Good Evening, Investor:
Friday, February 5, 2016
Stocks declined as investors considered how today's jobs report might influence the Federal Reserve's stance on rate hikes.
The Dow declined 211 points, with 21 of its 30 components retreating; the S&P 500 Index lost 35 points; and the Nasdaq fell 146. Decliners topped advancers by about three to one on the NYSE and by nine to two on the Nasdaq. The prices of Treasuries strengthened. Gold futures edged up 20 cents to close at $1,157.70 an ounce. The price of crude oil fell 83 cents, settling at $30.89 a barrel.
For the week, the Dow ended down 1.6%, the S&P 500 Index lost 3.1%, and the Nasdaq declined by 5.4%.
In earnings news
- LinkedIn's fourth-quarter net income fell 50% to $126 million as the professional social media firm spent to grow its business. Expenses rose 39%. Q4 revenue jumped 34% to $862 million from a year ago, but LinkedIn's full-year forecast disappointed analysts, sending shares (LNKD) tumbling 43.6%.
- Tyson Foods Inc.'s shares (TSN) advanced 9.9% after posting first-quarter earnings of $1.15 a share, up from 74 cents a share a year ago. Revenue fell 15.4% to $9.1 billion as food sales declined. The company raised its full-year earnings guidance but posted a full-year sales forecast that fell below estimates.
In other business news
- U.S. employers added 151,000 jobs in January following December's results, which were revised down to 262,000 from 292,000, the Labor Department reported. The jobless rate declined to 4.9% from December's 5.0%. Average hourly earnings edged up 0.5% from the prior month and rose 2.5% from a year earlier. The participation rate of working-age people who are employed or seeking work rose to 62.7% from 62.6%. Retailers added the most new jobs last month, with 58,000 new workers. Manufacturers created the most new jobs in a year, adding 29,000 workers.
- The U.S. trade deficit expanded a seasonally adjusted 2.7% to $43.4 billion in December, according to the Commerce Department. Exports declined 0.3%, marking the third month of declines, due to the dollar's strength and sluggish global growth. Imports edged up 0.3% as U.S. consumers bought more foreign-made cars and petroleum. For full-year 2015, the trade deficit rose 4.6% to $531.5 billion, exports dropped 4.8%, and imports slipped 3.1%.
- U.S. consumer credit grew in December by $21.3 billion, or at a seasonally adjusted annual 7.2% rate, according to the Federal Reserve. Revolving credit, which mainly reflects credit cards, rose $5.8 billion, or at a 7.5% pace. Nonrevolving credit, which includes auto and student loans, increased by $15.4 billion, or at a 7.1% pace.
Italian dairy cooperative 4 Madonne has raised 6 million euros in mini-bonds, which, according to Reuters, are guaranteed by huge wheels of Parmesan cheese. The cheesemaker will apply proceeds from its bond issue for capital expenditures, such as enhancing its facilities and its promotional efforts. RT reports that 4 Madonne's business was thriving in recent years, with production climbing to 75,000 wheels of cheese a year. Turnover reached 24 million euros in 2014. But when the cooperative sought to obtain a bank loan to expand its sales presence in the United States, its request was rejected.
Over 95% of Italian companies have 10 employees or less. And while these businesses typically rely on banks for financing, loans have been tougher to come by in Italy. Reuters reports that, following Italy's three-year recession, the country's banking system has been slow in releasing new credit. The country's reform-minded Prime Minister Matteo Renzi has been working with the European Commission to revive lending, in conjunction with European Central Bank's stimulus program. However, until these efforts fully materialize into Italy's economy, Renzi is encouraging businesses to raise money elsewhere, such as the capital markets.
4 Madonne's bonds will pay a fixed yield of 5% a year until they mature in January 2022. By that point, hopefully they'll achieve their goal of sweeping the U.S. market like a fleet of energized waiters storming the aisles of a restaurant until every patron receives a sprinkle of cheese from a fancy plastic grater. But until that happens, I'll pose a question to you, dear readers …
Q. What do you call a debt instrument issued by a cheese-loving chicken?
A. Chicken Parme-bond.
I'm re-grating that joke already. No more cheese puns; I parm-ise.
It's been a rocky stretch for the markets. Thank goodness the weekend is here. Whatever your plans arebe it the big game or a big list of choreshave fun, be safe, and hang tight.
John D. Natale
The opinions stated are those of the author and are not intended to be used as investment advice. The views are subject to change at any time in response to changing circumstances in the market and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or any mutual fund.
16,204.83, -211.75, or -1.29%
4,363.14, -146.42 or -3.25%
1,880.05, -35.40 or -1.85%
S&P MidCap 400
1,279.32, -27.66 or -2.12%
985.62, -29.17 or -2.87%
10-Yr Treasury Notes
30.89, -0.83, or -2.62%
1,157.70, +0.20 or +0.02%