Small Gain On Wall Street As Investors Eye Rate Hike

The Free Press WV

Wall Street ended modestly higher after a choppy session on Tuesday as gains in consumer discretionary stocks offset a drop in Apple and investors hunkered down for a potential interest rate hike next month.

Apple’s shares (AAPL.O) fell 3.15 percent after Credit Suisse said the iPhone maker had cut component orders by as much as 10 percent, indicating weakening demand for its newest smartphones.

The stock was the biggest drag on the three major indexes. After falling in the four previous sessions, the S&P 500 flittered between losses and gains for much of the session before finishing 0.15 percent higher at 2,081.72 points.

The report on Apple inflamed already-existing fears of a slowdown in global growth, especially in China, a key market for many U.S. companies including Apple, ahead of the crucial holiday shopping season.

Data on Tuesday showed persisting deflationary pressure in China and followed disappointing trade data over the weekend.

Companies will also be hit with higher borrowing costs if the U.S. Federal Reserve raises interest rates from near-zero levels next month, as is widely expected after Friday’s strong jobs report.

Still, the Dow Jones industrial average .DJI rose 0.16 percent to finish the day at 17,758.21 points. The Nasdaq Composite .IXIC dropped 0.24 percent to 5,083.24.

The prospect of a rate hike sent the dollar .DXY to a seven-month high. A strong dollar eats into the overseas sales at U.S. companies.

Following a dramatic selloff in August, fueled by fears about a slowing Chinese economy, and then a recovery in October, helped by corporate report cards that were not as bad as expected, the S&P 500 remains up about 1 percent for the year while the Dow is down marginally.

Seven of the 10 major S&P sectors were higher on Tuesday, with the consumer discretionary sector’s .SPLRCD 0.82 percent advance leading the gainers, helped by an 0.86 percent increase in Walt Disney (DIS.N) and a 0.64 percent rise in (AMZN.O).

Apple suppliers Skyworks (SWKS.O), Avago (AVGO.O), Cirrus Logic (CRUS.O) and Qorvo (QRVO.O) were down between 3.9 percent and 10 percent.

Gap (GPS.N) fell 1.44 percent after its comparable sales fell more than expected in October.

Among other gainers, D.R. Horton (DHI.N) surged 8.27 percent after its quarterly profit jumped 44 percent. Other homebuilders also rose.

Advancing issues outnumbered declining ones on the NYSE by 1,749 to 1,325. On the Nasdaq, 1,426 issues fell and 1,373 advanced.

The S&P 500 index showed five new 52-week highs and six new lows, while the Nasdaq recorded 85 new highs and 100 new lows.

About 6.7 billion shares changed hands on U.S. exchanges, below the 7.1 billion daily average for the past 20 trading days.

In Business and Finance….

The Free Press WV

New Pot Tax Will Fund College Scholarships

Pot lovers in one Colorado county will soon be getting high for higher education. With a 60% majority, voters in Pueblo County voted on Tuesday to phase in a tax on marijuana growers that will support college scholarships and other endeavors, WTKR reports. The tax will begin in 2017, hit 5% by 2020, and should raise $3.5 million—half of which is slated for scholarships to one of two colleges, reports Reuters. “The whole point of the scholarship program was to make higher education a reality for families who can’t afford to send their kids to school because of debt,“ says Pueblo County spokesperson Paris Carmichael.

Students will be able to follow any field of study at Pueblo Community College or Colorado State University-Pueblo, and all high school graduates in the county can apply. “There are some scholarships that come out of the legal marijuana industry but our preliminary research showed that this is the first to come from tax revenue,“ says Carmichael. The other half of the tax haul will go to various projects, including medical marijuana research, fixing up an old courthouse, and hiking trail and road improvements. The ballot was the third in four years to allocate marijuana taxes, the Denver Post reports; each of the previous two approved $40 million for construction of schools.

Why Starbucks’ New Cup Is Sparking Outrage

‘Tis the season to be jolly? Not all Starbucks customers would agree after seeing the company’s latest holiday-themed cup, Refinery 29 reports. The serving cup—which Starbucks rolls out with a new design every November—boasts two shades of red rather than the usual Christmas imagery, such as ice skates, snowflakes, or a snowman. Reaction is mixed, but some customers are calling them too plain, while conservative Christians are claiming that their most celebrated annual holiday is under attack, Buzzfeed reports:

But others are rallying to Starbucks’ defense on Twitter:

  • Tis the season of religious outrage. Mad about coffee cups, but not poverty, hunger, & sickness. Got it—Stonekettle (@Stonekettle) November 8, 2015
  • If doesn’t have books on their cups for Nat’l Library Week, it means they hate libraries. And literacy. And kittens. —Andy (@wawoodworth) November 8, 2015

Starbuck’s official explanation for the minimalist, two-toned cups? “In the past, we have told stories with our holiday cups designs,“ says Jeffrey Fields, Starbucks vice president of design and content, in a press release. “This year we wanted to usher in the holidays with a purity of design that welcomes all of our stories.“

Women’s Salaries Peak a Decade Earlier Than Men’s

Women’s earnings continue to rise slightly every five years between the ages of 20 and 40, at which point the median salary peaks at $49,000. From there until retirement 25 years later women’s earnings remain flat, while men’s salaries continue to grow until into their 50s, at which point the median salary is around $75,000, reports Marketwatch. This discrepancy persists even when men and women hold the same jobs, according to numbers released by salary comparison site PayScale, with a regular pay gap of 2.2% for most workers and an even higher one, 6.1%, for executives. ThinkProgress notes that the study shows the wage gap persists in every industry, at every educational level, and at every job level. “There’s discrimination,“ says Heidi Hartmann, the president of the Institute for Women’s Policy Research.

“A lot of pay is still based on the head of household model, where expectations that men earn to support their families while women earn money that’s just “nice to have” persist, she says. “There’s a heck of a lot of inefficiency the way supervisors set wages.“ And while more women do tend to take some time off of work to start a family, this doesn’t explain the stalled increase in earnings a full decade before men see the same plateau. Hartmann says that at least some of the difference may be more in the kinds of jobs women are currently taking versus men, and Payscale’s lead economist backs that up. “It’s not really a wage gap, it’s a jobs gap,“ Katie Bardaro says. Fast Company has a more detailed breakdown, ranging from a gender wage gap of 9.4% in farming, fishing, and forestry, to 1.4% in personal care and service.

VW Looking to Throw Cash at TDI Owners: Report

Volkswagen might be looking to buy its way out of the public relations disaster that keeps on giving: According to a report on The Truth About Cars, the German automaker will offer owners of affected diesel cars up to $1,250 in cash under a “TDI Goodwill Program” set to roll out Monday. That would come in the form of a $500 prepaid gift card and $500 to $700 to be spent at Volkswagen dealerships; VW would only confirm that an announcement is coming Monday, reports the New York Times. “There is a program in the works with VW, that I do understand,“ says the head of a dealership association who was not briefed on specifics. What’s not clear: Whether owners of affected cars who are involved in class-action lawsuits against VW would have to abandon those claims.

U.S. Stocks End Lower As Traders Worry About Global Growth

The Free Press WV

The stock market stumbled Monday as investors worried that the global economy could be slowing just as last week’s blockbuster U.S. jobs report appeared to open the way to the first rate hike from the Federal Reserve in nearly a decade. It was the first notable decline for the market in six weeks.

The Dow Jones industrial average lost 179.85 points, or 1 percent, to 17,730.48, slipping back into negative territory for the year. The Standard & Poor’s 500 index lost 20.62 points, or 1 percent, to 2,078.58. The Nasdaq composite fell 51.82 points, or 1 percent, to 5,095.30.

Investors continue to deal with the fallout of October’s unexpectedly strong jobs report, which greatly increased expectations that the U.S. Federal Reserve is likely to raise short-term interest rates, which have been close to zero since the 2008 financial crisis.

The Labor Department said U.S. employers created 271,000 jobs last month, more than the even most bullish of forecasts. The unemployment rate also dropped to 5 percent, the lowest in seven years. The surprising sign of strength could encourage the Fed to finally start to return interest rates to normal levels.

“This all shows how Friday’s employment report possibly changed the game,“ John Briggs, head of fixed income strategy at RBS, wrote in a note to investors.

The possibility of higher interest rates continued to push investors to reposition their portfolios. Even in a declining stock market, investors also sold government bonds. The yield on the 10-year Treasury note rose to 2.34 percent. That’s up from 2.33 percent Friday and significantly higher than the 2.23 percent level on Thursday. Yields on other Treasuries, including the two-year and three-year notes, also rose.

Securities that bet on which way the Fed will move interest rates show roughly a 70 percent chance the central bank will raise rates.

Global stocks were also reacting to news out of China, where customs data showed the country’s imports plunged 18.8 percent in October from a year earlier, damping hopes for a Chinese economic rebound this quarter. Exports shrank 6.9 percent in a sign of weak global demand.

Germany’s DAX index fell 1.6 percent, France’s CAC-40 index lost 1.5 percent and the U.K.‘s FTSE 100 lost 1 percent. In Asia, stocks actually rose in a bet that Asian governments would be more proactive in helping their ailing economies than their European counterparts.

“We’ve known about China’s issues for a while now, but this will likely lead to the government doing more stimulus,“ said Quincy Krosby, market strategist with Prudential Financial.

Among individual companies, travel site Priceline fell $138.75, or 9.6 percent, to $1,311.15 after the company’s outlook for the fourth quarter, a typically strong period for travel companies, came up short of analysts’ expectations.

Drugmaker Mallinckrodt fell $11.88, or 17 percent, to $58.01 after the short-selling firm Citron Research warned that the company might have issues similar to Valeant Pharmaceuticals. Citron became well-known earlier this year when it published a report on Valeant, whose stock has fallen by two thirds since the summer.

Benchmark U.S. crude fell 42 cents, or 0.9 percent, to $43.87 a barrel on the New York Mercantile Exchange. Brent crude, used to price international oils, declined 23 cents to $47.19 a barrel in London.

In other energy trading, heating oil fell a penny to $1.477 a gallon, wholesale gasoline was mostly unchanged at $1.371 a gallon and natural gas fell seven cents to $2.30 per 1,000 cubic feet.

Precious and industrial metals prices closed mixed. Gold edged up 40 cents to $1,088.10 an ounce, silver dropped 28 cents, or 1.9 percent, to $14.41 an ounce and copper rose a penny, or 0.5 percent, to $2.23 a pound.

Average US Rate on 30-Year Mortgage Jumps to 3.87%

The Free Press WV

WASHINGTON, D.C. — Average long-term U.S. mortgage rates rose sharply this week amid growing expectations that the Federal Reserve may soon raise its key short-term interest rate.

Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage jumped to 3.87 percent from 3.76 percent a week earlier. It was the largest weekly increase in the 30-year rate since June. The rate on 15-year fixed-rate mortgages advanced to 3.09 percent from 2.98 percent.

Still, rates remained historically low, marking a 15th straight week below 4 percent and well below last year’s levels. A year ago, the average 30-year mortgage rate was 4.02 percent, while the rate for 15-year loans was 3.21 percent.

While keeping the key rate at a record low near zero, the Fed last week signaled the possibility of a rate hike in December. It was the first time in seven years of record-low rates that the Fed has explicitly raised the possibility that it could raise the benchmark rate at its next meeting.

At their mid-December meeting, Fed policymakers will consider raising the rate if the economy continues to grow at a strong enough pace to keep adding jobs and push annual inflation toward the 2 percent target, Fed Chair Janet Yellen told Congress on Wednesday.

A December rate hike seems more likely by the day. Stocks have recovered nearly all of their losses from the summer, financial markets have calmed in China and elsewhere, and the U.S. economy continues to slowly improve.

Market expectations of a rate increase have brought plunging government bond prices and soaring yields. The yield on the 10-year Treasury bond, which mortgage rates have been tracking, climbed to 2.22 percent Wednesday from 2.09 percent a week earlier. The yield was at 2.23 percent Thursday morning.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage rose to 0.6 point from 0.5 point last week. The fee for a 15-year loan was unchanged at 0.6 point.

The average rate on five-year adjustable-rate mortgages jumped to 2.96 percent from 2.89 percent; the fee remained at 0.4 point. The average rate on one-year ARMs climbed to 2.62 percent from 2.54 percent; the fee held at 0.2 point.

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