The Dow keeps gushing
It's exuberance, but we are not ready to call it 'irrational', at this point. Stocks rallied again, pushing the DJIA to a new record, on day 2 of the fourth quarter. We discussed how Q4 is typically the strongest of the year, but stocks do face headwinds in the form of higher interest rates, tough comparisons on the earnings front, political uncertainty and higher oil prices. Speaking of higher oil prices, crude nearly hit a 4-year high today and there is a growing drumbeat that it will get back to $100 per barrel. It seems like a minute ago that crude was in the $40 per barrel range - but it was more like 2-3 years ago when we were experiencing what the NYT dubbed an 'Invisible Recession', that was festering in the energy sector. Today, saber rattling with Iran and heavier demand due to economic growth is powering oil prices higher.
Why it Matters: Higher oil prices used to be thought of as a negative for stocks, as they lead to increased costs for manufacturing and transportation. There is some debate about that, and today's multinational corporations have become pretty savvy about hedging their exposure to higher commodity prices. The $80 per barrel range is not high by historical standards, but if we start seeing $90 or $100 per barrel, watch out.
What's Next: The Iran factor is a big deal. While not in our top 5, Iran is the 6th-largest producer, according to the EIA, pumping 4.5 million barrels per day or 5% of the world's total. It's one of the original OPEC countries, who have all been loving these higher prices. It's hard to see why Iran would want to do anything to jeopardize that, but after last week's lambasting by President Trump at the U.N., anything is possible. The next OPEC meeting is December 6th in Vienna.
Read more:
What determines oil prices?
Opinion: The Dow Is Stupid
2 Big Red Flags For The Stock Market #2 Amazon raises minimum wage to $15
The world's biggest online retailer is raising its minimum wage to $15. This will 'benefit' more than 250,000 Amazon employees, both full-time, seasonal and part-time, according to the company. Target made a pledge to do the same by 2020, while Walmart plans to raise its minimum wage to $11 this January.
Why it Matters: Besides improving the earnings of a quarter of a million people, Amazon is putting pressure on Walmart , which has one million associates who earn at or near minimum wage. To be fair, Walmart has taken other measures to help its lower earners by adding more benefits and one time cash bonuses. That said, Amazon is going to take a hit to its bottom line with this move. It can probably afford to, given its $960 billion plus valuation. That said, labor costs for those 250,000 are going to rise 50% ($10-$15) and it is dealing with a 10% increase in transportation costs due to rising oil prices (see above).
What's Next: The Trump Administration and even Bernie Sanders are applauding the wage hike, which is unusual any way you look at it. Rare for those two to be on the same side of anything. Amazon has been the target of many criticisms by the President, so this might serve as a peace offering for the time being. But in terms of what this is actually going to cost Amazon… Be Smart. If you think Jeff Bezos is just going to swallow this and not pass on the costs to Prime subscribers, you don't know Amazon.
Read More:
The Amazon Effect on the US Economy
Does raising the minimum wage increase inflation? #3 The ETF party in September was a rager!
September was a HUGE month for ETF inflows with some $36.7 billion flowing into U.S. listed ETFs, according to the good folks at ETF.com. It was second only to January and it was heavily U.S. centric. No surprise that we saw record closes for the DJIA and S&P 500 in September. Even fixed income ETFs joined the party as rising interest rates made them a little more attractive to investors chasing yields.
Why it Matters: Like it or not, ETFs are gaining in popularity across all investor classes. There are more than 2,000 ETFs on the market right now with about $3.5 trillion in assets, but expect that number to multiply as restrictions are lifted on new ETF offerings and requirements. The ETFs with the most inflows in September are already the world's largest, so there is an imbalance brewing in assets under management that should only get worse. That's not necessarily a bad thing as there will be a shakeout as more ETFs come to market. Here's ETF.com's list of September's top ETF Gainers:  What's Next: ETFs do provide some level of stability during volatile times. Jim Ross, who was part of the team who launched the SPDR ETF from State Street, told us that turnover for SPY, was less than 1 percent in its 25 years. ETFs are also cheaper than mutual funds and have added tax benefits that retail investors are gravitating towards. There is a reason the market for these products keeps growing, and the fact that they continue to grow as U.S. markets touch record highs is what many investors would call a friendly trend. Read More: Are ETFs Riskier than Mutual Funds (Video) Biggest Myths About ETFs How to Use ETFs Chart of the Day: Who Invented the First Stock Ticker in 1867?
Around noon today, we noticed a sudden spike in interest in our article 'What is a Stock Ticker?' and in a span of just a half hour we had more than 29,000 people look it up. That left us scratching our heads.
At the same time, roughly about 9:29 pm India time, an episode of India's version of Who Wants to be a Millionaire saw a contestant face the final question that gave her a chance to win INR 7 Crore (approx. $950,000). She chose to quit.
The question was - Who invented the first stock ticker in 1867?
It seems that a lot of people were curious about the origins of the stock ticker and Google Trends too reflected that surge in interest with the maximum searches originating in India and neighboring Nepal. In fact, Investopedia's traffic tracker for the article pretty much mirrors that trend. Funny how that works, but we're glad that people trust us to be their source of all things finance. The answer by the way is Edward Calahan. CONNECT WITH INVESTOPEDIA |
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