Watching The Tape: Random gleanings from the world of business, investments and economics

Our incomes are like our shoes; if too small, they gall and pinch us; but if too large, they cause us to stumble and to trip.      – John Locke

Until the news broke last week, the markets were actually worried about tightening.  Well-heeled investors stayed on the sidelines.  Then a sole story seemed to lift the market.

Nike introduced self-tying shoes.

The shoe is pictured below, Nike’s innovative HyperAdapt 1.0.

Slip your feet into the HyperAdapt.  The shoe automatically tightens-up without conventional shoestrings – a perfect fit – and no laces to tie.

Kindergarten children around the world celebrated the news.  Apparently so did investors.

On the day Nike unveiled self-tying shoes, the Dow Jones Industrial Average tied its highest price of the year.

Below is a chart of the Dow Industrial Average from the lows reached February 11 of this year, through March 22.  The chart below oddly resembles a Nike shoe.

2016.03.23 pic2
Dow Jones Industrial Average February 11 – March 22 (source:  Yahoo Finance)

 

Comment:  Meanwhile – and we’ve waited a lifetime to use this pun –  If it ain’t brogue, don’t fix it.

 Nike’s Earnings Release

Of course there is no correlation between shoelaces and stock prices, however on Wednesday there was a very real connection between Nike shares and the Dow.  Nike is one of the 30 stocks comprising the Dow Jones Industrial Average.

On Wednesday, March 23, Nike released 3rd quarter earnings.  The earnings beat estimates, but the company lowered forecasts for future sales and earnings.

Nike stock plummeted – down 5% at one point – by far the worst performer in the DJIA.  For the day, the Dow dropped 80 points.  Nike was responsible for most of the DJIA’s 80 point drop, illustrating the index’s sensitivity to the volatility one or two companies.

Trivia question:  where was Nike founded?  Answer:  The University of Oregon.  In 1964, track athlete Phil Knight and his coach Bill Bowerman sold the new brand of shoes at track meets, directly from the trunk of Phil Knight’s car.

Easter Sales are strong

While many market watchers were focused on oil prices and the Federal Reserve last week, positive news about Easter Sales snuck in under the radar.

Looks like 2016 is a good year.  According to the National Retail Federation, Easter sales are expected to reach $17.3 billion this month, up 5.48% from last year’s record high. Of that $17.3 billion:

  • $5.5 billion will be spent on food
  • $3 billion will be spent on clothing
  • $2.7 billion on gifts
  • $2.4 billion on candy
  • $1.2 billion on flowers.

Comment:  Early warm weather helps.

March is known for another economic stimulus: sports betting. The American Gaming Association estimates Americans will wager $9.2 billion on the NCAA basketball tournament this month.

But here’s a twist: of that $9.2 billion, only $262 million will be bet legally.

Last year the illegal sports betting market in the U.S. grew to $148.8 billion.  To put that in perspective, Americans spent more on illegal gambling last year than three times the combined spending on Easter, Halloween and Mother’s Day.

Comment:  Our bracket was busted when Yale beat Baylor.

Circling back to Nike…

68 teams entered the March Madness field.  It’s important to uniform and shoe companies to sponsor winning teams, because of the advertising value.   According to The Baltimore Sun (Baltimore is the home of Under Armour), of the 68 teams:

  • Nike provided the uniforms for 41 teams.
  • Adidas provided uniforms for 14 teams.
  • Under Armour outfitted 10 teams.
  • Russell Athletic provided uniforms for three teams.

In the Sweet Sixteen:

  • Nike sponsors nine of the remaining teams (including founding University of Oregon).
  • Adidas has five teams left.
  • Under Armour has two teams (including Under Armour’s adopted home team, the University of Maryland).

Comment:  None of the tournament’s shoes are self-tying.

The Week Ahead 

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Economics

Monday:  International Trade, Personal Income

Tuesday: Janet Yellen speaks

Wednesday: Petroleum Status

Thursday:  Jobless Claims

Friday: Employment Situation, ISM Mfg Index

Earnings

Monday:  Westport Innovations

Tuesday: Sonic, Dave and Busters

Wednesday: Micron Technology

Thursday: Franklin Covey

Friday:  Blackberry

 

Watching the Tape is a compilation of news, observations and views written and edited by Bill Kibler, Senior VP, FinTrust Investment Advisors, bkibler@fintrustadvisors.com.  Information is provided by sources believed to be reliable, but FinTrust  is not responsible for accuracy.  The information herein is not a recommendation to buy or sell any security.  Past results are no indication of future performance.

 

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