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It's been a roller-coaster run, so get ready for today's ride. I'm Jessica Menton, bringing you up to speed as all three indexes are on course to close lower for the third straight week.
Futures are heading down. We're monitoring the tech-heavy Nasdaq as it teeters on the edge of a bear market. If it closes at or below 6487.75, the Nasdaq would be the first of the major three indexes to end a bull-market run that kicked off in wake of the financial crisis in March 2009.
As investors mull over global-growth worries, consumer-spending data is on tap later this morning along with the latest estimate of U.S. growth in the third quarter.
Plus, our Ryan Dezember explains why storing people’s stuff may have become too profitable a business for its own good in recent years.
A programming note: We'll be off on Monday and Tuesday due to Christmas Eve and Christmas and back in your inbox first thing Wednesday. Happy holidays!
Markets in a Minute
Global stocks continued to fall amid fears of a U.S. government shutdown and unease over the resilience of the global economy.
Analysts and investors are worried that the self-storage industry has attracted so much investment during a years-long bull run that America’s for-rent storage space may be outpacing the volume of the country’s excess belongings.
Self-storage stocks have surged since the economy began bouncing back from 2008’s housing collapse. Shares of the four largest self-storage owners have each quadrupled or better since bottoming out in early 2009, according to FactSet. Public Storage, CubeSmart, Life Storage and Extra Space Storage have each outpaced the S&P 500 on a total-return basis over the last decade, counting price changes and dividend payments.
The ten-year total return on Extra Space, the sector’s second largest player by locations and stock market value, is 1,182%. CubeSmart, which has a heavy presence around New York, has returned 794%.
These real-estate investment trusts are beating the market again this year, but concerns are mounting that billions of dollars worth of competing facilities under construction will challenge them for market share and prevent rents from rising like they have in recent years.
Many of the new projects are being built by private developers. So it’s hard to tell exactly how many new square feet are on the horizon.
Executives with Public Storage, the industry’s 161-million-square-foot behemoth, told investors on a recent conference call they estimate about $4 billion worth of new facilities have been built this year and that there will probably be about that much added again in 2019. In the decade leading up to 2016, they said, about $1 billion worth of new construction a year was typical.
The good news is that demand for storage doesn’t seem to be slowing. Green Street estimates that 8% of the U.S. population uses self storage, up from 3% three decades ago, even as technology has eliminated a lot of household clutter, like compact discs and video tapes.
Demand tends to be driven by death, divorce, downsizing and the like. Facility owners have shown they can raise rents much more aggressively than in other segments of real estate, such as apartments or offices.
“People always need some place to store their junk,” said Alice Chung, a commercial real-estate analyst at Moody’s Investors Service. “No one is going to start moving their stuff out just to save $3 or $4 a month.”
The Russell 2000 has shed 6.1% this week, on track for its largest weekly percentage loss since January 2016. If the small-cap index falls again Friday, it would be its seventh consecutive down day, which would mark its longest losing streak since September 2015.
So far this month, the Dow industrials has had an average daily move of -0.84%, on pace for its worst such average in a month since October 1987.
On this day in 1998, the S&P 500 closed above 1200 for the first time, finishing the day at 1202.84. The broad index closed Thursday at 2467.42.
U.S. durable-goods orders for November, due at 8:30 a.m. ET, are expected to rise 1.3% from the prior month.
U.S. gross domestic product for the third quarter, released at 8:30 a.m., is expected to be unrevised at a 3.5% growth rate.
U.S. personal income for November, on tap at 10 a.m., is expected to rise 0.3% from the prior month. Consumer spending is expected to rise 0.4%.
The personal-consumption-expenditure price index for November, issued at 10 a.m., is expected to rise 0.6% from the prior month. Core prices, which exclude food and energy, are forecast at a 0.2% gain. That would leave core prices up 1.9% from a year earlier.
The University of Michigan consumer-sentiment index for December, also slated for 10 a.m., is expected to tick down to 97.0 from 97.5 earlier in the month.
The Kansas City Fed manufacturing survey for December, posted at 11 a.m., is expected to drop to 12 from 15 a month earlier.
The Baker-Hughes rig count will be released at 1 p.m.
James Walker, a 66-year-old economist who lives in Pleasantville, N.Y., was laid off when the marketing analytics company he worked for was acquired two years ago. PHOTO: VICTOR J. BLUE FOR THE WALL STREET JOURNAL
The booming job market can’t fill the retirement shortfall. Nearly eight million older Americans are out of work or stuck in low-quality jobs, denying them a crucial time to accumulate savings.
Regulators are warning of “living will” shortcomings at four banks. U.S. bank regulators faulted Barclays, Credit Suisse Group, Deutsche Bank and UBS Group over their “living will” plans for winding themselves down in a crisis.
The first futures contract to pay out in bitcoin is poised for a green light. The contract is aimed at institutional players who have stayed out of cryptocurrency markets out of concerns that they are unregulated and susceptible to manipulation.
Investors and Fed officials are out of sync. Market declines following the Federal Reserve’s actions Wednesday show how investors and central bank officials are out of sync on the economic outlook and the impact of recent policy moves.
Some banks are breaking ties with Huawei Technologies. Two banks that helped power Huawei’s rise, HSBC and Standard Chartered, won’t provide it with any new banking services or funding after deciding that it is too high a risk.
The Saudis will cut oil output by more than planned. The country plans to curb its oil output by more than it committed in a recent OPEC pact, according to documents seen by The Wall Street Journal that reveal the cartel’s efforts to be more transparent about its production.
Major banks are suspected of collusion in bond-rigging probe. The European Commission suspects Deutsche Bank, Credit Suisse, Crédit Agricole and another global bank of colluding to manipulate a multitrillion-dollar government-backed bond market.
What We've Heard on the Street
“A weak market means that investors won’t be very forgiving about corporate earnings in the new year.”