Financial Review

Stuff Happening

Sinclair Noe — June 8, 2017

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DOW + 8 = 21,182
SPX + 0.65 = 2433
NAS + 24 = 6321
RUT + 18 = 1415
10 Y + .02 = 2.19%
OIL + .04 = 45.68
GOLD – 9.20 = 1278.60
BITCOIN + 0.04% = 2826.04
ETHEREUM + 0.61% = 259.56

We had a bunch of stuff happening today. The Dow Industrials hit a record high intraday, but could not hold on for a record high close. The trading session went from positive to negative and back.

The Nasdaq Composite did manage a new record high. But it looks like markets are still trying to digest everything. The S&P 500 traded in a range of about one-half of one percent.

The VIX, the volatility index, also known as the “fear gauge,” held at historically low levels. The dollar and bonds both traded lower but nothing out of the daily norm.

Let’s start with the testimony of former FBI Director Jim Comey before the Senate Intelligence Committee. The public hearing lasted nearly 3 hours. I won’t try to recap everything. One or two interesting points. None of the senators questioning Comey tried to claim that Comey was lying about his representation of his meetings with President Trump, however there was sharp disagreement over the significance of their conversations.

A one point, Comey said Trump lied. None of the senators tried to claim Trump did not lie. However, after the hearing, Trump’s lawyer, and spokesperson Sarah Huckabee Sanders had the unenviable task of proclaiming the president is not a liar. Comey did not answer some of the most pointed questions because of the classified nature. He later testified before a closed-door committee. We do not know what he said there.

We certainly learned more today than yesterday, when Intelligence chiefs Coats and Rogers stonewalled the Committee, but what Comey said in public is not the be-all, end-all of this investigation, no matter how much you might want to debate about the minutiae and innuendo and nuances of the testimony.

While it was compelling television, it is just one small piece of the puzzle; nothing that exonerated nor nailed the coffin. Perhaps the most important thing we learned today is that contemporaneous memorandums of communication carry probative value.

In other words, it was a smart move to keep a diary. The bottom line is what I said a month ago when Comey was fired: “Comey… is going to consume most of the oxygen in Washington for the foreseeable future.”

We are not seeing much progress on tax reform or an infrastructure plan. This doesn’t mean nothing is happening, just that it is now on a back burner, and time is running out. The Senate is working on its version of Trumpcare but if they can’t come up with something substantially different than the House, it will be dead on arrival.

Today, the House of Representatives voted largely along party lines to replace the 2010 Dodd-Frank Wall Street reform law, a move that is expected to die in the Senate but open the door to revamping or eliminating regulations that came out of the 2007-09 financial crisis. No real word on what might replace Dodd-Frank, other than the prospect of just letting the banksters run wild.

The  European Central Bank left interest rates and policies unchanged while trimming expectations for inflation through 2019. While that was largely expected, the shared currency fell as ECB President Mario Draghi said in his news conference that the euro area still isn’t generating enough inflation, overshadowing improved prospects for the economy that led officials to upgrade their growth assessment.

The change in the assessment of risks for the economy sets the scene for the ECB to start a discussion about the timing for the removal of the stimulus, but that is apparently a debate for another day.

According to an exit poll released shortly after voting ended, Prime Minister Theresa May will win 314 seats in Britain’s election, short of a majority in the 650-seat parliament. That is an exit poll, not official results.

Prime Minister May called the snap election in a bid to strengthen her hand in Brexit negotiations, to win more time to deal with the impact of the divorce and to strengthen her grip on the Conservative Party. It appears that her electoral gamble failed. If the exit polling numbers hold, it means May’s Conservative Party would have to form a coalition or attempt to govern with the backing of other smaller parties.

For investors, the over-riding factor is likely to be greater uncertainty about whether there will be a deal on Brexit and what it will look like. A delay in forming a government could push back the start of Brexit talks, currently scheduled for June 19, and reduce the time available for what are expected to be the most complex negotiations in post-World War Two European history.

Labour, led by veteran socialist Jeremy Corbyn, could attempt to form a government with those smaller parties, which strongly oppose most of May’s policies on domestic issues such as public spending cuts.

If Corbyn’s Labour does take power with the backing of the Scottish nationalists and the Liberal Democrats, both parties adamantly opposed to Brexit, Britain’s future will be very different to the course the Conservatives were planning and could even raise the possibility of a second referendum. The unofficial exit polls sent a small shock through markets, pushing the pound sterling down.

Brazil’s top electoral court excluded testimony of engineering company executives from an illegal campaign funding trial against President Michel Temer, a move that suggested it would throw out a case that had threatened to unseat him.

The Commerce Department’s quarterly services survey, or QSS, showed consumer spending, including healthcare spending, increased at a faster clip than the government had assumed in its second estimate of gross domestic product published last month.

The QSS data suggested first-quarter GDP could be revised up to as high as a 1.5 percent annualized rate from the 1.2 percent growth pace reported in May. Growth in the current quarter may be above 3 percent, due to payback from the first quarter’s 1.2 percent reading, but the underlying trend appears to be holding steady at close to 2 percent for the year.

The Federal Reserve reports net worth of U.S. households and nonprofit groups rose by $2.35 trillion, or 2.5 percent, to $94.84 trillion in the first quarter from the previous three-month period. Household wealth has grown, boosted mostly by a 5.5 percent gain in the Standard & Poor’s 500 Index last quarter and house price appreciation that matched the biggest year-over-year increase since 2014.

Now, the bad news. Household debt increased at a faster rate, or 3.2 percent, as mortgage borrowing advanced at a 3 percent pace. Other forms of consumer credit, including auto and student loans, climbed at a 5 percent rate, the slowest since 2013.

Although measures of consumer confidence have risen since the elections in November, that hasn’t necessarily translated into spending, helping to temper economic growth.

The number of Americans filing for unemployment benefits fell last week. Initial claims for state unemployment benefits declined 10,000 to a seasonally adjusted 245,000 for the week ended June 3. The Tuesday JOLT survey showed high job openings, and firms appear to be holding on to their workers.

Claims have now been below 300,000, a threshold associated with a healthy labor market, for 118 straight weeks. Low layoffs and record high job openings suggest a deceleration in job growth in May was likely because companies could not find suitable workers. Labor market tightness could encourage the Federal Reserve to raise interest rates at its June 13-14 policy meeting.

Department store operator Nordstrom said that some members of the Nordstrom family were considering taking the company private as it struggles with an industry-wide sales slowdown. Going private, which would involve raising debt, would be a risky but potentially profitable bet by Nordstrom’s founding family and largest shareholder bloc that the company can reshape itself and emerge from the retail meltdown stronger.

Shares of the Seattle-based clothing and accessories retailer ended 10.3 percent higher.

Hudson’s Bay Company disclosed that it will be cutting around 2,000 positions within North America as part of a major restructuring effort. HBC owns several major department stores, including Hudson’s Bay, Saks Fifth Avenue and Lord & Taylor.

Yahoo shareholders approved the company’s pending sale of its core internet business to Verizon for $4.48 billion. Yahoo expects that the deal will close on June 13, 2017. The closing of the deal, announced in July, had been delayed as the companies assessed the fallout from two data breaches that Yahoo disclosed last year. Verizon plans to cut 2,100 jobs upon completing the acquisition.

Alibaba Group announced today at an investor conference that is expects revenue growth of 45-49 percent in the 2018 fiscal year. That figure compared with 56 percent revenue growth posted for the 2017 fiscal year ended March 31. At the same event last year, the firm predicted 48 percent revenue growth

 Alibaba was up almost 14% today.

The FDA just requested that Endo International take its extended-release opioid painkiller Opana ER (otherwise known as oxymorphone hydrochloride) off the market. The agency said that the decision came after it found that the drug’s benefits no longer outweighed its risk for abuse.

FDA commissioner Scott Gottlieb said in a news release: “We are facing an opioid epidemic – a public health crisis, and we must take all necessary steps to reduce the scope of opioid misuse and abuse.” If Endo doesn’t remove the drug from the market voluntarily, then the FDA can formally withdraw its approval.

Endo shares dropped 14% in after-hours trade.

Financial Review

And Pause

Sinclair Noe — March 2, 2017

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DOW – 112 = 21,002
SPX – 14 = 2381
NAS – 42 = 5861
RUT – 17 = 1395
10 Y + .03 = 2.49%
OIL – 1.21 = 52.62
GOLD – 15.00 = 1235.00

Yesterday, the Dow advanced about 300 points to close above 21,000 for the first time, just 24 trading sessions after it first hit 20,000. That matches the fastest-ever move between thousand-point milestones, which last happened in 1999 and took the index above 11,000.

The number of Americans filing for unemployment benefits fell to near a 44-year-low last week. Initial claims for state unemployment benefits dropped 19,000 to a seasonally adjusted 223,000 for the week ended Feb. 25, the lowest level since March 1973.

It was the 104th straight week that claims remained below 300,000, a threshold associated with a healthy labor market. That is the longest stretch since 1970.

The Federal Reserve’s Beige Book, a collection of anecdotes about the economy gathered before the central bank makes interest-rate decisions, said “businesses were generally optimistic about the near term but to a somewhat lesser degree than in the prior report.” Overall, the US economy continues to meander along, with all districts reporting “modest to moderate” growth.

Federal Reserve Gov. Lael Brainard has been among the most consistent doves at the Fed, but now, “near-term risks” to the U.S. from abroad appear to have diminished. Brainard the US economy appears to be in transition to a more stable growth path and gradual interest-rate hikes are likely to be appropriate “soon.”

Fed Gov. Jerome Powell became the latest Fed official to hint that a hike is imminent when he said Wednesday that the case for raising interest rates in March “has come together.” Fed Chair Janet Yellen is set to speak on the economic outlook in Chicago on Friday in her last speech before the Fed’s March 14-15 meeting.

Emerging-market borrowers are selling bonds at an unprecedented pace before the Federal Reserve raises interest rates. Emerging-market issuance in dollars and euros this year has already exceeded $100 billion. That’s the fastest pace ever and almost 20 percent more than the previous record for the period in 2014. With yields still favorable to borrowers, they may accelerate plans to refinance maturing debt and lock in current yields.

The yield on the two-year US Treasury note rose 3 basis points to 1.32% in recent trade, its highest end-of-day level since June 10, 2009. Bond yields rise as prices fall. The yield also notched its largest four-day increase since Feb. 8, 2011. The yield on the 10-year Treasury note has popped about 16 basis points in the past week.

The dollar advanced. Oil closed at the lowest level in more than three weeks. US stockpiles expanded to 520 million barrels, the most in weekly government data going back to 1982, even as Saudi Arabia continued to lead OPEC’s efforts to cut production to end the glut.

Snapchat parent Snap Inc raised $3.4 billion in its IPO last night, valuing the company at $24 billion, more than double the size of Twitter and the richest valuation in a U.S. tech IPO since Facebook five years ago.

The shares priced at $17 each, above the expected range of $14-16. And the IPO was oversubscribed by more than tenfold; and when shares started trading, there was a pop to $25, and shares closed at $24.47.

Snapchat’s founder and early investors cashed out over $1 billion today. This for a company which reported revenues of $404 million with losses of $515 million in 2016. And shareholders don’t have voting rights. Go figure.

About 32 million Yahoo user accounts were accessed by intruders in the last two years using forged cookies. The company said some of the latest intrusions can be connected to the “same state-sponsored actor believed to be responsible for the 2014 breach,” in which at least 500 million accounts were affected.

Yahoo also said in December that data from more than 1 billion user accounts was compromised in August 2013. Yahoo’s board of directors have decided to forgo CEO Marissa Mayer’s 2016 bonus following the results of an internal investigation of how the company’s massive hacks were handled.

Yesterday, Amazon’s cloud service S3 went down for a few hours. Today, Amazon blamed the outage on human error and the movie LaLa Land.

Banks globally have paid $321 billion in fines since 2008 for an abundance of regulatory failings from money laundering to market manipulation and terrorist financing, per data compiled by Boston Consulting Group. That tally is set to increase in the coming years as European and Asian regulators catch up with their US peers, who have levied most charges to date.

The Labor Department has proposed delaying a rule that would require retirement advisers to act in the best interest of their clients. The “fiduciary rule” was set to go into effect on April 10 and would have prohibited retirement advisers from accepting incentives for promoting certain funds over others.

The Labor Department announced a proposed 60-day extension for the rule to go into effect on June 9. During that time, the department said it will collect applicable information on the possible effects of rule, including public comments.

As credit card companies compete for customers by offering increasingly better rewards and perks, American Express is giving its Platinum card a facelift and a benefits overhaul. The newly-enhanced card will come with Uber credits, increased travel rewards and more access to special events. But the new benefits don’t come cheap. The card carries a $550 annual fee, an increase from $450, and currently offers no sign-up bonus.

Federal law enforcement officials searched three facilities of heavy machinery manufacturer Caterpillar in Illinois. It was not immediately clear why federal agents raided the three locations, but Caterpillar has been fighting an Internal Revenue Service demand that the company pay $2 billion in taxes and penalties for profits assigned to a Swiss parts distribution subsidiary, Caterpillar SARL, or CSARL, per filings with the Securities and Exchange Commission.

That subsidiary was also the subject of a 2014 Senate committee report that charged Caterpillar “shifted billions of dollars in profits away from the United States.” Caterpillar also disclosed in its report that it had received grand jury subpoenas from the U.S. District Court for the Central District of Illinois seeking documents and information related to the movement of cash among U.S. and non-U.S. subsidiaries, and the purchase and resale of replacement parts.

Boeing is cutting its Seattle-area workforce by at least 1,800 jobs this year as the company streamlines operations. Boeing approved voluntary layoffs for 1,500 mechanics. Another 305 engineers and technical workers are leaving voluntarily.

Anheuser-Busch InBev  reported worse-than-expected quarterly results. The company said that challenges in Brazil hurt its overall performance.

Shake Shack same-store sales whiff. The burger chain announced adjusted earnings of $0.09 a share, matching estimates, but said same-shack sales, or sales in stores open at least two years, rose 1.6%, well shy of the 2.6% estimated gain.

Barnes & Noble reported third-quarter profit that missed expectations. Same-store sales fell 8.3%, largely due to lower traffic and a decline in coloring books, artist supplies and the best-selling Adele album that was released in 2015. The company now expects full-year 2017 same-store sales to decline about 7%.

Broadcom came in 15 cents above estimates with adjusted quarterly earnings of $3.63 per share, while the chip maker’s revenue was slightly above estimates. The company, which is a major supplier for Apple, said it expects healthy demand for its products to continue.

After the closing bell, Costco reported fiscal second-quarter per-share earnings and sales below expectations and said it plans to raise membership fees in June by $5.

The creepiest thing of the day, and there were multiple candidates – goes to Spiral Toys; a company that sells internet-connected teddy bears that allow kids and their far-away parents to exchange heartfelt messages left more than 800,000 customer credentials, as well as two million message recordings, totally exposed online for anyone to see and listen.

Since Christmas day of last year and at least until the first week of January, Spiral Toys left customer data of its CloudPets brand on a database that wasn’t behind a firewall or password-protected. The exposed data included more than 800,000 emails and passwords.

As we’ve seen time and time again in the last couple of years, so-called “smart” devices connected to the internet—what is popularly known as the Internet of Things or IoT—are often left insecure or are easily hack-able, and often leak sensitive data. There will be a time when IoT developers and manufacturers learn the lesson and make secure by default devices, but that time hasn’t come yet.

So, if you are a parent who doesn’t want your loving messages with your kids leaked online, you might want to buy a good old fashioned teddy bear that doesn’t connect to a remote, insecure server.

Tomorrow is the first Friday in March, but it is not a Jobs Report Friday. The jobs report is a monthly ritual for anyone following markets or the US economy, as it contains some of the main data points measuring the health of the labor market in the world’s largest economy.

The report almost always comes out on the first Friday of the month, but not this month: The February 2017 report is scheduled to be released on March 10, a week later than might be expected. It turns out that this is due to the way the jobs numbers are gathered and how the days of the week fell this year during a short month.

When the 12th is on a Sunday and there are 30 days or less in the month, the release date will wind up being the second Friday of the following month – so March 10, not tomorrow.

Attorney General Jeff Sessions said he would recuse himself from investigations involving the Trump campaign over his contacts with Russian officials during the 2016 election, but stood firm on the answers he gave during his Senate confirmation hearing about his past communications. Sessions denied during his confirmation hearing that he had ever communicated with any Russian officials while he was a top Trump campaign surrogate.

During his press conference, Sessions emphasized that he didn’t meet with Russian operatives about the Trump campaign during the election. So, the story is shifting. Is it too late to change my vote for Creepiest Thing of the Day?

Financial Review

5 Straight

Sinclair Noe — February 15, 2017

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Financial Review by Sinclair Noe for 02-15-2017
DOW + 107 = 20,611
SPX + 11 = 2349
NAS + 36 = 5819
RUT + 7 = 1404
10 Y + .03 = 2.50%
OIL – .23 = 53.48
GOLD + 5.40 = 1234.20

The consumer price index, or cost of living, rose by a seasonally adjusted 0.6% in January. The prices Americans pay for goods and services jumped in January by the largest amount in four years, mostly because we paid more for gasoline. Also, rents and medical costs have increased.

Food costs rose slightly in January but are down 2% in the past year. Headline inflation rose 2.5% over the prior year. Stripping out the volatile food and energy categories, Core consumer prices advanced a slower 0.3% in January. The core rate has moved up 2.3% in the past year.

Real hourly wages fell by 0.5% in January, reflecting the squeeze put on consumers by higher gasoline prices. Real or inflation-adjusted wages are flat over the past 12 months.

Most US retailers posted strong sales in January. Retail sales rose 0.4% last month, and December sales were revised up to 1% from 0.6%. Every major retail sector reported higher sales except for auto dealers, whose business tends to tail off after the Christmas shopping season. Auto purchases account for about one-fifth of all retail spending.

If autos and gasoline are excluded US retail sales rose 0.7%. Electronics and appliance stores saw a 1.6% rise in sales, the largest gain in a year and a half. Stores that sell clothing and sporting goods also posted sales gains of 1% or more. Sales at bars and restaurants advanced 1.4%.

Non-store retailers — which includes online retailers like Amazon — saw sales rise 12% over last year. One negative was a 2.3% spike in sales at gas stations.

The New York Fed’s Empire State manufacturing report came in at 18.7, better than 7.0 that was expected. Any reading over 0 indicates expansion of activity in the region. This was the best reading for the index is over two years, and the unfilled orders index rose above 0 for the first time in 5 years. All this data follows Tuesday’s latest Small Business Optimism report from the NFIB, which showed an additional increase in optimism about the economy from America’s small business owners.

World stocks hit 21-month peaks, and the dollar rose for the 11th straight day after Federal Reserve Chair Janet Yellen flagged a possible interest rate rise next month during upbeat comments on the US economy. Treasuries sold off on her testimony. Probabilities for a March rate hike jumped to 34 percent, but some are still worrying that the Fed will have to move faster than the market currently expects.

Yellen continued her semi-annual Humphrey-Hawkins testimony today, this time before the House Financial Services Committee. The hearing was contentious from the start. Republicans pressed Chair Yellen relentlessly to concede that the American economy is broken, that the Fed has failed to fix the underlying problems, and that excessive regulation is making things worse.

Members of the committee frequently interrupted Yellen. She acknowledged that economic growth has been “quite disappointing,” but she said the Fed’s efforts had contributed to strong job growth since the financial crisis, and she defended the value of the changes in regulation that followed it. She did not endorse a rollback of regulation of big banks.

The chief executives of major retailers including Target, JCPenney, Best Buy and Gap met with President Trump today. They made the trip to lobby against a “border adjustment tax” proposed by congressional Republicans.

Retailers are particularly vulnerable to such a tax because they sell a high volume of imported items – clothes, electronics or general merchandise – that could be 20% more expensive under the proposal. Retailers called the hour-long meeting positive and productive, though they offered few details.

Humana said it will pull out of the Affordable Care Act marketplace in 2018, making the announcement after it ended a merger agreement with Aetna. Humana also announced plans to repurchase $2 billion worth of its own shares. The company has steadily scaled back its presence, selling policies for 2017 in just 11 states.

In early January, the company said the number of its customers buying coverage through the exchanges had dropped to about 150,000. President Trump immediately seized on the company’s decision as evidence that the Affordable Care Act needed to be repealed and replaced; tweeting that “Obamacare continues to fail.” So far Trump has not come up with a replacement.

There have been plenty of distractions. Trump’s nominee for labor secretary abruptly withdrew his nomination today. Andrew Puzder, the CEO of CKE Restaurants (parent of Carl’s Jr. and Hardees) pulled out when it became obvious he did not have enough Republican support for confirmation.

This follows the firing of Trump’s first national security advisor, Michael Flynn, after he lied about his communications with Russians. And this follows news that a number of associates linked to President Trump’s campaign and business interests are part of the federal inquiry into communications with Russian government officials who sought to meddle in the November election.

The extent and purpose of those alleged contacts continue to be weighed, including whether the associates were aware they were communicating with Russian intelligence officials or those working on behalf of the Russian government.

Also today, Trump met with Israeli Prime Minister Benjamin Netanyahu and urged him to curb settlement construction even as Trump dropped a U.S. commitment to a two-state solution to the Israeli-Palestinian conflict, a longstanding bedrock of Middle East policy.

Time Warner shareholders met today to decide on the company’s proposed $86 billion merger with AT&T, and 79% voted “yes”. The transaction still needs approval from federal regulators.

Japanese telecommunications, internet and solar company SoftBank Group is buying US investment company Fortress Investment Group for $3.3 billion. SoftBank has set up a $25 billion private fund for technology investments that it says may grow to $100 billion. It already owns the US wireless company Sprint and Britain’s ARM Holdings.

Verizon is close to a revised deal to buy Yahoo’s core internet business for $250 million to $350 million less than the original agreed price of $4.83 billion. Since last year, Verizon had been trying to persuade Yahoo to amend the terms of the acquisition agreement to reflect the economic damage from two cyber-attacks.

Today, Yahoo was warning users that their accounts had potentially been compromised, but it declined to say how many people were affected. The newly reported malicious activity revolved around the use of “forged cookies” — strings of data that are used across the web and can enable people to access online accounts without reentering their passwords.

In its biggest year to date, the US solar market nearly doubled its annual record, per Greentech Media, topping out at 14,625 megawatts of solar PV installed in 2016. For the first time, US solar ranked as the number one source of new electric generating capacity, while growth of nonresidential installations surpassed residential solar for the first time since 2011.

The National Safety Council released estimates that 40,200 people died in motor vehicle crashes in 2016. It would be the first time that more than 40,000 people died on U.S. roads since before the Great Recession. The council pointed to low gas prices and an improving economy as contributors to the uptick.

The National Safety Council also estimated the cost of traffic deaths, injuries and property damage was $432 billion in 2016. The estimate is a 6% increase in deaths from 2015, and the council pointed to low gas prices and an improving economy as contributors to the uptick.

Warren Buffet continues to shine. Berkshire Hathaway, disclosed in a regulatory filing yesterday that it loaded up on Apple’s stock during the fourth quarter, increasing its stake to 57.36 million shares as of Dec. 31, up from 15.23 million shares as of September 30.

Apple stock was up 2.5% in the fourth quarter, and up 16.6% since the start of the year, to close at record highs yesterday. If the stake remained unchanged, Buffett’s Apple shares would be worth $1.1 billion more than they were just a little over six weeks ago.

Financial Review

Year of the Rooster

Sinclair Noe — January 23, 2017

Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB)

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Financial Review by Sinclair Noe for 01-23-2017
DOW – 27 = 19,799
SPX – 6 = 2265
NAS – 2 = 5552
RUT – 4 = 1347
10 Y – .06 = 2.40%
OIL – .35 = 52.87
GOLD + 7.40 = 1217.40

President Trump is expected to sign an executive order as early as today – intended to renegotiate NAFTA, the free trade agreement between the United States, Canada and Mexico. Trump also signed an executive order pulling out of the Trans-Pacific Partnership (TPP).

In one of first Trump administration orders, the Department of Housing & Urban Development suspended reduction of FHA annual mortgage insurance premium rates. That was a quarter of a percent cut in the mortgage insurance premium for FHA loan holders, announced last week by the U.S. Department of Housing and Urban Development and set to go into effect next Friday, January 27. The reduction was estimated to save the average FHA borrower $500 this year.

The new White House rolled out several policy promises on its new website. The position page on jobs and the economy reads: “To get the economy back on track, President Trump has outlined a bold plan to create 25 million new American jobs in the next decade and return to 4 percent annual economic growth.”

So, now we have a baseline, even if it is improbable.

A group including former White House ethics attorneys filed a lawsuit today accusing President Donald Trump of allowing his businesses to accept payments from foreign governments, in violation of the U.S. Constitution. The lawsuit, brought by the Citizens for Responsibility and Ethics in Washington, alleges that the Constitution’s emoluments clause forbids payments to Trump’s businesses. It will seek a court order forbidding Trump from accepting such payments.

President Trump held meetings this morning with business and labor leaders, seeking to work quickly on his campaign promise to boost the American manufacturing sector and deliver more jobs. Trump repeated a campaign promise to cut regulations by at least 75%. He also said there would be advantages to companies to make their products in the US, suggesting there will be a substantial border tax on foreign goods entering the US. This afternoon he meets with labor leaders and U.S. workers.

Foxconn Technology Group is considering building a display-panel manufacturing facility in the United States in a joint venture with Apple that could create up to 50,000 jobs. Terry Gou, Taiwan-based Foxconn’s chairman and CEO, said the facility could cost $7 billion and create between 30,000 and 50,000 new jobs, and could include the production of TV screens in addition to smartphone displays. The U.S. has no TV-display factories, even though it is the world’s second-largest TV market.

Supermarket operator Kroger says it will fill 10,000 permanent positions in its supermarket divisions. Kroger, which had about 431,000 full- and part-time employees as the New Year, also said its total active workforce grew by more than 12,000 in 2016.

On the eve of a summit last month between technology executives and then President-elect Donald Trump, IBM Chief Executive Officer Ginni Rometty publicly pledged to hire about 25,000 U.S. workers and spend $1 billion on training over the next four years.

In late November, IBM
completed at least its third round of firings in 2016, according to former and current employees. They don’t know how many people have lost their jobs but say it’s probably in the thousands, with many of the positions shipped to Asia and Eastern Europe.

Rometty’s hiring pledge prompted current and former IBM workers to vent on message boards and Facebook groups. IBM’s re-organization inevitably meant some workers would lose their jobs. Automation wiped out some positions, and at the same time, IBM has sent thousands of jobs offshore.

This will be another busy week for earnings reports; later in the week we’ll hear from Alphabet and Microsoft. Intel is also set to report, along with telecom and media giants Verizon, AT&T, and Comcast. 3M, Caterpillar, Boeing, and Ford will give us a snapshot of the manufacturing and industrial sectors.

We’ll also see earnings from pharmaceutical companies like Johnson & Johnson and Biogen and oil giant Chevron. The major data release in the week is the advanced reading of fourth-quarter GDP. There is also some housing data, durable goods orders, and a look at consumer sentiment.

Yahoo reported earnings after the closing bell that beat estimates but the earnings are secondary. Verizon has agreed to pay $4.8 billion for Yahoo, and the factor that could change that price is not financial results but hacks – and who knew what and when. Yahoo said today the closing would be delayed until the second quarter, or as soon as practicable.

The SEC is investigating whether two massive data breaches at Yahoo should have been reported sooner to investors. Yahoo faces questions about exactly when it knew about a 2014 cyber-attack it announced in September that exposed the email credentials of half a billion accounts. In December, Yahoo said it had uncovered yet another massive cyber-attack, saying data from more than 1 billion user accounts was compromised in August 2013. Securities industry rules require companies to disclose cyber breaches to investors.

McDonald’s posted better-than-expected global same-store sales in the latest quarter, but its results in the U.S. declined as enthusiasm for its all-day breakfast options leveled off. For the quarter that ended in December, the burger chain’s global comparable sales increased 2.7%, well estimates. In the U.S., comparable sales fell 1.3%; the company blamed a challenging comparison to the prior-year launch of its all-day breakfast service.

Halliburton reported mixed fourth quarter fiscal 2016 earnings results. Despite a miss on the top line, which continue to suffer from weak demand, Halliburton’s overall results point to improvements in North America — its largest revenue region.

OPEC’s production fell by about 221,000 barrels a day to just over 33 million a day in December, per secondary sources data in the group’s monthly report published Jan. 18. The declines still leave output about 1.8 million barrels a day higher than the average of 31.3 million the group is targeting in the first half of the year, underscoring a need to press on with cuts. Saudi Arabia’s Minister of Energy said the first two weeks of January saw “very strong” compliance and most producers are already exceeding their pledged cuts.

The mega-merger between health insurers Aetna and Humana has been blocked by a federal judge. The deal, in which Aetna proposed to buy Humana for $37 billion, has been ruled anti-competitive. Aetna now owes Humana a $1 billion break-up fee, according to Bloomberg. Last summer, Aetna threatened to pull out of the Affordable Care Act exchanges, after the Department of Justice brought a lawsuit to block the merger.

Reuters last week reported that another healthcare tie-up, the Anthem-Cigna mega-merger, would be blocked by a federal judge.  Former Attorney General Loretta Lynch argued in July when the suit was brought that both the Anthem-Cigna and Aetna-Humana mergers would hurt consumer choice and increase prices.

The City of Everett Washington has file suit against Purdue Pharma, alleging the drug manufacturer turned a blind eye to criminal trafficking of its OxyContin painkillers to “reap large and obscene profits” and demanding it foot the bill for widespread opioid addiction in the community.

In a first-of-its-kind lawsuit, city lawyers accused Purdue of gross negligence, creating a public nuisance and other misconduct and said the company should pay costs of handling the opioid crisis — a figure that the mayor said could run tens of millions of dollars — as well as punitive damages.

A computer problem forced United Airlines to ground all domestic flights for about an hour on Sunday evening, causing a cascade of delays and annoying customers throughout the United States. The “ground halt” was lifted after about one hour.

Cyber-attacks against banks have increased in numbers and sophistication in recent years, with criminals finding new ways to target banks. Last February $81 million was taken from the Bangladesh central bank when hackers broke into its system and gained access to the SWIFT international transactions network. The European Union is considering testing banks’ defenses against cyber-attacks, with an EU wide stress test.

Its lead may have narrowed over the past year, but South Korea still reigns supreme on Bloomberg’s Innovation Index, which ranks the world’s economies using metrics such as R&D spending and the concentration of high-tech public companies.

Hong Kong is the most expensive city in the world to live in. That’s according to the 13th Annual Demographia International Housing Affordability Survey, which says that Hong Kong’s housing market is the least affordable in the world.

All around the world, Chinese people are cleaning their houses, shopping for new clothes, and following several traditions leading up to and during the New Year to help usher in good luck and fortune. Roughly a sixth of the world will observe Chinese New Year. Starting January 28, celebrations to welcome in the year of the rooster will continue through February 2. This week also marks the world’s largest annual mass migration as millions of Chinese people travel back to their family homes for reunions ahead of the New Year celebrations.

Today also marks the start of tax filing season. Your taxes aren’t due until April 18^th this year, but you can start filing as of today.

And for those of you still trying to cling to your New Year Resolutions, be warned – today marks the start of Girl Scout Cookie season and it also marks the 100th anniversary of Girl Scout cookie sales. I could tell you to just say no, but that wouldn’t work.

Financial Review

Farewell, Goodbye

Sinclair Noe — January 10, 2017

Podcast: Play in new window | Download (Duration: 12:16 — 5.6MB)

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DOW – 31 = 19,885
SPX unchanged = 2268
NAS + 20 = 5551
RUT + 13 = 1370
10 Y + .01 = 2.38%
OIL – 1.16 = 50.80
GOLD + 6.50 = 1188.30

World stock markets nudged back toward recent multi-month highs, aided by a rally in commodity prices. The US dollar index slumped to a low of 101.51 in overnight action, breaking slightly below the lows of mid-December. The post-Brexit British pound moved lower; it’s the gift that keeps on giving, as the FTSE 100 closed in record territory for the 9^th straight session.

The Dow Industrials flirted with 20,000 again but it was nothing more than coy flirtation – moving within 42 points then slipping away. The S&P 500 was flat; not a fraction – no change at all. The Nasdaq posted its third straight record high close.

The home purchase sentiment index compiled by mortgage finance provider Fannie Mae fell in December, its fifth straight monthly decline. Tight inventories, rising mortgage rates and higher home prices are taking a toll on Americans’ attitudes toward home ownership. The overall index dropped 0.5% to 80.7 in December; down 2.5% from one year ago.

The National Federation of Independent Business said its optimism index jumped 7.4 points to 105.8, the highest level in 12 years. Small business owners overwhelmingly expect business conditions to improve under the new administration. Most of the December improvement came from the “expectations” components of the index. Owners say now is a good time to expand. Job creation plans increased 1 point, to a 9-year high, in December, but actual hiring was basically flat during the month.

Consumer credit expanded at a seasonally adjusted annual rate of 7.9%, or $24.6 billion, in November. The Federal Reserve reported that revolving credit, such as credit cards, jumped 13.5% while nonrevolving credit, such as car and student loans, rose 5.9%.

The Labor Department published its Job Openings and Labor Turnover Survey, also known as JOLTS. There were 5.5 million openings on the last day of November. That was 1.3% higher than October. The number of hires rose 1.1% to 5.2 million. The number of people who quit jobs voluntarily also rose, to 3.1 million. That was the second-highest level since before the recession.

Quits are tracked as a measure of worker confidence in the ability to land another job. The JOLTS report shows employers are slow to fire but also slow to hire. There were some signs of tightening in the labor market; the ratio of the unemployed per job opening dipped to 1.3, from 1.4 in each of the prior three months.

Meanwhile, confirmation hearings are underway for President-elect Trump’s cabinet nominees. Tomorrow, Trump holds his first news conference since before the election, but he was still making news today, calling for the immediate repeal of Obamacare.

Trump, who seemed unclear on the timing of already scheduled votes in Congress this week, demanded a repeal vote “probably sometime next week” and adding, “the replace will be very quickly or simultaneously, very shortly thereafter.” The Senate is planning a vote related to repeal on Thursday morning and the House could vote on Friday; the problem is the replacement, which doesn’t yet exist.

Later tonight, President Obama will give his farewell address in Chicago at 7PM Arizona time (9 ET). This is traditional for most two-term presidents. Most farewell addresses are forgettable, with 2 notable exceptions: the first presidential farewell delivered by George Washington, which was framed with warnings to the young nation about the dangers of sectionalism, overzealous partisanship, and of permanent foreign alliances; and the second noteworthy farewell address was from President Eisenhower, where he warned that the new “conjunction of an immense military establishment and a large arms industry” — which he dubbed “the military-industrial complex” — could pose grave dangers to American liberties and US democracy.

Arizona Governor Doug Ducey delivered the State of the State address yesterday. Ducey said he was ready to make “a commitment our educators can take to the bank.” That includes promises of increased state aid and higher teacher pay. And he had special programs designed to get teachers into schools in areas of high poverty. But Arizonans must wait until Friday when the governor releases his budget proposal to find out what that means in dollars and cents.

Apple has submitted a proposal to expand its manufacturing capabilities at a site in Mesa, Arizona where it already produces certain components for its consumer products. The notice shows Apple seeking to expand its production capabilities at the site in Mesa to be able to produce finished products and utilize foreign status materials/components — including a laundry list of core electronics components, such as printed circuit board assemblies, lithium polymer batteries and monitors.

If it’s approved, however, the Arizona facility would mark an unusual instance of a U.S. tech company manufacturing and assembling a finished product domestically, where labor costs are higher.

Yahoo will rename itself Altaba Inc and Chief Executive Officer Marissa Mayer will step down from the board after the closing of its deal with Verizon. Yahoo has a deal to sell its core internet business, which includes its digital advertising, email and media assets, to Verizon for $4.8 billion.

The terms of that deal could be amended – or the transaction may even be called off – after Yahoo last year disclosed two separate data breaches; one involving some 500 million customer accounts and the second involving over a billion. I wonder how many high level corporate board meetings were required to come up with the new name – Altaba – and I’m not sure how to pronounce it, but it should throw the hackers off the trail for a while.

Wall Street’s largest back-office processing service, Depository Trust & Clearing Corp, is partnering with IBM to upgrade how payments and record-keeping for credit-default swaps are handled by putting the system on a blockchain by early next year. If you’re wondering what blockchain is, it is basically a digital ledger that can publish a continuously growing list of ordered records through peer-to-peer transactions, without the need for a third party.

This is the technology behind Bitcoin; and while Bitcoin might be a bit dodgy, many of the world’s biggest banks and corporations are trying to harness the technology to make the likes of transacting cross-border payments, issuing debt and recording health data more efficient – or in this case record keeping for derivatives. And if it works here, look for it to eventually spread to the Options Exchanges and stock exchanges, etc.

Bank of America is being accused of stiffing the FDIC, the government agency that insures people’s deposits against a bank failure. The FDIC filed a lawsuit in federal court demanding that Bank of America pay $542 million it owes to the regulator’s deposit insurance fund.

The lawsuit claims Bank of America underreported a key risk metric by tens of billions of dollars during the final three quarters of 2013 and all of 2014. The FDIC said that allowed BofA to appear less risky than it really was – and avoid paying the FDIC an average of $77 million each quarter into the agency’s deposit insurance fund.

Volkswagen is considering a $4.3 billion settlement to resolve civil and criminal allegations stemming from its emissions-cheating scandal. The agreement, which has yet to be finalized, would lead to a financial expense that exceeds current provisions. It also includes a guilty plea to some criminal charges, strengthening compliance systems and installing an independent monitor for three years

Alibaba is leading a $2.6 billion bid to privatize Intime Retail Group, which operates 29 department stores and 17 shopping malls in China, giving the e-commerce giant a firmer foothold in bricks and mortar.

Jack Ma, executive chairman of Alibaba, met with Donald Trump to pitch the U.S. president-elect on how the company can create one million small business jobs in America.

Valeant is selling assets. The embattled drug-maker announced plans to sell three skincare brands to L’Oreal for $1.3 billion.

American Apparel has a new owner. The Canadian apparel maker Gildan Activewear won the auction for the failed retailer American Apparel with its bid of about $88 million.

Add another retailer to the casualty list – The Limited has shut down all 250 of its stores and laid off 4,000 workers. Sun Capital, the private-equity firm that owns The Limited, attributed the decision in part to falling foot traffic at shopping malls.

They issued a statement saying: “We’re sad to say that all The Limited stores nationwide have officially closed their doors. But this isn’t goodbye. The styles you love are still available online—we’re just a quick click away 24 hours a day.” I’m not sure, but certainly sounds like goodbye.

Financial Review

Accept Responsibility

Sinclair Noe — September 22, 2016

Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB)

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DOW + 98 = 18,392
SPX + 14 = 2177
NAS + 44 = 5339
10 Y – .05 = 1.62%
OIL + .74 = 46.08
GOLD + 1.80 = 1337.70

The Federal Reserve kept policy on hold, yesterday. The Fed held its key interest rate unchanged at a range of 0.25% to 0.50%, saying, “The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.” The Federal Reserve’s long-term outlook added to optimism over stimulus policies from global central banks.

For traders it was a cue to don their rally caps.  Risk on! Stocks climbed with bonds as the dollar fell. The S&P 500 tallied its best two-day performance in more than two months, while the Nasdaq closed at a record high. Oil rallied, leading commodities higher. Global equities extended a four-day advance, and Treasuries rose to a two-week high.

Filings for U.S. unemployment benefits dropped last week to match the lowest level since April. Jobless claims declined by 8,000 to 252,000 in the week ended Sept. 17. Applications for unemployment insurance are close to a four-decade low as companies focus more on filling available positions than on trimming staff. Filings have been below 300,000 for 81 straight weeks — the longest streak since 1970.

The National Association of Realtors reports existing-home sales declined 0.9% to a seasonally adjusted annual rate of 5.33 million. That was only 0.8% higher than a year ago, although year to date figures are 3% higher. First-time homebuyers comprised 31% of the market in August. As inventory tightened, it pressured prices higher. The median sales price was $240,000, which is 5.1% higher than in August 2015.

Weakness in the manufacturing sector dragged the Conference Board’s leading economic index down 0.2%. The index, which weights 10 different economic indicators, was hurt by a decline in the average workweek of production workers as well as the new-orders component of the Institute for Supply Management’s manufacturing index. While the U.S. LEI declined in August, its trend still points to moderate economic growth in the months ahead, with the economy growing at about a 1.8% rate.

Wall Street wants the UK to delay Brexit for as long as possible. At a meeting in New York, Wall Street heads asked Prime Minister Theresa May for a “long lead time” of up to two years to prepare for a Brexit.

Yahoo has confirmed a really big hack.  Information associated with at least 500 million user accounts was stolen. Yahoo confirmed that a data breach in late 2014 revealed information that may have included names, email addresses, telephone numbers, dates of birth, and some passwords and security questions and answers. Verizon, which agreed to buy Yahoo earlier this year, confirmed it was notified of the Yahoo breach within the last two days, but has “limited information” on the attack and will evaluate as the investigation continues. It is time to change your passwords.

Hanjin Shipping got some good news. The board of Korean Air Lines, Hanjin’s biggest shareholder, approved a 60 billion won $54 million loan to the shipper. After that, Korea Development Bank, the main lender to Hanjin, offered a conditional credit line of $45 million to help ease supply-chain disruptions caused by the collapse of the nation’s biggest container mover.

Mark Zuckerberg, Facebook’s chief executive, and his wife, Dr. Priscilla Chan, last year said they would give 99 percent of their Facebook shares to charitable causes. Now they are putting a large chunk of that money to work.

The Chan Zuckerberg Initiative, into which Mr. Zuckerberg and Dr. Chan put their Facebook shares, said it would invest at least $3 billion over the next decade toward preventing, curing or managing all diseases by the end of the century. While the Chan Zuckerberg Initiative has already made investments in charter schools and education start-ups, the money toward curing diseases represents the group’s first major initiative in science.

Zuckerberg said that if his organization’s plan to cure or manage all disease worked, it should increase human life expectancy to 100 years. “That doesn’t mean no one will ever get sick,” he said. “But they should be able to treat it and manage it.”

America is not the greatest country in the world, at least we are not the healthiest. We are number 28, when it comes to health goals set by the United Nations, according to a report published in the Lancet. Using the UN’s sustainable development goals as guideposts, which measure the obvious (poverty, clean water, education) and less obvious (societal inequality, industry innovation), more than 1,870 researchers in 124 countries compiled data on 33 different indicators of progress toward the UN goals related to health.

The U.S. scores its highest marks in water, sanitation, and child development. That’s the upside. Unsurprisingly, interpersonal violence (think gun crime) takes a heavy toll on America’s overall ranking. Response to natural disasters, HIV, suicide, obesity, and alcohol abuse all require attention. The US is No. 64 in the rate of mothers dying for every 100,000 births, and No. 40 when it comes to the rate children under age five die.

The federal fiscal year ends on Sept. 30 and Congress must pass a spending measure by then to keep the government open. In recent years, lawmakers have seldom been able to agree on a full federal budget and instead have relied on stop-gap measures. Today a stop gap measure was introduced and immediately rejected. They have a full week to work it out. What could go wrong?

A couple of weeks ago, Wells Fargo agreed to pay $185 million in penalties for perpetrating a massive fraud on customers; for years they had been opening bogus accounts in customers names’ without customers’ permission and charging fees to do it. Millions of phony accounts. Fake bank card PIN numbers. Fictitious email accounts. Wells Fargo admitted to firing 5,300 employees for engaging in these shocking tactics.

CEO John Stumpf was called before Congress to testify. Stumpf claimed the bank had an ethics hotline, a phone employees could call anonymously to report any type of unethical behavior; exactly the kind of safeguards put in place to prevent illegal activity from taking place and provide refuge to employees from dangerous work environments. Stumpf told lawmakers, “Each team member, no matter where you are in the organization, is encouraged to raise their hands.” He mentioned the anonymous ethics line, adding, “We want to hear from them.”

Well, CNNMoney has been hearing from some former Wells Fargo employees, and they are saying that attempts to report bad behavior got them fired. One former Wells Fargo banker not only refused orders to open phony bank and credit accounts. He called an ethics hotline and sent an email to human resources in September 2013, flagging unethical sales activities he was being instructed to do.

Eight days after that email, a copy of which CNNMoney obtained, he was fired. The stated reason? Tardiness. One former Wells Fargo human resources official even said the bank had a method in place to retaliate against tipsters. He said that Wells Fargo would find ways to fire employees “in retaliation for shining light” on sales issues.

Stumpf told the Congressional committee that the bank fired 5,300 employees involved in the fake accounts starting in 2011, not in response to the Consumer Financial Protection Bureau, which revealed the scandal earlier this month. However, there was no indication Stumpf or anyone at Wells Fargo notified regulators about the problems.

The bank did hire consultants at PricewaterhouseCoopers to help determine the scope of the problem — but that happened in August 2015. Nor has the bank ever disclosed in its public filings to the SEC that its activities were under investigation. He said the bank has been refunding fees charged for fake accounts, but that’s nowhere near sufficient. Some customers could face decades of higher mortgage or loan payments because lenders downgraded their creditworthiness based on the fake accounts. This is the untold disaster.

Meanwhile, Stumpf’s personal stock-holdings increased in value by more than $200 million while the scam was ongoing — thanks in part to Wells Fargo’s boasts about its cross-selling skills. Stumpf said several times that he accepted “personal responsibility” and “he’s accountable”. I think we can all learn a valuable lesson here. We all need to stand up and accept personal responsibility for our actions – just like John Stumpf.

If you get caught speeding, don’t argue with the cop; just say “I accept full responsibility” and then zoom off. If the IRS says you owe a boatload of back taxes, don’t even bother to take your tax returns to the audit; just tell them you take full responsibility for those errors, assure them that you are accountable, and then hang up the phone, and wait for your refund check.

Other banks have done pretty much the same thing. Just last year, the Justice Department charged five other big banks, Citibank, JPMorgan Chase, Barclays PLC, Royal Bank of Scotland, and UBS, with felony fraud for illegally manipulating the international currency markets. Their top executives all took “responsibility.” Nobody went to jail and most of them collected multi-million dollar bonuses. I tell you, this scam of accepting responsibility and being accountable, it is a money-maker!

And if you murder someone in cold blood, just tell the judge, “Your honor, I take full responsibility for that murder. I’m accountable.” Why that judge will surely grant you freedom to continue with your life of crime. Now, just be certain you say “I accept responsibility.” Do not, repeat, do not admit your guilt. You have to do it just like John Stumpf.

Financial Review

Big Stuff

Sinclair Noe — July 25, 2016

Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB)

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DOW – 77 = 18,493
SPX – 6 = 2168
NAS – 2 = 5097
10 Y unchanged = 1.57%
OIL – 1.14 = 43.05
GOLD – 6.80 = 1316.30

The Federal Reserve kicks off its monetary policy meeting on Tuesday and will announce its decision on Wednesday. The central bank is widely expected to hold interest rates steady and stop short of signaling a possible rate increase in September because of continued uncertainty about the economic outlook.

In total, 15 central banks are scheduled to meet this week. The Bank of Japan’s rate decision is due on Friday and will be closely watched for any hints of more easing in the face of a stronger yen post Brexit and a slowdown in the economy.

World shares held near nine-month highs after G20 finance chiefs said over the weekend they would use “all policy tools” to lift global growth. A communique issued by the G20 ministers at the end of the two-day meeting said Brexit, which dominated discussions, had added to uncertainty in the global economy where growth was “weaker than desirable”. It added that members, however, were “well positioned to proactively address the potential economic and financial consequences”.

The Brexit led to severe withdrawals at M&G, Schroders, Fidelity and Invesco in June, as equity funds domiciled in Europe suffered their largest monthly redemptions since September 2011. Investors pulled at least €1-billion-euro from each of the four large investment groups, which are either based in the U.K. or have large hubs in the country.

The latest survey by the Association for Financial Professionals shows companies are taking their most cautious approach to cash management since mid-2011, and increasing their holdings of cash in response to a rise in economic and geopolitical uncertainty. The survey shows companies accumulated cash balances at a far quicker pace in the second quarter than in the first, and expect to do so at a still faster pace in the current quarter. Capital investment and hiring by US multinationals has also been held back by swings in currency markets.

Oil prices fell to two and a half month lows this morning on worries that a global glut of crude and refined products would weigh on markets for some time. Barclays bank said global oil demand in the third quarter of 2016 was expanding at less than a third of the year-earlier rate, weighed down by anemic economic growth. Demand support from developed economies had faded, while growth from China and India had slowed.

Meanwhile, Libya’s hopes to boost crude exports have been dealt a blow after the head of the National Oil Corporation objected to a deal between the government and local guards involving payments to reopen key ports. The 2 percent drop in oil prices dragged down major energy companies. Chevron shares were down 2.4 percent and Exxon Mobil stock gave up 1.9 percent, the two biggest drops in the Dow Jones industrial average. Oil prices are down nearly 12 percent this month.

Major oil companies are planning to report their second-quarter earnings this week. BP will lead off on Tuesday, and Royal Dutch Shell and Total, of France, will report on Thursday. Exxon, Chevron and Eni, of Italy, will follow on Friday.

This will be a big week for tech stocks. Apple reports earnings tomorrow; Facebook reports on Wednesday. Alphabet and Amazon report on Thursday. Together, these four stocks make up 30 percent of the Nasdaq 100.

We are right in the middle of earnings reporting season. Second quarter earnings are expected to show S&P 500 companies earnings declined again, for the fifth consecutive quarter. Bloomberg reports second-quarter earnings fell 1 percent among the 130 companies in the S&P 500 Index that have issued thus far; which is not as bad as estimates at the beginning of reporting season.

And there is a bit of positive guidance news; nearly 90 percent of companies in the S&P 500 Index that have changed previously disclosed expectations for future earnings have raised the target. At this rate, if the guidance holds true, we should break out of the earnings recession in the third quarter.

Sprint reported fiscal first-quarter revenue that beat expectations as big discounts attracted more postpaid subscribers, and the No. 4 U.S. wireless carrier said it expected to be cash flow positive next fiscal year after breaking even this year. Sprint up 27% today.

Verizon is set to pay $4.8 billion in cash to acquire Yahoo’s core internet assets as well as real estate. After those sales, Yahoo would still hold stakes in Yahoo Japan and Alibaba – worth about $40 billion. The companies said the deal is subject to customary closing conditions, including approval by Yahoo’s shareholders, and is expected to close in early 2017.

Verizon will combine Yahoo’s search, email and messenger assets as well as advertising technology tools with its AOL unit, which it bought last year for $4.4 billion. Verizon, the No. 1 U.S. wireless operator, has been looking to mobile video and advertising for new sources of revenue outside the over-saturated wireless market. It will be a tough row to hoe because Facebook and Google already have a dominant position in digital ads.

AMC Entertainment has been trying to buy Carmike Cinemas for several months. AMC’s initial offer of $30 a share left some Carmike shareholders feeling short-changed. So, AMC sweetened the deal, to $33.06 per share in cash. That should seal the deal.

LVMH is selling Donna Karan to G-III Apparel. The French luxury goods giant LVMH is selling Donna Karan International to G-III Apparel for $650 million. The deal will be funded through new debt and by issuing $75 million of G-III common stock to be issued to LVMH.

Outerwall, the owner of Redbox video rental kiosks, said it had agreed to be taken private by affiliates of private equity firm Apollo Global Management in a deal valued at about $1.6 billion.

Tesla Motors and SolarCity have made progress in putting together a deal that will merge the electric car maker and the solar panel installer. The two companies are in the final stages of carrying out due diligence on each other, and could agree on the terms of a deal in the coming days, but it’s still unclear if SolarCity will try to press for other bids.

Tesla announced last month that it had made an all-stock offer for SolarCity worth $2.8 billion. It argued that by acquiring SolarCity, the two companies would form a one-stop clean energy shop, offering consumers solar panels, home battery storage and electric cars under a single brand.

Nintendo warns that the impact from Pokémon Go will be “limited.” Shares of Nintendo plunged more than 17% Monday after the company released a statement late Friday suggesting that it would see a “limited” financial impact from Pokémon Go. The plunge has the stock down about 27% from its recent high, but the stock is still up about 67% since the game’s release.

Helping advance research toward integrating drones into the National Airspace System, 7-Eleven and upstart Flirtey have completed the first fully autonomous drone delivery to a customer’s residence. While there’s some speculation on the ways that companies like Amazon, Wal-Mart, Walgreens and Domino’s could use drone delivery, many industry watchers think emergency conditions (flood/earthquake/medical) or niche situations (oil rigs/inaccessible roads) are the most likely scenarios for widespread drone usage.

The Japanese government and the European Commission are working together to connect their global positioning systems in a coordinated effort to clear a path for autonomous vehicles. By linking Japan’s Quasi-Zenith Satellite System and EU’s Galileo satellite network the margin of error of the combined system will be improved dramatically. The development could be positive for Japanese automakers and suppliers.

Two years ago, the Federal Reserve faced a predicament: One of its New York employees had leaked confidential government information to a banker at Goldman Sachs. Both men ultimately pleaded guilty to stealing government property. Goldman, for its part, paid a $50 million penalty to New York State regulators because its “management failed to effectively supervise” the banker.

After a considerable time, the Fed is now preparing an enforcement action against Goldman, and the bank is expected to pay a financial penalty to settle the case. The Fed is also considering an action against a third man, a former Goldman executive who worked alongside the more junior banker who received the leaked material. Unlike Goldman, the former executive plans to fight the Fed if it files a case against him.

Last week we told you the Department of Justice was conducting an investigation into IMDB, the Malaysian sovereign fund. Today, report the department of Justice has seized four multimillion dollar Manhattan condos and a stake in the Park Lane Hotel that are connected with the international money laundering scheme.

Turkey ordered the detention of 42 journalists on Monday and ordered the closure of 2,341 private schools, charities, and other institutions, under a crackdown following a failed coup that has targeted more than 60,000 people. Turkey also imposed a state of emergency which extends detentions without charges to 30 days.

Russia won’t be completely banned from the Rio Olympics. Russian athletes can individually apply and, if they meet strict anti-doping criteria, could be allowed to attend. The ban that applies to Russia’s track and field Olympic team has not been lifted.

Markets Mixed Amid Sundry of News

Charles Schwab: On the Market

Posted: 7/19/2016 4:15 PM ET

Markets Mixed Amid Sundry of News

U.S. equities finished out today's session mixed in choppy action amid an assortment of earnings reports, headlined by Netflix's lower-than-expected subscriber figures, and tempered sentiment following a reduction in the IMF's global growth forecast. Treasuries were mostly higher, despite an upbeat housing construction report, while gold and the U.S. dollar also gained ground, and crude oil prices were lower.

The Dow Jones Industrial Average (DJIA) rose 26 points (0.1%) to 18,559, while the S&P 500 Index declined 3 points (0.1%) to 2,164 and the Nasdaq Composite lost 19 points (0.4%) to 5,037. In moderate volume, 741 million shares were traded on the NYSE and 1.7 billion shares changed hands on the Nasdaq. WTI crude oil declined $0.49 to $45.45 per barrel, wholesale gasoline shed $0.01 to $1.38 per gallon, while the Bloomberg gold spot price increased $3.77 to $1,332.62 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.5% higher at 97.05.

Dow member Goldman Sachs Group Inc. (GS $161) reported 2Q earnings-per-share (EPS) of $3.72, well above the $3.04 FactSet estimate, as revenues declined 12.5% year-over-year (y/y) to $7.9 billion, compared to the projected $7.5 billion. Shares finished lower after running the past few sessions as earnings reports from the sector have mostly topped forecasts.

For our analysis of our outperform rating on the financial sector see the latest Schwab Sector Views: Sector Impact of Brexit from Schwab's Director of Market and Sector Analysis, Brad Sorensen, CFA at www.schwab.com/marketinsight.

Dow component International Business Machines Corp. (IBM $160) posted 2Q EPS ex-items of $2.95, above the expected $2.89, with revenues decreasing 3.0% y/y to $20.2 billion, exceeding the forecasted $20.1 billion. IBM reaffirmed its full-year earnings outlook, and shares were lower.

Dow member Johnson & Johnson (JNJ $125) announced 2Q earnings ex-items of $1.74 per share, north of the projected $1.68, as revenues increased 3.9% y/y to $18.5 billion, versus the estimated $18.0 billion. JNJ raised its full-year profit and revenue guidance. Shares of JNJ finished higher.

Dow member UnitedHealth Group Inc. (UNH $143) reported 2Q profits ex-items of $1.96 per share, above the projected $1.89, as revenues grew 28.1% y/y to $46.5 billion, compared to the anticipated $45.0 billion. UNH raised the lower end of its full-year earnings outlook. Shares were higher.

Netflix Inc. (NFLX $86) posted 2Q EPS of $0.09, topping the expected $0.03, as revenues rose 32.7% y/y to $2.0 billion, below the estimated $2.1 billion. The company's net subscriber additions missed the Street's expectations and its 3Q subscriber and profit guidance also came in short of projections. NFLX was sharply lower.

Yahoo Inc. (YHOO $38) announced 2Q earnings ex-items of $0.09 per share, one penny below forecasts, as revenues excluding traffic acquisition costs (TAC) fell 19.3% y/y to $842 million, compared to the expected $840 million. YHOO traded higher.

Monsanto Co. (MON $107) rejected Bayer AG's (BAYRY $101) recently upwardly revised near $55 billion takeover offer, saying that it views the proposal as financially inadequate and insufficient to ensure deal certainty. MON said it remains open to continued and constructive conversations with Bayer. MON was modestly higher.

Housing construction activity top forecasts

Housing starts (chart) for June rose 4.8% month-over-month (m/m) to an annual pace of 1,189,000 units, above the Bloomberg forecast of a 1,165,000 unit rate. May's starts were downwardly revised to an annual pace of 1,135,000. Building permits, one of the leading indicators tracked by the Conference Board as it is a gauge of future construction, gained 1.5% m/m in June to an annual rate of 1,153,000, after May's downward revision to a 1,136,000 rate, slightly above the expected annual pace of 1,150,000 units. Construction activity for single-family and multi-family structures both improved m/m, but remain below year ago levels.

Today's report adds to the recent string of favorable economic data that has helped foster all-time highs for the Dow and S&P 500, as discussed by Schwab's Chief Investment Strategist Liz Ann Sonders in her latest article, 19th Nervous Breakout: Stocks Finally Reach New Highs. Liz Ann notes that coupled with investor sentiment, economic upside surprises have been numerous and broad-based, explaining the market finally breaking out of what had been a remarkably narrow two-year trading range and fostering implications for Fed policy. Read more at www.schwab.com/marketinsight.

Treasuries were mostly higher, as the yield on the 2-year note was little changed at 0.69%, while the yield on the 10-year note and the 30-year bond declined 3 basis points (bps) to 1.55% and 2.27%, respectively. Bond yields have pulled back slightly from their recent rally that has come from favorable U.S. economic data as of late and eased U.K. Brexit fallout. For analysis see the video from Schwab's Liz Ann Sonders and Managing Director of Trading and Derivatives, Randy Frederick, titled Strong Jobs Report: Recession off the Table but Is Rate Hike Back On?, at www.schwab.com/insights. Follow Liz Ann and Randy on Twitter: @lizannsonders and @randyafrederick.

The only report of note on tomorrow's economic calendar is MBA Mortgage Applications.

Europe lower following earnings and data, Asia mixed

European equities traded lower, with some earnings reports missing expectations, along with a read on sentiment in Germany, while the International Monetary Fund (IMF) lowered its global growth forecast. Basic materials stocks led the downside move, with mining issues seeing pressure. In economic news, German investor confidence fell sharply into negative territory for the first time since October 2014 and hitting the lowest level since November 2012, on concern that Britain's decisions to leave the European Union—known as a Brexit—could weaken the region's economy, per Bloomberg. A plethora of reads on U.K. inflation came in mostly hotter than expected in June. The euro and British pound fell versus the U.S. dollar and bond yields in the region traded mostly to the downside. Amid the backdrop of heightened volatility in the region as the markets grapple with the impact of a Brexit, Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, offers analysis for investors in his article, After the Brexit Vote: What Lies Ahead for Markets?, and gives us Three Reasons Why Now is Not the Time to Retreat from Global Diversification at www.schwab.com/marketinsight. Be sure to follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia finished mixed with Japan's markets adding onto last week's rally after being closed for a holiday yesterday. The yen remained under pressure as expectations of more aggressive stimulus measures continued. For more on Japan's potential increased stimulus measures see Schwab's Jeffrey Kleintop's, article, What investors need to know about helicopter money, at www.schwab.com/oninternational. Australian equities dipped amid weakness in basic materials stocks, as miners came under pressure, while the minutes from the Reserve Bank of Australia's (RBA) unchanged monetary policy decision earlier this month suggested the central bank is keeping its policy options open after offering lower forecasts for the economy and inflation. Mainland Chinese stocks and those traded in Hong Kong declined, with the latter retreating from the recent rally. Meanwhile Indian securities rose and South Korean stocks traded lower.

Tomorrow's international economic calendar will include PPI from Germany, employment data from the U.K., and consumer confidence from the Eurozone.