What we think

Newsletter: In the Markets – Week-Ending October 14
Crystal Brook Advisors
We Make Financial Planning Crystal Clear™

United States: GDP forecasts are 2.2% in 2017 and 2% in 2018. Economists see a 60% chance of a U.S. recession within the next four years and 20% chance of a recession within the next year. The American economy has not grown for more than a decade without a recession. (1) America’s tech boom has delivered many technology giants but less job opportunities. After rising in the 1990s, the employment at computer and electronic firms has fallen by more than 40%, because of overseas production of hardware and intelligent robots. (2)

Europe: UK 10-year gilt yield climbed 0.07 % point to 1.10 % on Friday, which has pushed 10-year yields to the highest level since Brexit. The possible drop in overseas investor demand, higher inflation ahead due to the fall in pound. (3) Kashagan, a vast oil field in the Caspian Sea, sent its first crude for export after about 16 years in development and more than $50 billion of investments. It has the potential to increase output to 1 million barrels a day. (4)

Asia: China’s consumer prices rose 1.9 % this year in September, while producer prices rose by 0.1 % this year for the first time in five years, it showed signs of economic strength and an end to industrial deflation in China. According to data cued on the health of Chinese economy, it is transferring from a manufacturing base towards consumption. (5)

Latin America: Mexican industrial production fell in August. According to National Statistics Institution, industrial output dropped 0.4%, which is worse than expected. From one year earlier, manufacturing production rose 3.7%. However, Oil and gas production fell 6.4%, mining of metals and other minerals declined 6.5%, and construction in infrastructure was down 19%. Moderate gains in manufacturing were offset by continued declines in mining output and construction. (6)

Monday 10/10

• One of the biggest investors of Theranos Inc., sued the embattled startup company for a series of lies, material misstatements and omissions to attract nearly $100 million investment. (7)
• Wells Fargo shuffled some top banking executives and branches announced new posts, new payment and digital & innovation group to grapple with fallout from its sales-tactics scandal. (8)

Tuesday 10/11

• The U.S. dollar rose 0.7% against a basket of currencies amid highly possible raising rates in December. Dollar strength increased worries about earning prospects for U.S. multinationals, the economic prospects for emerging markets contributed to losses for U.S. crude oil, which fell 1.1% to $50.79/bbl. (9)
• Amazon is expanding their grocery business with a plan to build convenience stores and offer curbside pickup for online orders. The small brick-and-mortar stores would sell fresh items and provide same-day delivery for cereal and other goods with longer shelf lives. (10)

Wednesday 10/12

• Samsung stopped production of Galaxy Note 7, which could translate into a loss of $17 billion on revenue. Apple could see it’s iPhone sales climb 8 million units this year as a result of Samsung’s production halt. (11)
• Tim Sloan, Chief Operating Officer of Wells Fargo, became the new CEO of the bank after the immediate retirement of John Stumpf. Shares of Wells Fargo increased 1.4% in the post market actions. (12)

Thursday 10/13

• Both Material and energy stocks dropped -0.7%, which were the biggest decliners. Investors fear that weakness in China could hurt demand for energy and raw material. Nevertheless, WTI crude settled 0.5% higher at $50.40/bbl. (13)
• Sony enter the virtual reality market with a cheaper product even though sales of high-end VR headsets has been slow. Sony believes that less expensive products and PlayStation 4 console customer base could have a chance at mainstream acceptance. (14)

Friday 10/14

• The third quarter revenue of JP Morgan Chase & Co. rose 8.4% to 25.51 billion. Share added 1.9% in pre-market trading. The better-than-expected result was propelled by double growth of investment bank. (15)
• Kellogg’s has made a nice bolt-on deal into Latin America. However, investors still think it is risky due to the lack of growth and big margin headwinds on the back of price deflation, a strong dollar, restructuring costs and pension-related charges. (16)

Market Close

U.S. stocks closed slightly higher Friday, finishing near lows of the session to turn in a second losing week in a row, after a trio of quarterly bank results topped analyst estimates and Federal Reserve Chairwoman Janet Yellen said there may be benefits to running the economy with a tight labor market.
The Dow Jones Industrial Average closed up 39.44 points, or 0.2%, at 18,138.38, for a 0.6% loss on the week. Goldman Sachs Group Inc. rose 1.9% and was the top performer on the Dow. The S&P 500 index advanced 0.43 points to finish at 2,132.98, for a 1% decline on the week. On Friday, the financials and tech and sectors led gainers. The Nasdaq Composite index finished up 0.83 points at 5,214.16, for a 1.5% decline on the week. (17)

Contributor: Dan Wang

Sources:
(1,2,6,7,8,10,15) Source: Wall Street Journal
(3,4,11) Source: Bloomberg
(5,9,1213,14,16) Source: Seeking Alpha 
(17) Source: MarketWatch