Markets

There’s something behind this market sell-off that no one is talking about: The strong dollar

Stocks investors are spooked about a lot of things, and the strong dollar biting into earnings growth is now one of them. The dollar index, which measures the greenback versus a basket of other currencies, jumped 0.6 percent on Monday to 97.43, a 17-month high. As the dollar rose, the Dow Jones Industrial Average lost as much as 500 points, and the S&P 500 was down 1.6 percent early in the afternoon. The dollar’s strength Monday was largely attributed to weakness in the British pound and euro because of negative Brexit news and concerns about Italy’s budget. But the dollar has also been rising on trade war concerns, rising U.S. interest rates and weaker growth rates outside the U.S. “It could be a challenge for the stock market in the fact that about 40 percent of the...

The stock market doesn’t see a big risk for Trump in Mueller probe right now

The Mueller probe has been hanging like a dark cloud over the White House, but maybe not over the stock market anymore. The exit of Attorney General Jeff Sessions comes as expectations build for a final report from special counsel Robert Mueller that will show whether the Trump campaign colluded with Russians or not, among other things. But President Donald Trump’s naming of Matt Whitaker as an interim attorney general has assuaged some concerns on Wall Street that Mueller will find Trump at the center of his probe. “I think the market consensus is they probably have something but not enough to change the administration,” said Art Hogan, chief market strategist at B. Riley FBR. “I think the market looks at this as yes, it’s a bit of an overhang, but not one th...

Stocks making the biggest move premarket: BABA, SAP, ATHN & more

Check out the companies making headlines before the bell: Alibaba — The Chinese e-commerce company set a new record for its Singles Day event, with nearly $31 billion in goods sold in 24 hours. Alibaba had previously set a record for Singles Day last year, with $25.7 billion in goods sold. SAP — The U.S.-listed shares of the German software company fell more than 4 percent in the premarket after the company announced it would buy Qualtrics for $8 billion. Qualtrics, a privately held company that competes with SurveyMonkey, had plans to go public in the near future. Athenahealth — Reuters reported that hedge fund Elliott Management and private-equity firm Veritas Capital agreed to buy Athenahealth for $5.5 billion in cash. Elliott, which already had a stake of about 9 percent in Athenahealt...

Origins and Challenges of a Strong Dollar

That’s the title of an op-ed appearing in Nikkei newspaper (日本経済新聞): Chinn, as translated, in The Nihon Keizai Shinbun. Over the past four years, the US dollar has exhibited noticeable strength. The dollar appreciated 17% in inflation adjusted terms from mid-2014 to the eve of the election; upon the election of Donald J. Trump, the dollar again jumped another 5% in anticipation of fiscal stimulus and the Fed’s interest rate response. Throughout 2017, as the Trump Administration struggled to deliver on tax cuts and an infrastructure program, the dollar faded – only to surge with the passage of the tax plan, and the Fed’s stated intent to raise interest rates. The dollar now stands 20% stronger than it began its ascent. The sustained appreciation of the dollar, combined higher interest rates...

Out of Sample Regression Prediction of Mass Shooting Fatalities

Does a Trump dummy “work”? Reader sam writes: i think you’re putting too much weight into too few observations. Some things to make your analysis more convincing 1) show the if predictive accuracy increased with a trump dummy OUT OF SAMPLE or 2) try placing the ‘trump dummy’ variable a few months before or a few months after and see if that changes the coefs. i doubt you’ll see much of an effect. I did (2). sam is wrong. I address (1) by estimating a regression 1982q4-2016q4: f = -14.838 + 0.083pop Adj.R2 = 0.08, N = 137, DW = 1.84, bold denotes significance at 10% msl using HAC robust standard errors. Where f denotes mass shooting fatalities per quarter, pop is average monthly population in millions. Here is a graph of actual cumulative, estimated cumulative, and upper 90% prediction inte...

Natural gas prices spike on cold weather and lowest early season supply in 15 years

Forecasts of a more extended November cold snap across the U.S. sent natural gas prices to a near two-year high, as investors worry about rising demand at a time when supplies are at the lowest level to start the winter heating season in 15 years. Natural gas futures for December spiked more than 6 percent to $3.76 per mmbtu, the highest price since December, 2016. “We added a lot of heating demand over the last week,” said Jacob Meisel, chief weather analyst at Bespoke Weather Services. “This morning, there are more risks that the cold is going to linger a bit longer through November, not at the same intensity but it’s enough to scare a market that has low storage levels and already has strong physical prices.” Meisel said colder than average weather is expec...

Three Graphs and a Regression Equation

And we are less than one-third of the way through November. Cumulative casualties seem to be rising at a faster and faster pace. Figure 1: Cumulative mass shooting fatalities (dark red), non-fatal injured (pink), from 1982M08, through November 8, 2018.. Orange denotes 2017M01-2018M11, light orange 2016M11-2017M01. Source: Mother Jones, accessed 11/8/2018, and author’s calculations. The frequency of mass shooting events seems to be increasing. A negative binomial count regression (estimated using QML) indicates 1.6 more events per month under Trump (estimate statistically significant a 1% msl). Figure 2: Mass shooting event count, from 1982M08, through November 8, 2018.. Orange denotes 2017M01-2018M11, light orange 2016M11-2017M01. Source: Mother Jones, accessed 11/8/2018, and author’s calc...

Dropbox rises after beating estimates on revenue and earnings

Dropbox shares rose more than 9 percent on Thursday after the maker of collaboration software reported better-than-expected third-quarter earnings. Here are the key numbers: Earnings: 11 cents per share, excluding certain items, vs. 6 cents per share as expected by analysts, according to Refinitiv. Revenue: $360.3 million, vs. $352.7 million as expected by analysts, according to Refinitiv. Revenue was up 26 percent from a year earlier, according to a statement. Dropbox, which has more than 500 million registered users, had 12.3 million paying users in the third quarter, just above the 12.2 million estimated by StreetAccount. “We’re not going to run out of people who need Dropbox anytime soon and we have hundreds of millions of people who have used Dropbox. So we’re operat...

Yelp tanks more than 28% after announcing third quarter earnings

Shares of Yelp tanked more than 28 percent Thursday after the company announced its third quarter earnings report. The company reported revenue of $241 million for the quarter, just shy of analyst projections of $245 million. It also adjusted fourth quarter revenue guidance due to slower new account growth. “We do not believe there was a single or predominant factor that led to the shortfall relative to our expectations, but rather a combination of smaller operational factors that negatively affected productivity,” the company said in its shareholder letter. “These issues crystallized in the second half of the third quarter, having an earlier and more concentrated effect on our results under our new local sales model than would have been the case prior to our transition t...

Yelp shares drop 30% after revenue misses expectations, weak outlook

Shares of Yelp tanked after the company’s third quarter earnings report and guidance disappointed on Thursday. The stock was down by 30 percent in premarket trading Friday. The company reported revenue of $241 million for the quarter, just shy of analyst projections of $245 million. It also adjusted fourth quarter revenue guidance due to slower new account growth. “We do not believe there was a single or predominant factor that led to the shortfall relative to our expectations, but rather a combination of smaller operational factors that negatively affected productivity,” the company said in its shareholder letter. “These issues crystallized in the second half of the third quarter, having an earlier and more concentrated effect on our results under our new local sal...

Disney gains after reporting that studio revenue grew 50% year over year

Walt Disney reported fiscal fourth-quarter earnings and revenue that easily topped analysts’ expectations on Thursday. Here’s how the company did compared with what Wall Street expected: Earnings: $1.48 per share vs. $1.34 per share forecast by RefinitivRevenue: $14.31 billion vs. $13.73 billion forecast by Refinitiv In the year-ago quarter, Disney reported adjusted earnings of $1.07 per share on revenue of $12.78 billion. Shares of Disney rose 2 percent in after-hours trade. The company saw strength in its studio business where quarterly revenue grew 50 percent year over year. Disney said the growth was driven by “exceptional performance” of “Black Panther,” “Star Wars: The Last Jedi,” “Avengers: Infinity War” and “Incredib...

Fed unwavering in message that interest rates will keep going higher

The Federal Reserve made clear it sees a near perfect environment to keep raising interest rates and that it was undeterred by recent market volatility. Strategists viewed the Fed’s post-meeting statement Thursday as slightly hawkish, which means in favor of higher rates. Treasury yields were slightly firmer. The 2-year Treasury note, which most reflects Fed policy, rose slightly, briefly touching a new decade high of 2.97 percent. Stocks waffled after the Fed statement and then moved lower. “[Fed officials] seem pretty content. No big changes. It’s just more evidence that rates are going up,” said Michael Schumacher, director rates strategy at Wells Fargo. Strategists expect the Fed to raise interest rates by a quarter point in December, but after that there is a l...