Good news for Main Street is freaking out Wall Street

1. Market mayhem: Main Street is feeling good right now -- maybe a little too good if you ask Wall S...

Posted: Feb 5, 2018 5:34 AM
Updated: Feb 5, 2018 5:34 AM

1. Market mayhem: Main Street is feeling good right now -- maybe a little too good if you ask Wall Street.

After years of stagnant wages, American workers finally got a legit raise in January. Wages grew at the fastest pace since 2009 -- a strong signal of a healthy economy and a tight jobs market.

But there was no celebration on Wall Street for the clothing makers, miners and auto workers who scored wage gains. On the contrary, Friday's robust jobs report sent shudders through the stock market. Fears of inflation, higher rates and lower corporate profits sent the Dow plummeting 666 points, or 2.5% -- its darkest day since the Brexit turmoil in June 2016.

"We're at an inflection point, one that we haven't seen in quite some time, where good news for Main Street is not necessarily good news for Wall Street," said Peter Kenny, an independent market strategist and founder of Kenny's Commentary.

For years, Wall Street has feasted on a "goldilocks" environment of so-so growth and mysteriously low inflation. This backdrop was perfect for the stock market because it meant the Federal Reserve would keep its foot on the easy-money pedal in a quest to engineer inflation. Corporate profits could boom because they didn't have to pay workers more. And interest rates were ridiculously low, making stocks look like a bargain.

Now there are clues that the scales may be tipping ever so slightly back in the direction of Main Street.

"This is a great story for the average American worker. But it's sending some cautionary signals into the market," said Kenny.

Those signals first emerged in the once-sleepy bond market. The 10-year Treasury yield has rocketed from about 2.4% at the start of the year to a four-year high of 2.85% on Friday. Rising yields, which move opposite price, helped erase nearly $1 trillion of market value from the S&P 500 last week, according to S&P Dow Jones Indices.

"The 10-year has absolutely exploded. It's been on a tear," said Kenny.

The fear is that bonds, viewed as a boring but safe investment, will steal some of the thunder from stocks. That's because higher yields will make bonds suddenly look a bit more attractive.

The bond market turmoil is also a sign that investors believe inflation, including better wages, is finally emerging. If true, that would force the Fed to remove the punch bowl from the stock market party and raise short-term interest rates more aggressively.

Wall Street doesn't want average wages to rise too quickly because that will dent profitability. Corporate profit margins, a measure of efficiency, has climbed to record highs in part thanks to cheap labor costs.

"Unfortunately, we slipped into the counterintuitive point of the cycle, where great news is viewed as bad for the market," said Art Hogan, chief market strategist at financial firm B. Riley FBR.

2. Powell's swearing in: Jerome Powell takes over as chairman of the Federal Reserve following the departure of Janet Yellen on Friday. Wall Street didn't exactly give him a warm welcome.

Last week was the worst for the Dow in two years. Wages grew in January at the fastest pace in eight years. Investors worry it could be a sign that inflation will heat up.

As the Fed raises rates, borrowing money becomes more expensive, and economic growth can slow.

Related: This is why the Dow is plunging

3. Media earnings: Several big media companies report earnings this week: Disney on Tuesday, 21st Century Fox on Wednesday and News Corp and Viacom on Thursday. In the tech world, Snap reports on Tuesday and Twitter on Thursday.

Disney, which has announced a planned merger with 21st Century Fox, may report a boost from "Star Wars: The Last Jedi," which has raked in more than $1 billion globally.

And Viacom could face questions about a possible merger with CBS. The boards of the two companies said on Thursday that they are evaluating "a potential combination."

Comcast already reported its fourth quarter earnings, but it has something to look forward to: The Winter Olympics, which air on NBC, open on Friday.

Related: CBS and Viacom explore a merger

4. ... and other earnings: Other prominent companies report earnings next week, starting with Hess on Monday. General Motors, Dunkin' Donuts and Chipotle both report their financials on Tuesday.

Then come Michael Kors, Hasbro and Tesla on Wednesday. And Kellogg, Tyson Foods, AIG, Expedia, Nvidia and Yum all release earnings on Thursday.

Related: Elon Musk says he has sold out flamethrowers

5. Welcome, HomePod: The HomePod, Apple's answer to the Amazon Echo, hits stores Friday.

Eager customers have been waiting a long time. The 7-inch-tall speaker was unveiled last June, and was supposed to launch in December. It's the company's first major hardware launch since the Apple Watch in 2015.

Related: Apple's HomePod speaker gets February launch date

6. Coming this week:

Monday -- Powell's swearing in; Hess earnings

Tuesday -- Disney, Snap, General Motors, Dunkin' Donuts, Chipotle earnings

Wednesday -- 21st Century Fox, Michael Kors, Hasbro, Tesla earnings

Thursday -- News Corp, Viacom, Twitter, Kellogg, Tyson Foods, AIG, Expedia, Nvidia, Yum! earnings

Friday -- Olympics start; HomePod hits stores

West Lafayette
Few Clouds
36° wxIcon
Hi: 46° Lo: 29°
Feels Like: 32°
Kokomo
Clear
33° wxIcon
Hi: 43° Lo: 29°
Feels Like: 26°
Rensselaer
Clear
36° wxIcon
Hi: 45° Lo: 28°
Feels Like: 29°
Fowler
Clear
36° wxIcon
Hi: 46° Lo: 28°
Feels Like: 29°
Williamsport
Few Clouds
36° wxIcon
Hi: 47° Lo: 28°
Feels Like: 32°
Crawfordsville
Overcast
36° wxIcon
Hi: 47° Lo: 29°
Feels Like: 30°
Frankfort
Scattered Clouds
37° wxIcon
Hi: 46° Lo: 30°
Feels Like: 37°
Delphi
Broken Clouds
37° wxIcon
Hi: 45° Lo: 29°
Feels Like: 31°
Monticello
Broken Clouds
37° wxIcon
Hi: 44° Lo: 28°
Feels Like: 31°
Logansport
Clear
34° wxIcon
Hi: 42° Lo: 27°
Feels Like: 34°
Fair Weather Continues
WLFI Radar
WLFI Temps
WLFI Planner

Indiana Coronavirus Cases

Data is updated nightly.

Cases: 350970

Reported Deaths: 5973
CountyCasesDeaths
Marion47763893
Lake30007480
Allen20256333
Elkhart18510245
St. Joseph18319243
Hamilton14971181
Vanderburgh10862134
Tippecanoe991133
Porter915392
Johnson7484177
Hendricks7143163
Vigo6580105
Monroe591453
Madison5732125
Clark564884
Delaware5434108
LaPorte5171104
Kosciusko501846
Howard400578
Bartholomew367565
Warrick360574
Wayne355192
Floyd348878
Marshall333949
Cass319132
Grant315652
Hancock307762
Noble284750
Boone274656
Henry272141
Dubois262934
Jackson255237
Morgan251845
Dearborn249733
Gibson217033
Shelby212861
Knox207722
DeKalb204438
Clinton202224
Lawrence200549
Wabash190623
Miami188118
Adams187424
Daviess174246
Montgomery167029
Jasper165015
Ripley164521
Fayette163837
Steuben163016
Harrison162024
LaGrange156533
Whitley156516
Huntington147211
White147024
Putnam142530
Wells142533
Decatur141846
Randolph139524
Clay138026
Jefferson137618
Posey133620
Scott124024
Greene117954
Jay113315
Sullivan109018
Jennings102415
Starke100828
Spencer9578
Fulton94219
Fountain9228
Perry88021
Washington8789
Franklin79528
Carroll79313
Orange74428
Vermillion72810
Owen71410
Parke6796
Tipton66527
Blackford62715
Rush6278
Newton62113
Pike57421
Pulaski48020
Benton4423
Brown3995
Martin3896
Crawford3421
Union2972
Switzerland2765
Warren2763
Ohio2477
Unassigned0285

COVID-19 Important links and resources

As the spread of COVID-19, or as it's more commonly known as the coronavirus continues, this page will serve as your one-stop for the resources you need to stay informed and to keep you and your family safe. CLICK HERE

Closings related to the prevention of the COVID-19 can be found on our Closings page.

Community Events