WASHINGTON, February 9, 2017 – After a wobbly opening, President Trump brightened the mood, reviving hopes of a relatively near-term tax cut and juicing—at least for now—the flagging Trump-Santa Claus Rally’s 2017 edition.
According to a noon report from CNBC, the President promised an announcement on the state of U.S. tax rates:
“‘Lowering the overall tax burden on American business is big league … that’s coming along very well. We’re way ahead of schedule, I believe. And we’re going to announce something I would say over the next two or three weeks that will be phenomenal in terms of tax,’ Trump said at a meeting with airline executives.
The Dow Jones industrial average rose more than 100 points, with Goldman Sachs contributing the most gains.
“‘It’s almost a resumption of the Trump trade,’ said Matt Weller, senior market analyst at Faraday Research. ‘In his acceptance speech, Trump talked about infrastructure and deregulation, but in recent weeks he’d gotten away from that.’
“‘This is sort of reigniting those animal spirits,’ he said.
“The S&P 500 advanced about 0.6 percent, with financials rising 1 percent, hitting a new all-time high.”
Over all, Thursday trading action has an upward bias, but it’s uneven. Crude oil prices, which had been sinking for a couple of sessions, reversed the decline somewhat today, with West Texas Intermediate up 64 cents to stand at $52.98 as of 12:19 ET. Financials are also looking up after selling off recently, likely due to profit taking.
On the other hand, gold and silver, which have been on a tear, anticipating more U.S. inflation in 2017, back off Thursday morning after an initial upswing. Silver is currently standing at 17.705 per ounce, unchanged on the day, while gold is sharply off, down $5.40 to stand at $1,234.10 per ounce.
Gold and silver mining stocks and ETFs adjusted accordingly, although copper miners have been moving higher as a result of work stoppages and government interventions at a number of substantial mining and smelting sites in Indonesia, problems that have halted and started to reverse Freeport McMoRan’s (symbol: FCX) recent rally, given that company’s major exposure in Indonesia.
Quarterly earnings season, always a tumultuous time for stock traders, is nearing an end for the current quarter (calendar year Q4, although many companies operate on a different calendar). Earnings thus far have been mixed, with some company’s greatly exceeding analysts’ expectations while others have disappointed.
Disappointment is certainly an appropriate way to describe the sinking fortunes of Twitter (TWTR), which sank like a rock Thursday morning after issuing a quarterly earnings report considerably short of expectations, according to Reuters and other sources. Twitter
“…reported on Thursday it had more active users than a year earlier but lower advertising revenue, disappointing investors with its failure so far to translate fans such as U.S. President Donald Trump into more dollars.
“Investors punished the company’s shares, which fell 11.7 percent to $16.53 in morning trading.
Advertising revenue in the fourth quarter declined 0.5 percent year-over-year to $638 million, Twitter said, and the company said that advertising revenue growth would continue to lag user growth during 2017.”
Word on the street is that investors are getting increasingly irritated at Twitter CEO Jack Dorsey’s insistence on splitting CEO time between Twitter and payment services company Square (SQ), feeling that the floundering Twitterverse is tanking at least in part due to Dorsey’s severely divided attention. Notes Bloomberg:
“Pressure mounted in the fourth quarter when Twitter’s search for a potential buyer failed, forcing it to focus on reaching profitability as an independent business. Twitter cut 9 percent of its staff, sold its Fabric developer business to Google and shut down its Vine short-video app. It also lost both its chief operating officer and chief technology officer, increasing the load on Dorsey, whose time is divided because of his other job — as CEO of Square Inc.”
“The fact that they’ve tolerated having a shared CEO is remarkable given the situation they’re in,” said Brian Wieser, an analyst at Pivotal Research Group. “Unfortunately, it’s a situation of investor indifference — everyone is used to Twitter’s troubles by now.”
BTW, perhaps unsurprisingly, Square isn’t doing so hot either. InvestorPlace contributor Lawrence Myers calls that company “an overvalued money loser.”
Twitter’s troubles seem all the more unbelievable given the undoubted boost President Trump’s endless Twitter comments have been providing, even after taking up residence at the White House. Yet Twitter has done a disastrously poor job monetizing its activities, to the point where it can’t even get a viable takeover bid—clearly an indication of a distracted and unfocused management team.
Twitter’s board will need to make a decisive move soon before Twitter’s shares head into penny stock territory and thence into oblivion. Investors Beware!