Financial Review

Happy Time Vibe

Sinclair Noe — December 4, 2017

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DOW + 58 = 24,290 (Record)
SPX – 2 = 2639
NAS – 72 = 6775
RUT – 11 = 1532
10 Y + .02 = 2.38%
OIL – .91 = 57.45
GOLD – 4.00 = 1276.70

Cryptocurrency

• Number of Currencies: 1,362
• Total Market Cap: $349,166,950,507
• Volume (24h): $13,255,090,001

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Volume (24h)	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	11,582.0	$195.97B	$6.14B	46.29%	1	-0.11%	+19.49%
	Ethereum	ETH	462.13	$45.26B	$1.03B	7.74%	0.0404611	-0.62%	-1.92%
	Bitcoin Cash	BCH	1,508.90	$26.23B	$777.45M	5.87%	0.134083	-1.97%	-3.99%
	Ripple	XRP	0.24700	$9.79B	$107.72M	0.81%	0.00002174	+0.82%	-3.39%
	IOTA	MIOTA	2.23250	$7.22B	$1.08B	8.17%	0.00022357	-15.60%	+136.49%
	Dash	DASH	754.28	$5.93B	$157.91M	1.19%	0.0658949	-1.14%	+21.57%
	Litecoin	LTC	103.320	$5.61B	$331.87M	2.50%	0.00890391	-0.70%	+12.94%
	Bitcoin Gold	BTG	305.21	$5.38B	$119.41M	0.90%	0.0277613	-1.87%	-9.77%
	Cardano	ADA	0.127907	$3.45B	$77.64M	0.59%	0.00001145	-7.25%	+162.11%
	Monero	XMR	210.35	$3.32B	$94.78M	0.72%	0.0185096	+1.85%	+21.83%

This morning, the markets surged – largely, a happy-time vibe from the tax cut plan – but as the day wore on, the euphoria faded. The Nasdaq turned south after about one hour of trading. The entire tech sector came under serious pressure.

Microsoft dropped 4%, its biggest single-day decline since June 2016.  Facebook lost 3.6%. Amazon down almost 2.5%. Alphabet down 1%. Apple slipped about 0.7%. The S&P 500 managed to hang on until the final minutes of trading before the numbers turned red. The Dow Industrials managed to hold on to a positive session and a record high close, but that close was 245 points down from the intraday high.

Treasuries continued to slip. Even though yields rose today, they remain relatively subdued, with 10-year Treasury yields struggling to push much above 2.40 percent. If the economic outlook is so strong, then how does one explain long-term bond yields?

Bond traders are naturally more cautious, and appear to be taking their cue from forecasts that fiscal stimulus, including Republican-backed tax cuts, will deliver only a modest boost to the economy in the next two years.

Municipal bond investors are bracing for what promises to be the biggest week not only of 2017, but possibly of years to come. Estimates are that borrowers may sell $19 billion to $21 billion of tax-exempt bonds this week, almost triple the average this year. The reason why issuance will boom is that the Senate this weekend passed its version of tax reform, which includes prohibiting tax-exempt advance refunding.

Senate Republicans narrowly passed their tax bill over the weekend, and now must reconcile it with the House version before they can send it to the White House. Easier said than done. There are significant differences between the House and Senate versions.

The Senate calls for all individual tax breaks to expire after 2025 to comply with budget rules, while the House would keep most of the individual changes in place, except for a $300 per person family credit.

So-called pass-through businesses, such as partnerships and limited liability companies, are also treated differently under the bills. And the Senate bill would postpone a corporate tax rate cut — to 20 percent from 35 percent — for one year, until 2019; that means tax overhaul’s potential direct impact to 2018 corporate earnings is likely to be zero.

The House bill would consolidate the current seven individual tax brackets to four, leaving the top tax rate at 39.6 percent. The Senate bill would have seven brackets — with lower rates, and a top rate of 38.5 percent.

In a last-minute change, the Senate GOP decided to keep the alternative minimum tax for individuals, while raising the exemptions until 2026, and preserve the corporate AMT. The House would repeal both levies.

The Senate bill also keeps the estate tax (while doubling the exemption amount until 2026). The House plan doubles the threshold, but eventually fully repeals the levy. The Senate legislation also calls for repealing the Obamacare individual mandate — and while House Republicans mostly support that, it could get tricky if moderates’ votes are needed.

A key part of trying to make health insurance coverage universal is to require that everyone gets it; this helps spread the costs of health care among as broad a pool of people as possible. Repealing the requirement will save the government money because fewer people will enroll in publicly-subsidized health plans.

However, a good chunk of those subsidies underpinned the individual insurance market, so even people who don’t receive the payments are expected to see higher premiums.

The U.S. faces a partial government shutdown after money runs out on Dec. 8 if Congress can’t agree on a spending bill by then. House Republicans introduced a temporary stop-gap spending bill to fund the government until Dec. 22. The bill maintains the current federal spending levels but includes a provision to ensure that states are not forced to suspend the popular Children’s Health Insurance Program, which annually provides health insurance for nearly 9 million children in low-income families.

In the largest deal of 2017 CVS Health is buying Aetna, the third-largest US insurer, for $69 billion. Aetna stockholders will be paid $145 a share in cash and 0.8378 CVS shares per Aetna share. The acquisition is subject to regulatory approval, but if approved it will change the nature of retail and healthcare.

First, if CVS does buy Aetna, it might be able to win over more business—both from individual consumers and from employers buying plans on behalf of their workers. In theory, that’s because CVS could gain a competitive edge by reducing the cost of providing care to Aetna’s customers.

How could it do this? CVS is not just drugstores. In 2006, it acquired a company called MinuteClinic, which operates walk-in clinics. CVS now has more than 1,000 of them, including in its stores and in some Target locations. This is one of the main reasons CVS and Aetna could, together, save money: A company that sells insurance could start providing care directly, and steer customers not immediately to doctors but rather first to its own nurses and pharmacists working at CVS locations.

For example, if an Aetna customer has diabetes, it can be extremely costly (for both Aetna and the customer) for them to frequently see doctors for help managing their condition. Instead, a merged CVS-Aetna could encourage this customer to go to its walk-in clinics regularly for check-ins, potentially limiting those higher-cost doctor visits.

The merger is intended to shift the way consumers interact with their healthcare. The plan is to make pharmacies the “new front doors of healthcare” — as opposed to a traditional doctor’s office or a hospital; and once a customer is in the front door, the sale continues in the pharmacy.

The other reason for the CVS-Aetna deal is Amazon, which has been plotting to move into the pharmacy business. Amazon has already secured the necessary licenses in 12 states and there is a possibility they will try to start up an online pharmacy that could ship medications.

How does a brick and mortar retailer respond to Amazon? History shows that Amazon can crush competitors. Whether the CVS-Aetna deal could withstand the onslaught remains to be seen, but they are going to respond with some fresh new ideas. The actual amount of money prescriptions bring into pharmacies isn’t all that much, it’s what else you buy while you’re at the pharmacy — snacks, drinks, beauty products — that makes pharmacies a booming business.

Say that prescription portion went online, it would be much harder for retail pharmacies to compete with convenience stores, grocery stores and anyone else selling candy bars and deodorant. But say you’re an Aetna member, the preferred way to get your prescription might be by going to a CVS pharmacy, bringing foot traffic that might not come organically. And it is possible CVS-Aetna customers could see benefits if the new company can provide some innovative new services or pass through cost benefits to them.

On the other hand, the merger could give CVS control over drug wholesalers, pharmacies, insurers, and pharmacy benefit managers – in other words, a way to crush competition from other companies. One thing the two companies are hoping for is synergy – that’s corporate-speak for cost savings, and the big place to cut expenses is by firing workers.

For the first time in 40 years, power plants are no longer the biggest source of U.S. greenhouse gas pollution. That dubious distinction now belongs to the transport sector: cars, trucks, planes, trains and boats.

The big reversal didn’t happen because transportation emissions have been increasing. In fact, since 2000 the U.S. has experienced the flattest stretch of transportation-related pollution in modern record keeping, according to data compiled by the U.S. Energy Information Administration. The big change has come from the cleanup of America’s electric grid. Electricity use in the U.S. hasn’t declined much in the last decade, but it’s being generated from cleaner sources.

A dramatic switch away from coal, the dirtiest fuel, is mostly responsible for the drop in emissions. Coal power has declined by more than a third in the last decade. Meanwhile, the transportation sector is getting cleaner. Cars are becoming more efficient under aggressive pollution rules, or CAFÉ standards, but that’s so far been offset by an ever-rising American appetite for SUVs, crossovers and pickup trucks.

Investments in electric cars may soon begin to do to the transportation sector what wind and solar have done to the power sector: turn the pollution curve upside down. The price of battery packs has been plummeting by about 8 percent a year and electric cars are now projected to become cheaper, more reliable, and more convenient than their gasoline-powered equivalents around the world by the mid-2020s.

Dow Continues Rally, Techs Sock Nasdaq

Charles Schwab: On the Market

Posted: 12/4/2017 4:15 PM EST

Dow Continues Rally, Techs Sock Nasdaq

 

The Dow added to its recent surge, with economic optimism getting a boost from another strong read on domestic business spending, while the Senate's passage of its tax reform bill over the weekend added to the enthusiasm. However, sustained weakness in the tech sector continued to weigh on the Nasdaq. Treasury yields and the U.S. dollar were higher ahead of a busy week of economic reports that will culminate with Friday's nonfarm payroll report, while crude oil and gold were lower.

The Dow Jones Industrial Average (DJIA) rose 58 points (0.2%) to 24,290, the S&P 500 Index lost 3 points (0.1%) to 2,639, and the Nasdaq Composite tumbled 72 points (1.1%) to 6,775. In heavy volume, 987 million shares were traded on the NYSE and 2.4 billion shares changed hands on the Nasdaq. WTI crude oil fell $0.89 to $57.47 per barrel and wholesale gasoline declined $0.05 to $1.69 per gallon. Elsewhere, the Bloomberg gold spot price decreased $4.42 to $1,276.20 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.4% higher at 93.23.

CVS Health Corp. (CVS $72) announced an agreement to acquire Aetna Inc. (AET $179) for $207 per share in cash and stock, valued at about $69 billion, excluding debt. Under the terms of the deal, Aetna stockholders will receive $145 in cash and 0.8378 CVS Health shares for each share owned. Shares of both companies were lower.

Italy's Prysmian SpA (PRYMY $16) announced an agreement to acquire Kentucky-based General Cable Corp. (BGC $30) for $30 per share in cash, for a total value of about $3 billion, including the assumption of debt. Shares of BGC rallied over 35%.

Dollar, rates and stocks gain ground on tax reform and continued robust business spending

Treasuries finished lower, as the yield on the 2-year note rose 3 basis points (bps) to 1.80%, while the yields on the 10-year note and the 30-year bond advanced 1 bp to 2.37% and 2.76%, respectively.
Treasury yields and the U.S. dollar moved to the upside and the stock markets added to last week's strong gains, bolstered by the Senate's passing of its tax reform bill over the weekend. Now the reconciliation process looms as the House and Senate have to find some key areas of compromise before a tax reform bill can go to President Donald Trump's desk for a signature.

Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend notes in his latest commentary,Tax Reform Bills Progress, but Many Hurdles Remain, negotiations between the House and Senate will likely be extremely challenging, given the differences between the two approaches. For investors, we still think it is too early to take any drastic action. If and when a tax bill passes, there will be time to review the details and amend your tax and financial plans accordingly. Regardless of the outcome of the tax bill, it’s always a good idea to meet with your tax and financial advisors before the end of the year to review your current financial situation and discuss your plans for the coming year.

Factory orders (chart) dipped 0.1% month-over-month (m/m) in October, better than the Bloomberg expectation of a 0.4% decline, and versus September's upwardly revised 1.7% gain. Stripping out the volatile transportation component, orders rose 0.8% and September's 0.7% gain was revised to a 1.1% increase. October durable goods orders—preliminarily reported last week to have dropped 1.2%—were favorably adjusted to a 0.8% decrease, and compared to forecasts of a revised 1.0% decline. Also, nondefense capital goods orders excluding aircraft, a gauge of business spending, were revised higher to a 0.3% decrease from the initially-reported 0.5% decline.

The highlight of the report was the upward revision to the gauge of business spending, which has risen for four-straight months, with an average month gain of 1.3% for the period. This adds credence to Schwab's Chief Investment Strategist Liz Ann Sonders' view that an even sharper recovery could be in the cards for U.S. business capital spending in 2018, while tax reform—if we get it—would be an additional kicker in her article, Takin Care of Business: Several Important Kickers for a Strong Capex Cycle.

Today's release kicked off a busy economic calendar that will continue tomorrow with a look at the all-important services sector in the form of the ISM non-Manufacturing Index, with economists forecasting a slight decline in the reading for November to a level of 59.0 from October's 60.1, as well as Markit's final Services PMI Index for November, expected to post a reading of 54.7, in line with its preliminary report, but below the 55.3 registered the month prior, while the trade balance will round out the day's docket, with the deficit expected to widen to $47.1 billion during October from September's $43.5 billion.

Europe higher on U.S. tax reform, Brexit negotiations in focus, Asia mixed

The European equity markets rallied, with financials a noticeable gainer along with industrials. Bond yields in the region were mostly higher, while the euro declined versus the U.S. dollar on the weekend's tax reform bill passage by the Senate and upbeat U.S. business spending data, which bolstered global economic optimism. The British pound reversed to the downside on the greenback after the meeting between Prime Minister Theresa May and European Commission President Juncker ended without reaching a deal on an Irish border issue. The meeting was highly expected to produce a deal and likely help Brexit talks end a deadlock. With volatility showing some signs of life last week, in his article, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, tackles the question, Are Stocks too Expensive?, noting that although world stock market valuations are above average, similar valuations have produced double-digit gains over the following 12 months during the past 50 years. Jeff concludes that valuations support a globally diversified portfolio offering the best diversification benefits in 20 years.

Stocks in Asia finished mixed as the markets grapple with the weekend's tax reform bill passing in the U.S. Senate, along with flared-up uncertainty regarding what possible ramifications former U.S. NSA advisor Mike Flynn's guilty plea for lying to the FBI may have for the Trump administration. This news on Friday caused the U.S. stock markets to dip but they held onto solid weekly gains. Stocks in Japan, mainland China and Australia all lost ground, but securities traded in South Korea, Hong Kong and India saw modest gains. Although showing some signs of choppiness, the global stock markets remain nicely higher for the year that has been bolstered by the broadest economic growth in a decade. This is expected to continue in 2018 as discussed by Schwab's Jeffrey Kleintop, CFA, in his article, 5 Reasons Investors Should Give Thanks.

Services PMI readings from across the globe will dominate tomorrow's international economic calendar, with other reports of note to include retail sales from the U.K. and the Eurozone, new home sales from Australia, and industrial production from Spain. In central bank action, the Reserve Bank of Australia will meet, with no change to its benchmark interest rate expected.

Financial Review

24K Magic

Sinclair Noe — November 30, 2017

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

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DOW + 331 = 24,272 (Record)
SPX + 21 = 2647 (Record)
NAS + 49 = 6873
RUT + 1 = 1544 (Record)
10 Y + .04 = 2.42%
OIL + .08 = 57.38
GOLD – 8.80 = 1275.60

Cryptocurrency

• Number of Currencies: 1,361
• Total Market Cap: $297,611,083,181
• Volume (24h): $15,874,370,947

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Volume (24h)	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	9,621.2	$165.88B	$8.02B	50.52%	1	-2.89%	+22.45%
	Ethereum	ETH	422.70	$41.83B	$1.76B	11.10%	0.0444209	-2.24%	+5.17%
	Bitcoin Cash	BCH	1,276.60	$22.52B	$1.10B	6.94%	0.136491	-2.71%	-19.01%
	Ripple	XRP	0.23100	$9.46B	$243.48M	1.53%	0.00002497	-2.53%	-0.01%
	Dash	DASH	752.00	$6.05B	$489.20M	3.08%	0.079939	-0.84%	+38.02%
	Bitcoin Gold	BTG	277.95	$4.88B	$139.16M	0.88%	0.0298825	-2.98%	-4.96%
	Litecoin	LTC	84.410	$4.65B	$461.73M	2.91%	0.00876616	-1.75%	+15.77%
	IOTA	MIOTA	1.27000	$3.58B	$166.62M	1.05%	0.00013133	-3.13%	+64.12%
	Cardano	ADA	0.115385	$3.02B	$120.63M	0.76%	0.00001187	-0.94%	+321.83%
	Monero	XMR	166.19	$2.68B	$116.47M	0.73%	0.0176935	-5.17%	+7.76%

Record highs for the Dow, the S&P, and the Russell. The Nasdaq recovered nicely from a nearly 1.5% decline yesterday, but not enough for a record.

Well, it’s easy to see that the promise of a tax cut has been a big boost to Wall Street. Some estimates claim a corporate tax cut could boost S&P 500 earnings by 6%. The Senate convened at 10:30 a.m. this morning to continue discussing the bill after it passed a procedural vote on Wednesday. Republicans are using special procedures that shield the measure from a Democratic filibuster.

Debate on the legislation is limited to 20 hours. When the debate ends, it will be time for a vote-a-rama, a marathon of amendment votes. Eventually, the Senate would vote to pass the tax bill. But before then, the contents of that bill are expected to change. Republicans have been discussing significant revisions to their bill as party leaders try to secure the votes they need for passage.

The congressional Joint Committee on Taxation said Wednesday afternoon that the Senate tax bill would add $1 trillion to federal budget deficits over the next decade, even after accounting for additional economic growth, a major blow to Republicans’ contention that the $1.5 trillion tax cuts in the bill will pay for themselves through growth.

The committee, which serves as the scorekeeper for growth and revenue estimates in tax bills, estimated that the Senate bill would boost economic growth by 0.8 percent over a decade. Republicans have said they expect substantially stronger growth than that to result from the tax cuts.

Throughout the tax debate over the last month, Republican leaders have frequently cited other analyses by the committee to make their case for the bill. The committee said economic growth generated by the tax cut will offset losses by about $458 billion over the next decade. Over that same period, an additional $51 billion will be needed to pay interest on the additional debt the government will borrow to pay for the tax cuts.

The Joint Committee on Taxation calculates the budgetary effects of changes in economic growth are projected to reduce the deficit by $407 billion during the budget window, with the net deficit increasing by $1 trillion. That’s consistent with the findings of the Penn-Wharton model, which projects the Senate tax bill would increase growth by less than 0.1 percent a year, due largely to the drag from increased debt.

Congressional Republicans and the Trump administration have yet to produce an analysis supporting their claims that the $1.5 trillion tax cut would not add to federal budget deficits. Instead, they cite a ballpark estimate of the additional economic growth the tax plan will unleash, which, they say, should be enough to make the cuts pay for themselves.

While there are still many unresolved details to the Tax Plan, at its core it is legislation that will change major areas of American life, plus everything from education to health care. Corporate taxes, along with those on wealthy Americans, would be slashed on the presumption that when people in penthouses get relief, the benefits flow down to basement tenements.

Elements in both the House and Senate bills could constrain the ability of state and local governments to levy their own taxes, pressuring them to limit spending on health care, education, public transportation and social services.

The Congressional Budget Office warned the tax cut package could trigger rules mandating cuts to Medicare. Some 13 million people could lose health care via the elimination of a key plank of Obamacare.

Insurance premiums are also expected to rise by 10 percent. The House bill includes provisions that would end the deductibility of tuition waivers for graduate students and repeal the deduction for interest paid on student loans. Both chambers’ bills would tax investment earnings from university endowments.

Economists and tax experts are overwhelmingly skeptical that the bills in the House and Senate can generate meaningful job growth and economic expansion. Many view the legislation not as a product of genuine deliberation, but as a transfer of wealth to corporations and affluent individuals — both generous purveyors of campaign contributions.

According to the Joint Committee on Taxation and the Congressional Budget Office, by 2027, people making $40,000 to $50,000 would pay a combined $5.3 billion more in taxes, while the group earning $1 million or more would get a $5.8 billion cut.

In a recent University of Chicago survey of 38 prominent economists across the ideological spectrum, only one said the proposed tax cuts would yield substantial economic growth. Unanimously, the economists said the tax cuts would add to the long-term federal debt burden, now estimated at more than $20 trillion.

Consumer spending slowed in October as the hurricane-related boost to motor vehicle purchases faded, while a sustained increase in underlying price pressures suggested that a recent disinflationary trend had probably run its course.

The Commerce Department said consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.3 percent last month after surging 0.9 percent in September. The jump in spending in September was the largest since August 2009 and was spurred by some drivers in Texas and Florida replacing automobiles destroyed when Hurricanes Harvey and Irma slammed the states.

Spending on long-lasting goods like autos fell 0.1 percent last month after accelerating 2.9 percent in September. Spending on nondurable goods such as prescription drugs and recreational items rose 0.2 percent. Outlays on services increased 0.3 percent.

The Fed’s preferred inflation measure, the personal consumption expenditures (PCE) price index excluding food and energy, rose 0.2 percent in October after a similar gain in September. The so-called core PCE increased 1.4 percent in the 12 months through October.

The Labor Department said initial claims for state unemployment benefits slipped 2,000 to a seasonally adjusted 238,000 for the week ended Nov. 25. Last week marked the 143rd consecutive week that claims remained below the 300,000 threshold, which is associated with a strong labor market. That is the longest such stretch since 1970, when the labor market was smaller. The labor market is near full employment, with the jobless rate at a 17-year low of 4.1 percent.

The White House is contemplating a scenario to replace Secretary of State Rex Tillerson with CIA Director Mike Pompeo within the next few months, according to multiple reports. There’s no decision yet on the timing of Tillerson’s departure, which has been expected for months. But multiple sources close to the White House and across government said Pompeo is the leading candidate to take over at the State Department.

Shares of the retail-pharmacy giant CVS and health insurer Aetna jumped in trading on Thursday after The Wall Street Journal reported that the two companies were nearing a deal. CVS was reported in late October to be in talks to buy Aetna in a deal worth about $66 billion. According to the latest report, CVS is nearing a majority-cash purchase of Aetna of $200 to $205 a share. Aetna’s stock gained 2% on the news. CVS rose by as much as 5%.

Aetna previously agreed to buy rival insurer Human for $34 billion, but the Department of Justice blocked that deal. A judge ruled in favor of the DOJ in January, saying a combination of the two companies would be anticompetitive.

For CVS, the acquisition is a way to fend off competition from Amazon, which has been speculated to be interested in the healthcare industry. It would allow the retailer to keep a greater share of each drug sale and to direct more Aetna clients into its stores.

OPEC members and other oil-producing countries agreed to extend production cuts until the end of 2018. Crude prices rose.

Kroger jumped more than 6 percent after the company forecast strong same-store sales for the four quarter and posted better-than-expected earnings.

Meanwhile, Costco shares climbed 3.9 percent after the company reported a 7.9 percent rises in same-store sales for November.

This weekend, for the several billionth or so time in Earth’s history, the Moon will be in the part of its orbit around Earth where it’s a little closer, 16,000 miles closer than usual, and it looks a teeny amount larger. Call it a Supermoon or whatever, you should look at the moon – this weekend, tonight, every night. It helps keep things in perspective.

Gains Taper Near Close

Charles Schwab: On the Market

Posted: 10/26/2017 4:15 PM EDT

Gains Taper Near Close

 

After being higher for most of the day, the U.S. stock markets finished mixed, with gains in the tech sector on Twitter's quarterly results being tempered by health care issues following a disappointing outlook from Celgene. Treasury yields were higher amid mixed economic data, including a disappointing pending home sales report, while the U.S. dollar rallied with the euro seeing pressure in the wake of the European Central Bank's decision to cut and extend its stimulus measures. Crude oil prices were higher and gold was lower.

The Dow Jones Industrial Average (DJIA) rose 72 points (0.3%) to 23,401, the S&P 500 Index increased 3 points (0.1%) to 2,560, while the Nasdaq Composite was 7 points (0.1%) lower at 6,557. In moderate volume, 875 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq. WTI crude oil added $0.46 to $52.64 per barrel and wholesale gasoline gained $0.01 to $1.70 per gallon. Elsewhere, the Bloomberg gold spot price lost $11.30 to $1,266.23 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 1.1% higher at 94.70.

Twitter Inc. (TWTR $20) reported a Q3 net loss of $0.03 per share, or earnings-per-share (EPS) of $0.10 ex-items, versus the $0.06 FactSet estimate, as revenues declined 4.0% year-over-year (y/y) to $590 million, above the projected $587 million. The company said daily active users grew 14.0% y/y and monthly active users rose 4.0%. TWTR issued Q4 operating earnings guidance that topped forecasts. Shares rallied.

Comcast Corp. (CMCSA $36) posted Q3 earnings of $0.55 per share, or $0.52 ex-items, versus the projected $0.49, with revenues declining 1.6% y/y to $21.0 billion, compared to the forecasted $21.1 billion. CMCSA's video subscribers fell but by a slightly smaller amount than expected. The company said it increased operating earnings despite the impact of the severe storms and the uneven comparison due to the Rio Olympics. Shares finished lower.

Ford Motor Co. (F $12) announced Q3 EPS of $0.39, or $0.43 ex-items, compared to the expected $0.33, as automotive revenues rose 0.9% y/y to $33.6 billion, above the forecasted $33.0 billion. F raised the low end of its full-year EPS outlook. Shares were higher.

United Parcel Service Inc. (UPS $119) reported Q3 EPS of $1.45, in line with forecasts, as revenues grew 7.0% y/y to $16.0 billion, above the expected $15.6 billion. The company cited the impact of natural disasters, but said it saw balanced shipment growth and yield expansion, while its international profit rose solidly. UPS raised the low end of its full-year earnings outlook. Shares were higher.

Shares of Celgene Corp. (CELG $100) tumbled after the company lowered its 2017 revenue outlook and its long-term guidance for 2020, due to certain market dynamics and recent pipeline events. The updated guidance accompanied its Q3 earnings report, which showed revenues were softer than expected as sales of its psoriasis drug Otezla severely missed estimates. This also comes as the company announced last week that its highly-anticipated drug for Crohn's disease failed a late-stage trial.

In late-day action, the Wall Street Journal reported that CVS Health Corp. (CVS $73) was in talks to acquire Aetna Inc. (AET $179). Neither company commented on the headline. Shares of AET rallied on the news, while CVS was slightly lower.

Jobless claims rise

Weekly initial jobless claims (chart) rose by 10,000 to 233,000 last week, but below forecasts of an increase to 235,000, with the prior week’s figure being revised higher by 1,000 to 223,000. The four-week moving average dropped by 9,000 to 239,500, while continuing claims decreased 3,000 to 1,893,000, north of estimates of 1,890,000.

The advance goods trade deficit widened slightly more than expected to $64.1 billion in September, from the upwardly revised $63.3 billion in August, and compared to expectations of $64.0 billion.
Preliminary wholesale inventories increased 0.3% month-over-month (m/m) in September, versus forecasts for a 0.4% increase, and following August's downwardly revised 0.8% rise.

Pending home sales were flat m/m in September, versus projections of a 0.5% rise, and following the negatively-revised 2.8% drop registered in August. Compared to last year, sales were 5.4% lower, versus estimates of a 4.2% drop. Pending home sales reflect contract signings and are used as a gauge of the pipeline of existing home sales, which unexpectedly rose in September.

The Kansas City Fed Manufacturing Activity Index for October unexpectedly showed growth (a reading above zero) accelerated, with the index rising to 23, versus forecasts for it to remain at September's 17 level.

Treasuries were lower, as the yields on the 2-year and 10-year notes, as well as the 30-year bond, were all 2 basis points higher at 1.62%, 2.45% and 2.96%, respectively.

The U.S. dollar rallied as the euro dropped in the wake of the monetary policy decision from the European Central Bank (ECB). Bond yields and the U.S. dollar have received some support from continued global economic and earnings optimism, most recently yesterday's solid gain in durable goods orders, as well as relative optimism regarding tax reform.

Tomorrow, the economic calendar will culminate with the first look (of three) at Q3 GDP, projected to show growth slowed a bit to a quarter-over-quarter (q/q) annualized rate of 2.6%, from the 3.1% pace seen in Q2, with personal consumption decelerating to a rise of 2.1% from 3.3%. Although the hurricanes are likely to have some impact, growth is projected to remain steady and post the best two-quarter performance since early 2015, per Bloomberg. The final University of Michigan Consumer Sentiment Index is also slated for release, with economists anticipating a reading of 101.1, matching the preliminary report, but above the 95.1 posted in September.

Schwab's Chief Investment Strategist Liz Ann Sonders notes in her article, Trying to Reason With Hurricane Season: The Aftermath of "Harma," that we expect to see a boost in economic activity associated with the recovery/rebuilding efforts. Liz Ann also points out in her latest article, Takin Care of Business: Several Important Kickers for a Strong Capex Cycle, that U.S. business capital spending (capex) has already picked up; but an even sharper recovery could be in the cards for 2018, while tax reform—if we get it—would be an additional kicker courtesy of the proposed 100% depreciation allowance. She adds that the pick-up in capex is a relatively new bright spot for the U.S. economy; and in 2018 it will likely be a shining characteristic of the latter innings of an economic expansion.

Europe higher as ECB trims and extends stimulus measures

European equity markets traded higher, with the euro seeing solid pressure versus the U.S. dollar as the European Central Bank announced following its monetary policy meeting that it will cut its bond buying program in half in January. However, the ECB said it will extend the time frame for its purchases to September, with the possibility of another extension if needed, while committing to a substantial reinvestment of maturing debt in 2018 and for an extended period. The announcement came as the ECB left rates unchanged and the markets paid close attention to President Mario Draghi's customary press conference that followed the decision, in which he appeared to foster a dovish takeaway regarding his views on the inflation and eurozone economic growth. Schwab's Jeffrey Kleintop, CFA, offers analysis of the global monetary policy front in his article, How the Shift by Central Banks May Affect the Stock Market. Bond yields in the region were lower following the ECB's announcement. The British pound also saw some pressure. Spanish stocks led the way, rallying on eased concerns toward the Catalonia turmoil.

Stocks in Asia finished mixed following the declines in the U.S. yesterday, while the markets digested a flood of diverging earnings reports and awaited the monetary policy decision out of the eurozone from the ECB. Japanese equities gained modest ground, rebounding after snapping a 16-day winning streak yesterday, with some upbeat earnings reports helping overshadow strength in the yen. Schwab's Liz Ann Sonders discusses with Randy Frederick in the video, Tracking Sentiment: Are Investors Too Optimistic About Stocks?. Stocks in mainland China advanced, but those traded in Hong Kong decreased, while a disappointing earnings report from the semiconductor sector weighed on South Korean securities, despite the nation reporting stronger-than-expected Q3 GDP growth. Finally, markets in Australia and India advanced.

Tomorrow’s international economic calendar will offer CPI and PPI from Japan, PPI from Australia, retail sales from Spain and housing prices from the U.K.

Financial Review

Getting Warmer

Sinclair Noe — August 8, 2017

Podcast: Play in new window | Download (Duration: 13:16 — 7.6MB)

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DOW – 33 = 22,085
SPX – 5 = 2472
NAS – 13 = 6370
RUT – 4 = 1410
10 Y + .03 = 2.28%
OIL – .23 = 49.16
GOLD + 3.40 = 1261.70
BITCOIN – 1.06% = 3416.49 USD
ETHEREUM + 7.34% = 286.39

President Trump said North Korea will be “met with fire and fury and, frankly, power the likes of which the world has never seen before” if Kim Jong Un’s regime continues to threaten the US. Trump was speaking with reporters in Bedminster, New Jersey.

Trump’s comments followed a report in the Washington Post, citing a Defense Intelligence Agency analysis, that North Korea successfully developed a miniaturized nuclear warhead that could fit onto its missiles. And it comes just days after the United Nations Security Council ratcheted up sanctions on North Korea, targeting about $1 billion of the nation’s approximately $3 billion in exports.

Those restrictions followed two intercontinental ballistic missile tests in July. The S&P 500 Index fell to session lows and the CBOE Volatility Index jumped 11 percent about a half hour before the end of the trading session on Wall Street. The 10-year Treasury yield rose. Crude retreated toward $49 a barrel.

The effects of climate change are already having an impact on the U.S. after average temperatures have risen dramatically over the last four decades. The U.S. Global Change Research Program Climate Science Special Report, compiled by a group of scientists from 13 federal agencies, found with high confidence that it was “extremely likely that more than half of the global mean temperature increase since 1951 was caused by human influence on climate.”

The report states: “Evidence for a changing climate abounds, from the top of the atmosphere to the depths of the oceans. Thousands of studies conducted by tens of thousands of scientists around the world have documented changes in surface, atmospheric, and oceanic temperatures; melting glaciers; disappearing snow cover; shrinking sea ice; rising sea level; and an increase in atmospheric water vapor.

Many lines of evidence demonstrate that human activities, especially emissions of greenhouse gases, are primarily responsible for observed climate changes in the industrial era. There are no alternative explanations, and no natural cycles are found in the observational record that can explain the observed changes in climate.”

The report is part of the National Climate Assessment, which has been congressionally mandated to take place at least every four years since 1990. A National Academies of Science committee reviewed the study and said it was “timely, accurate, and well-written.”

The report’s authors also described a link between climate change and severe weather events, citing: “A change in the frequency, duration, and/or magnitude of extreme weather events is one of the most important consequences of a warming climate,” with an increase in heavy precipitation, extreme heat events and tropical storms as a result.

The report says that the cost of extreme weather has exceeded $1.1 trillion since 1980. The National Academy of Sciences has signed off on the paper, and it is now awaiting approval from the Trump administration.

The New York Times released a draft of the report today. According to the Times, scientists fear that the Trump administration could either alter or suppress the findings, and for good reason. The report directly contradicts claims by Trump and members of his cabinet who say that the human contribution to climate change is uncertain, and that the ability to predict the effects is limited.

This past week, the State Department began the formal process to withdraw from the Paris climate accord, officially notifying the United Nations. Trump has instructed the Environmental Protection Agency to scrap or change regulations aimed at reducing greenhouse gases, and has started to open more public land and waters to fossil fuel activity.

Mentions of the perils of climate change have been removed from the White House’s Web site and the Department of Interior and, in April, the EPA eliminated its online climate-change section pending a review that will be focused on “updating language to reflect the approach of the new leadership.” How the Trump administration decides to handle the report remains to be seen. The EPA and 12 other agencies have until Aug. 18 to approve the report.

Shortly after the Bureau of Labor releases the monthly non-farm payroll report, we get more details in a report called Job Openings and Labor Turnover Survey; the JOLTS report is on a one month lag. The number of advertised job openings rose to a record-high 6.2 million in June.

While the record high in job openings was good news, actual hiring declined in the month, and the number of workers quitting their jobs — a gauge of confidence in the jobs market — wasn’t significantly changed. The report shows that layoffs have become more and more rare in the past year, with about one worker in 100 getting laid off per month. With layoffs so infrequent, it doesn’t take much net job creation to keep the unemployment rate trending down.

Even though the unemployment rate dropped to 4.3%, there is ongoing concern about weakness in wage growth. The Labor Department reports that 7.6 million workers held multiple jobs last month, up 2% from 7.4 million in July 2016. That’s back to highs not seen in 20 years.

And it should not be mistaken as a sign of healthy entrepreneurship. The principal reason workers hold more than one position is that no single job provides a sufficient income. In a strong economic recovery, the number of full-time workers should be rising, and the number of workers employed part-time or holding multiple jobs, should decline.

Sentiment among small-business owners skyrocketed in July as customer demand improved, despite continued gridlock in Washington. The sentiment gauge from the National Federation of Independent Business rose 1.6 points to 105.2. That snapped a five-month streak of readings that either declined or remained the same, and easily beat the consensus forecast for a decline to 103.2.

The jump in the July survey reflected better views of the labor market: owners reported having more open positions now as well as plans to hire more in the future. Survey respondents also have stronger sales expectations, and expect better business conditions, thanks in part to resilient American consumers.

The NFIB said little about Washington in the release, except to note that “stronger consumer demand” came despite dysfunction among lawmakers.

The CoreLogic Home Price Insights report shows home prices nationwide, including distressed sales, increased year over year by 6.7 percent in June 2017 compared with June 2016 and increased month over month by 1.1 percent in June 2017 compared with May 2017.

The CoreLogic HPI Forecast indicates that home prices will increase by 5.2 percent over the next 12 months. The report finds inventories tight, with unsold inventory at 1.9 percent, the lowest second quarter reading in over 30 years.

As a result, prices are marching higher and affordability is deteriorating nationally. In Arizona, home prices climbed 6.1 percent over the past 12 months, and 0.7 percent from May to June.

Disney reported a near 9 percent fall in quarterly profit, pulled down by higher programming costs and declining subscribers at its flagship sports channel ESPN. Disney also announced it will stop providing new movies to Netflix starting in 2019 and launch its own streaming service.

CVS Health forecast current quarter profit below Wall Street estimates and said it has been ordered to cooperate with investigations into possible false claims submitted to a government healthcare program and drug pricing.

The No.2 US drug store chain reported quarterly profit above Wall Street estimates on strength in its pharmacy benefits management business, which helped to more than offset a 2.6 percent drop in same-store sales. The attorney general for the Southern District of New York has sought information on possible false claims submitted regarding reimbursements for Medicare Part D prescription drugs.

Minnesota’s attorney general wants info regarding a probe into pricing of insulin and epinephrine drugs. Sanofi, Eli Lilly and Novo Nordisk were named in a proposed class action lawsuit, which alleged the firms simultaneously hiked insulin prices by over 150 percent in the past five years.Mylan, the maker of emergency epinephrine injectors EpiPen, is facing investigations after it doubled the cost of its syringes used to treat severe allergic reactions.

On Monday, a class-action lawsuit was filed against CVS Health, which alleged the company colluded with third-party PBMs to raise generic drug prices. The suit claims that the pharmacy agrees with pharmacy benefit managers, or PBMs — the middlemen of the industry who manage the list of what drugs an insurer will and will not pay for — to sell certain drugs at a higher price if a customer is paying with insurance.

US News & World Report publishes and annual “Best Hospital Honor Roll”, ranking the 20 hospitals that outperformed all others in its review based on a variety of specialties. Mayo Clinic Hospital in northeast Phoenix ranked No. 20. It was the first time the Phoenix hospital had cracked the honor roll and the first time any Arizona hospital made the top 20.

The hospital also was ranked No. 1 in Arizona and the Phoenix metro area on the publication’s overall review. Mayo Clinic in Rochester, Minnesota, where the health system is headquartered, was ranked No. 1. The Phoenix hospital was cited for excelling in: cancer; cardiology and heart surgery; ear, nose and throat; gastroenterology and gastroenterologic surgery; geriatrics; nephrology; neurology and neurosurgery; orthopedics; pulmonology; and urology.

Right now, Earth is plowing through a cloud of tiny bits of comet dust, turning the rice-grain-size debris into what many call shooting stars.  Known as the Perseid meteor shower, this recurring astronomical event is easily the most watched — and beautiful — shower every year.

The peak viewing time will be this weekend – Friday, Saturday, and Sunday, enjoy.

Financial Review

Better Than We Thought

Sinclair Noe — August 27, 2015

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

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DOW + 369 = 16,654
SPX + 47 = 1987
NAS + 115 = 4812
10 YR YLD un = 2.17%
OIL + 4.03 = 42.63
GOLD + .10 = 1126.50
SILV + .41 = 14.62

Yesterday Wall Street cracked a six-day losing streak with its best rally in nearly four years. Today, traders piled on; the two-day total, 978 points on the Dow industrials and the best two-day percentage gain since the crisis of 2008; which wipes out Monday’s losses, but still leaves the Dow down from one week ago. On the longer-term charts, Monday and Tuesday dropped below the lows of last October at 15,855, compared to Monday’s low of 15,370, which basically matched the lows from February 2014 at 15,340. On a long-term chart this now provides a range of support. With today’s gains, the S&P has recovered about half of the 11-percent meltdown it suffered over a six-day losing streak.

China’s key stock market index surged 5.3 percent earlier today, for its biggest gain in eight weeks, and the first gain in five sessions. China has been selling down its holdings of US Treasuries; the idea is to put a floor under the devaluation of the yuan; also probably to raise some capital for stimulus. So far, it isn’t an asset dump and there is absolutely no evidence it is the source of economic pain for the US. Even if China wanted to dump Treasuries, there really isn’t a good alternative.

The bigger problem for China, and for the US as a trade partner with China, is the economic slowdown. China accounted for almost 40 percent of global growth last year. China takes in raw materials from emerging market countries and then ships out finished products to the US and Europe. In the age of globalization, any imbalance or excess with a major economy like China inevitably affects other countries. And as excesses in Chinese real estate rolled over to the Chinese stock markets, local investors panicked and that created a nasty case of jitters for global investors. Meanwhile, the Chinese government has been intervening, but they have been more reactive than proactive; trying to staunch the bleeding rather than fending off the wound. But don’t underestimate the power of the People’s Bank of China; it’s a central bank without much restraint.

The countries most at risk to a China slowdown are regional trading partners like South Korea, Vietnam, Thailand, and Indonesia; also emerging market countries like South Africa, Turkey, and Brazil; Europe has some vulnerability because its economy has been weak for some time. The US is largely insulated from China’s downturn. Exports to China amount to only 1 percent of US gross domestic product; and the US economy has been much stronger than almost all other global economies.

If this is beginning to sound a lot like the Asian Contagion of 1997, well, there are certainly similarities. And it might be a mistake to think that China’s economy could fall and drag down the emerging markets and we would walk away unscathed. One challenge is money moving to the safe haven of the US dollar; a stronger dollar makes US goods and services less competitive overseas. And an interest rate hike from the Fed would make the dollar even stronger.

And so today Fed policymakers meet with other central bankers and economists from around the world at an informal summit in Jackson Hole Wyoming. Janet Yellen will not attend. NY Fed President William Dudley said a September hike seemed “less compelling” given recent global economic uncertainty. Kansas City Fed President Esther George says the market turmoil “complicates” any decision to raise rates, but she repeated her long-held call for normalization. Typically, but not always, when the market drops 10%, the Fed follows by cutting interest rates. That isn’t an option, but it will make it much harder to hike rates.

The economy is in better shape than we thought. The Commerce Department has revised second quarter gross domestic product from an initial estimate of 2.3% growth to 3.7%. Businesses increased investment by 3.2% versus an initial drop of 0.6%, with spending on structures such as office buildings rising by 3.1% instead of a drop of 1.6%. One reason businesses might have invested more: Corporate profits jumped an estimated 2.4% in the second quarter after declining by 5.8% in the first quarter. And they boosted spending on equipment by 10.7%, rather than 7%. State and local government spending was boosted to 4.3% from 2.0%.

Then again, the economy might be in worse shape than we thought. The headline GDP number was strong, but we also saw a report showing gross domestic income increased at an annual rate of just 0.6 percent. GDP tracks all expenditures on final goods and services produced in the United States, whereas GDI tracks all income received by those who produced that output. And for the first time the Bureau of Economic Analysis released an average for the GDP and the Gross Domestic Income growth rates. That average came in at 2.1 percent after rounding, and that’s probably closer to the truth than either number alone. The scary part is that there is a big spread between GDP and GDI.

Oil prices spiked on the GDP report, up 10.4% on the day. Oil dropped below $40 this week as problems in China raised concerns about slowing economies and weak global demand. Prices are down about 32 percent from this year’s closing peak in June on speculation that a world supply glut will be prolonged. OPEC members are sustaining output while U.S. stockpiles remain more than 90 million barrels above the five-year seasonal average. So, why the big spike in oil today? Did the supply demand picture change radically from this time yesterday? Of course not. What we are seeing is casino-style speculation in oil markets. Good news, in the form of the GDP report, likely resulted in a short squeeze.

The National Association of Realtors reports contracts to buy previously owned homes rose less than expected in July, but continued to suggest upward momentum in the housing market recovery. Pending Home Sales Index, based on contracts signed last month, increased 0.5 percent to 110.9. Pending home contracts become sales after a month or two, and last month’s increase suggested further gains in home resales, which reached an 8-1/2-year high in July.

Filings for U.S. jobless benefits dropped to a three-week low. Unemployment applications dropped by 6,000 to 271,000 in the week ended Aug. 22. As the unemployment rate has dropped, demand for skilled workers is convincing hiring managers to keep staffing levels consistent with sales.

Arizona has the third-worst job market in the U.S., according to one measure used by the U.S. Bureau of Labor Statistics. Not only did the federal agency look at the official unemployment rates for U.S. states, but also the number of discouraged jobless workers who have stopped looking for positions and the number of part-time workers who would prefer full-time hours. Arizona and its two neighbors, California and Nevada, have the highest unemployed and underemployed rates in the country. Arizona’s jobless and underemployed rate is 13.8 percent. Arizona’s official and traditional unemployment rate is 6.1 percent for July, that’s up 0.2% from June. That ranks 41st. Arizona’s economy lost 7,200 non-farm jobs last month.

CVS Health is jumping further into tele-health with a partnership that will expand patients’ remote access to doctors. Three leading tele-health companies – American Well, Teladoc and Doctor On Demand – will begin receiving referred CVS customers, as well as referring their own customers to 150 CVS walk-in clinics, in six states by the fourth quarter. The new move also underscores CVS’s push to position itself as a broader healthcare services company, and not just medications.

Boeing has agreed to a preliminary deal to settle a long-running lawsuit accusing the company of mishandling its 401(k) plans it offered to its employees. The class-action accused Boeing of failing to uphold its fiduciary duties by allowing excessive fees to go unchecked, choosing higher-cost retail mutual funds over cheaper options, and improperly making 401(k) plan decisions to benefit vendors.

A bankruptcy judge has approved Corinthian Colleges’ liquidation plan, which sets aside millions of dollars in debt relief for former students. Late last year, Corinthian sold off more than half its campuses following multiple probes into whether it misled investors and students about its finances and job placement rates. Corinthian abruptly closed its remaining 28 schools in April, becoming the largest failure in for-profit higher education.

If you’re looking for a new car, you might want to check the rating on that car. The new Tesla P85D just earned a ranking of 103 out of a possible 100 from Consumer Reports. One reason for the high ranking is that the car is very fast, zero to 60 in 3.5 seconds. Despite the record score, the magazine criticized the $127,820 test vehicle for the quality of its interior materials compared with other luxury models, as well as a ride that is firmer and louder than the base Model S.

Financial Review

Wisdom of Solomon

Sinclair Noe — June 15, 2015

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

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DOW – 107 = 17,791
SPX – 9 = 2084
NAS – 21 = 5029
10 YR YLD – .03 = 2.36%
OIL – .44 = 59.52
GOLD + 4.90 = 1187.20
SILV + .12 = 16.17

Debt discussions between Greece and its European creditors collapsed last night; talks broke down after just 45 minutes. It is believed that Greece has until the eurogroup meeting on Thursday to agree on a deal or the risk of default grows enormously. It takes time for any deal to pass through parliaments and therefore any deal beyond 18 June meeting may delay payments being made to Greece to beyond the end of the month.

The other key event this week is the Fed FOMC meeting and while few people now anticipate a rate hike at Wednesday’s meeting, there could be hints that it will come in September which could spark further volatility in the markets. Despite a slow start to the year, the data is improving and we’re now seeing rising wages and spending which is necessary if inflation is going to reach the Fed’s target within the forecasting period. This month’s decision will also be accompanied by a press conference with Chair Janet Yellen; if nothing else, that means Yellen has a good opportunity to float some trial balloons.

The reality is that growth has been tepid despite unprecedented monetary easing and years of Zero Interest Rate Policy. There has been progress in the labor market; the economy adds jobs but wage growth has been stagnant and the labor participation rate has been near historic lows. There are certainly reasons for the Fed to remain cautious but there are also many policymakers desperate to raise rates because they are afraid of another financial bubble; and bubbles always pop eventually, and they want to make sure they can respond; which is difficult with rates near zero.

So far this year, bonds, commodities, and emerging markets have seen increasing volatility even as the major US stock indices have been trading in a very tight range. Something has to give; money either positions for further gains in US stocks or money moves out of stocks, either to the sidelines or to some other areas of the market. We should get some further ideas on where the money is going following the Fed’s meeting on Wednesday.

Industrial output sank 0.2% in May. Compared to 12 months ago, industrial production was up 1.4%, compared to 4.8% growth as recently as November. Since November it has been all downhill. The six-month drop in output, adjusted for inflation, puts the sector in a technical recession.

Saudi Arabia’s $560 billion stock market opened to foreigners today, giving international investors direct access to the Middle East’s largest economy for the first time. Some restrictions on trading will still apply: Foreign investors must have a minimum of $5 billion in assets under management, at least five years of trading experience, and will only be able to own 49% of a single stock.

Remember the Umbrella Revolution? Hong Kong is gearing up for a vote this week on a contentious electoral reform package backed by Beijing, with a weekend poll showing public support has shifted against the proposal. Police are not taking any chances this time around, setting up patrols and barriers, following the sometimes violent clashes during demonstrations last year against the package. More than 100,000 people took to the streets during the height of the protests, bringing key areas of the city to a standstill and taking a heavy toll on GDP.

Stocks with primary listings in China are now valued at just over $10 trillion, an increase of $6.7 trillion in the past 12 months. Many consider the heavy expansion as worrisome. No other stock market has grown as much in dollar terms over a 12-month period; valuations are now their greatest in five years and margin debt has climbed to record highs, all while the economy is mired in its weakest expansion since 1990. Putting it into perspective: The size of Japan’s stock market is $5 trillion. The U.S. market is valued at almost $25 trillion.

Homebuilders are feeling more confident about their sales prospects than they have since last fall, while their outlook for sales over the next six months is at the highest level in 10 years. The National Association of Home Builders/Wells Fargo builder sentiment index climbed to 59 this month, up five points from 54 in May.

California-based homebuilders Standard Pacific and Ryland Group have announced plans to merge, creating the fourth-largest U.S. home builder with a market cap of $5.2 billion. Upon closing of the deal, Standard Pacific stockholders will own about 59% of the combined company.

Cox Automotive announced it would buy Dealertrack Technologies for $4 billion in cash. Dealertrack provides web-based software and services to the automotive industry, including dealers, lenders and vehicle manufacturers. Its products include the industry’s largest online credit application network. Cox Automotive provides digital marketing and software for consumers, auto dealers and manufacturers. Its properties include Autotrader.com and Kelley Blue Book.

The Hudson’s Bay Company, the Canadian owner of Saks Fifth Avenue and Lord & Taylor, has agreed to acquire the Galeria Kaufhof department store chain in Germany and its Belgian subsidiary from the Metro Group for $3.2 billion, including debt.

CVS Health will pay $1.9 billion to buy Target’s pharmacies and clinics, expanding its reach by adding stores bearing its name inside the Target stores. CVS, which already has 7,800 drugstores, will acquire Target’s more than 1,660 pharmacies across 47 states, renaming them as CVS/pharmacy.

Putting a timeline on its helicopter exit, United Technologies has announced it will decide on spinning off or selling its Sikorsky Aircraft business by the end of the third quarter.

The Paris Air Show is underway. Boeing and Airbus are poised to win at least 220 orders, with a value of $23 billion, for competing narrow-body jets. Last week, Boeing raised its 20-year outlook by about 1,000 jet deliveries to 38,000 planes valued at $5.6 trillion.

North America’s largest video game trade show, the Electronic Entertainment Expo, opens a three-day run at the Los Angeles Convention Center on Tuesday, and you can go. E3, as it’s known, typically attracts more than 40,000 industry-only attendees. For the first time, the event is opening the show to 5,000 members of the public. The gaming industry pulled down about $11 billion in 2011; this year it will be closer to about $120 billion; which means that video games are bigger than Hollywood and the music industry. And gaming is about to get much bigger with 3-D virtual reality headsets making a big buzz this year.

The record $9 billion fine levied against BNP Paribas is presenting US authorities with novel legal questions, after morphing into a fight over whether terrorism victims should get any of the money. BNP pleaded guilty to violating sanctions in June 2014 by funneling billions of dollars through the US financial system for clients in Sudan, Iran and Cuba. Now, a group of terrorism victims is asking the DOJ to compensate them with funds from the BNP settlement, attempting to draw a connection between the French bank’s misconduct and terrorist acts overseas.

Back in 2008 the government provided bailout money to several faltering financial institutions, including the trading unit of AIG. The government demanded a 79.9% equity stake in the financial-services conglomerate in exchange for providing an $85 billion loan at an initial 14.5% interest rate. At the time, U.S. officials said the government acted because AIG was so entangled with other firms around the world that they feared its collapse would be catastrophic to the global financial system. Hank Greenberg, the former AIG chief felt the terms of the bailout were unfair and a bit harsh. He sued. At the center of the case is a dispute about the breadth of the Federal Reserve’s powers, and the limits on its discretion. Today a federal judge issued a ruling saying that AIG was treated unfairly and the government exceeded its authority. And then, with the Wisdom of Solomon, the judge decided that Greenberg would not get any money, because he is just such an ungrateful cuss.

U.S. authorities are also examining payments made by Nike under a 1996 soccer sponsorship with Brazil for possible evidence of wrongdoing by the company or others. Nike has not yet been formally named or charged with any wrongdoing, but allegations of corruption around its $160 million deal are discussed in the Justice Department’s 161-page indictment of FIFA officials.

At some time or another, you’ve probably been to a drive-in teller at the bank and used one of those cylindrical canisters to make a transaction; you put your things in the canister, put the canister in a tube, and it is whisked away with air pressure to the teller. Yea, you don’t see those much anymore, probably because the canisters could become jammed, especially if someone put a bunch of coins in it, which would weigh it down. Anyway, Elon Musk thinks those things are way cool. Elon Musk is the guy behind Tesla electric cars and Space X, the private rocket company. He’s proposing building a big version, he calls it a Hyperloop, and he thinks this might be a way to transport people from city to city.

In a nutshell, Hyperloop involves blasting pods down pressurized tubes at extremely high speeds. In the most popular example given, the transportation would get you from San Francisco to Los Angeles in 30 minutes. Musk has said that he’s not going to build the Hyperloop himself, but has expressed interest in helping the technology along. Most recently he said that he would fund the construction of a test track to illustrate the technology. And today, Musk announced Space X will build a test track near Hawthorne California and he also announced a competition for someone to design a Hyperloop pod. We don’t know what you win, but good luck.