Trade Representative said certain products including clothing and cellphones are being removed from the tariff list based on “health, safety, national security and other factors” The S&P 500 rose 1.48% and the Nasdaq was 1.95% higher. Apple which surged more than 4%. (FT)

 

Yesterday the yield on the 10-year Treasury broke below the 2-year rate, an odd bond market phenomenon that has historically been a reliable indicator for economic recessions. (CNBC)

 

CBS and Viacom have agreed to merge, ending years of talks. The new company will be called ViacomCBS. (WSJ)

Airbnb has settled a lawsuit alleging the site allowed vacation rental owners who use the site to discriminate against customers based on race. (OregonLive)

 

Semiconductor equipment company Edwards Vacuum in Hillsboro is expanding its workforce by 100 employees, to 250. (OregonLive)

 

Troy Reinhart
Northwest Quadrant Wealth Management



Investors are jumping into bonds like they're a hot IPO, with the U.S. yield curve at its flattest level since 2007. The 30-year Treasury rate tumbled as much as 14 basis points on Monday to close in on its record-low of 2.0882% from July 2016, while the 10-year note fell 10 bps to 1.65%, and at one point was just 5 bps more than two-year notes. The pace of the move means 1.318% - the 10-year's all-time low set three years ago - is at risk of being broken, unless the Fed maintains a hawkish stance or if Beijing unveils a stimulus package to counter trade war fallout. (SA)

 

The U.S. budget gap widened further in July as federal spending outpaced revenue collection, bringing the deficit to $867B in the first ten months of the fiscal year, a 27% increase from the same period a year earlier. For the month, the biggest expenditure - Social Security - was $88B followed by Medicare and National Defense, each at $56B. Customs duties, which include tariffs from imports, jumped by 75% to $56.9B YTD.  (FT)

 

U.S. consumer prices rose broadly in July, but the increase in inflation will likely do little to change expectations that the Federal Reserve will cut interest rates again next month amid worsening trade tensions.  The Labor Department said this morning its consumer price index increased 0.3% last month, lifted by gains in the cost of energy products and a range of other goods. The CPI had edged up 0.1% for two straight months. In the 12 months through July inflation is up 1.8%.  (CNBC)

 

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.
 



The boards of CBS and Viacom were negotiating late into Sunday night, trying to hash out a price for their long-awaited all-stock merger, Bloomberg reports. The companies aim to announce a merger by today, although the timing could slip into Tuesday, capping years of failed merger attempts and board infighting. Shari Redstone, whose family investment vehicle National Amusements controls both companies, would become chairman of the combined entity, while Viacom CEO Bob Bakish would lead the firm as CEO. (SA)

 

Investment banks are shedding thousands of jobs, with almost 30,000 losses announced since April as falling interest rates, weak trading volumes and investor pressure to protect profits force the sector to shrink.  Most of the cuts have come in Europe, with Deutsche accounting for more than half the total, but in New York City jobs in commodity and securities trading have also gone.  Bank executives are under pressure from investors to cut costs and protect profits. Since long-term US interest rates began to fall in November, financials have fallen 5 per cent, while the S&P 500 has risen 6 per cent. (FT)

 

Trying to diversify away from ETFs and index funds, BlackRock (the world’s largest asset manager) has scooped up a 30% stake in Authentic Brands Group, parent company of Sports Illustrated, for $875M. Created in 2010, Authentic Brands Group also owns Aeropostale, Juicy Couture, Nine West, Spyder, and Frye. The deal values Authentic at more than $4B including debt and will see BlackRock supplant private-equity firm Leonard Green & Partners as its largest shareholder. (FT)

 

With Northwest Quadrant Wealth Management, a Registered Investment Advisor I am Josh Fenili.



Stocks rose yesterday, erasing most of the steep losses from earlier in the week, as global bond yields rebounded while investors digested better-than-expected trade data out of China. 
 
Uber shares plunged 12% after the ride-hailing service reported second-quarter financial results. The company lost $5.24 billion in the quarter.  Now, Uber must convince investors that it is on a path to profitability with a realistic long-term plan for generating returns for investors
 
In Denmark’s $495 billion mortgage-backed bond market, another milestone was reached as Nordea Bank said it will start offering 20-year fixed-rate mortgage loans that charge no interest.  The development follows an announcement earlier in the week by Jyske Bank, which said it will start issuing 10-year mortgages at a coupon of minus 0.5%. Danes can also now get 30-year mortgages at 0.5%, and Nordea recently adjusted its prospectus to allow for home loans up to 30 years at negative interest rates.
 
Semiconductor materials specialist JSR Micro says it plans to build a $100 million factory in Hillsboro and begin production there sometime next year.  JSR is a Japanese petrochemical company.  JSR didn’t say why it chose Oregon, but Hillsboro is home to Intel’s Ronler Acres campus, Intel’s most advanced production site.
 
With Northwest Quadrant Wealth Management, I'm Tyler Simones.



The S&P 500 and Nasdaq ended narrowly higher yesterday, after spending mostly of the day sharply lower.

The flight to safety sent the yield on the 10-Year Treasury Note — used as a benchmark for mortgage rates and auto loans — falling to a low of 1.595%, the lowest since 2016. The yield on the 30-year Treasury Bond bottomed around 2.12%, near its all-time low reached in 2016. Yields pared some of their declines later in the session but held steady near multiyear lows.

 

Shares of the ride hailing company, Lyft spiked after the company reported second-quarter financial results. The company lost $644 million in the quarter, or $2.23 a share. Revenue soared 72% year-over-year to $867.3 million, and Lyft raised its full-year guidance to between $3.47 billion to $3.5 billion.

 

America's two largest newspaper publishers will merge to combat declining circulation and plunging advertising revenue but will still face pressure to cut costs at hundreds of already cash-strapped publications around the country.  The combination of McLean, Virginia-based Gannett and GateHouse Media, based in Pittsford, New York, will create a conglomerate that will own more than 250 daily newspapers and hundreds of weekly and community papers.  The new company will own the Statesman Journal in Salem, and the Register-Guard in Eugene.
 
With Northwest Quadrant Wealth Management, I'm Tyler Simones.



Stocks rebounded yesterday from their worst day of the year after China’s central bank indicated it plans to keep its currency at a level stronger than some investors had first feared.

 

Shares of Disney traded lower even though the company reported record quarterly revenue as expectations for record-breaking movie profit and higher earnings and sales failed to materialize.  Disney stock has been trading at record highs recently, after the opening of Endgame. The stock is at $141.87, up 29% for the year.

 

Job openings nationwide fell slightly in June but topped 7 million for a record 15th month in a row, reflecting the strongest labor market in decades even as the U.S. faces stiffer economic challenges.  Job openings rose the most in retail and real estate.

 

The iconic clothing retailer founded almost a century ago, Barneys, is filing for Chapter 11 bankruptcy protection but will keep the doors open at its 10-story Madison Avenue store.  The company has secured $75 million in financing to pay employees and vendors as it seeks a buyer.  Barneys stores in Chicago, Las Vegas and Seattle will close along with 12 concept and warehouse locations.  Stores in Beverly Hills, San Francisco and in Boston will remain open.  The picture for most traditional retailers grows worse by the year.  The number of retail store closed in the U.S. this year has already surpassed the total number in 2018.
 
With Northwest Quadrant Wealth Management, I'm Tyler Simones.



Stocks fell sharply yesterday as a trade war between the world’s largest economies intensified with China retaliating against President Donald Trump’s latest move.


The Chinese yuan sank to 7 per US Dollar yesterday which is an all-time-low, with the Chinese central bank blaming the depreciation on market forces and President Trump’s decision last week to extend tariffs on almost all Chinese imports. Mr. Trump responded on Twitter, accusing China of engaging in currency manipulation.

 

The average rate on the popular 30-year fixed mortgage hit 3.70%, the lowest in 3 years. That rate will likely dip even lower, as bond yields continue to fall.  The drop last week meant that 8.2 million 30-year mortgage holders could likely qualify for a refinance and save at least 0.75% off of their current interest rate.  While rates are now incredibly favorable for both refinance and home purchase, consumers still need to shop around for the best rate, and a full one-third of them are not, according to a new survey from Fannie Mae.

 

The yield curve in the bond market is giving the largest waring of an impending recession since 2007.   Rates on 10-year notes sank to 1.74%, close to completely erasing the surge that followed President Donald Trump’s 2016 election. In early trading, they fetched as much as 32 basis points less than three-month bills, the most extreme yield-curve inversion since just before the 2008 crisis.
 
With Northwest Quadrant Wealth Management, I'm Tyler Simones.



US Stocks had their worst week of 2019 last week after investors had to deal with a slew of mixed economic data, and more trade war sabre rattling between the US and China.
 
Warren Buffett’s Berkshire Hathaway said Saturday its second-quarter earnings rose due to unrealized investment gains, while the company’s cash pile grew to a record.  Berkshire reported second-quarter net earnings of $14 billion, from $12 billion, in the year-earlier period.  The 88-year-old Buffett, whose shrewd investments have earned him the nickname “the Oracle of Omaha,” still has plenty of cash on hand for future acquisitions as a way to drive profit. Berkshire held a record $122 billion in cash at the end of the second quarter, up from $114 billion at the end of the first quarter.

 

The University of Michigan said the final reading of its consumer-sentiment index for July was 98.4, up from 98.2 in June.  Recent consumer surveys have pointed to the most favorable personal finance expectations since May 2003, but consumers also have begun to take precautionary measures to increase savings and reduce debt.

 

The economy created a another 164,000 new jobs in July, underscoring the strength of a robust U.S. labor market that’s shown little sign of deterioration.  The unemployment rate was unchanged at 3.7% and remained near a 50-year low. In a good sign, more people entered the labor force in search of work.

 

With Northwest Quadrant Wealth Management, I'm Tyler Simones.



Stocks fell sharply again yesterday, erasing big gains from earlier in the day, after President Donald Trump said the U.S. would impose an additional 10% tariff on another $300 billion of Chinese imports to the U.S.
 
The US economy added 164,000 new jobs in July, underscoring the strength of the US labor market.  The increase was slightly below the forecast of 171,000.  The unemployment rate remained unchanged at 3.7% which is a 50 year low.
 
 American manufacturers grew in July at the slowest pace in three years thanks to festering U.S. trade disputes that have hurt exports and undermined the global economy.  The Institute for Supply Management said its manufacturing index slipped to 51.2% last month from 51.7% in June. That’s the lowest reading since August 2016.


A big quarter at the parent company of KFC, Taco Bell and Pizza Hut. Yum! Brands beat on earnings and revenue thanks to blow-out sales at all three of its big brands. Same-store sales at Taco Bell topped 7%, while KFC was up 6%. They also saw a 2% increase at Pizza Hut, which has been lagging.  The stock rose 4% on the news.
 
With Northwest Quadrant Wealth Management, I’m Tyler Simones.



>>U.S. stocks sold off yesterday after the Federal Reserve cut interest rates by just 25 basis points, and the selloff gathered steam during Chairman Jerome Powell’s subsequent press conference, where he gave the impression that Wednesday’s cut was a “mid-cycle adjustment to policy” rather than the first in a series of actions to lower interest rates.

 

The Federal Reserve is worried about the economy, but American consumers aren’t. They’re very confident, in fact.  The consumer confidence index jumped to 135 in July from 124 in June.  The index now sits just a touch below an 18-year high of 137.9 set last October.


The nation’s businesses created 156,000 private-sector jobs in July, according to payroll processor ADP, showing that companies are still willing to hire despite stiffer headwinds for the economy such as the ongoing trade spat with China.

 

Pending home sales rose in June, with activity particularly brisk in the western part of the U.S. The National Association of Realtors said pending home sales climbed 2.8%, with gains in each of the four major regions, including a 5.4% jump in the West.  Compared to 12 months ago, sales rose 1.6%, the first year-over-year gain in 17 months.  The Case-Shiller home-price report also released showed moderating gains in prices in key Western cities, and in Seattle’s case, an outright year-over-year decline.
 
With Northwest Quadrant Wealth Management, I’m Tyler Simones.


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