Financial Review

Honey for Bears

Sinclair Noe — February 8, 2016

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DOW – 177 = 16,027
SPX – 26 = 1853
NAS – 79 = 4283
10 Y – .11 = 1.74%
OIL – .80 = 30.09
GOLD + 15.50 = 1190.00

This was just an ugly session from the start. The Dow opened about 200 points down and then trickled lower; at one point down more than 300 points. The S&P 500 index broke down through the key level of support at 1860 that I warned you about in January and again last week, taking out the August 2015 lows and the October 2014 lows.

The S&P 500 not only took out support from January, but now we look to minor support at 1815, and then, well there isn’t really any support. In other words, the charts look very dangerous here.

And if you prefer fundamentals over technicals; this is what FactSet had to say in its recent report: “For Q4 2015, the blended earnings decline is -3.8%. If the index reports a decline in earnings for Q4, it will mark the first time the index has seen three consecutive quarters of year-over-year declines in earnings since Q1 2009 through Q3 2009.”

The difference this time versus 2009 is that valuations are much higher. FactSet data show expectations for first-quarter per-share earnings have collapsed to a decline of 5.5% as of today. Back in September, that forecast was for growth of 4.8%. By the end of December, it had fallen to growth of just 0.8%.

Chinese stock markets are closed for trade all week to celebrate the Lunar New Year, providing little direction for European stocks at the open. However, data out over the weekend showed China’s foreign-exchange reserves fell to the lowest level in more than three years last month, in another sign of capital flight as the yuan weakens.

European stocks opened lower, extending last week’s losses. The Stoxx Europe 600 index had its lowest close in more than 15 months; banks in the Stoxx Europe 600 Index have dropped about 39 percent since a peak in July. Their slump this year is the worst of any other industry group.

Oil prices kicked off the week in the red. Data on oil demand in the world’s two largest markets, the U.S. and China, has taken a sharp turn lower. U.S. demand for oil products in January fell 3.9% compared with January 2015. In China, although overall oil demand was flat in December and an improvement on November’s outright decline, it still represented the second weakest reading for the year.

Meanwhile, hopes about an agreement between producers within and outside of the Organization of the Petroleum Exporting Countries to cut output and support prices have also faded in recent days. A meeting between Saudi Arabia and Venezuela on Sunday ended without any plans for a production cut. Iran plans to sell 300,000 barrels of crude oil a day to European customers now that Western sanctions are lifted. And within the next few months, Iran wants to ramp up production to 500,000 barrels a day, with the remainder going to Asia.

Chesapeake Energy, the natural gas driller that’s been cutting jobs and investor payouts to conserve dwindling cash flows, lost more than half it stock market value today after a report that it hired a restructuring law firm. The company’s bonds led losses among high-yield debt. Chesapeake’s notes due March 2016 (about $500 million in bonds) tumbled to a record to 74.5 cents, from 95 cents last week, while its bonds maturing in 2017 fell to an all-time low at 34 cents.

Exchange-traded funds that hold US junk bonds slid to their lowest levels in almost seven years. BlackRock’s iShares iBoxx High Yield Corporate Bond exchange-traded fund and SPDR Barclays High Yield Bond ETF both fell to the lowest levels since 2009. In high yield, energy, communications and health care fared the worst. Banks and insurers in Europe led a surge in the cost of insuring corporate bonds to the highest levels since 2013.

European financial firms are taking a beating amid fears of “a chronic profitability crisis that makes it impossible for banks to build up barely-adequate capital bases. None of the fresh wave of selling stems from new news, but the list of negatives is long. Fears surrounding non-performing loans and other deep-rooted issues in the Italian banking sector have driven nerves, while a slew of weak earnings from large banks such as Credit Suisse and Deutsche Bank have added to concerns. The worst of the lot is Deutsche Bank, Germany’s biggest, down about 10% today, and down 40% year-to-date, as its credit default swaps spiked to their highest levels since 2012.

Bank credit default swaps, or contracts that offer protection against the risk of a bond defaulting, have also surged in price, indicating intensifying fears for financial groups’ credit. Deutsche bank’s 5-year senior CDS has jumped 11bps today to a three-and-a-half-year high of 212bps, up from 134bps just over a week ago. The cost of protecting the company’s subordinated debt from default for five years using credit-default swaps has more than doubled since the end of 2015, rising to 438 basis points, a four-year high, from 187. That is just a very, very big selloff.

And what makes it crazier still, is that it looks like Deutsche Bank has more than sufficient reserves set aside for its debt and the interest on its debt, exclusive of operating results. But for now that doesn’t matter; share price has dropped, which increases expectations for more turmoil, which pushes the cost of hedging, which frightens shareholders, who then sell, pushing prices even lower. If it all sounds a bit over-done, it is, but it still demands we pay attention.

And the situation is not unique to Deutsche Bank, which is just one of the extreme examples. Basically all the banks are seeing their credit default swaps trading at the highs of the year. And here in the US, the large cap financials are down almost 12% year-to-date. That means there has been some panic selling. Today, the mega-banks, including Bank of America, Citi, and Wells Fargo all moved to new lows intraday or at the close.

The KBW Bank Index, which consists of 24 banks, is approaching 2008 and 2011 lows relative to the S&P 500. So, the question of the day is: Are the large cap financials cheap or is the rest of the market still overpriced? We may need more time to answer that one, but for now the big banks distress is honey for the bears.

If Congress does not act soon, Puerto Rican officials say major defaults are likely this spring. They are trying to make their case for a law that would allow a broad restructuring of the territory’s multibillion-dollar debt. The officials also said they knew that any legislative help would come at a stiff price: Puerto Rico would have to submit to a federal control board, something viewed by some on the island as colonialist-style interference.

Argentina has offered to pay about $6.5 billion in cash to U.S. holdouts that refused debt restructurings after its 2001 default, implying a haircut of about 25% on the amount bondholders say they are owed. If accepted by all the holdouts, which are led by billionaire Paul Singer’s Elliott Management, the deal would clear the way for Argentina’s return to the international capital markets.

Washington is vowing to ensure the United Nations Security Council imposes serious consequences on North Korea after it launched a space rocket in a purported satellite program widely considered to be a cover for developing ICBMs. The latest launch, which follows North Korea’s Jan. 6 nuclear test, may kick off a rapid buildup of American missile defenses in Asia.

Apollo Education Group, the parent company of the University of Phoenix, will be taken private as it is acquired by a group of investors for $1.1 billion. The investors will pay $9.50 in cash per share, which is 30% above the company’s trailing 30-day volume weighted average stock price. Tony Miller, chief executive of The Vistria Group, one of the investors, will become chairman of the board for the Apollo Education Group once the transaction is completed. The other investors included Apollo Global Management, LLC and Najafi Companies.

The agreement arrives weeks after the company reported a decline in revenue and another round of layoffs at the for-profit college. Phoenix, like other for-profit schools, has been battered by poor enrollment, government investigations and heightened federal regulation.

Chipotle closed its more than 2,000 restaurants today for a few hours to address employees about the food-borne illnesses that have led to lawsuits and a federal investigation. Chipotle used the event to review new food safety protocols and explain the steps the company is taking to improve food safety.

Ford is planning to build a new assembly plant in Mexico to sharply increase output from the country, representing the latest shift of investment abroad by a Detroit automaker following the signing of a costly new labor deal. Ford expects to add 500,000 units of annual Mexican capacity starting in 2018 (more than double what it built in 2015), by constructing a new assembly complex in San Luis Potosí and expanding an existing factory near Mexico City.

You don’t see this every day…Credit Suisse CEO Tidjane Thiam has asked the company’s board to reduce his bonus, days after the Swiss bank reported a fourth-quarter multibillion-dollar loss that sent its share price tumbling. Thiam, who joined the bank in July, did not indicate the size of the cutback, but said his was the largest bonus reduction within the management team.

Financial Review

Dark Clouds

Sinclair Noe — January 12, 2016

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DOW + 117 = 16,516
SPX + 15 = 4658
NAS + 47 = 4685
10 Y – .06 = 2.10%
OIL – .67 = 30.74
GOLD – 7.70  = 1087.50

The recent sell-off on Wall Street has some of the investment banks worried. For the past 7 years, JPMorgan Chase has seen every dip in the market as a buying opportunity. Now they are changing their tune and advising clients to sell any rally. A report from JPMorgan’s chief equity strategist cites several areas that are raising red flags, including: deteriorating technical indicators, expectations of anemic corporate earnings combined with the downward trajectory in U.S. manufacturing activity and a continued weakness in commodities, with oil dropping under $20 a barrel.

RBS, the Royal Bank of Scotland, says investors face a “cataclysmic year” where stock markets could fall by up to 20% and oil could slip as low as $10 a barrel. In a note to its clients the bank said: “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.” It said the current situation was reminiscent of 2008, when the collapse of the Lehman Brothers investment bank led to the global financial crisis. This time China could be the crisis point.

Goldman Sachs is warning that global stock markets may get worse. They remain neutral on stocks for now, but any further drops would create opportunities to invest. They prefer Europe to the US stock market because the European Central Bank is supporting the economy, and that’s poised to help the region’s companies to possibly achieve single digit earnings growth.

Standard & Poor’s says the outlook for corporate borrowers worldwide is the worst since the global financial crisis. The proportion of issuers facing a potential downgrade at the ratings company surpasses possible upgrades by the most since 2009. The gap also widened the most since the financial crisis in the past six months, S&P said. The corporate-debt outlook has darkened because of slower growth in China and a commodity rout that’s cut prices to the lowest since 1999. The slump has also driven corporate defaults to the highest since 2009.  S&P says there may be “significantly” more ratings downgrades than upgrades in 2016.

Lehmann, Livian, Fridson Advisors says the junk bond market is indicating a 44% chance of recession in the US within one year. They say, they aren’t making a forecast, just analysis of junk bond spreads over treasuries, now at 7.4%, which is not at recessionary levels of 10.19%, but indicates a 44% probability of recession. Jeffrey Gundlach, the co-founder of Doubleline Capital, sees a one-third chance of recession this year. Citigroup analysts say spread levels on the Markit CDX North America High Yield Index are pricing in an expected loss of 21.2 percent over a five-year period.

Now, that is a lot of negativity coming from the strategists and the big investment banks. You might expect at least some artificial optimism when the president of the Dallas Fed talks about oil. You’d expect some droplets of hope for that crucial industry in Texas. But when Dallas Fed President Robert Kaplan spoke on Monday, there was none, not for 2016, and most likely not for 2017 either, and maybe not even for 2018.

The wide-ranging speech included a blunt section on oil, the dismal future of the price of oil, the global and US causes for its continued collapse, and what it might mean for the Texas oil industry: “more bankruptcies, mergers and restructurings….”

But does all this negativity really mean the markets are collapsing, or is it a contrarian indicator? Is this a replay of last August, when we saw a nasty pullback, followed by a quick recovery, or is this the beginning of a recession that could drag down the markets and the economy? Of course we do not know, and the analysts do not know. What we do know is that there are risks in this market and those risks appear to be underpriced; on the flip side, these risks are now being identified. Another thing we know is that the Dow and the S&P are both trading below their 50 day and 200 day moving averages, so a downtrend is in place, at least for the moment.

We can also see what the analysts are seeing whenever we fill up the car. The price of oil is down 79% from the 20-year high hit in July 2008 at $145.29 which created record gasoline prices at the pump. Oil prices dropped under $30 a barrel today for the first time since 2003, dropping below a critical level of support: $30.28 a barrel, the financial crisis closing low on Tuesday, December 23, 2008.

The companies in the Standard & Poor’s 500 energy sector are expected to lose a collective $28.8 billion this calendar year, down from $95.4 billion in net income earned during 2008.  The analysis includes only the 36 S&P 500 energy companies that reported net income in 2008.

Take the situation at the S&P’s 500 biggest energy company, Exxon Mobil. The company is expected to report net income of $16.3 billion in calendar 2015, that’s down 64% from the $45.2 billion the company reported as net income in 2008. Still, it is a profit. Shares of Chesapeake Energy, an oil explorer, has seen its shares drop 94% from the day oil peaked back in 2008. The company is expected to post a loss of $13.1 billion for 2015, down from the $604 million profit it made in 2008. Or BP, which today announced it was cutting 4,000 jobs. An estimated 250,000 oil industry jobs have been lost worldwide since the price decline began.

Of course, you could just sell or avoid the energy sector, but the problem there is that some of these oil companies will default; not Exxon, but some of the smaller players. The defaults could be a big problem for the junk bond market; the junk bond market could be a big problem for the banks; the banks are always a problem; not just because they probably have a few bad bets on the oil patch, but because they leverage those bets with trillions of dollars of derivatives.

But just avoiding the oilpatch might not be enough; according to Bank of America’s High Yield credit strategist “on an unadjusted basis non-commodity earnings growth has been negative 2 of the last 4 quarters, representing the worst 4 quarter average earnings growth in a non-recessionary period since late 2000.”

The fourth quarter earnings reporting season is underway. Yesterday Alcoa kicked off earnings season, posting better than expected earnings and worse than expected revenue. Today Alcoa dropped just over 9%, to a 7-year low. Alcoa is down 28% over the past 9 sessions.

CSX reported after the closing bell today; the number 3 US railroad reported a lower quarterly net profit citing a drop in freight volumes, especially a 32 percent decline in the amount of coal hauled. Fourth-quarter net income was $466 million or 48 cents per share, 2 cents better than estimates, but down from $491 million or 49 cents per share a year earlier.

Still to come this week are Intel, JPMorgan, Wells Fargo, and Citigroup, among others.

The Labor Department’s Job Openings and Labor Turnover Survey, also known as the JOLT survey, showed 5.43 million job openings, up from 5.34 million in October. That’s still shy of the all-time high notched earlier in the year, but moving in the right direction. Even better, hires rose to 5.2 million from 5.17 million, and more people, 2.83 million, quit. That’s a sign of worker confidence in their job prospects.

The National Federation of Independent Business reported that its small-business optimism index edged up 0.4 points to a reading of 95.2. The readings have ranged between 94.1 and 98 in 2015. The percentage of small-business owners who expect real sales to improve rose by 9%, while those who expect better business conditions in the next six months slumped by 7%, which seems to be a contradiction.

The International Monetary Fund’s managing director Christine Lagarde says the Federal Reserve should wait to hike rates again until they see “clear evidence of firmer wage or price pressures.” Well, that didn’t stop the Fed in December… so. The Fed’s official inflation target, the PCE price index, rose at just 0.4% 12-month rate in November, well below the 2% official target.

Private-equity firm Apollo Global Management is said to be in advanced talks to buy Apollo Education (no relation) for about $1 billion. Apollo Education, operator of the for-profit University of Phoenix, had been in talks with a number of firms over a control-changing purchase.

McDonald’s could face pressure from the European Union after consumer groups in Italy filed fresh complaints. The company is accused of charging franchisees rents at excessive levels above market rates. McDonald’s is already one of the targets of an EU investigation into its tax arrangement with Luxembourg.

Last call for Internet Explorer.  Effective today, Microsoft has officially stopped supporting older versions of the web browser to encourage users to migrate to its new browser, Edge, instead. That could cause security and other issues for some companies.

The Powerball jackpot is now up to $1.5 billion, maybe more by tomorrow night’s drawing. If you take the lump sum and pay taxes, you would only get about one-third that amount, but don’t worry because you are not going to win. Probably. Your six numbers will not match, and your finances will stay put, minus $2. Most likely. Sorry. And good luck.

Financial Review

By Land and Sea

Sinclair Noe — January 11, 2016

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DOW + 52 = 16,398
SPX + 1 = 1923
NAS – 5 = 4637
10 Y + .03 = 2.16%
OIL – 2.04 = 31.12
GOLD – 10.40 = 1095.20

Chinese stocks saw another big drop. China’s Shanghai Composite tumbled 5.3% on Monday, bringing its 2016 loss to 14.8%. The sell-off did not trigger circuit breakers because the Chinese exchanges gave up on that idea after last week’s big declines. The decline came even after the yuan gained following a second intervention from the central bank.

Oil prices are sharply lower to start off the week as concerns over demand from China impact trading again, along with some fresh worries. Morgan Stanley is the latest major investment firm to forecast oil prices could fall into the $20s with the U.S. dollar continuing to strengthen against major currencies. WTI crude futures dropped under $32 a barrel; that is a 12-year low. And remember this is at a time of increased tension in the Middle East; forget the fear premium, at least unless shipments are actually disrupted.

Meanwhile, oil is being pumped out of the ground as if price doesn’t matter. Maybe we need to re-think the idea that oil-dependent economies like Saudi Arabia aren’t so much pumping oil now to defend market share but to get oil out of the ground while it has any value at all.

Arch Coal filed for Chapter 11 bankruptcy. The company said it has an agreement with a majority of its lenders to erase $4.5 billion in debt from its balance sheet and allow it to keep operating without interruption. The bankruptcy court filing listed $5.8 billion in assets and $6.5 billion in debt. Coal’s share of electricity generation in the US fell to 30 percent in April, as the historically popular fuel was overtaken by gas for the first time. Coal still generated more than 40 percent of electricity globally.

If you want to see how much of a slowdown we are really seeing, look to the rails. Analysts at Bank of America say railroad cargo in the US dropped the most in six years in 2015. According to the research note, “Carloads have declined more than 5 percent in each of the past 11 weeks on a year-over-year basis. While one-off volume declines occur occasionally, they are generally followed by a recovery shortly thereafter. The current period of substantial and sustained weakness, including last week’s -10.1 percent decline, has not occurred since 2009.”

And the BofA researchers put the data in historic perspective: “Similar periods of weakness have occurred in only five other instances since 1985: (1) the majority of 1988, (2) the first half of 1991, (3) several weeks in early 1996, (4) late 2000 and early 2001, and (5) late 2008 and the majority of 2009 … all either overlapped with a recession, or preceded a recession by a few quarters.”

You could argue that a shift away from coal, the slowdown in the industrial sector, and weakness in the oil patch would lead to fewer goods being moved by rail. So, for confirmation, look to the sea. Commerce between Europe and North America has literally come to a halt.

Over the weekend, not one cargo ship was in-transit in the North Atlantic between Europe and North America.  All of them (hundreds) were either anchored offshore or in-port.  Nothing was moving. The reason commerce has stopped is simple: People are not buying things. The Baltic Dry Index, an assessment of the price of moving major raw materials by sea, dropped to 468, the lowest since the index began in 1985.

After the close of trade today, Alcoa kicked off the unofficial start to earnings reporting season. Profit excluding one-time items was 4 cents a share, beating estimates of 2-cents per share. Sales dropped to $5.2 billion. With aluminum trading near six-year lows, the company is planning to separate its manufacturing units from its legacy smelting and refining business, creating two companies later this year. Raw-aluminum prices have fallen over 25% in the past year.

To cope with falling aluminum prices amid rising low-cost output from China, Alcoa has divested, closed or curtailed about a third of its global smelting capacity since 2007. Meanwhile demand from aerospace companies, Alcoa’s largest source of revenue after primary metals, has increased along with soaring aircraft production. This morning Alcoa announced it has struck a $1.5 billion long-term supply contract with General Electric’s aviation unit to supply it with advanced nickel-based super alloys, titanium and aluminum components for engines and for engine parts made by GE.

Expectations for earnings season are low, with strategists expecting a 5.3% decline in earnings in Q4, which would mark the third straight quarter of year-on-year declines for corporate profits, the first such period since 2009.

For-profit education provider Apollo Education Group said today it will consider selling itself among other options. Apollo, which had a market value of $714 million as of Friday, has been struggling with increased regulatory scrutiny that has squeezed federal aid. High debt loads and poor job prospects have kept students away. The company also reported a drop in revenue for the 18th straight quarter as new degree enrollments at University of Phoenix fell 38%. The stock lost more than three-quarters of its value in the past year.

Drugmaker Shire Plc says Baxalta International has agreed to a $32 billion cash and stock offer. The London-listed Shire first approached the US-based Baxalta with an all-stock offer in July. Shareholders will receive cash and stock with an implied total value of $45.57 per share based on Jan. 8 prices. The deal marks a strong start to mergers and acquisitions (M&A) in healthcare in 2016 after the sector saw its biggest deal-making streak in history last year, with global deals totaling $673 billion.

Asahi Group Holdings is expected to make an offer for SABMiller’s Grolsch and Peroni beer brands as early as this week. The beer properties could be sold to Asahi for as much as $3.4 billion. Grolsch and Peroni are seen as necessary merger casualties due to acquirer’s Anheuser-Busch’s deep penetration in Europe.

The Supreme Court heard oral arguments today in the case of Friedrichs v. California Teachers Association, where the plaintiff seeks to bar public-sector unions from collecting “fair-share” fees from non-members, a move known as free-riding, that could reduce union membership drastically and drain union coffers. The fair share or “agency” fee is widely seen as a compromise between the First Amendment rights of public employees who may not wish to join a union and the material interest of the unions, which are required by law to bargain on behalf of all members of a given unit, regardless of membership status.

A 1977 decision known as Abood, ruled the fees constitutional. Freidrichs is a teacher in California, and along with other teachers recognized in the case they say they don’t want to underwrite union activities that are contrary to their beliefs.

Should the Supreme Court rule for the plaintiffs, the result will hit the labor movement hard. That’s because members in non-right-to-work states will find themselves newly able to receive the benefits of a union contract without having to pay for them. Public-sector unions are the only part of the labor movement that’s thrived in recent decades: Nearly 36 percent of public-sector workers are unionized, compared to less than 7 percent of private sector workers.

A decision for the Friedrichs plaintiffs would not affect private sector unions because most of these are governed separately under the National Labor Relations Act, from which public-sector workers are excluded. Nor would it necessarily lead to a later decision applying the same reasoning to private unions, because the link to First Amendment rights might be less clear in a private-sector context.

General Motors is set to go to trial today in a lawsuit over its 2014 recall of millions of vehicles for a faulty ignition switch linked to nearly 400 injuries and deaths. In the lawsuit, plaintiff Robert Scheuers claims he was injured in an accident and the air bag did not deploy, which Scheuer blamed on the switch.

It is the first of six trials this year before U.S. District Judge Jesse Furman in the Southern District of New York, who oversees litigation from crash victims and from customers who say their cars lost value. While not binding on other cases, the verdict will provide insight into the strengths of both sides’ evidence as GM looks to wrap up the remaining switch litigation. It has already agreed to pay roughly $2 billion in civil and criminal penalties and settlements over the switch.

Apple Music is reported to now have more than 10 million paying subscribers. Back in October, Apple reported 6.5 million subscribers. Industry leader Spotify said in June it has 20 million paying subs. Spotify needed six whole years to attract its first 10 million paying customers, but it took Apple Music just a few months to hit the same milestone.

Looking at the bigger picture, though, Apple Music’s milestone becomes somewhat less impressive. Apple preinstalls the Apple Music app on every iPhone, and there are about 90 million iPhones in the US alone. No matter how Apple got there, it looks bad for Spotify.

The College Football Championship game between Alabama and Clemson kicks off in about 2 hours, and the winner is … Nike. The brand renewed its deal with Clemson in August, signing an eight-year contract reportedly worth $23 million to the school.

Alabama is even pricier: Nike signed an eight-year, $30 million deal with the school in 2010. That means Nike gets to grab all the television eyeballs for itself. And college football’s biggest stage draws many, many eyeballs. Last year 33 million watched. Good news for the Valley of the Sun as well.

Financial Review

Bueller? Bueller?

Sinclair Noe — October 9, 2015

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DOW + 33 = 17,084
SPX + 1 = 2014
NAS + 19 = 4830
10 YR YLD – .01 = 2.10
OIL + .14 = 49.57
GOLD + 17.40 = 1157.40
SILV + .16 = 15.93

World shares were green across the board after details from the Fed’s minutes cast further doubt on the prospect of a rate rise this year. European stocks broke a one-month high for their best weekly gain since late January on renewed hopes central banks will keep monetary policy loose for longer. Overnight, Asian equities and currencies also moved higher following yesterday’s gains on Wall Street (the Dow ended above 17,000 for the first time since August, while the S&P 500 closed well past its 50-day MA of 1,995).

Oil prices traded above $50 a barrel this morning, with a gain of nearly 9% this week; for the biggest weekly gain in 6 years.

Investors are now positioning themselves for corporate earnings season, which picks up steam next week with most of the nation’s largest banks reporting their results, as well as big companies including; Intel, Netflix, UnitedHealth and GE. Earnings are expected to be down roughly 5.5 percent from a year ago, according to FactSet, mostly because of the drop in commodity prices. Now there is a game on Wall Street where analysts set the bar very low and then celebrate when a company stumbles over it. However, if the index reports a decline in earnings for Q3, it will mark the first back-to-back quarters of earnings declines since 2009. In other words, the last time we had consecutive quarters of negative earnings growth, the US economy was in a recession.

Yesterday the Fed published the minutes of the September FOMC meeting; most of the attention was on the policymakers’ decision to leave interest rates unchanged for now; they’re worried about global economies and inflation running below their target of 2%; they think we are at or near full employment. Generally the tone was dovish. The current Fed has talked about raising rates for about a year.  Now we have the Fed saying future interest rate increases will be “data dependent.” Also in the minutes, we saw economic projections and they are basically calling for 2% GDP growth. Slow, sluggish – get used to it.

Emerging market currencies have had a strong week. The Indonesian rupiah was the leader with a 9.2% gain against the dollar, followed by the Russian ruble, with a 7.3% gain. The Malaysian ringgit gained 6.4%, and the Brazilian real was up 4.8%. This does not mean emerging market currencies are in a bull market; for now, it’s just a bounce.

If you follow all the data the Fed is looking at, you would stay quite busy; there are at least 30 economic reports that must be monitored in order to get a clue as to what the Fed’s next move will be. The quick and easy monitor is the dollar index, because the greenback affects just about every tradeable market: inflation, manufacturing, exports, trade balance, jobs, and more – in one handy chart. The dollar index is just a hair under 95. It has traded from a high of 98.7 in August to a low of 92.5 (also in August).

The dollar index has been in a downtrend since September 25, and this is why we have seen a bounce in oil (probably a greater cause than rig counts and demand, or Russia’s moves in Syria.) This is why the commodity indices have had a nice little rally in the month of October. Emerging-markets currencies have been battered over the past year by the expectation that the Federal Reserve will soon raise interest rates, but as the dollar has experienced a recent dip, the emerging currencies have bounced.

The trend lines on the dollar index suggest resistance around 97.5 and support, right about where we landed today; any further breakdown could see the dollar index testing the 92.5 lows. If we see a bounce, or even some sideways action here, then we look for the support and resistance trend lines to cross in the final week of the month, which is coincidentally, when the Fed FOMC holds its next meeting.

Today, New York Fed President William Dudley and Dennis Lockhart of the Atlanta Fed each said they expected a policy tightening in 2015 despite some recent red flags.

In a brief press conference yesterday, Rep. Kevin McCarthy announced he would not seek the nomination as House Speaker, saying he was still short of the support needed to be an effective speaker. Rep. Jason Chaffetz of Utah, current House Oversight chairman, and Rep. Daniel Webster of Florida were running against McCarthy. Rep. Darrell Issa of California says he’s considering jumping into the race for House speaker; Issa says he would support Paul Ryan of Wisconsin, the Chair of the House Ways and Means Committee; Ryan has said he does not want the job. Anybody else? Anybody? …Bueller?

Meanwhile, Congress faces another deadline to lift the debt limit on Nov. 5; today John Boehner acknowledged that getting enough votes to pass a debt-limit increase would be difficult. And another potential government shutdown threat looms in December when the current stop-gap spending bill expires.

U.S. import prices declined 0.1 percent. A surge in value of the U.S. dollar last year, fueled by expectations a strengthening U.S. economy would lead to higher interest rates, has been a factor pushing down inflation, evident by declines of non-oil import prices. The smaller than expected decline in import prices might lay a bit of groundwork for an eventual interest rate hike by the Federal Reserve because a smaller downward push on inflation from imports could alleviate the Fed’s concerns that inflation is too low.

In a separate report, the Commerce Department said wholesale inventories rose 0.1 percent in August, boosted by larger stocks of computers and professional equipment used by businesses. Inventories are a key component of gross domestic product changes. The component of wholesale inventories that goes into the calculation of GDP – wholesale stocks excluding autos -rose 0.1 percent. At August’s sales pace it would take 1.31 months to clear shelves. An inventory-to-sales ratio that high usually means an unwanted inventory build-up, which would require businesses to liquidate stocks. That in turn could weigh on manufacturing and economic growth.

Glencore is slashing its zinc production by a third in reaction to a 30% plunge in the commodity’s price over the past few months. The company will cut 500,000 tons of zinc production, 4% of the world’s total supply. Glencore is the world’s biggest miner of the industrial metal.

Chipmaker Intel is set to get the go-ahead from EU antitrust regulators for its $16.7 billion offer for Altera. A decision is scheduled by Oct. 14.

PC sales dropped sharply again in the third quarter. IDC estimates global PC shipments fell 10.8% year-to-year to 71 million units, a drop nearly as large as the second quarter’s 11.8%. Sales have been declining for so long — 14 consecutive quarters — that it is becoming harder to remember a time when PCs ruled the tech world. However, the market’s four biggest players all grabbed share from smaller firms with less scale. IDC calculates market leader Lenovo’s unit share rose 130 basis points year-to-year to 21%, HP’s increased 110 basis points to 19.6%, Dell’s jumped 120 bps to 14.3%, and Apple’s climbed 60 basis points to 7.5%.

Apollo Education Group, the parent company of The University of Phoenix has released information that the Department of Defense has suspended the university from recruiting military students. University of Phoenix, the largest for-profit college in the US, has brought in $1.2 billion in GI Bill money since 2009 and received $20 million in tuition assistance from the Pentagon last year alone. That outsized share of the market, in addition to alleged predatory tactics at the school to lure in military personnel, resulted in an investigation into the school earlier this year. Though the order to stop military recruitment at the University of Phoenix is not yet permanent, it is likely a distressing development for the school, as well as the larger for-profit college industry.

Combining two vaccine components from Crucell Holland and Janssen Pharmaceutical, Johnson & Johnson is beginning clinical trials of a preventive Ebola vaccine regimen in Sierra Leone. Is the Ebola outbreak finally over? For the first time since the disease was reported in March 2014, the World Health Organization reported no new cases over the past week. According to the WHO, this is part of a trend: The number of cases in West African countries has remained below 10 per week over the past three months, but that doesn’t mean the virus can’t surface again. A total of 11,300 have died since the start of the epidemic.

According to the International Monetary Fund, 6.5 percent of global gross domestic product currently goes to energy subsidies. The United Nations Environmental Program has just published a report calling for a $6 trillion cut of public and private investments in high-polluting energy by 2030. The agency estimates the world’s governments and private institutions should be investing $5 to $7 trillion annually on things like infrastructure improvements, clean energy, sanitation and agriculture, starting now, in order to meet the U.N.’s 2030 goals for reducing the pollution that causes climate change.

The 2015 Nobel Peace Prize was awarded today to Tunisia’s National Dialogue Quartet for its efforts to bring democracy to the country. The National Dialogue Quartet is made up of four organizations: the Tunisian General Labor Union; Tunisian Confederation of Industry, Trade and Handicrafts; Tunisian Human Rights League; and Tunisian Order of Lawyers. The Tunisian revolution, which forced the country’s long-time president to step down in what was called the Jasmine Revolution, led to uprisings against dictators in other nations including Egypt, Libya and Syria in what became known as the Arab Spring. Today, Tunisia is the only country in the region to make genuine progress transitioning to a democracy.