Economic January News

Home equity is rising as property values improve and the rate of new home construction falls due to labor shortages and rising material costs (thanks in part to recent hurricanes). Wholesale inventories rose slightly more in November than forecast and that should help fourth quarter economic growth. The Labor Department reported a slight increase in import prices for December, but it was the smallest gain since July and fell below forecasts. Fed is already contemplating the number and frequency of rate increases for the year. China’s consumer inflation grew to 1.8 percent last month.
Optimism regarding overall growth remains very high. Those gains are starting to show up at the consumer level with WalMart yesterday becoming the latest company to announce a wage hike in light of the corporate tax reforms. The world’s largest private employer plans to raise wages for its U.S. hourly workers to $11 and pay a special bonus of up to $1,000 per individual. They are one of more than 80 companies that have publicly announced bonuses and/or wage increases made possible thanks to the tax reform law passed just before the holidays. Unfortunately for some, WalMart also abruptly announced the closure of 63 of its Sam’s Clubs stores which is expected to impact over 10,000 employees. Regardless, investors see the positives outweighing the negatives and continue to reward companies.
The unofficial start of earnings season kicks off today as big banks JPMorgan (NYSE:JPM), Wells Fargo (NYSE:WFC) and PNC Financial (NYSE:PNC) report their quarterly numbers. Earnings for S&P 500 companies are expected to have increased by 11.8% in Q4, according to Thomson Reuters. But many companies are forecast to take one-time charges due to deferred taxes and may be reluctant to give the broad positive guidance expected by the trading community. • Grain markets are flat this morning as they await the USDA data at 11:00 AM CST. History, as well as this week’s build in open interest suggest that volatility can be expected. • U.S. consumer prices posted modest rise in December. Larger-than-expected increase in core prices bolstered expecations for firmer U.S. inflation in 2018. • Legendary oil tycoon T. Boon Pickens is closing his hedge fund, saying trading oil has lost its luster. The onetime Texas oil wildcatter wrote in a LinkedIn post that he wants to invest in “personal passions like promoting unbridled entrepreneurship and philanthropic and political endeavors.”