May 2, 2017

Stocks opened mixed this morning, without direction. The Dow and S&P 500 are currently flat. Gold miners are up over 1% in early trading, whereas banks, semiconductors and biotechs are struggling. The Financials sector has now given up nearly all its year-to-date gains. Both emerging markets and developed foreign stocks are up on the day. The VIX Index is up a bit to trade around 10.2, which is still extremely low. Commodities are mostly lower. Oil is down again to trade around $48.60/barrel. Bonds are slightly higher in price, lower in yield. The 5- and 10-year Treasury yields are trading at 1.83% and 2.31%, respectively. 

We’re getting some clarity on how bad auto sales have been in 2017. Pretty much all of them missed Wall Street forecasts for April sales. Nissan said its vehicle sales fell 1.5% in the month; Ford’s fell 7.1%; GM’s fell 5.8%; both Fiat Chrysler’s and Honda’s sales declined 7%. Declining auto sales really hurt first quarter consumer spending, which is used to calculate gross domestic product (GDP). We’ve seen other signs that economic activity has softened. Citigroup’s US Economic Surprise Index, which measures to what extent economic data are coming in better or worse than expected, has fallen quite a bit since mid-March. Economists generally believe the current weakness is temporary.   

Pfizer (PFE) reported a mixed quarter, beating earnings estimates but falling a bit short on revenue. Sales for most of the company’s major drugs were slightly below Wall Street expectations. The report confirmed intensifying price competition among pharma companies in some areas. And as you would expect, the company’s newer patent-protected drugs saw rising sales while the legacy unprotected drugs experienced declining sales. Management reaffirmed its guidance for 2017 revenue between $52bil and $54bil, but also warned investors that as merger and acquisition activity heats up in the industry, there is increased risk that some deals may fall through. After the company’s failed attempt—thanks to Congress—to buy Allergan (AGN), that warning seems a bit late. The stock is down 2% this morning. 

The Federal Reserve’s policy-making committee is meeting today and tomorrow to consider interest rate hikes and Fed balance sheet moves. 

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