News for the Week of May 2 – May 6, 2016
by David Abuaf, CFA
Investment Manager, RJFS
Government / Political / Economic
1. European officials say US laws and policies that make it difficult to get data from tech firms are hindering counterterrorism efforts
2. NATO’s top commander said the US has too few intelligence assets focused on the threat from Russia – I think the same exact thing when I watch the TV show The Americans which actually has a basis in reality; remember Anna Chapman!? I know Joe Biden does; “It wasn’t my idea to send her back”
3. Colorado’s high court ruled that municipalities in the energy-rich state can’t bar fracking
4. Detroit teachers staged a “sickout” after news that the district might be unable to pay them after the end of June
5. China’s Communist Party suspended the membership of an influential businessman for a year after he criticized Xi’s push to curb dissent
6. The EU proposed asylum rules that would force member nations to take in certain numbers of refugees or pay a fine
7. The DoJ warned North Carolina that the state’s bathroom law violates the Civil Rights Act
· The Republican legislative leaders said they don’t intend to modify the bathroom law before a Monday deadline – because…being told something is illegal for the DoJ is just a warning?
8. The FDA assumed regulatory authority over e-cigarettes
General Markets / Economic
1. An index of US factory activity slipped in April but continued to signal growth in the manufacturing sector
2. A gauge of China’s manufacturing industry edged lower last month
3. Worker productivity slid in the first quarter
4. The trade gap narrowed in March amid slow growth at home and abroad
5. The ECB said Wednesday that it would stop printing the 500-euro bank note, but that it would remain legal tender
6. US sales of cars and light trucks hit 1.5 million vehicles in April, up 3.6% from a year earlier
1. Halliburton and Baker Hughes called off their merger amid objections by regulators that it would hurt competition in the oil-field services business
2. Aeropostale is preparing to file for bankruptcy protection this week
3. Tesla expects to ramp up annual output to a half-million vehicles two years earlier than planed
4. Google parent Alphabet and Fiat Chrysler agreed to incorporate Alphabet’s self-driving technology into 100 Chrysler minivans
· And GM will begin testing within a year a fleet of self-driving electric taxis with Lyft
1. Thank god for North Korea. Without them I would not have known that funerals and weddings are security threats! NK banned all weddings and funerals for the next week as potential security threats as Kim Jong Un is about to be anointed as their official leader
2. A man walking the Great Wall of China wall fell off the wall in the Jiankou section. He was climbing down the wall by a high stepladder, but his backpack got caught and he lost balance and fell. Fortunately he suffered only minor injuries.
3. Whoa!!!! One of a kind flight on JetBlue. After all passengers were seated, the attendant announced “this will be the very first flight where crying babies is a good thing.” JB offered a 25% discount to passengers every time a baby started crying. Look, that’s great, but I’m more concerned about the parents who now have to work to subdue and relax their child post anger L
4. Two research teams reported that they grew human embryos outside the uterus for up to 13 days
5. A 12 year old boy in Maine stole a school bus and went on a joyride
6. An Israeli man who believes God has been unkind to him asked a court for a restraining order, the man claimed God exhibited a negative attitude toward him. Notes state that God didn’t even appear in the courtroom!
7. In the days since Donald Trump accused Hillary Clinton of playing the “woman card,” her camp has sent donors an actual “woman card”
8. The body of a dead man washed up this week on Manhattan Beach in Brooklyn, NY. His feet were literally encased in cement!
Commentary for Week of May 2 – May 6, 2016, by David Abuaf
Stocks fell last week in response to underwhelming quarterly earnings reports and disappointing economic data from the US and China. Large cap stocks outperformed small caps. Fears about slowing global growth clipped cyclical stocks in sectors such as energy, mining, and industrials, which had led the market since the February 11 low.
The Labor Department said Friday that nonfarm payrolls rose 160,000 last month, below expectations of 205,000 additions, and the lowest number of jobs added in seven months. The unemployment rate stayed unchanged at 5% while wages rose a strong 2.5%. However, US first quarter productivity per worker declined 1% - possibly why the job additions were low.
While companies are beating earnings expectations, though those had already been lowered, the top line remains challenged, according to William Nichols at Cantor Fitzgerald. With 85% of companies in the S&P 500 reporting earnings, many are beating earnings per share expectations, but the percentage of those beating revenue estimates is only 53%, below the five year quarterly average.
Now that the reporting season is just about done, investors will likely turn their focus to the June 15-16 FOMC meeting. Although a rate hike isn’t expected, they’ll be parsing Fed officials’ commentary before then. We believe the market will tread water until then and that will be the big story that drives the summer market (typically a low volume time of year).