January 4, 2017

Stocks opened higher this morning (Dow +22 pts; SPX +.39%). The pattern of yesterday’s session—surge at the open which softened in the afternoon—could repeat today. At the moment, most sectors are the in green, led by consumer discretion and utilities. In addition, biotechs are up 2% in early trading. The VIX Index dropped 5% to trade around 12 today. The dollar is weaker and that’s giving some fuel to commodities. Copper is up nearly 2%. WTI crude oil is flat on the day, trading around $52.29/barrel. A quick look at the chart suggests strongly oil may trade up to $60/barrel in the near-term. Bonds are a bit lower as yields tick upward. The 5- and 10-year Treasury yields are trading at 1.96% and 2.46%, respectively.

Blackstone Vice Chairman Byron Wein, in a Bloomberg interview, discussed his outlook for 2017. He said Donald Trump won’t be as radical as many believe. His will be a “more methodical, thoughtful presidency.” He will be successful in cutting taxes, boosting infrastructure spending and dismantling regulation. GDP growth will be closer to 3% than 2% and “the market will go up.” Finally, he believes the dollar will continue to be strong and the US will be the best of the major markets this year.  

Automakers reported December sales volumes today. GM said December deliveries were up 10%, which beat Wall Street estimates. Ford sales were flat; Nissan sales rose 9.7%; Fiat Chrysler sales fell 10%; Toyota sales rose 2%. All of those results were better than expected, capping a very strong year for auto sales in the US. Auto sales have been rising for 7 straight years but are expected to fall a bit this year. This morning, Ford (F) and GM (GM) are up 4%.  

We learned that Eurozone inflation accelerated last month to the highest rate since 2013. This is a big deal because Europe has been flirting with deflation—due to very slow economic growth—for almost three years. The European Central Bank (ECB) has been fighting deflation with huge monetary stimulus. This news will be welcome but certainly isn’t enough to make them declare victory. There are some other signs, by the way, that economic growth is accelerating a bit. The Citigroup Economic Surprise Index for Europe has been in a steady up-trend since September. That means economic data is trending better than economists’ expectations.

Vice President-Elect Pence and House Speaker Ryan this morning announced their first order of business is to repeal and then replace ObamaCare. One of their primary goals is to reduce the cost of healthcare insurance. 

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