Halloween Is Boo-ming

Happy Halloween! It should be a fun one, given that candy sales are expected to rise 4.1 percent from last year, reaching $4.1 billion, according to data from IHS Markit. The sales increase is particularly impressive given that candy prices have dropped 0.9 percent compared with last year, marking the second consecutive Halloween candy price decline.

The National Retail Federation, which surveyed more than 7,000 consumers, estimates more than 179 million Americans will be participating in some type of Halloween festivities. That's up from 171 million last year.

Those figures mean this will be a lucrative holiday for retailers. By the trade group's calculations, this year's total Halloween spending - for costumes, cards, decorations, candy and more - will end up hitting a record $9.1 billion, up from $8.4 billion in 2016.

The Top-Heavy Market

So far in 2017, the five largest companies in the S&P 500 index — all high-tech giants — have added close to a trillion dollars in market capitalization. The remaining 495 stocks have added roughly $2 trillion. This means the five largest stocks have accounted for a third of the 2017 gains in market cap for the entire S&P 500.

Apple remains in the lead as the largest public company in the world by more than $100 billion in market cap, but Google's parent company Alphabet, the second biggest, is now worth $724 billion. That makes it larger than any company not named Apple has ever been.

The third, fourth, and fifth largest companies in the S&P are Microsoft, Amazon and Facebook. Those companies are now all worth more than $500 billion as well.

Going Out of Business

How bad has the retail business been this year? More store closings have been announced in 2017 than any other year on record. Since January 1, retailers have announced plans to shutter more than 6,700 stores in the U.S., according to Fung Global Retail & Technology, a retail think tank.

That beats the previous all-time high of 6,163 store closings, which happened in 2008 amid the financial meltdown. It's going to get worse: As many as 8,600 brick-and-mortar stores are expected to close this year.

Walgreens helped bring this year's tally to a new high when it said this week that it plans to close about 600 locations. Other chains that have announced big batches of store closings this year include Kmart, Sears, JCPenney, Ann Taylor, Gap, Banana Republic, Gymboree, Teavana, Michael Kors, Bebe, Perfumania, The Limited, and Staples.

The Coming Flood of Health Care Jobs

Where are the jobs going to come from in the next decade? Health care. Health-related jobs in areas such as home health care and hospitals will grow by about 3.7 million jobs by 2026, according to a report released Tuesday by the Labor Department.

Health care spending reached $3.2 trillion in 2015, almost 18 percent of gross domestic product that year. That means it has more than tripled since 1960, when spending on health care was just 5 percent of GDP.

Meanwhile, jobs related to manufacturing will decline by almost half a million over that same decade. The Labor Department says that each recession since 1979 has wiped out a substantial number of manufacturing jobs, erasing about 8 million jobs in almost four decades.

The Trouble With Growing Bond Numbers

The corporate bond market is booming. High-grade companies, excluding financial institutions, have issued nearly $712 billion in bonds so far this year, the most ever for a comparable period, according to Dealogic records going back to 1995.

Though monthly debt sales have slowed a bit since companies issued $102.4 billion in May, the most for any month this year, the market has remained strong. In the most recent sizable issuances, Northrop Grumman issued $8.3 billion this month, and Wal-Mart issued $6 billion.

The increased indebtedness has led some to suggest that more heavily indebted or lower-rated companies could run into trouble if the Fed raises interest rates. Strategists at BlackRock said this week that they were downgrading their outlook on U.S. credit to neutral, from overweight, citing high prices that could limit bond investors' returns going forward.

The Best Earnings Beaters

LogMeIn, a cloud-based software company that reports earnings this week, has incredibly beaten earnings estimates for 32 consecutive quarters. The stock has averaged a gain of more than 5 percent on the first day that it trades after quarterly earnings. 

There are other stocks that have come close to LogMeIn's record. Among the stocks beating estimates most often in recent years:

• Columbia Sportswear, 96.9 percent
• Lockheed-Martin, 96.9 percent
• Mettler-Toledo, 95.9 percent
• Silicon Labs, 95.3 percent
• Visa, 94.7 percent

Mixed Signals on Investor Confidence

Stock market participants' confidence is reaching historic highs, according to data from the University of Michigan consumer sentiment report, which asks about the probability of an increase in stock prices over the coming year. Currently, about 65 percent of respondents see such an increase in the offing, arguably the best reading in the survey's history.

It isn’t just retail investors feeling good about the market. According to the Bank of America-Merrill Lynch fund manager survey, the average cash balance in portfolios has fallen to 4.7 percent, the lowest level since May 2015.

The Michigan survey can be read as something of a contrarian indicator, however, since the previous record high came in early 2016, shortly before the market’s most recent pronounced pullback. The lowest-ever reading recorded by the survey—which goes back to 2002—occurred in 2009, around the financial crisis bottom, which marked the start of an uptrend that is still ongoing.

Microsoft Hits the Heights

After 17 years, Microsoft is returning to its tech-bubble peak. The software giant closed with a market value of $600 billion yesterday for the first time since January 2000, according to the Journal’s Market Data Group. Shares rose to $77.91, setting an all-time share price high.

For the year, Microsoft shares are already up 25 percent. That puts them on track to have their best year since 2013. Most observers attribute the rebirth of Microsoft to its growth in the cloud-computing space.

The firm is the third-largest S&P 500 company in market value, trailing Apple (about $800 billion)and Google’s parent company, Alphabet (about $690 billion). In July,  Facebook and Amazon.com joined the trio as the only U.S.-listed companies valued at more than the $500 billion.

Remembering Black Monday

Thirty years ago, on October 19, 1987, the stock market experienced what became known as Black Monday, when the Dow Jones industrial average experienced its largest percentage single-day drop ever, losing 22.6 percent of its value. Some other facts about that day:

• The market as a whole lost roughly $1 trillion in value on Black Monday
• The crash came after a two-week period in which the Dow had already dropped 15 percent
• The 604 million shares traded nearly doubled the previous record for volume
• The Dow's second-worst percentage loss was just 7.9 percent, on October 15, 2008 
• The Dow did not surpass its pre-Black Monday level until January 1989

Savvy New Jersey

What's the most financially savvy state? It's not New Jersey, which comes in at Number Five, according to a new survey from WalletHub. It's Massachusetts, followed by New Hampshire and Connecticut.

But New Jersey’s overall score was good enough to get it into fifth place. It ranked second for the lowest total debt as a percentage of median income and for the lowest percentage of credit usage, as well as in the top five in the categories of debt and spending, and saving.

When it came to financial literacy and credit, our state didn’t do anywhere near as well, though, with ranks of 16 and 27, respectively. And it was tied for 50th place for the highest foreclosure rate in the country.

The Optimism of Older Americans

Older Americans’ cheeriness about the U.S. economy is increasing at a swift clip, but younger folks aren’t feeling quite so optimistic. Beginning in September 2016, U.S. consumer sentiment as measured by the University of Michigan has climbed year-over-year each month for Americans age 55 and over, growing as much as 19 percent in April from the comparable year-ago period.

Though it has moderated since, sentiment growth for this age bracket still starkly contrasts with that of younger Americans, where growth has been negative for more than a year. Confidence among younger people slipped slightly in the October reading.

Going back decades, consumer surveys have shown Americans in their 20s and 30s more optimistic about the economy compared with their parents and grandparents. What's changed now? One factor in older Americans’ buoyant enthusiasm could be the wealth effect, as stock portfolios and retirement savings have soared.

The Cost of Retiring in New Jersey

Do you have a million dollars saved for retirement? If so, the data research firm HowMuch calculates that will last you 17 years and ten months here in New Jersey. That's eighth from the bottom among the 50 states.

A million dollars will last you the longest in Mississippi, where it would allow you to maintain your lifestyle through 25 years and six months. It would last the shortest in Hawaii, at 13 years and one month.

The figures were based on the cost of living index in each state for the second quarter of 2017, as well as the average annual expenditures of people over 65. The cost of living in New Jersey is among the highest in the nation - it's higher in only six other states.

The Big Test in College Savings

The good news is that an increasing number of families are saving for their kids’ college education. The bad news, according to Fidelity Investments’ latest College Savings IQ survey of almost 2,000 parents nationwide, is that many are likely not saving nearly enough.

A record 72 percent of families have opened college savings accounts, but many families are underestimating the cost of college. Parents of high schoolers, for example, are expecting a four-year nonprofit private college education will cost $145,000 on average. But the projected sticker price is close to $220,000.

Parents saving for college with a 529 plan reported an average balance of $32,000 saved, almost 50 percent more than parents saving without a 529 plan. Parents working with a financial advisor also reported saving more for college than those who didn’t have an advisor — $14,000 more, according to the Fidelity survey.

Workers Are Staying Put

Despite the low unemployment rate, workers are no more likely to leave their jobs than they were two years ago, according to the Labor Department’s new Job Openings and Labor Turnover Survey, or JOLTS. The rate at which workers quit their jobs—seen by many economists as a sign of confidence in the labor market—fell slightly to 2.1 percent in August from 2.2 percent in July.

The quits rate, or the share of employed people who voluntarily leave their jobs in a month, has held nearly steady for two years after slowly climbing following the end of the recession in mid-2009. The sideways move in the quits rate comes at a time when the unemployment rate has fallen to a 16-year low and the number of available jobs has touched the highest level on records back to 2000.

The number of job openings in the U.S. slipped slightly in August from July’s record high, but was the third highest monthly level on record. There were 6.08 million seasonally adjusted openings during the month, down from 6.14 million in July.

Expectations of Inflation

Are consumers and investors starting to believe inflation will rise? A September survey by the Federal Reserve Bank of New York, released yesterday, shows consumers expect annual inflation will be at 2.8 percent three years from now. That's up from 2.6 percent in the previous reading, and is the highest level since April.

Another survey of inflation expectations for the next year, from the University of Michigan, climbed to 2.7 percent last month, from 2.6 percent a month earlier. In the bond market, the differential between nominal and inflation-adjusted Treasury yields, known as breakevens, show expected annual inflation of 1.89 percent over the next 10 years, up from less than 1.7 percent in June.

But this inflation hasn't started up yet. The Fed’s preferred measure of inflation, the personal consumption expenditures price index, was up 1.4 percent from a year earlier in August.

Bullish on Earnings Season

Quarterly earnings season kicks off this week, and according to FactSet, it should be a strong one. Earnings for S&P 500 companies are seen coming in at $32.34 a share in the third quarter. That represents growth of 2.8 percent from a year ago. Sales are seen rising 4.8 percent compared with the third quarter of 2016.

J.P. Morgan Chase & Co. is even more bullish on the coming season. Their recent reports indicate that the overall earnings per share growth rate could be more than three times that of current consensus expectations.

But these forecasts have dimmed in recent months. Profit expectations have dropped 4.2 percent since the end of June, when earnings were seen coming in at $33.76 a share, according to FactSet.

The Surprising Trend in Small Caps

The S&P 500 index of large-cap stocks is up 14 percent year to date, and has been climbing the entire year, supported by solid earnings growth. The small-cap Russell 2000 index is up just 11 percent year to date - but it's catching up to the big boys.

More than half of that gain, or 6 percent, came in September. The small-cap index rose even as earnings picture for the sector deteriorated, with analysts penciling in a decline in earnings for the third quarter. What is most surprising, though, is what kind of smaller companies have rallied so far this year - primarily those of lower quality.

According to WisdomTree, the Russell 2000’s non-dividend payers returned 18.7 percent year-to-date. Shares of companies with negative earnings returned 21.7 percent, and the companies in the lowest return-on-equity quartile returned 22.7 percent - twice the return of the underlying index.

September's Jobs Report

The U.S. economy lost 33,000 jobs in September, primarily due to the effects of hurricanes Harvey and Irma, the Bureau of Labor Statistics reported this morning. Nevertheless, the headline unemployment rate dropped to 4.2 percent, the lowest that number has been since 2000.

This was the first month in which the economy shedded jobs in seven years. On top of that, revisions to the employment numbers from July and August reduced the number of jobs added in those months by an additional 38,000.

The net loss of jobs is expected to be a temporary blip. For comparison, payroll gains had averaged 249,000 in the six months before Hurricane Katrina at the end of August in 2005. After the storm struck New Orleans, employment gains averaged 76,000 over the next couple of months before rebounding strongly to 341,000 in November 2005.

Where Our Area Gives

Fidelity Charitable recently came out with a fascinating study of Americans' charitable giving, looking at what charities people in different metropolitan areas are most likely to support. The New York/Northern New Jersey area ranked near the top of many of the lists, ranking number one in one area: People from around here are most likely to give to international affairs organizations.

Other areas of giving where we rank highly:

• Society Benefit (including civil rights, community improvement, social advocacy and volunteer organizations): 2nd
• Education: 4th
• Health: 5th
• Arts and Culture: 6th
• Human Services (nonprofits that provide basic, daily care including food banks, homeless shelters and youth programs): 10th

Auto Sales Bounce Back

Led by strong truck and SUV sales and the replacement of cars destroyed by Hurricane Harvey in Texas, the auto industry posted its first monthly sales gain of the year in September. U.S. sales rose 6.1 percent to a total of just over 1.5 million vehicles.

Of the major automakers, only Fiat Chrysler and Hyundai reported sales declines. GM reported that sales rose 11.9 percent from a year ago, while Ford sales rose 8.7 percent. Toyota posted a 14.9 percent increase, Nissan sales were up 9.5 percent, and Honda sales rose 6.8 percent. Volkswagen said its sales rose 33.2 percent over numbers that were depressed a year ago by its diesel emissions cheating scandal.

Industry analysts expect sales to be strong through the end of the year, fueled by customers whose cars were destroyed by Harvey and Hurricane Irma in Florida. But that's not expected to be enough to match last year's record number of more than 17.5 million cars sold.

Third Quarter Scorecard

The third quarter of 2017 is now in the books, and it was a strong quarter for investors, in what is also shaping up as a very strong year.  Here's a scorecard for the major indexes:

• S&P 500 up 4.4% in the third quarter, up 14.0% year to date
• Dow Jones Industrial Average up 5.6% in the third quarter, up 15.3% year to date
• Nasdaq up 5.9% in the third quarter, up 23.6% year to date
• S&P Midcap 400 up 3.2% in the third quarter, up 9.3% year to date
• S&P Smallcap 600 up 6.2% in the third quarter, up 9.0% year to date

An Upgrade to Second Quarter Growth

The U.S. economy’s pace of growth in the second quarter was raised to 3.1 percent from 3 percent on Friday. According to the final revisions from the federal government, the U.S. expanded in the second quarter at the fastest clip in two years.

The U.S. is on track to grow slightly faster than 2 percent in 2017, keeping in line with growth trends since the end of the Great Recession. The somewhat stronger pace of growth in the spring mostly reflects higher farmer inventories. The production of unsold goods such as crops or new cars adds to GDP, and the value of inventories rose by $5.5 billion, stronger than previously reported.

Other key figures in the government’s third estimate of GDP, including readings on inflation, were little changed. The increase in consumer spending, considered the largest driver of economic growth, was unchanged at 3.3 percent.