4B
MONEYLINE CABELA’S STOCK TAKES OFF ON TALK OF SALE Shares of Cabela’s rose 17.5% Wednesday to close at $39.26 after Elliott Associates, the hedge fund with an 11% stake in the hunting gear retailer, called for changes, including a possible sale. Elliott said Cabela’s shares are “significant undervalued,” and other private equity firms might be interested in Cabela’s assets.
NEWS MONEY SPORTS LIFE AUTOS TRAVEL SMALL STOCKS + TINY GAINS = SHIFT AWAY FROM RISK S
L awrence J ournal -W orld - USA TODAY THURSDAY, OCTOBER 29, 2015
MARKET ANALYSIS
7%
6%
5%
Russell 2000 S&P 500
4%
3%
SLOWER TO RECOVER Stocks in the Russell 2000 have been slower to recover from the August 2015 correction than stocks in the S&P 500. Weekly percentage change YTD for each index:
2%
1.5%
1% 0
-1%
-2%
-2.2%
-3%
FRANCOIS NASCIMBENI, AFP/GETTY IMAGES
COST TO VW: ‘ENORMOUS BUT MANAGEABLE’ Volkswagen executives on Wednesday signaled that the cost of the automaker’s emissions scandal will mushroom but indicated the company can absorb the blow. New Volkswagen CEO Matthias Mueller acknowledged the $7.3 billion in provisions Volkswagen set aside in the third quarter will cover only fixes. It does not include the cost of penalties and potential customer compensation. That means the bill for the scandal could escalate to more than $25 billion. The company declined to offer a specific estimate. It will be “enormous but manageable,” the company’s new financial chief, Frank Witter, told news reporters. 4 CITIES TOP STREAMING LIST Some cities like to stream video more than others. Subscription streaming services such as Netflix have penetrated 47% of U.S. homes, a new Nielsen report finds. The cities with the highest rate of streaming: Washington, D.C., and Seattle (both at 56%), and Portland and San Francisco (both at 55%). Overall, Netflix is in 42% of U.S. homes, Amazon Prime in 18% and Hulu 9%. Portland and Washington were the only two cities among the top five in subscribership to all three streaming services. RECALLS DING FIAT CHRYSLER Fiat Chrysler Automobiles on Wednesday reported a loss of $330 million after adjusting for recall costs that were higher than expected and to account for the cost of vehicles damaged in the China port explosion in August. The company recorded a onetime charge of $842 million for recalls and $157 million for inventory lost or damaged in the port explosion. Without those charges the automaker would have earned $303 million, meeting analyst expectations. DOW JONES INDUSTRIAL AVG. 17,800 17,750 17,700
4:00 p.m.
17,780
198.09
17,550
-5%
-6%
Source Bloomberg
-7%
KRIS KINKADE, USA TODAY
Adam Shell @adamshell USA TODAY
mall stocks have delivered under-sized gains in the big rally after the stock market’s first correction in four years, a sign investors are moving away from less-speculative stocks and reducing risk. Once bull market leaders, small-company stocks — which are deemed as more speculative, high-flying investments — have turned to laggards. The performance math since the market bottom tells a story of investors’ diminishing infatuation with small company stocks and a renewed preference for more stable, safer and solid bluechip stocks. The Russell 2000, an index of small-company stocks, has rallied just 8.8% since its correction low Sept. 29. In contrast, the 30 big blue-chip companies in the Dow Jones Industrial Average are up 13.5% since its late-August low and the large-company Standard & Poor’s stock index has jumped 11.9%. “The larger the stock, in terms of market (value), the better the returns have been (recently),” noted Paul Nolte, a money manager at Kingsview. Small caps lost their leadership status in July. With market volatility on the rise, an interest rate hike from the Federal Reserve on the horizon and some signs of a weakening economy, investors no longer are swinging for the fences. “I’m not surprised to see small cap underperforming in recent weeks,” says Michael Farr, CEO of
@PDavidsonusat USA TODAY
9:30 a.m.
17,581
INDEX
Nasdaq composite S&P 500 T- note, 10-year yield Oil, light sweet crude Euro (dollars per euro) Yen per dollar
CLOSE
CHG
5095.69 2090.35 2.10% $46.15 $1.0909 121.23
x 65.54 x 24.46 x 0.06 x 2.95 y 0.0131 x 0.90
SOURCES USA TODAY RESEARCH, MARKETWATCH.COM
USA SNAPSHOTS©
Average CD yields As of Wednesday: 6-month
This week Last week Year ago 0.17% 0.17% 0.16% 1-year
This week Last week Year ago 0.28% 0.28% 0.27% 21⁄2-year
This week Last week Year ago 0.44% 0.44% 0.41% 5-year
This week Last week Year ago 0.85% 0.85% 0.84% Find more interest rates at rates.usatoday.com. Source Bankrate.com JAE YANG AND KARL GELLES, USA TODAY
The Federal Reserve held off on raising interest rates Wednesday but signaled a hike could come as early as December despite recent speculation that a slowing economy will prompt the central bank to wait until next year. With job gains weakening markedly the past two months and the government BLOOMBERG expected to report Janet third-quarter eco- Yellen nomic growth of less than 2% at an annual rate Thursday, the Fed’s decision to keep its benchmark rate near zero was widely expected. The central bank hasn’t lifted the rate in nearly a decade, and it has been near zero since the 2008 financial crisis. But in a statement after a twoday meeting, the Fed said, “In determining whether it will be appropriate to raise the target rate at its next meeting,” the Fed will assess progress toward its goals of maximum employment and 2% WASHINGTON
WEDNESDAY MARKETS
After lagging in market rebound, small caps are losing favor to more stable blue-chip stocks
RICHARD DREW, AP
Traders such as Mark Puetzer are finding investors trending back to the safety of the Dow and S&P 500.
“Markets are nervous. So the larger companies become the havens.” David Kotok, chief investment officer at Cumberland Advisors
money-management firm Farr, Miller & Washington. “Smaller companies are generally deemed to be more speculative investments compared to large caps. As volatility has increased, some investors may have sought the relative safety of large caps with their strong balance sheets and cash stockpiles.” Unlike big companies that can fund themselves from within,
smaller companies are more dependent on external sources, which is becoming more difficult as credit markets tighten ahead of coming rate hikes, experts say. “Markets are nervous,” says David Kotok, chief investment officer at Cumberland Advisors. “So the larger companies become the havens.” The market advance has become more narrow, too, with fewer stocks powering the advance as worries have increased, prompting investors to seek out bigger, better-known stocks that have proved they can boost sales and profit in a slower-growth economic environment. Dominating the performance charts recently, for example, are the so-called “TFANG” shares, an acronym that stands for technology, Facebook, Amazon.con, Netflix and Google parent Alphabet. Tried-and-true stocks are in vogue. Small upstarts are out of favor. And that new trend could have legs. “Leadership off the lows has been all about large caps vs. small caps and we continue to anticipate this has longer-term implications,” Jason Trennert, founder of Strategas Research Partners told clents in a research note, adding that market leadership has come from the top ranks, or the stocks with the biggest market values in the S&P 500. “If you haven’t owned the right ones or the big ones, returns remain more difficult to find,” Trennert added. So-called “safe” sectors in the S&P 500, such as utilities and consumer staples, have emerged amid an investor shift to higher levels of risk-aversion.
Here we go again: Fed hints at possible rate hike in December Paul Davidson
17,650 17,600
-4%
Stocks trip but regain footing; Dow rises nearly 200 points Adam Shell @adamshell USA TODAY
Wall Street at first reacted negatively when the Fed left rates unchanged and signaled a December rate hike was still possible, but then it rebounded with the Dow ending up nearly 200 points. The Dow Jones industrial average, which had been up about 100 points just before the Federal Reserve announcement at 2 p.m. ET, tumbled and briefly turned negative. But it rebounded to finish up 198 points, or 1.1%. The Standard & Poor’s 500 rose 1.2%, and the Nasdaq composite gained 1.3%. The Fed’s statement sent a annual inflation. That marks the central bank’s first reference to bumping up rates at a specific meeting. Fed policymakers will gather Dec. 15-16. In recent weeks, financial markets and many economists have sharply reduced the odds of such a move. But tellingly, the Fed on
clear message to Wall Street that it keeps a December rate hike on the table, says Russ Koesterich, BlackRock’s global chief investment strategist. “The Fed is telling the market that the December meeting is very much live,” Koesterich says. But he doesn’t think a rate hike of a quarter of a percentage point, with rates near 0%, will kill the bull market in stocks. Bear markets normally are caused by an aggressive Fed, which he does not see, or a recession, which he says is not the “most likely outcome” at the moment. The odds of a rate hike are rising in futures markets. Before the Fed statement, the odds of a December rate hike were about one in three, but now are up closer to 50-50. Wednesday suggested recent headwinds have eased. It dropped an assertion from its previous statement that global and market developments “may restrain economic activity somewhat” and further suppress inflation. Instead, it simply cited global and financial developments. Chi-
na’s slowing economy has performed modestly better than expected and stocks have rallied. The Fed said the economy “is expanding at a moderate pace,” echoing its fairly upbeat September outlook. Policymakers noted “the pace of job gains slowed” recently but added that the unemployment rate “held steady” and household spending and business investment “have been increasing at solid rates.” And it added that labor market slack — such as part-time workers who prefer full-time jobs — “has diminished since early this year.” The Fed reiterated that the risks to its outlook are “nearly balanced” and that it will boost rates when it “has seen some further improvement in the labor market” and is “reasonably confident” inflation will drift back to its 2% goal over the mediumterm. The generally positive appraisal appeared to distinctly leave the door open to a December move. “The Fed sent its clearest signal yet that, pending decent data, it has the December meeting in its sights for the first rate hike,” economist Michael Feroli of JPMorgan Chase wrote to clients. Some policymakers, such as Richmond Fed chief Jeffrey Lacker, believe the Fed already should have hoisted rates. He dissented again Wednesday.