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Economic Data Deluge

Following the heaviest inflow of Q3 earnings reports of the entire quarter yesterday after the closing bell, we see new economic data reads and news from across the pond. There will also be a long-awaited unveiling of the GOP tax reform plan today. And this is all aside from a new group of Q3 earnings reports coming out before the opening bell this morning.

Initial Jobless Claims fell again, to 229K last week from a slightly upwardly revised 234K the previous week. Continuing claims have sunk to multi-quarter lows beneath 1.9 million to 1.884 million specifically. This is more positive news, following yesterday’s ADP ADP strong 235K new private-sector jobs results for October. Tomorrow’s Bureau of Labor Statistics (BLS) non-farm payroll report is expected to bring in north of 300K new jobs last month. All of these numbers speak to an unwaveringly strong U.S. labor market.

Productivity and Labor Costs reads were also released early today. Preliminary productivity hit 3.0%, a bit higher than the 2.8% analysts had been expecting. The last time this metric registered this high was back in 2014. Labor costs were close to in-line with expectations at 0.5%, following a 0.3% read last time around. A surge in productivity with slight wage increases would seem to be music to the ears of economists and market participants alike; solid growth without unruly inflation creating headwinds is likely as Goldilocks as it gets.

Which brings us to the tax reform proposal key to the Republican-run Congress today and its success in next year’s mid-term elections, and my question is one that is almost never asked by market analysts these days: with 3% growth, still-cheap borrowing costs and solid employment numbers, what do we need a tax cut for?

These types of measures are typically used to pry an economy out of being stuck in the mud; if we’re already at or near our goals currently, wouldn’t a tax cut at this stage be simply borrowing against future gains, with the possible additional problems of blowing a hole the the national deficit, which would create longer-term economic issues?

This aside for now, the Bank of England today has decided to ratchet up its interest rates 0.5%, amounting to its first rate hike in 10 years. This announcement comes as inflation in the U.K. remains at 3% while economic growth is slowing, not speeding up.

The Bank also stayed pat with an asset buyback program worth U.S. $574 million. It’s far from a typical move for a central bank to raise rates while the country’s economy slows; starting new businesses, obtaining mortgages, etc. will now be more difficult. Perhaps the logic is that giving commercial and investment bank in England a leg up will spur the economy indirectly in the months ahead.

Q3 Earnings Roundup

We will hear from Apple AAPL and Starbucks SBUX after the closing bell. Yesterday afternoon we saw a big beat from Facebook FB augmented by remarks from CEO Mark Zuckerberg that security measures will add to costs at the social media leader at the expense of future profits. Tesla TSLA, on the other hand, missed expectations on a Model 3 “bottleneck,” but future projections for auto deliveries in 2018 remained hopefully robust.

Newell Brands NWL shares have tumbled more than 20% this morning following its disappointing Q3 earnings results, where by the consumer plastics maker missed the 92 cent Zacks consensus and posted just 86 cents per share. This was still 10% growth year over year. Revenues in the quarter narrowly missed the 3.7 billion expected, and the company lowered earnings estimates for full-year 2017.

Global quick-service restaurant major Yum! Brands YUM beat estimates by 2 cents per share to 68 cents in its most recent quarter, with $1.44 billion in revenues topping the $1.40 billion in the Zacks consensus estimate. Comps at KFC of +4% assisted the positive results in the quarter. Shares are trading up 2% in today’s pre-market.

Hyatt Hotels H surpassed expectations greatly on the bottom line, posting earnings of 26 cents per share compared with the 17 cents expected. Revenues of $1.12 billion topped the $1.09 billion we had been looking for. RevPAR rose 1.6% quarter over quarter, slightly offset by adjusted EBITDA down year over year.


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