Starbucks Corporation (NASDAQ:SBUX) stole the spotlight as Thursday came to a close with the announcement that CEO and founder Howard Schultz is stepping down. Schultz won’t be done with the company completely — he’ll become executive chairman and focus on innovation efforts and the development and expansion of the company’s high-end Reserve Roasteries retail concept.
U.S. equities mostly declined on Thursday as crude oil continued to climb in the wake of Wednesday’s OPEC production freeze agreement.
The catalyst for the trepidation is growing concern stocks may have come to far too fast in the wake of president-elect Donald Trump’s surprise victory.
Despite a restoration of corporate earnings growth in the third quarter, hopes surrounding Trump’s fiscal stimulus plans, and a rebound in the economic data, niggles such as extended valuations, Federal Reserve rate hikes, and the ongoing rise in interest rates (driven in part by higher inflation expectations) are weighing on sentiment.
In the end, the Dow Jones Industrial Average gained 0.4%, the S&P 500 lost 0.4%, the Nasdaq Composite lost 1.4% as big tech stocks were hit, and the Russell 2000 lost 0.7%.
Treasury bonds were weaker, the dollar declined, gold fell 0.1%, and oil gained 3.3% to build on Wednesday’s 9%-plus gain. That boosted the ProShares Ultra DJ-UBS Crude Oil (NYSEARCA:UCO) recommended to Edge subscribers to a gain of 21% since added on Nov. 15.
The rise in interest rates was furthered by Treasury Secretary nominee Mnuchin’s remarks about potentially extending the average maturity of U.S. debt — possibly via the issuance of 50-year or 100-year bonds.
Inflation expectations were bolstered by his comments about the potential for the U.S. economy to grow at a sustainable rate of up to 4% despite GDP growth rate constraints such as demographics, labor productivity, and workforce participation.
All of this has been great news for subscribers, with the ProShares UltraShort Lehman 20+ Yr(ETF) (NYSEARCA:TBT) now up nearly 32% since recommended back in August. Further gains look likely, magnified not only by rate hikes and Trump’s policies but by the investor exodus out of bond funds.
Financial stocks led the advance with a 1.7% gain on net interest margin hopes.
Big tech stocks were the laggards, down 2.3%, on chatter of possible hedge fund liquidations (as money managers are forced out of popular trades to chase performance). Facebook Inc (NASDAQ:FB) dropped 2.8%.
Express, Inc. (NYSE:EXPR) was slammed 20.4% on weaker-than-expected earnings and profit margins and lowered forward guidance on expectations of a challenging holiday shopping season on weak mall traffic on high promotions. Guess?, Inc. (NYSE:GES) fell 10.2% on weak earnings.
All eyes are on Friday’s non-farm payroll report, the last jobs report before the Fed’s December policy meeting where interest rates are expected to be raised.
Analysts are looking for payrolls to grow 170,000 and the unemployment rate to hold at 4.9%. The highlight of last month’s report was the appearance of some wage inflation, with a 0.4% surge in hourly earnings. Analysts are looking for a 0.2% rise in November.