The Tech Slide

It was a rough day for technology on the stock market yesterday. While the S&P 500 was little changed, the stocks in the tech sector plunged 2.7 percent and at one point was on pace for its steepest decline of the year.

The biggest names got the worst of it. Facebook dropped 3.7 percent, and Netflix fell 5.4 percent. Chip-maker Nvidia — one of the hottest heavyweight stocks this year — fell by more than 7 percent.

If there's a silver lining, it's that yesterday wasn’t the first time that tech and internet stocks suddenly plunged. In June, Apple and Amazon.com were hit for 3.9 percent and 3.2 percent one-day losses, respectively, but they rebounded nicely.

Daunting Debt in Retirement

Older persons today appear more likely to enter retirement in debt than in past decades, according to a working paper from the National Bureau of Economic Research. The percentage of people age 56 to 61 arriving at retirement with debt rose from 64 percent, for those born from 1931 to 1941, to 71 percent, among those born from 1948 to 1953.

Additionally, the value of debt held rose sharply over time. While the median amount of debt in the 1931-1941 group was about $6,800, it more than quadrupled among war babies born between 1942 and 1947, and almost quintupled among the 1948-1953 group.

The paper also finds that the debt distribution appears to have changed across cohorts. In the oldest group, the top quartile of the debt distribution held around $51,000 in debt. But for the two younger cohorts, this same quartile of the population held more than double ($106,000) and almost triple ($146,800) that amount.

The Declining State of Retirement

New data reported from the journal Health Affairs suggests that older Americans have more serious health problems than they used to, making it more difficult to enjoy retirement at an increasing age. The data shows that Americans in their late 50s have more serious health issues than folks the same age did 10 to 15 years ago.

The Health Affairs article looked at survey data to compare the health of older Americans using ADL (activity of daily living) measures. ADL limitations include actions like walking across a room, self-dressing, self-bathing, feeding oneself and getting into or out of bed. The number of Americans with these limitations rose from 8.8 percent of people who have a retirement age of 65 to 12.5 percent of people at the current retirement age of 66.

The study looked at cognitive health, too. Eleven percent of Americans set to retire at 66 already showed signs of cognitive decline or dementia at age 58 to 60, which is up from 9.5 percent from Americans with a retirement age of 65 to 66.

What's Going On with TIPS?

In a surprising development, mutual funds and exchange-traded funds targeting inflation-protected Treasurys, known as TIPS, pulled in $1.2 billion in the week ended Wednesday. That represented the largest draw since November 2016 and was the third-largest weekly inflow on record.

That burst of TIPS fund buying contrasts with recent inflation readings. The Labor Department’s consumer-price index rose 2 percent in October from a year earlier while the Fed’s preferred measure of inflation rose 1.6 percent in September from a year earlier, well below the central bank’s 2 percent target.

The 10-year break-even rate—the yield premium investors demand to hold the 10-year Treasury note relative to the 10-year TIPS—was 1.87 percent at the end of last week. That's been pretty steady over the past three months.

A Big Black Friday Weekend

The biggest shopping weekend of the year has arrived, and 69 percent of Americans — an estimated 164 million people — are planning to shop or considering shopping during Thanksgiving weekend, That's according to the annual survey released this week by the National Retail Federation.

Of those considering shopping the long holiday weekend, the survey found that 20 percent planned to shop on Thanksgiving Day (32 million), but Black Friday will remain the busiest day with 70 percent planning to shop today (115 million). A substantial 43 percent are expected to shop on Saturday (71 million), with 76 percent saying they will do so specifically to support Small Business Saturday. On Sunday, 21 percent expect to shop (35 million), and 48 percent are expected to shop on Cyber Monday (78 million).

Of those shopping, 66 percent said they’re doing so to take advantage of deals and promotions retailers will offer, while 26 percent cited the tradition of shopping over Thanksgiving weekend. Another 23 percent simply said that it’s something to do over the holiday weekend.

Thoughts for Thanksgiving

"Thanksgiving, after all, is a word of action." ~ W.J. Cameron

An optimist is a person who starts a new diet on Thanksgiving Day. ~ Irv Kupcinet

"The unthankful heart discovers no mercies; but the thankful heart will find, in every hour, some heavenly blessings." ~ Henry Ward Beecher

Thanksgiving Spending

Between buying the turkey and stuffing, travel costs, and finding just the right bottle of wine, Thanksgiving is getting to be an expensive holiday. A new survey from LendEDU finds that the average American will spend a total of $165.14 this year on Thanksgiving expenses.

Travel makes up a sizable part of that, but it’s not the majority. The site, which surveyed 1,000 people about their expected costs, says travel expenses make up $67.59 of that amount, with the rest going for food, wine, and other expenses.

The real winners at this time of the year are the nation’s turkey farmers. LendEDU calculates there are 254 million turkeys raised in the U.S. each year, with a total value of $4.85 billion - and 36 million of those turkeys are eaten at Thanksgiving.

Good News for Borrowers

Americans’ access to credit continues to improve, according to a new Federal Reserve Bank of New York survey. The so-called survey of consumer expectations found that respondents who were too discouraged to apply for credit over the past 12 months declined to 4.9 percent in October, reaching its lowest level since the survey began in 2013.

The survey, done every four months, focuses on mortgages and refinancing, credit cards and limit increases, and auto loans. The most recent one found a rise in those applying for and accessing credit for such things, and a drop in rejections. 

The New York Fed also updated its gauge of so-called financial fragility. While the average probability of respondents needing $2,000 for an unexpected expense in the next month rose to 33 percent, from 32 percent previously, the probability of being able to come up with the funds also rose to nearly 70 percent, from 67 percent.

From a Century Ago

The largest stock in America is now Apple, with nearly $900 billion in market capitalization. The MarketWatch web site recently ran a list of the biggest stocks of 100 years ago; here's what the market looked like in 2017:

1. U.S. Steel, $46.4 billion
2. AT&T, $14.1 billion
3. Standard Oil of New Jersey, $10.7 billion
4. Bethlehem Steel, $7.1 billion
5. Armour, $5.8 billion
6. Swift, $5.7 billion
7. International Harvester, $4.9 billion
8. duPont, $4.9 billion
9. Midvale Steel, $4.8 billion
10. U.S. Rubber, $4.6 billion

The High Cost of Working

Employees have some pretty major priorities when it comes to objectives outside their work, and after saving for retirement, the ones that top the list are work-life balance and becoming fit and healthy. That's the good news, says the Global Employee Benefits Watch 2017/18 study from Thomsons Online Benefits.

The bad news is that the survey reveals most employees—64 percent—feel that their employer and workplace are having a negative or very negative impact on their wellbeing. Survey respondents also said that they want employers’ support for their broader needs beyond salary and retirement plans, such as buying a home or financial management.

But they’re not feeling all that supported by employers. Some 63 percent said that one of their life’s goals is getting fit and staying healthy, but only 30 percent said their employer was helping that effort through a benefits program.

Two Ways for Auto Loans

One area of the credit arena that continues to grow is vehicle lending. Auto loans have grown for 26 straight quarters, a New York Federal Reserve report out Tuesday showed, even though delinquency rates are also up.

Banks and traditional lenders have been largely limiting their borrowing to higher-rated customers, even as the U.S. job picture remains upbeat. But their nonbank competition—mostly the financial arms of the auto manufacturers themselves or lenders that operate from a “captive” position as part of the dealerships—have taken a different tack.

Almost 10 percent of subprime car loans made by nonbank lenders were more than 90 days past due in the third quarter, the highest rate in more than seven years, according to the New York Fed’s quarterly report. That’s more than double the 4.4 percent delinquency rate for subprime loans made by traditional banks, a number that’s largely improved since the end of the financial crisis.

The Disappearing GE

The behemoths of the stock market are now the high-tech FAANG stocks, so what's happened to the old warhorses? Ten years ago, General Electric was the second largest company in the S&P 500 behind only Exxon Mobil. It’s still larger than 93 percent of the stocks in the S&P 500, but it ranks 33rd at this point.

General Electric still has a market cap of $153.6 billion, but in the past ten years, the company has lost $240.7 billion in value. Meanwhile, over the same ten years, three of the four largest stocks right now have each added more than $500 billion.  Facebook has also added $500 billion in market cap, given that it wasn’t even public ten years ago and it now has a market cap of $521 billion.

Had someone told you in 2007 that the S&P 500 would be up 80 percent ten years from now, you would have certainly expected GE to be leading the way and adding to its market cap. Instead, this old warhorse has lost $240 billion.

Inside the Retail Bust

One of the biggest economic stories of this yaer continues to be the retail bust. Through the third quarter of this year, 6,752 locations were scheduled to shutter in the U.S., excluding grocery stores and restaurants, according to the International Council of Shopping Centers. That's more than double the 2016 total and is close to surpassing the all-time high of 6,900 in 2008, during the depths of the financial crisis.

Apparel chains have by far taken the biggest hit, with 2,500 locations closing. Department stores were hammered, too, with Macy’s Inc., Sears Holdings Corp. and J.C. Penney Co. downsizing. In all, about 550 department stores closed, equating to 43 million square feet, or about half the nation's total.

Making matters more difficult is the explosive amount of risky debt owed by retail coming due over the next five years. Just $100 million of high-yield retail borrowings were set to mature this year, but that will increase to $1.9 billion in 2018, according to Fitch Ratings. And from 2019 to 2025, it will balloon to an annual average of almost $5 billion.

Hard Times for American Retirees

Getting old in America isn’t what it used to be. In a worldwide study, the U.S. has fallen to No. 17, down three spots from last year, in its ability to offer its citizens a secure retirement. The Natixis Global Asset Management Global Retirement Index ranks 43 mainly developed countries on this score.

Why did the U.S. have such a dismal showing? We took hits in income equality, health care spending and life expectancy. While America may have the fifth-highest income per capita, we have the sixth lowest score for income equality, suggesting that retirement saving is difficult for average workers. Our life expectancy fell, yet we spend the most on health care compared to the other countries analyzed in the index.

A big part of the problem is demographics. Overall, we are living longer — and that’s not necessarily a good thing for retirement planning. About half of the people born today in the developed world are expected to live past the age of 100, up from a global average life expectancy of 71 currently.

The Giving Season

We're entering the giving season, and 45 percent of experienced donors in a new survey said they expected to increase their charitable giving this year. Only 7 percent expected to give less than last year, according to Exponent Philanthropy, an association of some 2,000 funders.

This is truly the charitable time of year: Thirty-two percent of survey respondents said they would give at least half of their full annual contribution during the last two months of the year. An additional 27 percent they would give between 26 percent and 50 percent in November and December.

The survey also asked which factors contributed to their 2017 giving decisions. Among the most important:

•   Community needs: 43 percent
•   Market performance: 31 percent
•   Desire to maximize impact: 28 percent

The Biggest Surprises

One thing most investors keep a keen eye on during earnings season is those companies reporting a surprise - earnings well above or below what Wall Street expects. Here are the five biggest surprises of this season:

• SL Green Realty Consensus earnings: -4 cents per share, actual earnings: 40 cents per share
• EQT Corp. Consensus earnings: -3 cents per share, actual earnings: 12 cents per share
• Apache Corp. Consensus earnings: -2 cents per share, actual earnings: 4 cents per share
• Vornado Realty Trust Consensus earnings: 3 cents per share, actual earnings: 36 cents per share
• Amazon.com Consensus earnings: 7 cents per share, actual earnings: 52 cents per share

And the top five surprises on the downside:

• Brighthouse Financial Consensus earnings: $2.14 per share, actual earnings: -$5.64 per share
• Digital Realty Trust Consensus earnings: 36 cents per share, actual earnings: -2 cents per share
• HCP Inc. Consensus earnings: 15 cents per share, actual earnings: -2 cents per share
• Mattel Consensus earnings: 57 cents per share, actual earnings: 9 cents per share
• Charter Communications Consensus earnings: 98 cents per share, actual earnings: 19 cents per share

The High Cost of Caregiving

Caring for the elderly usually means caring for their finances as well. A new Merrill Lynch study finds that 92 percent of caregivers say they are also financial caregivers, performing at least one aspect of financial caregiving during their caregiving journey. After two years of receiving care, 88 perent of care recipients are no longer managing their finances independently.

The report finds that financial caregivers are responsible for a wide variety of tasks. The most common include: paying bills from their recipient’s account (65 percent), monitoring bank accounts (53 percent), handling insurance claims (47 percent), filing taxes (41 percent), and managing invested assets (21 percent).

According to the report, caregivers on average spend $7,000 on caregiving per year, which goes toward paying for personal, medical and household needs. But it can be higher than that: Caregivers for people with Alzheimer’s and other forms of dementia spend, on average, 54 percent more than the average caregiver.

The Case for Optimism

Wall Street’s earnings forecasts are holding up better than they have in years. Analysts usually start out the year too optimistic, but they have cut their full-year earnings estimates for S&P 500 companies by only 1.5 percent so far this year, the smallest downward revision since 2011.

By this time last year, earnings forecasts had come down by roughly 7 percent, according to FactSet data. All told, analysts now see per-share earnings for S&P companies rising roughly 10 percent in 2017 from a year earlier, FactSet reports.

Tech remains a huge driver of that. Analysts are now expecting tech-sector profits will rise 14 percent this year, compared to expectations for an 11 percent increase a month ago. The double-digit earnings growth for the sector accounts for more than 20 percent of the S&P’s overall market value.

2017's Tech Blowout

Last week, the Nasdaq marked its 63rd record close of 2017, surpassing the previous record of 62 all-time closing highs in a calendar year rung up in 1980. All three main benchmark stock indexes closed at records at the same time for the 25th time this year, tying a record for the calendar-year trifecta set in 1995.

So far this year, the Nasdaq has far outperformed the other main equity gauges. The index has risen nearly 26 percent in 2017, compared with a gain of nearly 16 percent for the S&P 500 index and 19 percent for the Dow.

The story of 2017 is tech stocks. The S&P 500 was up 2.3 percent in October, its best month since February, but technology accounted for 75 percent of that gain. Without tech, the S&P would have been up roughly 0.5 percent.

October's Jobs Report Bounces Back

Following on the heels of a very disappointing September, total nonfarm payroll employment rose by 261,000 in October, the U.S. Bureau of Labor Statistics reported this morning. The unemployment rate ticked down to 4.1 percent, reaching its lowest level since December 2000.

Employment in food services and drinking places increased sharply, mostly offsetting a decline in September that reflected the impact of Hurricanes Irma and Harvey. In October, food services and drinking places added 89,000 workers, after a decrease of 98,000 in September, when workers were cut because of the hurricanes.

In addition, September’s payrolls data, initially reported as the first drop in seven years, were revised to show employers actually created 18,000 new jobs that month, extending the economy’s streak of job gains to a record 85 straight months. When combined with August and September’s job growth, the economy added jobs over the last three months at a pace of 162,000 a month.

The Fed Speaks

As expected, the Federal Reserve announced yesterday it was leaving interest rates unchanged, in a range of 1 percent to 1.25 percent. However, 12 out of 16 Fed officials have penciled in a December rate hike in the so-called dot-plot, a projection of where Fed members see rates in the future.

The Fed also said that economic activity was on the rise, and that recent hurricanes shouldn't have long-term effects. "Although the hurricanes caused a drop in payroll employment in September, the unemployment rate declined further," the Federal Open Market Committee said. "Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters."

The Fed noted that inflation remained soft and below its 2 percent objective, despite the fact that gas prices rose after the hurricanes. Its preferred inflation gauge, personal consumption expenditures, excludes food and energy prices, and that figure rose just 1.3 percent in September.

Confidence Highest in 17 Years

Americans' confidence is soaring: Consumer confidence for the month of October surged to the highest level since December 2000.  The month's overall reading rose to 125.9, a tick above the previous high set in March. 

The share of respondents who say jobs are plentiful rose to 36.3 percent, the most since June 2001. People reporting good business conditions increased to 34.5 percent, matching the highest since 2001.

Consumers aren’t as optimistic about the future as they are about the present, however.  When it comes to the present, consumers haven’t been this optimistic since July 2001, with a reading of 151.1.  When it comes to the future, though, the number is just 109.1, and confidence levels still have yet to surpass the recent highs from last March.