You could have missed yesterday and not have actually missed much. The major benchmarks lost every ounce of steam they might
have exhibited during the session to end it with barely a budge on either side and it looks like much the same is happening in the
early going.
When all was said and done Wednesday, the S&P 500 (SPX) posted its fourth straight lower close with a measly 0.01% skid. It
wasn’t even a half-point decline. The Dow Jones Industrials ($DJI) slipped too, settling off 0.16%. The Nasdaq Composite (COMP)
managed to eke out 0.21% gain.
Though trading was muted yesterday, there are a couple agenda items that might wake the benchmarks up today. There’s much ado
about plenty in Washington that could spill into the markets if any movement is made. Of course, the tax bill pieces carry a
certain level of drama that seems to infiltrate the markets now and again, but any action, or inaction, on extending funding to run
the government by Friday, leading to a shutdown, might have consequences. (See below.)
Jobs also could be in focus ahead of Friday’s unemployment figures—the last one of the year—with reports out today on initial
and continuing claims, and Challenger’s job cut roundup. Initial and continuing claims came in just a bit higher. (See below.)
Remember, too, that tomorrow is quadruple witching and some investors might have been aligning positions already this week and
could continue to do so today and tomorrow. Typically, that could be a volatility maker, so investors might want to keep an eagle
eye on volume and price swings even when it appears the markets are taking a pause.
What’s more, these are the final days of 2017, and history tells us that stocks tend to get pressured when investors are taking
capital gains or balancing profits and losses for tax purposes—another reason to keep a keen watch out on the markets. There also
appears to be a measure of what some market analysts are calling “tax-cut selling,” apparently prompted by uncertainty about how
the final tax bill shakes out in Congress and a desire to take profits off the table now.
Broadcom Ltd. (NASDAQ: AVGO) shares were
advancing better than 4% in the early going, following yesterday’s similar post-market rise. AVGO beat Wall Street’s expectations
of earnings and revenue in the quarter, and forecast fiscal Q1 revenues to handily outpace analysts’ estimates.
Lululemon Athletica Inc. (NASDAQ: LULU)
also knocked Wall Street’s expectations out of the park and its shares jumped nearly 7% in the afterhours. In early trading, shares
were tracking higher by nearly 9%.
Oil prices sunk yesterday, losing nearly 3% in their biggest pullback in more than two months. U.S. inventories, as reported by
the government Wednesday, were sharply higher last week at a time when crude production hit another weekly peak. That might suggest
that demand could be waning. But, it’s probably best to also remember that we typically see bigger crude stockpiles at the end of
the year. A government report on natural gas inventories is due out later this morning.
Yesterday, West Texas Intermediate (/CL) crude oil prices, the U.S. benchmark, finished the session down nearly 3%, its deepest
one-day drop since early October. (See chart.) Prices were tracking slightly higher in the early going today.
FIGURE 1: CRUDE'S BIG PULLBACK. It was barely two weeks ago that crude prices hit a 2½-year peak. What happened?
Looks like demand might be falling while supply is building. /CL prices per barrel tumbled nearly 3% yesterday; the last time they
settled by that much was Oct. 6 (circled near yellow arrow). Prices have seen similar percentage swings, but haven’t closed off
that much. Data sources: CME Group, Standard & Poor’s. Chart source: The thinkorswim® platform from TD Ameritrade. For illustrative
purposes only. Past performance does not guarantee future results.
Numbers 1: Government Shutdown
If lawmakers don’t approve an extension of government funding by Friday, a shutdown “could happen,” according to President
Trump. And that could be costly to the economy, according to S&P Global’s Beth Ann Bovino. In a report issued yesterday, she
said she thinks the odds of a shutdown are slim, but cautioned about the consequences: It would shave about 0.2 percentage points
off the real Q4 gross domestic product (GDP), which is equal to $6.5 billion in real dollars.
“In particular, if a shutdown were to take place so far into the quarter, Q4 GDP would not have time to bounce back, which could
shake investors and consumers and, as a result, possibly snuff out any economic momentum," she said in a report entitled “With A
U.S. Government Shutdown, Ho Ho Ho Would Become Boo-Hoo.”
Numbers 2: Jobs
Yesterday’s employment report from payroll processors ADP showed that 190,000 jobs were added last month. Manufacturing added
40,000 jobs, marking the most in ADP’s 15 years of number crunching. While that report doesn’t always totally square with the
government’s figures, it could be an interesting precursor to them. As noted here yesterday, Wall Street is forecasting some
170,000 jobs were added last month, a number that would keep unemployment at 4.1%, according to Briefing.com. Economist Diane Swonk
of DS Economics is projecting a rebound of 180,000 new jobs, noting that the retail sector is the one to watch amid “an acute
shortage of truck drivers,” she said in a report. Many retailers already have warned about slower delivery times, she said.
Numbers 3: California Fires
A jaw-dropping $9.4 billion in insurance-related claims, according to Dave Jones, the state’s insurance commissioner. About $9
billion of that covers the Wine Country fires. The week-long blazes destroyed or damaged more than 21,000 homes, 2,800 businesses
and 6,000-plus vehicles. “These numbers not only represent staggering losses to tens of thousands of Californians,” Jones said in a
statement. “The October wildfires that devastated whole communities and tragically cost 44 people their lives have now proven to be
the most destructive and deadliest in our state’s history.”
Travelers Companies Inc (NYSE: TRV) has
already projected Q4 wildfire-related losses could cost as much as $675 million, before taxes, while Allstate Corp
(NYSE: ALL) put an estimate of $516 million just for October.
And all this before raging fires underway now in Southern California are totally contained. Stay tuned.
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