Late Rush Gives Hope to Retail American shoppers were on track to deliver a welcome Christmas gift to retailers: the best holiday sales growth in three years.
(…) Early estimates this year indicate that Dec. 20, known as Super Saturday, was the biggest shopping day of the season, edging out Black Friday, which had held that spot for the past decade. Saturday’s sales totaled $23 billion, compared with Black Friday’s $20 billion, according to consulting firm Customer Growth Partners. (…)
Oil Jobs Squeezed As Prices Plummet U.S. oil and gas companies have been a job engine through much of an otherwise lackluster economic expansion. Now, after a roughly 50% plunge in oil prices, companies are cutting capital budgets and weighing layoffs.
(…) One company caught in the industry downturn is Hercules Offshore Inc. The Houston-based firm is laying off 324 employees, roughly 15% of its workforce, because oil companies aren’t renewing contracts for its offshore drilling rigs in the Gulf of Mexico while crude prices are depressed.
“It’s been breathtaking,” said Jim Noe, executive vice president of Hercules, which was founded in 2004. “We’ve never seen this glut of supply and dislocation in oil markets. So we’re not surprised to see a significant decline in demand for our services.” (…)
Tom Runiewicz, a U.S. industry economist at IHS Global Insight, forecasts companies providing support services to oil and gas companies could lose 40,000 jobs by the end of 2015, about 9% of the category’s total, if oil stays around $56 a barrel through the second quarter of next year. Equipment manufacturers could shed 5,000 to 6,000 jobs, or about 6% of total employment for such companies. (…)
Oil Rises After Five Weeks of Falls Oil rose after falling for five consecutive weeks, amid reports of escalating clashes in Libya, a key crude producer.
The average price of a Manhattan cooperative or condominium topped $1.68 million in 2014 for the first time, an increase of more than 16% from 2013, and 10% above peak prices in 2008 during the last real-estate boom, an analysis by The Wall Street Journal found.
The median price for an apartment was $911,000, also a record, up 6.6% from last year and 0.6% from a peak in 2008. (…)
At a closed-door meeting on Wednesday, officials at the country’s central bank, the People’s Bank of China, told representatives from two dozen banks and other financial firms that it would allow them to include more money in their deposit bases, giving them additional room to lend, according to banking officials familiar with the matter.
Analysts estimate the move is roughly equivalent to injecting 1.5 trillion yuan, or about $242 billion, into the banking system. (…)
Chinese banks for weeks have been pressing the PBOC to free up more funds to boost lending. A rare drop in bank deposits, historically the main source of cheap funding for Chinese banks, is forcing banks to curtail lending or seek more-expensive types of financing. (…)
In the latest move, the PBOC will relax how banks calculate the loan-to-deposit ratio, the major restraint on banks’ lending abilities, the banking officials said. Currently, Chinese banks can’t lend more than 75% of their total deposits, but that calculation doesn’t include large deposits from nonbank financial institutions such as asset managers and securities firms. Now, the PBOC will allow banks to add those deposits to their calculations of their loan-to-deposit ratios, the banking officials said.
At the same time, PBOC officials told participants at Wednesday’s meeting that banks wouldn’t have to set aside additional reserves for these deposits with the central bank, the officials said.
The two steps combined would have the same effect as a 1.5-percentage-point cut in banks’ reserve-requirement ratio, the banking officials said. (…)
China’s industrial profits fell the most in two years last month, according to National Bureau of Statistics data published Dec. 27. Copper also declined before a report due on Dec. 31 that is expected to show manufacturing in the country contracted.
Falling industrial profits data “predicts further poor demand for commodities,” RBC Capital Markets Ltd. said in a note today.
Copper for delivery in three months on the LME fell 0.7 percent to $6,256.50 a metric ton by 9:34 a.m. in London. The metal headed for the lowest close since June 2010 and is down 15 percent this year.
BACK TO THE FUTURE: Greek Vote For President Fails, Reviving Uncertainty Parliament failed to elect a president, meaning Greece will be forced into snap elections—a prospect that has renewed fears over the country’s financial problems and its relationship with its international creditors.
The Lonesome Cowboy charted:
It took 6 years but we have now gone full circle. In 2009, you could not find anybody positive on equities. Today, bears are nearly extinct and bulls produce more and more bull…
Don’t Question the Bull Market for 2015 Stocks have subsequently performed well when the Fed starts to hike rates in response to better growth.
(…) Q: Will the Federal Reserve end the bull market?
A: This is unlikely. Although the likely start of interest rate hikes in late 2015 may contribute to an increase in stock market volatility, history has shown that stocks have subsequently performed well when the Fed started to hike rates in response to better growth. During the nine economic expansions over the past 50 years, the S&P 500 has performed well around the first Fed rate hike, suggesting the Fed is unlikely to derail the market next year. The first rate hike has historically come only about halfway through economic cycles and well before bull markets have ended.
This is the topic of the year and everybody simply repeats what somebody else has said, without verifying. The facts can be found in this post I wrote last August: EQUITIES AFTER FIRST RATE HIKES: THE CHARTS SINCE 1954. To summarize the 15 tightening cycles since 1954:
To be brief, in layman’s terms, in reality, there seems to be no consistent nor typical pattern after the first rate hikes.
However, digging a little more into the history book, I found that in 6 of the 8 years when the S&P 500 rose during the initial rate hike, inflation was actually diminishing or stable (2004). This did not verify in 1987, although the market eventually avenged itself and in 1999 when internet speculation blinded everybody.
Maybe we got ourselves a bit of a rule here: rate hike cycles are not damaging to equities in as much as inflation is not rising at the time.
Since inflation seems to be a thing of the past, most people will simply dismiss this caveat. Not Mrs. Yellen, however. She wants inflation back to 2%…
More bull from the same Barron’s piece:
Q: Will valuations prevent U.S. stocks from a seventh straight positive year?
A: Valuations for the S&P 500 remain slightly above the long-term average price-to-earnings ratio (PE) of between 16 and 17 times trailing earnings, indicating a slightly expensive market. However, given that valuations have a poor record of timing market tops, and considering our positive earnings outlook, we do not expect above-average valuations to lead to an end of the bull market. As noted in our Outlook 2015: In Transit publication, we expect high-single-digit earnings growth to drive stock prices higher next year, supported by 3%-plus U.S. GDP growth, stable profit margins, and low interest rates, accompanied by little change in PEs.
We can debate what is “long-term” in “the long-term average. Here are the facts on the S&P 500 Index trailing P/E:
From my lens, the actual 18.2x P/E does not quite “remain slightly above the long-term average price-to-earnings ratio”. Using 1993 as the base is pure dishonesty.
To finish with the above quotes, investors should stop being obsessed with “timing market tops”, a fool’s game if there is one. The best one can do is assess probabilities that equities will rise or fall. On that, the Rule of 20 has an outstanding record:
Barron’s is not all bad. From another article:
STILL, THERE’S ANOTHER WAY to look at the market—by considering the valuation of the median or “typical” stock. And that tells a far different story. The median stock in the S&P 500 trades at 21 times trailing earnings, according to Leuthold Group strategist Doug Ramsey, some 25% higher than the cap-weighted price/earnings ratio. In 2000, the median stock traded at a 35% discount. “The average stock has gotten quite expensive, relative to the indices,” says Ramsey.
SONY’S MARKETING COUP (with special mention to B. Obama):
Sony’s ‘The Interview’ Racks Up Online Views “The Interview” has been streamed or downloaded more than two million times since it became available last Wednesday, Sony Pictures said Sunday, boasting of high demand for the controversial comedy.
Allow me to save you time with this short review from Leah Grace at Quiddity:
I lasted about 25 minutes into the movie because as Google ruefully admits, it is silly. James Franco plays a parody of himself and I can only stand a few minutes of toilet humor. More importantly though, the release of “The Interview” will be a study on how important streaming websites could be for big movies and how it could affect clout of movie theaters (major movie theaters pulled out of releasing the movie due to the threats). You don’t have to go and see it but let us definitely sit back and see how the revenue numbers go.