Financial Review

Tax Plan Puffery

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DOW + 72 = 23,430
SPX + 3 = 2582
NAS + 7 = 6790
RUT + 10 = 1503
10 Y + .02 = 2.37%
OIL – .32 = 56.23
GOLD – 17.40 = 1277.00

Cryptocurrency

• Number of Currencies: 912
• Total Market Cap: $242,651,274,595
• 24H Volume: $8,257,485,175

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	8,083.4	$135.23B	$3.68B	44.57%	1	-1.96%	+22.72%
	Ethereum	ETH	372.17	$35.70B	$841.59M	10.19%	0.0457184	+1.22%	+16.29%
	Bitcoin Cash	BCH	1,219.00	$20.46B	$816.53M	9.89%	0.149375	-2.23%	-5.14%
	Ripple	XRP	0.24100	$9.29B	$208.90M	2.53%	0.00002952	+0.25%	+16.61%
	Litecoin	LTC	71.540	$3.89B	$182.29M	2.21%	0.00884957	-1.35%	+17.62%
	Dash	DASH	475.10	$3.67B	$173.21M	2.10%	0.0584733	-0.51%	+12.63%
	IOTA	MIOTA	0.94100	$2.67B	$96.62M	1.17%	0.00011773	-1.83%	+66.39%
	NEO	NEO	35.353	$2.30B	$249.48M	3.02%	0.0043399	-1.75%	+24.43%
	Monero	XMR	137.36	$2.13B	$63.47M	0.77%	0.016987	+0.44%	+13.23%
	NEM	XEM	0.20779	$1.88B	$14.50M	0.18%	0.00002568	-2.78%	+8.70%

It was a light volume session on Wall Street today. Stocks moved higher but closed well off session highs. This will be a holiday shortened week with the markets closed on Thursday and just a half session for stocks on Friday. We should all be thankful to take a few days away from the debate over the tax plan.

Sen. Susan Collins of Maine objects to the last-minute decision by Republican tax writers to include a repeal of Obamacare’s individual mandate — a critical source of revenue for the bill. Alaska Sen. Lisa Murkowski, another swing Republican, also has voiced objections to scotching the individual mandate. And Sen. Ron Johnson of Wisconsin wants more generous treatment for pass-through businesses.

Meanwhile, Sens. Bob Corker of Tennessee and Jeff Flake of Arizona, among others, have said the bill’s deficit impact could cost their support. If 3 Republican senators vote against a tax plan, it will not pass; that number might dip down to just 2 defectors depending on how the special election in Alabama swings. We don’t know if some of these senators have solid objections or if they are just negotiating.

This weekend, the White House indicated it might be willing to give in on repealing the individual mandate. But yanking the provision would exacerbate a problem troubling other potentially critical Republican votes in the Senate. It generates more than $300 billion in sorely needed revenue. Deficit hawks are working to wrench the bill in the other direction.

Corker, for one, has been categorical in declaring he’ll oppose a tax bill that adds “one penny” to the deficit. Late last week, he said he is working with like-minded colleagues to rein in the Senate version’s cost, now estimated at $1.4 trillion. In fact, the bill costs much more than that, thanks to expiring provisions for wage earners.

The White House budget director claims the bill will more than pay for itself through the economic growth it unleashes. But that’s just puffery. The administration so far has failed to produce an analysis justifying the claim. No independent study backs it up, either, and some paint a dire picture of the tax package’s impact on the nation’s fiscal health.

For example, even factoring in new economic growth from lower rates, the Penn-Wharton Budget Model found the measure would add up to $6.9 trillion to the debt by 2040.

Federal Reserve Chair Janet Yellen said she will step down from its Board of Governors once her successor, Jerome Powell, is sworn into the office. The announcement was expected, although Yellen could have stayed on as a governor even after stepping down as the chair, because her term as governor does not end until January 31, 2024.

Her decision to leave will give Trump an additional fourth spot to fill on the Fed’s seven-person Board of Governors in Washington, including for a vice chairman. This Wednesday, we’ll get the minutes of the last Fed FOMC meeting.

The Department of Justice will file a lawsuit today to block AT&T’s $85 billion acquisition of Time Warner. The No. 2 U.S. wireless carrier struck a deal in October 2016 to buy Time Warner, which also owns the premium channel HBO and movie studio Warner Bros, to compete with emerging technology companies by bundling video entertainment on its mobile service. The deal is opposed by an array of consumer groups and smaller television networks because it would give AT&T too much power over the content it would distribute to its wireless customers.

The legal challenge comes after AT&T rejected a demand by the Justice Department earlier this month to divest its DirecTV unit or Time Warner’s Turner Broadcasting – which contains news network CNN – to win antitrust approval. AT&T’s chief executive said then that he would defend the deal in court to win approval if necessary. Time Warner ended down 1.1 percent today.

Nebraska regulators today approved a Keystone XL oil pipeline route through the state, breathing new life into the long-delayed $8 billion project, although the chosen pathway is not the one preferred by the company that hopes to build it and could mean more time is needed to study the changes.

The Nebraska Public Service Commission’s vote also is likely to face court challenges and may even require another federal analysis of the route, if the project’s opponents get their way. Environmental activists, American Indian tribes and some landowners have fiercely opposed the project since it was proposed by TransCanada Corp in 2008. It would carry oil from Canada through Montana, South Dakota and Nebraska to meet the existing Keystone pipeline, where it could proceed as far as the U.S. Gulf Coast.

TransCanada has said that it would announce in late November or early December whether it planned to proceed with building the pipeline — which would carry an estimated 830,000 barrels of oil a day. Approval of the route gives TransCanada the ability to gain access to the land of holdout landowners through eminent domain proceedings.

North Korea is back on the list of state sponsors of terrorism, a designation that allows the United States to impose more sanctions. The designation came a week after Trump returned from a 12-day, five-nation trip to Asia in which he made containing North Korea’s nuclear ambitions a centerpiece of his discussions.

The Treasury Department will announce additional sanctions against North Korea on Tuesday. The designation will be largely symbolic, as North Korea is already heavily sanctioned by the United States. The United States has designated only three other countries – Iran, Sudan and Syria – as state sponsors of terrorism.

There is a possibility the move could backfire. North Korea could respond in several ways, including renewing missile or nuclear tests. The move also could undercut Trump’s efforts to solicit greater Chinese cooperation in pressuring North Korea to halt its nuclear and ballistic missile tests. In any case, it will do little to open the way for US dialogue with North Korea.

Chancellor Angela Merkel of Germany faced the greatest crisis of her career after negotiations to form a new government collapsed. The breakdown abruptly raised the prospect of new elections in Germany. Merkel said she was hopeful about forming a majority government. But if forced to choose, she would prefer to go through new elections rather than try to lead a minority government.

At a time when the European Union is facing a host of pressing problems, from Brexit negotiations with Britain, to the rise of right-wing populism, to separatism in Spain’s Catalonia region, the possibility of political instability in a normally reliable Germany prove disconcerting.

The potential for instability in Germany would be a major blow to the European Union. The political instability stems from the elections in Germany on Sept. 24, when Merkel’s Christian Democrats finished first. But their share of the overall vote dropped significantly, while the far-right Alternative for Germany scored a record vote, entering Parliament for the first time as the third-biggest grouping. Merkel was unable to form a coalition among the remaining parties.

Today’s emerging-market disaster comes courtesy of Chile. The nation had the world’s worst-performing stock market and major currency today due to some political turmoil. The prospect of a clear victory for billionaire Sebastian Pinera in next month’s run-off election evaporated following a poor performance in the first round on Sunday.

Many investors had taken for granted that Pinera would win the second round on Dec. 17, with the benchmark IPSA index rallying 39 percent this year through Friday in dollar terms on hopes the tax cuts he pledged would revive investment, growth and corporate profits. But that’s now in doubt, and the IPSA index retreated as much as 4.8 percent to 5,134.58 in Santiago on Monday, its biggest intraday loss since January 2012.

Chipmaker Marvell Technology Group said it would buy smaller rival Cavium for about $6 billion, as it seeks to expand its wireless connectivity business. In the last two years, the chip industry has witnessed a series of deals as companies try to gain market share in emerging areas such as automotive technologies and connectivity. The most recent is a bid by Wi-Fi chipmaker Broadcom for rival Qualcomm for $103 billion, in what could be one of the biggest technology deals ever.

The opioid crisis has ravaged some communities across the country. Of the estimated 50,000 Americans who died of drug overdoses in 2015, some 63% involved opioids. That same year, more than 33,000 Americans died of drug overdoses involving opioids. It’s estimated more than 54,000 people died from opioids in 2016.

According to a new report from The Council of Economic Advisers, an agency that is part of the Executive Office of the President, the economic cost of the opioid crisis in 2015 was $504 billion, much higher than previous estimates. One study from the Beth Israel Deaconess Medical Center in Boston found that the average cost of treating an opioid overdose victim in intensive care units jumped 58% between 2009 and 2015.

As the addiction persists, patients arrive in a worse condition and require longer stays. In 2015, average cost among 162 academic hospitals was $92,400 per patient in intensive care. The U.S. spent nearly $8 billion on criminal justice-related costs due to selling and consuming opioids, which was almost entirely a cost to state and local governments.

The cost in lost productivity is about $20 billion. Some seven in 10 employers have felt some effect of prescription drug usage among their employees. And fatal overdoses cost nearly $22 billion in health care and lost productivity costs.

Stocks Mostly Flat as New Fed Chief Announced

Charles Schwab: On the Market

Posted: 11/2/2017 4:15 PM EDT

Stocks Mostly Flat as New Fed Chief Announced

 

U.S. stocks finished the regular trading session mostly unchanged amid some favorable reports on weekly jobless claims and preliminary Q3 productivity and as President Trump announced Jerome Powell is expected to succeed Janet Yellen as the next Federal Reserve Chair. The markets also grappled with the details of this morning's release of the House's tax reform proposal. Treasury yields and the U.S. dollar were lower, while gold and crude oil prices traded slightly higher. In earnings news, Facebook and Tesla were under pressure after announcing their quarterly results following yesterday's closing bell.

The Dow Jones Industrial Average (DJIA) rose 81 points (0.3%) to 23,516, the S&P 500 Index was nearly unchanged at 2,580, and the Nasdaq Composite decreased 2 points to 6,715. In moderately heavy volume, 910 million shares were traded on the NYSE and 2.2 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.24 to $54.54 per barrel and wholesale gasoline added $0.03 to $1.77 per gallon. Elsewhere, the Bloomberg gold spot price gained $1.52 to $1,276.18 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% lower at 94.69.

Facebook Inc. (FB $178) reported Q3 earnings-per-share (EPS) of $1.59, versus the $1.28 FactSet estimate, as revenues rose 47.0% year-over-year (y/y) to $10.3 billion, topping the projected $9.9 billion. Daily and monthly active users were roughly in line with expectations, but its higher-than-expected outlook for capital expenditures and security investments was well above forecasts, and the company said this will impact profitability. Shares traded lower.

Tesla Inc. (TSLA $298) posted a Q3 loss of $3.70, or $2.92 per share ex-items, versus the expected $2.31 per share shortfall, with revenues rising 29.9% y/y to $3.0 billion, compared to the forecasted $2.9 billion. The company lowered its production target for its Model 3 due to constraints at its battery manufacturing facility. Shares finished sharply lower.

Yum Brands Inc. (YUM $79) announced Q3 EPS of $1.18, or $0.68 ex-items, versus the forecasted $0.67, as revenues declined 5.0% y/y to $1.4 billion, roughly in line with expectations. Q3 same-store sales grew 3.0% y/y, compared to the estimated 1.9% increase. The parent of Taco Bell, KFC and Pizza Hut maintained its full-year guidance. Shares rallied.

Kraft Heinz Co. (KHC $77) reported Q3 EPS of $0.77, or $0.83 ex-items, compared to the expected $0.82, as revenues grew 0.7% y/y to $6.3 billion, mostly in line with expectations. The company's organic sales growth slightly missed forecasts as sales declined more than expected in North America, overshadowing solid growth in the rest of the world. Shares were lower.

Jobless claims decline unexpectedly, Q3 productivity jumps

Weekly initial jobless claims (chart) decreased by 5,000 to 229,000 last week, below the Bloomberg forecast of an increase to 235,000, with the prior week’s figure being revised higher by 1,000 to 234,000. The four-week moving average fell by 7,250 to 232,500, while continuing claims dropped 15,000 to 1,884,000, south of estimates of 1,894,000.

Preliminary Q3 nonfarm productivity (chart) rose 3.0% on an annualized basis, versus expectations of a 2.6% gain, following the unrevised 1.5% increase seen in Q2. Unit labor costs gained 0.5%, above the forecast calling for a 0.4% gain. Unit labor costs were revised higher to a rise of 0.3% in Q2.

Today's employment data precedes tomorrow's fully-loaded economic docket, headlined by the October nonfarm payroll report, which is expected to show job growth of 310,000, rebounding from September's hurricane-impacted 33,000 decline. Private sector employment is projected to rise by 301,000 after falling 40,000 the month prior. The unemployment rate is forecasted to remain at 4.2% and average hourly earnings are estimated to rise 0.2% month-over-month after, building on September's 0.5% gain, and be up 2.7% y/y. Also, the September trade deficit is expected to widen to $43.2 billion, and September factory orders are projected to match August's 1.2% m/m rise, while the ISM non-Manufacturing Index and Markit's Services PMI Index are estimated to show growth remained solid.

Economic growth remains steady and a relatively new bright spot may be emerging as discussed by Schwab's Chief Investment Strategist Liz Ann Sonders in her article, Takin Care of Business: Several Important Kickers for a Strong Capex Cycle. Liz Ann also points out that tax reform—if we get it—would be an additional kicker, and the House's bill released today is garnering heavy scrutiny. Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend and Vice President of Trading and Derivatives, Randy Frederick, discuss in the video, Where Does Tax Reform Stand?.

Friday's reports are not likely to sway already elevated expectations of a December Fed rate hike, which was reinforced by the Central Bank's monetary policy decision yesterday, but could impact the outlook for the frequency of rate hikes next year. We expected two-to-three rate hikes in 2018, meaning the market's expectations may have to rise to meet the Fed's as Liz Ann notes in her analysis of yesterday's decision titled, Fed Stands Pat in November; Gets Ready to Go in December.

Also, the markets are grappling with today's expected pick of Fed Governor Jay Powell as the next Chairman of the Central Bank by President Donald Trump, along with the release of the House tax reform bill and the Bank of England's decision to raise rates as expected.

For analysis of the Fed and President Donald Trump's pick for the next Chairman check out our article, Fed Chairman: Why Trump's Choice Matters. President Trump's expected pick of Fed Governor Jay Powell as the next Fed Chairman today is also fostering uncertainty and Schwab's Chief Fixed Income Strategist Kathy Jones and Randy Frederick discuss in the video, Should a Change in Fed Leadership Matter to Investors?.

Treasuries finished higher, with the yield on the 2-year note flat at 1.61%, while the yields on the 10-year note and the 30-year bond declined 3 basis points to 2.35% and 2.83%, respectively. Treasury yields and the U.S. dollar dipped amid the aforementioned fiscal and monetary policy uncertainties, as well as the Bank of England's decision to raise rates today.

Europe mixed, pound falls despite BoE rate hike, Asia mostly lower amid earnings

European equity markets finished mixed, with the markets grappling with the details of the U.S. tax reform bill that was released today, while digesting the expected rate hike by the Bank of England (BoE), which included a more dovish forecast for further increases. The British pound fell on the BoE's decision and outlook to help the U.K. markets move higher. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers analysis of the changed global monetary policy landscape in his article, How the Shift by Central Banks May Affect the Stock Market. The markets also awaited the Fed leadership announcement in the U.S., while losses for financials were limited by a rally in shares of Credit Suisse Group AG (CS $16) on the heels of the company's sharp increase in profits. Markit reported that eurozone manufacturing output continued to depict solid growth. The euro traded higher versus the U.S. dollar and bond yields were lower.

Stocks in Asia finished mostly lower on some mixed earnings data in the region, while the markets digested yesterday's unchanged Fed monetary policy decision. Also, caution appeared to set in ahead of the Bank of England's monetary policy decision, as well as the release of the House's tax reform bill and President Trump's pick for the next head of the Fed in the U.S. Japanese equities gained ground. Australian securities dipped with financials seeing some pressure, while shares trading in mainland China and Hong Kong also declined. Stocks trading in South Korea and India finished lower. For analysis of the global market rally, see Schwab's Liz Ann Sonders' and Randy Frederick's video, Tracking Sentiment: Are Investors Too Optimistic About Stocks?.

The international economic docket for tomorrow will yield reads on the services sector from China, India, Australia and the U.K., with Australia also expected to report retail sales.

Financial Review

Black Monday + 30

Sinclair Noe — October 19, 2017

Podcast: Play in new window | Download (Duration: 13:15 — 7.6MB)

Subscribe: Android | RSS

DOW + 5 = 23,163 (Record)
SPX + 0.84 = 2562 (Record)
NAS – 19 = 6605
RUT – 3 = 1502
10 Y – .02 = 2.32%
OIL – .64 = 51.40
GOLD + 9.20 = 1290.70

Cryptocurrency

• Number of Currencies: 873
• Total Market Cap: $170,063,950,800
• 24H Volume: $3,432,050,501

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	5,694.9	$94.88B	$1.68B	49.05%	1	+0.02%	+3.13%
	Ethereum	ETH	307.59	$29.36B	$331.65M	9.66%	0.0542081	+0.20%	-0.03%
	Ripple	XRP	0.21712	$8.45B	$314.98M	9.18%	0.00003856	+1.31%	-11.94%
	Bitcoin Cash	BCH	330.66	$5.55B	$183.38M	5.34%	0.0583385	+0.34%	+6.19%
	Litecoin	LTC	59.870	$3.19B	$143.17M	4.17%	0.0104936	+0.07%	+3.21%
	Dash	DASH	295.11	$2.25B	$30.31M	0.88%	0.0518648	+0.24%	+0.12%
	NEM	XEM	0.22116	$2.03B	$3.49M	0.10%	0.00003971	0.00%	+10.38%
	NEO	NEO	28.920	$1.45B	$27.49M	0.80%	0.00508234	-0.03%	+3.49%
	BitConnect	BCC	199.387	$1.44B	$13.46M	0.39%	0.0350416	+0.92%	+4.33%
	Monero	XMR	89.00	$1.35B	$34.55M	1.01%	0.0155816	+0.85%	+2.24%

Somehow, the Dow managed to pull another record out of the hat. Major market indices were down most of the day – the Dow was down 105 points this morning – but the Dow and S&P clawed back to positive in the final minutes of trading.

Janet Yellen went to the White House today for a meeting with Trump, billed as some sort of job interview. If Yellen was smart, and she is, she probably let it be known that she was ready to move on when her term as Fed Chairwoman ends in February and she maybe offered a little advice on how not to blow up the economy. The meeting lasted about 30 minutes.

Politico reports Federal Reserve Governor Jerome Powell is the leading candidate to become the chair of the Fed. Powell has been heavily favored by Treasury Secretary Steven Mnuchin, who is leading the Fed chair search for Trump. Other finalists include former Fed Governor Kevin Warsh, Stanford economist John Taylor and National Economic Council Director Gary Cohn.

I don’t know why the major stock indices moved into positive territory at the end of the day, but it happened to coincide with the news about Powell. A decision is expected in a few days.

Senate Health Committee Chairman Lamar Alexander announced bipartisan support for an on-off-on again fix for Obamacare. Twelve Republicans and 12 Democrats signed on to the bill, which would continue ObamaCare’s insurer subsidies for two years and give states more flexibility to waive ObamaCare rules.

Trump announced last week he was canceling the payments, arguing the previous administration lacked the authority to make them. But Democrats, and some Republicans, including Alexander, have pushed for Congress to temporarily fund the payments to stabilize the ObamaCare markets. If they don’t, Alexander said, “there will be chaos in this country and millions of Americans will be hurt.”

Amazon.com wants to build a second headquarter. It would be a big deal. Amazon plans to spend $5 billion and employ about 50,000 workers. Cities are slobbering for that kind of economic development. For its second campus, Amazon wants a metropolitan area of more than a million people with good education, mass transit and likely lower costs than its home base in Seattle.

Amazon said it will need 8 million square feet in a second region, making it the biggest economic development target in decades. Amazon has said it will announce a decision next year. Applications for the gig are due today. New Jersey proposed $7 billion in potential credits against state and city taxes if Amazon locates in Newark and sticks to hiring commitments. New Jersey might be better served sending politicians to classes in remedial math.

Tucson hauled a 21-foot saguaro cactus to Amazon’s main Seattle headquarters via a truck. The plan didn’t turn out the way that Tucson’s economic group had hoped: Amazon refused to accept the gift. Canada is trying to lure the company, and in Ottawa, they instructed hockey fans to cheer for Amazon between periods.

Pittsburgh is offering free sandwiches to every Amazon employee who ends up working there. Four bids from New York, including the city and areas upstate. Tonight, New York City will be lit up all orange – it is not a Halloween drill. The mayor of the Atlanta suburb of Stonecrest said his city would use 345 acres of industrial land and create a new city called Amazon. Bezos would be its mayor for life. That’s just sad.

The front-runners are Austin, Atlanta, Toronto, Pittsburgh, and Boston. Each public stunt is just the wrapping on a package of tax breaks, promises, and other giveaways enclosed in the bids, many of which cities, counties and states have decided to keep private. Most cities will lose and have nothing to show for their self-debasement.

When Amazon announced plans for HQ2 they were fairly specific about their requirements: Amazon is looking for existing buildings of at least 500,000 square feet and total site space of up to 8 million sq. ft. It would like the site to be within 30 miles of a population center and within 45 minutes of an international airport. It prefers metro areas with more than 1 million people. Amazon is prioritizing “stable and business-friendly regulations and tax structure” in its considerations.

Also, good public transit, close to freeways, bus and light rail, bike lanes and even pedestrian access, good wi-fi and mobile phone infrastructure, an educated workforce with a solid university system in place. And more generally, it needs affordable housing and a good cultural fit. Now forget Amazon for a minute, and you have a blueprint for local government to follow when they consider investing in a strong business environment.

For a company trying to fend off activist investors targeting bloated corporate spending, General Electric has seemed particularly clueless about how it spends money. Along with paying executives astronomical salaries for lousy results, it has showered them with perks that read like a caricature of executive excess. Perhaps the most egregious example is the one revealed yesterday in the Wall Street Journal.

It reports that the company often sent an empty aircraft to follow then-CEO Jeffrey Immelt around as he traveled the world on another corporate jet, just in case his primary plane (no doubt equipped with GE aviation equipment) broke down during one of his business trips.

GE has a long history of bloated executive compensation. When former CEO Jack Welch retired in 2001, he was left with a retirement package valued at almost $420 million, and included items like the use of an $50,000-a-month Manhattan apartment, choice seats for the Yankees, Knicks, Red Sox, and at Wimbledon, and the use of GE’s airplanes.

The size and excess of Welch’s golden parachute only came to light in his divorce filings, and its non-disclosure to shareholders became the subject of a SEC enforcement action. But while Welch’s haul was embarrassing, it came when GE was still making money for investors, so nobody cared.

Every two years, the US Energy Information Administration (EIA), America’s official source for energy statistics, issues scenarios about how much solar, wind and conventional energy the future holds for the US. Every two years, since the mid-1990s, the EIA is wrong. Last year, it was spectacularly wrong.

The Natural Resources Defense Council and Statista recently teamed up to analyze the EIA’s predictions for energy usage and production. It found that the EIA’s ten-year estimates between 2006 to 2016 systematically understated the share of wind, solar and gas. Solar capacity was a whopping 4,813% more in 2016 than the EIA had predicted it would be.

Meanwhile, EIA estimates regularly overstate US fossil fuel consumption, which some see as an attempt to boost the oil and gas industry.

Spain’s central government said it would suspend Catalonia’s autonomy and impose direct rule after the region’s leader threatened to go ahead with a formal declaration of independence if Madrid refused to hold talks. In an act unprecedented since Spain returned to democracy in the late 1970s, Prime Minister Mariano Rajoy said he would hold a special cabinet meeting on Saturday that could trigger the move.

The Socialist opposition said it backed the government but suggested the measures should be limited in scope and time. Catalan president Carles Puigdemont, ignoring a 10 a.m. deadline to drop his secession campaign, wrote a letter to Rajoy threatening a formal declaration of independence. The war of words increased uncertainty over a standoff that has raised fears of social unrest, cut growth prospects for the euro zone’s fourth-largest economy and rattled the euro.

Apple shares fell nearly 3 percent on signs of weak demand for the iPhone 8. Wireless carriers in the United States and Canada have reported slow third-quarter customer upgrades. While some expect a pickup after the iPhone X goes on sale in November, others cautioned that phone’s high price tag could weigh on demand. The uncertainty about demand was coupled with a Taiwan media report of a cut in iPhone 8 production.

Verizon Communications reported quarterly revenue topped Wall Street analyst estimates and the company added more phone subscribers than expected.

Today marks the 30^th anniversary of Black Monday – the Crash of 87. On October 19, 1987 the Dow Industrial Average dropped 508 points or 22.6%, nearly double the percentage loss for Black Friday in October 1929, which ushered in the Great Depression.

A 22.6% loss today would be more than 5,200 points – slamming the Dow back under 18,000. In 1987, Black Monday wiped out $500 billion of stock market wealth. A similar percentage drop today would wipe out $6 trillion. Program trading offered a way of quickly hedging bets when markets got rocky.

As with so many other things that initially appear to make our lives easier, though, the whole system dramatically backfired when it led to too many people scrambling for the exit at the same time. There are many theories behind Black Monday, some better than others, but the truth is we don’t know exactly why the markets melted down 30 years ago. And that is a problem.

Financial Review

Health Care, Taxes

Sinclair Noe — September 26, 2017

Podcast: Play in new window | Download (Duration: 13:15 — 7.6MB)

Subscribe: Android | RSS

DOW – 11 = 22,284
SPX + 0.18 = 2496
NAS + 9 = 6380
RUT + 4 = 1456
10 Y + .01 = 2.23%
OIL – .13 = 52.09
GOLD – 16.70 = 1294.60

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	3,901.1	$64.87B	$1.04B	40.51%	1	+0.51%	-0.09%
	Ethereum	ETH	288.50	$27.28B	$345.46M	13.46%	0.0735021	-0.08%	2.01%
	Bitcoin Cash	BCH	446.28	$7.36B	$166.82M	6.50%	0.113125	-0.93%	-13.93%
	Ripple	XRP	0.19001	$7.21B	$77.05M	3.00%	0.00004798	+0.29%	2.61%
	Litecoin	LTC	52.410	$2.75B	$172.80M	6.73%	0.013249	+0.15%	-1.37%
	Dash	DASH	342.55	$2.57B	$42.09M	1.64%	0.0865328	+0.45%	5.23%
	NEM	XEM	0.22578	$2.06B	$2.26M	0.09%	0.00005848	-0.29%	-3.25%
	IOTA	MIOTA	0.51622	$1.44B	$14.93M	0.58%	0.00013258	+0.31%	-7.42%
	Monero	XMR	94.00	$1.41B	$32.74M	1.28%	0.0238114	+0.53%	-2.96%
	NEO	NEO	26.670	$1.34B	$61.33M	2.39%	0.00683284	+1.18%	33.50%

The Graham-Cassidy health care bill is dead. Late yesterday, the Congressional Budget Office and Joint Committee on Taxation released a report on the bill – it was not a full score, or detailed analysis but it was enough to uncover the nasty truth. The bill would have ended the subsidies in the ACA for low- and moderate-income Americans’ private insurance premiums as of 2020.

It also would have terminated the extra funding the ACA provided states that had extended Medicaid to more low-income adults. Instead, the measure would have provided states a smaller amount of money — about $240 billion less between 2020 and 2026 — in the form of block grants to spend on unspecified subsidies for health insurance and care. And the dollars would have been shifted gradually from states that had expanded Medicaid to the ones that hadn’t.

The CBO report did not have enough time to calculate how many people would lose health insurance coverage but they made a rough guesstimate that the number would be in the millions. An analysis by the Brookings Institution estimates that about 21 million people would lose coverage.

Supporters of the proposal never offered a good reason for this new approach. Saying they hoped to encourage state innovation, they ignored the decisions states had already made about healthcare policy as well as the differences in healthcare costs from state to state and city to city.

Professing to be vexed by rising premiums and Medicaid spending, they did nothing to address a key source of the problem, the rising cost of care. Claiming to protect people with preexisting conditions, their convoluted proposal would have let states lift almost all the safeguards the ACA had provided for people who are already sick.

Remember, it was Senator Cassidy, not Jimmy Kimmel who came up with the Jimmy Kimmel Test, the pledge that nobody would be denied health care because of expense. Senate leaders tried to persuade Senator Susan Collins by tossing an extra $700 million to the state of Maine. Collins said no. That means GOP leadership did not have the votes.

The bill was pulled and it is dead, until next time, whenever that will be. The Affordable Care Act still has problems but they can be fixed. With Graham-Cassidy off the table, senators should resume the bipartisan efforts to stabilize the health care markets.

Next on the agenda – tax reform. Senator John McCain is laying down the same marker on tax legislation as he did on health care, demanding regular order and support from both parties. McCain’s tax demands cut against GOP leaders’ plans to use the same fast-track procedure on taxes as they tried to use on health care. That procedure requires 50 Senate votes and allows for bypassing a potential Democratic filibuster. Because the GOP controls only 52 votes in the Senate, every vote is crucial to their agenda.

Cutting taxes on corporations and the wealthy may be an easier political lift than taking health insurance away from 20 to 30 million Americans. But there is still a math problem that must be overcome – how to cut taxes without blowing up the deficit.

The initial plan is to offset lower tax rates and even reduce the deficit by eliminating unnamed loopholes and slashing unnamed wasteful spending, and dynamic scoring, which is another way of saying they want to count their chickens before they hatch – calculating that tax cuts will pay for themselves by leading to higher economic growth – and then counting that incredible growth surge before it happens, if it happens at all.

The tax cut blueprint will be unveiled tomorrow. The nonpartisan Tax Policy Center ran some estimates, using dynamic scoring. Trump’s proposal to cut the corporate tax rate from 35% to 15% will cost $2.3 trillion in forgone tax revenues over the next 10 years.

An additional proposal would allow business income received by owners of pass-through entities, such as partnerships or LLCs, to be taxed at 15% rather than the higher rate on ordinary income earned by individuals. If this proposal excluded business income from large partnerships, it would cost $1.4 trillion over 10 years. So, the total revenue loss from a 15% cut would be at least $3.7 trillion.

Balance those cuts by limiting the existing tax preferences of business. To start, suppose all the current targeted tax breaks for specific industries could be repealed. This would include: taxing incentive fees of hedge fund managers as ordinary income, not capital gains; repealing the special deductions for domestic oil and gas production, as well as eliminating tax credits for renewable energy and low-income housing.

Best-case scenario: those raise $270 billion in tax revenues over 10 years. Suppose further we could limit deductions by businesses to 50% of the interest paid on bonds or loans for another $380 billion over 10 years.

Next, repatriate all that corporate cash sitting overseas; bring it home at a rate of just 10%, raising another $150 billion over 10 years. All those proposals raise just $800 billion compared to $3.7 billion in tax cuts, leaving a shortfall of $2.9 trillion. And that’s just the business side of the ledger.

For individual taxes, the plan calls for cutting individual rates to 35%, 25% and 10% for the relevant income brackets. Add $450 billion for the permanent repeal of the alternative minimum tax, plus $700 billion for doubling the standard deduction. These cuts together total $3.15 trillion.

Then come back with more revenue by repealing head of household filing and personal exemptions, things like mortgage interest deductions, and state and local taxes (some ideas that will be nearly impossible politically). But if it could be done, it would add about $3.35 trillion back – meaning individual taxes would be higher.

That leaves us with a $2.9 trillion shortfall on the business side, compared to a $200 billion gain on individual taxes – net shortfall of $2.7 trillion. Senate Republicans last week agreed on a budget resolution allowing a $1.5 trillion increase in the federal deficit over the next 10 years from tax legislation. That’s a difference of at least $1.2 trillion.

And we haven’t even figured in substantial increases in defense spending. To compensate, the plan is calling for GDP growth to explode 50% or more. Where would that remarkable growth come from? Nobody seems quite sure. One idea is that business will spend more on equipment, even if that equipment is automation that displaces workers across all sectors.

Another is that people will see their incomes grow substantially, despite the demographic reality that the boomer generation is retiring at a rate of 10,000 per day. Another idea is that we won’t have a recession over the next 10 years, interest rates will remain near record lows, and there will be no war.

In other words, to avoid a massive deficit, we all must start wearing rose colored glasses. Even then, the estimates say the deficit will explode between 2028 and 2038 to more than 100% of GDP.

Federal Reserve Chairwoman Janet Yellen today said the Fed will continue to gradually raise interest rates, and needs to be cautious about “moving too gradually,” citing the lag between monetary policy and economic activity. Meanwhile, fresh research from the Federal Reserve shows the gap in income and wealth between the richest and poorest households, already at historically high levels, continues to widen.

Fed Gov. Lael Brainard said the Fed’s latest survey of consumer finances, to be released Wednesday, shows the share of income held by the top 1% of households reached 24% in 2015, up from 17% in 1988. The share of wealth held by the top 1% rose to 39% in 2016, up from 30% in 1989.

Brainard said income inequality may damp consumer spending, as the wealthiest households are likely to save a much larger portion of any additional income they earn compared with lower income households.

A new poll of 2,200 adults by Morning Consult found that only 54 percent of Americans know that people born in Puerto Rico, a commonwealth of the United States, are US citizens. Americans often support cuts to foreign aid when asked to evaluate spending priorities.

The polling shows support for additional aid was strongly associated with knowledge of the citizenship status of Puerto Ricans.  More than 8 in 10 Americans who know Puerto Ricans are citizens support aid, compared with only 4 in 10 of those who do not. The island of Puerto Rico is in bad shape after Hurricane Maria.

So far, the crisis has yet to receive the kind of attention or aid that came for Texas and Florida as those states braced for the horrific storms Harvey and Irma. Puerto Rico will undoubtedly need more help in the weeks and months to come. FEMA still has several billion dollars from the aid package recently approved by Congress in the wake of Hurricane Harvey hitting Texas, but is expected to run out of recovery cash by mid-October, necessitating further funding from Congress.

The question of how Puerto Rico will recover from Maria will be answered over the course of months and years, not days and weeks. So far, Trump has been conspicuously unconcerned by the crisis in public. There is quite a bit of aid being directed to the American island, but it’s not enough for the scale of the devastation. The island is still in terrible peril, and the efforts so far won’t be close to enough to keep its population safe.

Financial Review

A Quiet Friday in August

Sinclair Noe — August 25, 2017

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DOW + 30 = 21,813
SPX + 4 = 2443
NAS – 5 = 6265
RUT + 3 = 1377
10 Y – .02 = 2.17%
OIL + .43 = 47.86
GOLD + 5.00 = 1291.80
BITCOIN – 1.09% = 4360.42 USD
ETHEREUM – 0.90% = 328.87

For the week, the Dow rose 0.65 percent, the S&P 500 gained 0.72 percent and the Nasdaq climbed 0.79 percent. The weekly gains for equities snapped a two-week skid of declines for the Dow and S&P 500 and a four-week drop for the Nasdaq.

Hurricane Harvey projected to make landfall around Corpus Christi, Texas between 10 PM and midnight but it is now hitting the Texas coast with heavy wind and rain. The storm is more accurately stretched along a wide swath of the coast, with heavy rains as far east as New Orleans and inland beyond San Antonio.

Harvey is now a Category 3 storm, meaning the government now classifies it as a “major” hurricane with 120-mph winds and gusts over 150-mph. Harvey, the strongest storm to hit the U.S. since Wilma in 2005, is forecast to inundate Houston, Corpus Christi and Galveston, cities with more than 2.6 million people combined, with drenching rain and dangerous flooding. Texas Governor Greg Abbott declared a state of disaster for 30 counties. The storm may generate $1.9 billion of economic losses and $1.3 billion in insured losses.

The problem with this hurricane is they don’t see it trailing off in any direction so it’s just going to hover Harvey could deliver a one-two punch that could also spell trouble for the Houston Ship Channel. One forecast model shows the storm returning to the Gulf of Mexico before making a second landfall closer to Galveston, sending a storm surge into the channel, which carries more than 163 million tons of cargo per year.

The surge, coupled with the rains, could bring about water levels higher than ever recorded in the Houston metropolitan area. A storm surge of up to 12 feet may occur near the Padre Island National Seashore. Storm surges account for close to half of all hurricane deaths. It is going to be an issue for the ship channels.

Harvey may dump as much as 35 inches of rain on areas of Texas over the next week. Usually, you don’t get peak rainfall and peak surge at the same time. If the forecast holds for Houston, rainwater would be running down streams and rivers while ocean water is surging up to meet it. In other words, that unprecedented amount of rain will have nowhere to go.

A large metro area like Houston is also particularly vulnerable to flooding. Large swathes of the city are concrete and asphalt, which prevents rainwater from properly draining. It doesn’t help that Houston is naturally a low-lying city with clay soil that doesn’t drain well anyway. Sewage drainage will probably be a problem and clean water may also be affected. And not just humans are affected – all sorts of wildlife will be moving to higher ground.

The Federal Emergency Management Agency is sending staff and supplies to the region. Flooding will probably close roads and inundate power plants, while strong winds may disrupt utilities’ systems and knock out power to hundreds of thousands of homes and businesses. Anadarko Petroleum, Exxon Mobil and Royal Dutch Shell are among the energy explorers that have shut platforms in the Gulf of Mexico.

Midstream LP shut natural gas capacity in south-central Texas; and Enbridge evacuated non-essential workers from some platforms. BNSF was halting traffic from Galveston Island late Thursday and holding Galveston-bound trains until further notice. Cameron LNG begins evacuating workers ahead of Hurricane Harvey.

Gasoline futures hit a 4-month high in intraday trade. It is estimated the hurricane will push gas prices up by about 10-cents per gallon in the short-term. One of the worst things that can happen to a wind farm is too much wind. The storm could knock out between 2.1 and 3.6 gigawatts of power near the Texas coast.

The weather is fine in Jackson Hole, Wyoming. It’s a nice place to go fly fishing. This morning, Janet Yellen delivered what is probably her final speech to the Jackson Hole Economic Summit, an annual gathering of central bankers.

Yellen defended the government’s response to the 2008 financial-market meltdown while outlining some areas that regulators could review to improve efficiency in the financial system. Yellen focused on financial regulation and veered away from monetary policy. Yellen said reforms put in place after the 2007 to 2009 crisis have strengthened the financial system without impeding economic growth and any changes to these rules should remain modest.

That pretty much signals that she is not expecting to be re-nominated when her term expires in February.

European Central Bank president Mario Draghi also spoke at Jackson Hole. Draghi said he still is not seeing much inflation in the Eurozone and “a significant degree of monetary accommodation is still warranted.” Draghi said protectionist policies pose a “serious risk” for growth in the global economy.

Gary Cohn, who was president of Goldman Sachs before accepting a position in the Trump administration as head of the White House national economic council, is considered the front-runner to replace Yellen as the next Chair of the Federal Reserve.

Today Cohn said he had come under “enormous pressure” to resign after Trump equivocated in his denunciation of white supremacist groups, saying there had been “very fine people on both sides” at the demonstrations. The economic adviser said he had considered stand down but decided to stay on after discussions with the president. The New York Times reported he had gone as far as drafting a letter of resignation.

Treasury Secretary Steven Mnuchin said on Friday the nation’s debt ceiling will be raised in September and that after talks with congressional leaders from both parties everyone is “on the same page.” Mnuchin says he’s hopeful about getting a tax-code overhaul done by the end of this year after flatly stating he was “wrong” about finishing a deal by August.

Investors are fleeing U.S. stocks in a way they haven’t since 2004. According to a new Bank of America Merrill Lynch, for 10 straight weeks a total of $30 billion has left U.S. stocks, marking the longest streak of outflows since 2004.

Investors turned instead to emerging markets and European and Japanese stocks, which saw $36 billion in inflows over the last 10 weeks. The 10-week outflow from U.S. stocks comes despite the S&P 500’s nearly 1 percent gain this quarter and a record high on Aug. 8.

Some of the top sectors of the year have seen significant outflows, including tech, financials, and the consumer sectors. The only sector that has seen inflows – defense stocks. By investing style, investors withdrew $1.6 billion from U.S. growth stock funds and $1.1 billion from U.S. value stock funds

A South Korean court found Lee Jae-yong, heir to the Samsung empire and its de facto leader, guilty on charges of bribery and embezzlement, and other crimes. The court sentenced Lee to five years in prison. That’s less than the 12-year term prosecutors were hoping for. But it’s long enough to ensure that he will spend time behind bars.

Lee’s father, Lee Kun-hee, himself was once convicted for tax evasion, but he never served prison time because sentences of up to three years can be suspended. The ruling puts a cap on months of proceedings that tied the country’s single most important company to a corruption scandal revolving around former president Park Geun-hye. Park was impeached in March and is herself separately on trial.

The court found Lee guilty of providing $6.3 million in bribes to Park’s personal confidante, to secure approval for a merger between two Samsung subsidiary companies that gave Lee more power at the expense of other shareholders. Lee will appeal the conviction.

The conviction also marks a win for Koreans hoping to hold accountable the country’s chaebol—the country’s family-run conglomerates, which the public has increasingly resented for their corruption and grip on the economy. Newly-elected president Moon Jae-in made chaebol reform a key part of his campaign platform.

From exploding phones to execs charged with embezzlement, it has been an eventful year for Samsung, and none of those problems seem to matter. Samsung shares have gained 40% over the past year, a rise worth some $85 billion in market cap.

YouTube has expanded the internet-delivered YouTube TV subscription service into 14 new U.S. markets, which makes it available to half of all U.S. households. YouTube added the Phoenix market in July. According to Google, YouTube TV now offers the most markets with live local broadcast feeds from the four major broadcasters — ABC, CBS, Fox and NBC — than any over-the-top competitor.

Rivals in the space include AT&T’s DirecTV Now, Dish Network’s Sling TV, Hulu, Sony’s PlayStation Vue and FuboTV. However, the YouTube TV “skinny bundle” is missing big chunks of the cable dial. Unavailable on the service: networks from Turner, including CNN, TBS and TNT; Viacom; Discovery Communications; and Scripps Networks Interactive. HBO also isn’t available as an option, but Showtime is.

How much traction YouTube TV has gained to date isn’t fully clear; Google hasn’t released any subscriber numbers. But the service, and the other OTT contenders, are clearly appealing to a consumer segment that’s looking for a cheaper alternative to cable, satellite and telco TV — and traditional pay-TV customers are continuing to dwindle.

After weeks of relative slumber, gold traders were rudely awoken to a surge in volume and volatility. In a span of one minute, gold futures contracts equaling more than 2 million ounces traded. Prices spike, then dropped just as fast, and gold settled slightly higher for the session.

We don’t know who or why. But so much for a quiet Friday in late August.

Stocks Snap Out of Recent Funk

Charles Schwab: On the Market

Posted: 8/22/2017 4:15 PM ET

Stocks Snap Out of Recent Funk

The U.S. equity markets joined their foreign counterparts in a global rally, courtesy of reports suggesting signs of tax reform progress that helped to tamp down omnipresent geopolitical worries. Treasury yields were higher and the U.S. dollar was flat amid another low-key economic calendar, as well as Friday's looming speeches from Fed Chief Yellen and ECB President Draghi at the key symposium in Jackson Hole, Wyoming. Meanwhile and crude oil prices gained modest ground and gold was lower.

The Dow Jones Industrial Average (DJIA) advanced 196 points (0.9%) to 21,900, the S&P 500 Index was 24 points (1.0%) higher at 2,453, and the Nasdaq Composite jumped 84 points (1.4%) to 6,297. In light-to-moderate volume, 688 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq. WTI crude oil inched $0.30 higher to $47.83 per barrel and wholesale gasoline was up by $0.01 to $1.59 per gallon. Elsewhere, the Bloomberg gold spot price decreased $6.77 to $1,285.11 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 93.55.

Toll Brothers Inc. (TOL $37) reported fiscal Q3 earnings-per-share (EPS) of $0.87, above the $0.69 FactSet estimate, as revenues rose 18.0% year-over-year (y/y) to $1.5 billion, roughly in line with forecasts. The luxury homebuilder issued full-year revenue guidance with a midpoint just shy of the Street's estimates, while narrowing its outlook for deliveries for the year. Shares of TOL came under pressure.

DSW Inc. (DSW $18) posted Q2 EPS of $0.35, or $0.38 ex-items, versus the projected $0.29, with revenues growing 3.3% y/y to $680 million, above the estimated $666 million. The shoe retailer's Q2 same-store sales rose 0.6% y/y, compared to the expected 2.2% drop. DSW reaffirmed its full-year guidance, while announcing a new $500 million share repurchase program. Shares rallied.

Medtronic PLC. (MDT $82) announced fiscal Q1 earnings of $0.74 per share, or $1.12 ex-items, compared to the forecasted $1.08, as revenues rose 3.0% y/y to $7.4 billion, mostly matching estimates. MDT reaffirmed its full-year guidance. MDT traded lower.

Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA points out in his latest article, Earnings may be about to do something they've never done before, the earnings estimates for the world's companies have risen back to $30 again for the fourth time in 10 years. Without a rise in earnings above $30, stock prices may find it difficult to move any higher. Thanks to solid global growth supporting all the major regions of the world a break out above $30 now appears more likely than it has in a decade. Read more on the Markets & Economy page at www.schwab.com and follow Jeff on Twitter: @jeffreykleintop.

Macy's Inc. (M $20) was nicely higher after the retailer announced restructuring plans, in addition to the appointment of former Senior Vice President of eBay North America, Hal Lawton, as President, effective September 8. 

Regional manufacturing report continues to show solid growth

The Richmond Fed Manufacturing Activity Index remained at July's unrevised 14 level in August, versus the Bloomberg expectation of a decline to 10, with a reading above zero denoting expansion.

Treasuries are lower with the yields on the 2-year and 10-year notes, along with the 30-year bond, rising 2 basis points to 1.32%, 2.20% and 2.78%, respectively.

Treasury yields and the U.S. dollar are gaining ground and action remains choppy as the markets grapple with monetary policy uncertainty in the face of mostly upbeat economic data and persistent low inflation, while the Fed is expected to begin to reduce its behemoth balance sheet. This sets the stage for Friday's key Fed symposium in Jackson Hole, Wyoming, where Fed Chief Janet Yellen and European Central Bank (ECB) President Mario Draghi are expected to speak.

As noted in the latest Schwab Market Perspective: Volatility Returns!, the Federal Reserve is likely to embark on its quantitative tightening (QT) plan, in order to slowly unwind its bloated balance sheet. We have confidence that the Fed has little desire to jolt the financial markets, but it and the market are in uncharted territory as unwinding a $4.5 trillion balance has never been done historically. We continue to believe this will be an additional volatility-driver. Read more on the Markets & Economy page at www.schwab.com.

Tomorrow, the preliminary Markit Manufacturing and Services PMI Indexes with don the economic calendar, with economists anticipating readings of 53.5 and 55.0, respectively, while housing data will be released in the form of new home sales, forecasted to be flat m/m during July at an annual rate of 610,000 units, and weekly MBA Mortgages Applications will also be reported.

Europe higher despite data and looming ECB speech, Asia up in cautious trading

European equities finished mostly higher, with the euro and British pound losing ground on the U.S. dollar, and as basic materials issues led the way. The markets shrugged off lingering geopolitical concerns, and caution ahead of speeches by Fed Chair Yellen and ECB President Draghi in Jackson Hole, Wyoming, on Friday. A disappointing read on German investor sentiment, which deteriorated for a third-straight month in August, also did not derail the advance in the region. Bond yields in the region mostly moved to the upside. Schwab's Jeffrey Kleintop, CFA points out in his article, What are fund flows telling us about trends and risks in the global stock market?, the trends in money flows this year show a change to a rising overall inflow of money as investors take note of better overall stock market performance and a preference for ETF that invest in non-U.S. markets. The underlying distribution of money flows appears to be driven by fundamentals or diversification, rather than purely by performance or geopolitical risk aversion, suggesting a trend that is more deeply rooted (although some markets may be vulnerable in the event of an escalation of geopolitical risk). Investors may want to consider these trends as they consider the global diversification in their own portfolio. Read more on the Markets & Economy page at www.schwab.com.

Stocks in Asia finished mostly higher though the markets appeared to remain cautious ahead of this week's speeches from central bank leaders in the U.S. and Europe. Also, focus on the Korean peninsula remained amid heightened tensions between North Korea and the U.S., with the latter conducting its annual joint military drills with South Korea. South Korea's markets moved modestly higher. For more on the geopolitical front, see Schwab's Jeffrey Kleintop's, CFA, article, Missiles and Markets: An investor guide to geopolitical risks on the International Investing page at www.schwab.com, as well as Schwab's Chief Investment Strategist Liz Ann Sonders' latest commentary, Twist and Shout: United States Takes on North Korea … Implications for Stocks on the Markets & Economy page. Follow Liz Ann on Twitter: @lizannsonders. Mainland Chinese stocks inched higher, while those traded in Hong Kong gained solid ground. Meanwhile, markets in Australia advanced and Indian securities nudged to the upside, but Japanese equities dipped modestly, extending a recent losing streak even as the yen pared some of a recent gain.

The Markit Manufacturing PMI Indexes from across the globe will dominate tomorrow's international economic calendar, while consumer confidence from the Eurozone is also on tap.