September 7, 2017

Stocks opened modestly lower this morning (Dow -41 pts; SPX -.13%). A 2% slide in bank stocks is holding the market back. Gold miners are up 2% in early trading. A host of other industries—semiconductors, retailers, transports, pharmaceuticals, utilities, real estate—are trading higher as well. WTI crude oil is trading down slightly to $49/barrel as Hurricane Irma approaches Florida. Bonds are trading higher as yields plunge. The 5- and 1-year Treasury yields are down to 1.63% and 2.04%, respectively. Yields haven’t been this low since the day after the presidential election. This is the proximate cause of the decline in bank stocks today.

US worker productivity during the second quarter of 2017 was revised up to 1.5% annualized growth. This sounds pretty obscure but is important for the long-term health of the US economy. Economists say productivity growth is what drives improvement in the national standard of living. Productivity is essentially hourly output per worker. Viewed very simply, if you are a business owner and the employees are improving productivity, your profit margins are rising. If you measure productivity vs. year ago levels it grew at a 1.3% rate, the strongest in two years. This is a good sign. 

Disney announced details on its planned streaming video app, coming in late 2019. Marvel and Star Wars movies will be offered exclusively through the service. The app will primarily feature all Pixar and Disney films. The company obviously plans to develop new content for the app. In addition, there will be a separate ESPN app, coming much sooner, crafted sort of like an iTunes for sports content. CEO Bob Iger also gave earnings guidance in his speech at an industry conference. He said 2017 full-year earnings per share will be roughly in line with 2016. This comes as a surprise to Wall Street analysts, who were expecting stronger results for the back half of this year. There were a number of reasons, one of which was cruise & theme park hit due to Hurricane Irma. The stock immediately fell nearly 3%. 

Mastercard (MA) says it expects to achieve about 20% earnings growth this year and next. Wall Street was expecting 17% growth this year and 16% earnings growth next year. And the company has previously guided to “mid-teens” earnings growth. Management also said 2017 revenue will likely come in at the high end of prior guidance. So clearly the business has accelerated recently. The stock is up 3.3% this morning. Visa (V) shares are up 1.9% in sympathy. 

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