Fed fatigue
The chase by Frances Horodelski:
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On this day in 1988, Ronald Reagan (a senior himself) declared today National Senior Citizens Day. "For all they have achieved throughout life and for all they continue to accomplish, we owe older citizens our thanks and a heartfelt salute. We can best demonstrate our gratitude and esteem by making sure that our communities are good places in which to mature and grow older."
Fed fatigue. There is more than sufficient ink being spilled on the analysis of the Fed’s FOMC minutes released yesterday. Suffice to say that the U.S. dollar likes what it heard as do global stocks and U.S. futures, bonds a little less so. Maybe the most important line is “that labour market conditions had moved noticeably closer to those viewed as normal in the longer run.” The term normal, normalizing, normalization was used 19 times in the statement. The committee also noted that “Participants agreed that the Committee should provide additional information to the public regarding the details of normalization well beforemost participants anticipate the first steps in reducing policy accommodation to become appropriate.” Translation: we’ll tell you how we’re going to do it well before we need to do it.
Market participants will now await the big speeches tomorrow including Janet Yellen in the morning. The theme of this year’s Jackson Hole is “Re-Evaluating Labour Market Dynamics” and the program will be released today at 6 p.m. mountain time.
It is global PMI day (when Markit provides an early look at the manufacturing sector around the world) and generally the data points were softer than expected and softer than the previous month. The weakest link is France which remains below 50 (the demarcation between expansion and contraction in the manufacturing side of the economy) but at the same weak level as last month. All the other major countries have numbers above 50. The number for the U.S. will be released at 9:45 a.m. ET.
On the earnings calendar, Hewlett Packard is trading down about 1% this morning post its results last evening. The company’s results were at the high end of guidance, the mid-point of its full year outlook was raised, revenue rose for the first time in 11 quarters and the hardware side of the business grew although services fell. Free cash flow is coming in above the company’s forecasts but RBC wonders whether it is sustainable. Barclays notes that cash flow is “exceptionally strong” providing more options for the company’s next fiscal year. Barclays rates the name neutral but has raised the valuation target to $41 from $38. There are 16 buys, 19 holds and 2 sells.
There aren’t a lot of us, but Canada is in the AAA group and continues to be worthy of that rating according to Fitch which affirmed that credit rating last night. Who else is in the club – Australia, Denmark, Germany, Finland, Hong Kong, Liechtenstein, Luxembourg, Mexico, Norway, Singapore, Sweden, Switzerland and the United Kingdom. The United States has a split rating with S&P at AA+ while Moody’s remains at AAA. There are only three U.S. companies with AAA ratings: Microsoft, Johnson & Johnson and Exxon Mobil.
Today’s BNN line-up includes CEOs from Exchange Income Corporation, BuildDirect, Whooshh Innovations and Caldwell Investment Management. Our shows will also focus on the opportunities and expectations for the Canadian banking sector as Royal Bank kicks off reporting season tomorrow as well as our ongoing plethora of investment ideas.
Headlines are few and far between but we do expect the Department of Justice to announce a record settlement with Bank of America where the latter will be paying an estimated $17 billion in fines for its participation in the mortgage debacle of the financial crisis. We have breaking news that Family Dollar is saying not yet to Dollar General due to anti-trust concerns and the belief that a deal with DG couldn’t be completed given those concerns. FDO cited a letter from Dollar General in a letter sent last night that included “blatant mischaracterizations and did nothing to address the anti-trust issues in DG’s proposal.” And in other news, Wind Mobile is dramatically dropping its roaming rates.
We’re awaiting existing home sales and the leading economic indicators at 10 a.m. ET. A couple of interesting analyst changes including Cameco dropped to hold from buy at Cowen and Tesla’s new coverage at CSLA with a buy and a $300 target.