Financial Review

Make Way for May

Sinclair Noe — April 28, 2017

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DOW – 40 = 20,940
SPX – 4 = 2384
NAS – 1 = 6047
RUT – 16 = 1400
10 Y – .02 = 2.28%
OIL + .21 = 49.18
GOLD + 4.20 = 1268.70

Looking back on the week, we had a couple of strong moves Monday and Tuesday, following the French election over the weekend – the rally was based on an absence of bad news. After that, markets looked for good news and floundered.

The tax reform plan failed to impress. We had some good earnings reports, which helped to lift a few stocks – notably a few of the big tech stocks, and that helped the Nasdaq Composite climb above 6,000 to new record highs. For the week, the Dow rose 1.9 percent, the S&P gained 1.5 percent and the Nasdaq rose 2.3 percent.

During April, the Dow gained 1.3 percent, the S&P rose 0.9 percent and the Nasdaq jumped 2.3 percent.

Yesterday, Alphabet, Amazon, and Microsoft reported earnings. Alphabet and Amazon crushed it. Microsoft was a slight disappointment. From the close of the market on Thursday to session highs on Friday, all three stocks hit an all-time high. That added more than $30.6 billion to Alphabet’s Class A market capitalization, $14.2 billion to Amazon’s market capitalization, and $6.7 billion to Microsoft’s market cap, reaching about $52 billion between the 3.

The stocks later pared gains, falling below their peaks. By the end of the day on Friday, the trio were just $27.4 billion richer, with Alphabet seeing $22.75 billion of those gains. The gains left both Amazon and Alphabet closing in on share prices of $1,000.

Amazon went public in 1997; if you had been brilliant enough to invest $10,000 at the IPO price of $18, and patiently held, you would be sitting on just over $4.8 million. Amazon’s market capitalization reached about $442 billion, pushing founder Jeff Bezos’ wealth closer to the richest in the world.

Alphabet and Microsoft had market caps of about $636 billion and $529 billion, respectively.

The US economy expanded at the slowest pace in three years as weak auto sales and lower home-heating bills dragged down consumer spending, offsetting a pickup in investment led by housing and oil drilling. Gross domestic product, the value of all goods and services produced, rose at a 0.7 percent annualized rate after advancing 2.1 percent in the prior quarter.

Consumer spending, the biggest part of the economy, rose 0.3 percent, the worst performance since 2009. There is a tendency for weak economic growth in the first quarter; the past few years winter storms were blamed for the declines; this year, warm winter weather is being blamed.

Since 2000, expansion in the first quarter of each year has averaged 1 percent, compared with 2.2 percent for the rest of each year. The pattern I recognize is that consumers get tapped out over the holidays and must tighten their belts in the first quarter.

The good news is that the unemployment rate is low, people have jobs, there is no immediate economic dilemma, and the economy should rebound as we move through the rest of the year. The bad news is that the growth trajectory looks a lot like the past few years, solid but sluggish. And in the background, inflation is eating into consumers’ wallets.

Real disposable personal income rose at a 1 percent pace in the period, the weakest since the fourth quarter of 2013. The report also showed price pressures were picking up. The GDP price index rose 2.3 percent in the first quarter. A measure of inflation tied to consumer spending and excluding volatile food and energy costs was up 2 percent, the fastest in four quarters.

And there is a good chance consumers will loosen the strings on the pocketbook in the second quarter. The University of Michigan consumer confidence survey shows consumers feeling good. The current conditions index in April was at its second-highest since 2005, and consumer expectations for inflation in the year ahead, and in five to 10 years, were unchanged from the prior month.

The employment cost index, released by the Labor Department, showed a 2.4 percent annual rise — the fastest pace in two years – and climbed 0.8 percent from the prior quarter for the strongest rate since the end of 2007. The wages and salaries component also increased 0.8 percent in the first three months of the year, the most since the second quarter of 2008.

The Federal Reserve FOMC policy meeting is next week and it is widely expected the Fed will leave interest rates at current levels while maintaining guidance for 2 more rate hikes this year.

The federal government will continue for at least one more week. Faced with a budget deadline of midnight tonight, legislators could not agree on the details of a budget plan to keep the doors open and the lights on, but they did agree to kick the can down the road. Congress approved a one-week extension to agree on a spending bill to fund the government through September.

Leaders of both parties say they’re close to agreement on a broader spending plan after Republicans signaled they would accept Democratic demands that the Trump administration promise to continue paying Obamacare subsidies and drop its bid for immediate funds for a wall on the Mexican border.

House GOP leaders abandoned efforts to vote this week on their plan to repeal and replace Obamacare for lack of support in their party. A vote is still possible next week.

Brazil is on strike, a nationwide general strike to protest President Michel Temer’s austerity measures, hitting public transport and closing schools, factories, banks and other businesses in every state. Police clashed with demonstrators in several cities, firing tear gas in efforts to clear roadways blocked by burning barricades.

Protesters also obstructed the entrances of airports and metro stations. Temer’s efforts to pass pension and labor reforms have deeply angered many Brazilians. Temer has proposed a minimum age for retirement. The lower house of Congress approved a bill this week to weaken labor laws by relaxing restrictions on outsourcing and temporary contracts.

GM, Ford, Toyota, and Mercedes all halted production at factories in Sao Paulo. the strike was strategically concentrated in public transportation so that even people who might want to get to work could not.

Young Europeans are sick of the status quo in Europe. And they’re ready to take to the streets to bring about change, according to a recent survey. Around 580,000 respondents in 35 countries were asked the question: Would you actively participate in large-scale uprising against the generation in power if it happened in the next days or months? More than half of 18- to 34-year-olds said yes.

A U.S. appeals court has blocked health insurer Anthem’s bid to merge with Cigna, upholding a lower court’s decision that the $54 billion deal should not be allowed because it would lead to higher prices for healthcare. The ruling effectively kills the proposed merger that was opposed by the U.S. Justice Department, 11 states and a district court judge after consumers, medical professionals and others objected to it.

In the end, Cigna itself tried to back out. Anthem and Cigna are suing each other. Cigna has sought to abandon the merger and force Anthem to pay a $1.85 billion breakup fee while Anthem filed a lawsuit to force its smaller rival to go through with the combination.

A consortium led by private equity firms Hillhouse Capital Group and CDH Investments offered on Friday to buy Belle International Holdings in a deal valuing the entire Hong Kong-listed shoe retailer at about $6.8 billion.

After months of speculation about whether Time, Inc. would be acquired, its board of directors has decided not to sell the company. Following the news, Time Inc. shares were down more than 19%.

Two initial public offerings went opposite directions Friday, as software company Cloudera shares shot up above its issue price and car-vending machine company Carvana saw its shares slump. Cloudera gained 20%, while Carvana dropped 26%.

Gasoline demand in the US dropped 2.4% in February compared with a year earlier, the second straight monthly decline. Still, coming in at 8.9 million barrels per day. The price of oil has nearly doubled from 12 months ago – a powerful motivation to conserve, but the lower demand also points to less economic activity.

Oil prices settled a bit higher today but still registered a second straight monthly decline. The problem for oil companies is that oil has spent a very long time consolidating around $50 to $55 and has now dropped under that range. Meaning any move higher will face strong resistance.

Meanwhile, any move below $47 would break through support. For oil companies, they have largely based their guidance for 2017 on prices in the $60 a barrel range.

Rising crude prices helped Chevron and Exxon Mobil easily beat analysts’ quarterly profit expectations. Chevron and Exxon expanded production in their American shale portfolios during the quarter, with both deciding the low-cost fields offered an easy opportunity to boost profit. They have laid out plans to increase drilling in those fields this year.

Exxon reported quarterly profit more than doubling to $4 billion, even as production fell 4 percent. Chevron swung to a $2.6 billion quarterly profit and turned cash flow positive. Chevron’s results were helped by $2.1 billion in asset sales. The company has sold more than $5 billion in assets since last year and is seeking buyers for its Canadian oil sands business.

General Motors recorded its highest ever profit for a first quarter. US sales of Chevrolet trucks and crossovers rose 3.5 percent and 12 percent, respectively, during the quarter, while GMC truck and crossover sales jumped almost 10 percent. GM’s net profit rose 33 percent in the first quarter to $2.6 billion, or $1.70 per share, beating estimates of $1.48 per share.

Financial Review

Turkey, Again

Sinclair Noe — February 14, 2017

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

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DOW + 92 = 20,504
SPX + 9 = 2337
NAS + 18 = 5782
RUT + 4 = 1396
10 Y + .04 = 2.47%
OIL + .28 = 53.71
GOLD + 3.30 = 1229.00

Four consecutive trading sessions with record highs.

Federal Reserve Chair Janet Yellen testified before the Senate Banking Committee this morning, part of her semi-annual two-day testimony to Congress. Yellen said the labor market is basically where the Fed wants it to be, and inflation is just a little lower than their target. She said, “Waiting too long to remove accommodation would be unwise, potentially requiring [the Fed] to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession.

“At our upcoming meetings [we] will evaluate whether employment and inflation are continuing to evolve in line with [the Fed’s] expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.”

She said the Fed expected three rate increases this year, and they might hike in March, maybe. That doesn’t mean the Fed will raise rates in March, but the Fed wants that option. Normally, Yellen talks about downside risks, today she seemed more concerned about the upside risk.

“The economic outlook is uncertain, and monetary policy is not on a preset course,” she told members of the Senate Banking Committee, adding that “changes in fiscal policy or other economic policies could potentially affect the economic outlook,” she said, adding that “it is too early to know what policy changes will be put in place or how their economic effects will unfold”. We know that President Trump has promised details on his “phenomenal” tax reform plan within the next couple of weeks. Fed economists will surely pay attention.

Yellen rebutted President Trump’s claims that banks aren’t lending. Trump has targeted the Dodd-Frank Act as part of his quest to roll back regulations, claiming the regulatory reform prevents banks from lending.

Yellen shot down those claims, saying commercial and industrial lending specifically surged after the crisis, rising 75 percent since 2010. Yellen mentioned a recent survey from the National Federal of Independent Business, in which only 2 percent of respondents cited access to capital as their greatest obstacle.

She said US banks are stronger than their foreign counterparts, which makes them more competitive, and it is reflected in record earnings for US banks. Dodd-Frank is making life difficult for banks, but the truth is, banks are lending plenty of money, and companies are not starved for capital.

The two-year note yield jumped to as high as 1.25 percent from a low of 1.18 percent earlier in the day. The 10-year yield rose to 2.50 percent from 2.43 percent before her remarks were released. The dollar rose after Yellen’s comments, hitting a high last reached on Jan. 20. During Yellen’s testimony, stocks flipped between small gains and losses but started carving out fresh intraday highs as the testimony wrapped up.

Richmond Fed President Jeffrey Lacker, a long-time proponent of tighter monetary policy, says the Federal Reserve will likely have to raise interest rates more rapidly than financial markets currently expect given that any new policies by the Trump administration, while uncertain, will force the Fed’s hand.

Producer prices, or prices at the wholesale level, rose more than expected in January, recording their largest gain in more than four years.  The producer price index for final demand jumped 0.6 percent last month. That was the largest increase since September 2012 and followed a 0.2 percent rise in December. Despite the surge, the PPI only increased 1.6 percent in the 12 months through January. The gains in PPI last month largely reflected increases in the prices of commodities such as crude oil.

National Security Adviser Michael Flynn resigned his position, apologizing to Vice President Mike Pence for misleading him about his conversations with Russia. Retired Army Lt. Gen. Keith Kellogg has been named as acting national security adviser in his stead.

In better news for the Trump administration, Steven Mnuchin was confirmed as U.S. Treasury secretary after winning a Senate vote 53-47. Mnuchin‘s  to-do list includes tax reform and how to handle economic cooperation efforts with China, Mexico and other trading partners.

Tens of thousands of Northern California residents are in shelters as engineers worked to shore up a crumbling overflow channel and drain the rain-swollen reservoir at the Oroville Dam before new storms sweep the region. Residents below the dam were ordered from their homes on Sunday when an emergency spillway that acts as an automatic overflow channel appeared on the brink of collapse from severe erosion.

Aetna ended its $37 billion takeover of Humana, after deciding not to appeal a ruling by a federal judge who blocked the health insurers’ combination on antitrust grounds. The companies came to a mutual agreement to terminate the deal, and Aetna will pay Humana a $1 billion breakup fee, or about $630 million after taxes.

Cigna and Anthem filed the paperwork to terminate their proposed merger. Then Cigna filed suit against Anthem, seeking a $1.85 billion reverse termination fee and more than $13 billion in additional damages, which includes the amount of premium Cigna shareholders did not realize.

Hologic said it would acquire medical aesthetics company Cynosure for $1.65 billion. The deal comes a day after Botox maker Allergan said it would buy Cynosure’s rival Zeltiq Aesthetics for about $2. 5 billion. Cynosure makes products used in non-invasive body contouring, hair removal, skin revitalization and women’s health.

Restaurant Brands International, owner of the Burger King and Tim Hortons fast-food chains, has approached Popeyes Louisiana Kitchen about a possible acquisition. Popeyes shares jumped 14 percent in New York. Restaurant Brands and Popeyes have yet to agree on a deal price, and there is no certainty that negotiations will continue.

PSA Group, the French automaker of Peugeots and Citroëns, said it was in discussions about a potential acquisition of the European brands Opel and Vauxhall from General Motors. PSA and GM already produce some vehicles together.

A South Korean special prosecutor’s office is seeking an arrest warrant for Samsung leader Jay Y. Lee. He was questioned for 15 hours yesterday as part of an investigation into a graft scandal that could topple President Park Geun-hye. In January, the special prosecutor wanted to arrest Lee for paying bribes to win the state pension fund’s support for the merger of Samsung C&T and Cheil Industries.

Japan’s Toshiba said its chairman will step down, and the company booked a $6.3 billion write-down to its US nuclear unit, a write-down that wipes out its shareholder equity and will drag the group to a full-year loss.  Toshiba rattled investors by failing to release its earnings on schedule, saying initially it was ‘not ready’ and then announcing later it needed more time to probe its Westinghouse nuclear business after internal reports uncovered potential problems.

Credit Suisse announced a big loss –  $2.3 billion – when considering the $5.3 billion settlement with the US Justice Department tied to its dealing in mortgage-backed securities in the period leading up to the financial crisis. Credit Suisse says it will eliminate up to 5,500 jobs in 2017.

Phoenix-based Freeport McMoRan is cutting production at the world’s second-largest copper mine in Indonesia. That follows new restrictions on copper concentrate exports imposed by that country.

T-Mobile, the No.3 U.S. wireless carrier, reported quarterly profit and revenue above estimates as promotional offers helped add more subscribers. The company has been gaining share from bigger rivals Verizon and AT&T in an over-saturated U.S. wireless market. T-Mobile had several promotional offers in the fourth quarter, including a free iPhone 7 offer with eligible trade-in.

Apple closed on Monday at $133.29 a share, surpassing its record closing high price of $133, set in February 2015. That was enough to push the market cap above $700 billion. The stock is up more than 15 percent in 2017, gaining nearly $100 billion in market cap in just six weeks. It’s also just points away from a split adjusted price of $1,000 a share.

Perhaps what’s even more impressive is the move from its 52-week low in May. The stock has rallied nearly 50 percent and gained more than $200 billion in market cap in just nine months. There is speculation Apple will soon come out with big updates for the iPhone 8, which would also coincide with a 10^th anniversary of the iPhone. Strong sales of the iPhone 6S two years ago, have left a larger-than-normal base of customers ready to upgrade. Guesstimated launch date is September.

Also hitting a new high today, a much smaller company called Lumentum, whose core business is optical communications, late today the company reported mixed fiscal Q2 results and guidance. They also recorded their first 3D sensing consumer revenues, which might be part of an order for final qualification to provide 3D sensing for the new Apple iPhone 8, which will probably include a 3D-sensing module to enable augmented-reality applications. There is no confirmation on an Apple deal just yet.

Financial Review

Hat Trick

Sinclair Noe — February 9, 2017

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DOW + 118 = 20,172
SPX + 13 = 2307
NAS + 32 = 5715
RUT + 19 = 1378
10 Y + .05 = 2.40%
OIL + .71 = 53.05
GOLD – 12.40 = 1229.60

We have new record high closes for the Dow, S&P, and Nasdaq. It’s a hat trick.

The chief executives of several airlines, as well as executives from air cargo companies, were invited to a breakfast meeting at the White House this morning. Trump called the air-traffic control system “outdated” and he told the execs: “We have an obsolete plane system, we have obsolete trains, we have obsolete airports, we have bad roads. And we’re going to change all that.”

Trump also said: “We’re going to be announcing something I would say over the two or three weeks that will be phenomenal in terms of tax and developing our aviation infrastructure.” He gave no indication of what the announcement might entail. Presumably the “phenomenal” tax and infrastructure plan does not apply solely to the airline industry, and Wall Street lapped it up. He went on to say: “Lowering the overall tax burden on American business is big league.”

The rally had stagnated in recent days as investors sought details about Trump’s policy agenda. Financials, which have soared since the election, were the best-performing group, up 1.4 percent after three sessions of declines, while energy shares gained 0.9 percent. Those sectors stand to benefit should lower taxes spur economic activity as interest rates and the demand for energy would presumably rise.

After 18 months of courtship and court cases, two massive deals that would have reshaped the U.S. health insurance industry have both been declared dead. Anthem’s $48 billion deal to buy Cigna was blocked by a federal judge late Wednesday, weeks after another judge halted Aetna’s bid for Humana. Reasons given: The mergers would have led to less competition and higher prices for Americans.

Applications for unemployment benefits in the U.S. unexpectedly declined last week to an almost three-month low. Jobless claims fell by 12,000 to 234,000 in the week ended Feb. 4. The latest results extend a trend of historically low claims, with applications staying below 300,000 in the longest streak since 1970. A shortage of skilled workers is prompting companies to hold on to existing employees while continuing to add more workers to help fulfill demand.

The Senate has confirmed Jeff Sessions as attorney general largely along party lines. The 52-47 vote capped weeks of divisive battles over Sessions, an early supporter of President Trump. Next up is Representative Tom Price, Trump’s pick for health secretary and a staunch advocate of repealing Obamacare. A vote come could come later tonight.

Secretary of State Rex Tillerson met his Canadian counterpart for the first time on Wednesday for talks that touched on NAFTA, the trade agreement President Trump has pledged to renegotiate. The top US diplomat also met with Mexico’s foreign minister to discuss collaboration on law enforcement, migration and security, and agreed to visit the country in the coming weeks.

A US court of appeals is reviewing arguments on whether to reinstate the Trump administration’s temporary ban on immigration, with the outcome likely to be appealed to the Supreme Court.

Meanwhile, Trump’s first executive order, signed January 25, entitled: “Border Security and Immigration Enforcement Improvements” resurrects some of the most controversial immigration enforcement programs of recent years, seeks to deputize state and local law enforcement as immigration officials across the country, and threatens major cuts to federal funding for cities that fail to fall in line with the administration’s vision.

Trump has called for the construction of new immigrant detention facilities along the U.S. border with Mexico – including through private contracts – as quickly as possible, and there have been requests for additional asylum officers at 2 for-profit Detention Centers in Arizona.

A Dallas federal judge has upheld the Labor Department’s fiduciary rule, dealing a setback to the financial industry’s attempts to kill the measure. But the legal move may not mean much for the regulation’s fate. Last Friday, President Trump issued a memorandum to study the rule’s impact and rescind or revise it if it isn’t consistent with his administration’s regulatory principles. A status report will be published on March 10.

Boeing won orders for 39 wide-body aircraft from Singapore Airlines; a deal worth about $14 billion, as Southeast Asia’s biggest long-distance carrier upgrades its fleet over the next decade with more fuel-efficient models to cut costs.  The airline agreed to buy 20 777-9s, which are set to debut at the decade’s end, and 19 787-10s, the longest Dreamliner model.

There’s a good chance you can’t get there from here. More than 2,700 flights were canceled and all public schools in New York City, Boston and Philadelphia will be closed today as the region braced for a winter storm that could dump a foot of snow or more.

President Trump has written a letter to China’s President Xi Jinping in his first direct communication with the leader of the world’s second-biggest economy since he took office. With currency wars threatening to raise their head again, China has managed to get the yuan exactly where it wants it.

The nation’s authorities have let the currency rise against the dollar, making it harder for the U.S. administration to accuse it of undervaluing the exchange rate, while at the same letting the yuan weaken against a trade-weighted basket of currencies.

Greece’s two-year bond yield climbed above 10 percent as negotiations to release further IMF funds remained deadlocked. The International Monetary Fund weighed in this week, publishing a long-awaited analysis of the challenges the Greek economy still faces. The report has been the focal point of heated disagreement between the fund and Europe in terms of what Greece needs to do to get back on track.

The fund has argued that, in addition to needed reforms, European governments must provide debt relief to Greece for the country’s economy to recover fully. Meanwhile, Astellon Capital, a hedge fund based in London, published analysis saying that some form of restructuring is essential for Italy, given the inability of the country’s economy to grow.

The Astellon report also notes that the E.C.B. and sickly Italian banks have been the main buyers of Italian government bonds over the past three years. Also, Mediobanca, the Italian investment bank published a report which highlights just how little Italy has benefited from being in the euro: Growth has been literally zero, and the economy’s competitiveness as an exporter has deteriorated.

Twitter reported fourth-quarter revenue was $717 million, missing the $740 million average analyst estimate. Sales growth of 1 percent slowed dramatically in the period from the 48 percent gain a year earlier. Twitter added 2 million new users, bringing the total number of people who log in monthly to 319 million. Twitter has had trouble persuading advertisers to spend more money on its social-media platform as fewer people join.

Coca-Cola offered up a flat earnings report. Excluding items, the company earned 37 cents per share, in line with estimates. Net operating revenue fell about 6 percent to $9.41 billion, the seventh straight drop, but slightly ahead of estimates. The company forecast 2017 adjusted earnings to fall 1-4 percent from 2016. Coca-Cola has been offloading much of its bottling business to cope with falling demand for carbonated beverages in North America. Coke said it was on track to complete re-franchising of its US bottling operations by the end of this year.

Whole Foods is shrinking its store count for the first time since the recession. After reporting disappointing earnings, the upscale grocer says it will close 9 stores; including one in Prescott.

With about 70 percent of the S&P 500 having reported results, fourth-quarter earnings are on track to have climbed 8.5 percent, which would be the best performance since the third quarter of 2014, according to Thomson Reuters.

Financial Review

Halftime Report

Sinclair Noe — June 30, 2016

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

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DOW + 235 = 17,929
SPX + 28 = 2098
NAS + 63 = 4842
10 Y + .01 = 1.49%
OIL – 1.48 = 48.40
GOLD + 3.40 = 1322.70

Today is the end of the month, end of the second quarter, and end of the first half of trading, so let’s break down some numbers at halftime.

The Dow and S&P 500 and Nasdaq are now back in the black for 2016 and for the second quarter. The Dow is up 106 points since the start of the year. The S&P is up 40 points year to date. The Nasdaq is up 106 for the year.

For the month of June, the Dow added 64 points, the S&P gained 2 points, and the Nasdaq is down 106. June included some brutal Brexit related losses. The Dow is still down about 80 points from last Thursday (pre-Brexit), the S&P is still down about 15 points, and the Nasdaq is down about 68 points. Still, it was a nice bounce back; the best 3-day rally in 4 months, following the worst 2-day decline for Wall Street in 10 months.

Tomorrow, July 1^st is the most bullish day of the year; according to the Stock Trader’s Almanac, on July 1, over the past 21 years, the S&P 500 has advanced 85.7% of the time on the first trading day of July. The average gain is 0.46%. Of course, not every July 1 is created equal.

European stocks and the pound held on to a third day of gains as the immediate market flurry over Britain’s vote to pull out of the European Union settled. The rebound was not enough, however, to offset the sharp losses suffered in the aftermath of last week’s vote which have put global stocks on track for their worst monthly performance since January. And this does not mean that we have seen the end of Brexit related problems or fallout in financial markets.

Oil closed down almost 3% today but still posted its best quarter in 7 years. Back in January, West Texas Intermediate crude oil touched a 14-year low, falling below $27 a barrel. It gained about 26.1% for the second quarter, and trades roughly 30.5% higher year to date. Still, WTI has had a hard time cracking $50 a barrel, which seems to be the level that sees producers ramping up output.

Initial U.S. jobless claims rose by 10,000 to 268,000 for the week stretching from June 19 to June 25. Still, new claims remained below the key 300,000 mark for the 69th straight week, the longest streak since 1973.

The Senate passed and sent to the White House a relief measure to help Puerto Rico deal with its fiscal crisis, just two days before the territory planned to default on a large debt payment. President Obama said he will sign the measure. The rescue package will not prevent Puerto Rico from missing the $2 billion debt payment due on Friday, but the bill would bar lawsuits by creditors for nonpayment retroactive to December – an important provision in light of the imminent missed debt payment. The legislation would allow the island’s government to restructure its $72 billion total debt so that it can manage payments and create an oversight board to guide the recovery process; at least that is the theory. There will likely be further defaults in the not so distant future.

Nearly all of the largest U.S. banks are on steady enough footing to issue dividends or make share buybacks after passing the final round of the Fed’s annual stress tests. The US units of Deutsche Bank and Santander were the only lenders to fail for a second year in a row, meaning they cannot increase shareholder payouts until they establish a new plan. “Material weaknesses” were also seen at Morgan Stanley, but the Fed allowed the bank to proceed with a dividend hike and $3.5 billion buyback while it rectifies the issues.

After passing the Dodd-Frank stress tests, Wall Street banks announced their stock-buyback plans. Among the notables, JPMorgan will buy back $10.6 billion worth of stock, while Citi and Bank of America will repurchase $8.6 billion and $5 billion worth of shares. Goldman Sachs will also buy back shares, but it did not release an amount. All told, the 31 banks are planning to dish out about $96 billion.

Separately, the International Monetary Fund says Deutsche Bank is the riskiest financial institution in the world as a potential source of external shocks to the financial system: “Among the globally systemically important banks, Deutsche Bank appears to be the most important net contributor to systemic risks, followed by HSBC and Credit Suisse,” according to the IMF Financial Sector Assessment Program. The institution also said the German banking system poses a higher degree of possible outward contagion compared with the risks it poses internally.

What is the cost of being labeled a systemically important financial institution? In the case of General Electric, the magic number looks to be about $50 billion. GE officially shook off the designation on Wednesday that had been applied by the Financial Stability Oversight Council to its GE Capital finance unit.

April last year, GE began selling off almost all of GE Capital’s assets, about $200 billion in sales. Since G.E. announced its plans to offload the financial side of the business, the company’s stock has added about $5.25 a share, or roughly $50 billion in overall market capitalization. G.E.’s stock is up more than 20 percent, even as the S&P 500 has gone nowhere; and while Morgan Stanley, Citigroup and Goldman Sachs have all lost more than 20 percent of their former value.

A federal appeals court threw out a $7.25 billion antitrust settlement among Visa, MasterCard and millions of retailers over credit card fees. The settlement was intended to resolve nearly a decade of litigation concerning whether Visa and MasterCard improperly fixed fees that merchants were charged when customers used credit or debit cards, also known as swipe fees. The settlement would have allowed Visa and MasterCard to impose higher and higher swipe fees.

The 2nd U.S. Circuit Court of Appeals in New York said the accord was unfair to retailers that stood to receive no payments, and in the court’s view, little or no benefit at all. It also decertified the case as a class action. Circuit Judge Pierre Leval, a member of the three-judge panel that unanimously struck down the settlement wrote: “This is not a settlement; it is a confiscation.” The case could now be renegotiated or it could go to trial.

Looking to free up TV spectrum for cellular use, the FCC has acquired $86 billion worth of wireless airwaves from television broadcasters in the first phase of a complex auction. The agency hopes bidders will be willing to spend that much when it resells the airwaves in an auction that will start later this summer, but it may have to sell less spectrum than expected, or use multiple rounds to settle bidding by broadcasters.

The movie studio Lionsgate agreed to buy Starz, the premium cable channel home to hit shows like “Outlander,” for about $4.4 billion.

Theater chain Carmike Cinemas dropped today’s scheduled shareholder vote on its proposed sale to AMC Entertainment Holdings, saying it was adjourning until next month and throwing the $1.1 billion deal into doubt. The deal was opposed by some of Carmike’s biggest shareholders. Carmike said the adjournment was made at the request of AMC and that the special meeting will reconvene on July 15.

The big deal announced today comes from Mondelez International, a $23 billion offer for Hershey, the chocolate company.  Hershey said that Mondelez had offered to pay $107 a share in cash and stock, a premium of about 10 percent to Hershey’s closing stock price. Hershey said that its board had “rejected the indication of interest and determined that it provided no basis for further discussion between Mondelez and the company.”

Winning Hershey could prove tricky for Mondelez, since the smaller chocolate maker is effectively controlled by a charitable trust that owns about 81 percent of the company’s voting power. The Hershey Trust, established by Milton Hershey and his wife, Catherine, in 1905, has opposed takeovers of the company in the past.

In 2002, the trust halted an auction of the company at the 11th hour as it was about to accept a $12 billion deal from Wm. Wrigley Jr. Company. News of the offer approach sent shares in Hershey up 16 percent, to $113.49, which is more than the offered amount. So, if Mendelez is serious, they will clearly have to sweeten the deal. (sorry, I couldn’t resist.)

The Justice Department has told Anthem its planned takeover of Cigna threatens competition and probably can’t be fixed by selling parts of their businesses. A decision on the $48 billion merger is expected by mid-July.

If you decide to just kick back for the Fourth, you might take advantage of the downtime to grab your mobile device and reset your passwords. Oculus VR CEO Brendan Iribe, is the latest, high-profile victim of a Twitter account takeover, and he allegedly used an old password. The hackers took over his Twitter account by posting: “Imagine creating the coolest s**t to ever be introduced to gaming and technology but using the same pass for 4 years lol… silly Mr. CEO.” It got worse from there.

Millions of U.S. travelers flying during the busy Fourth of July holiday weekend will face heightened security and increased delays due to the deadly attacks at Istanbul’s main airport. Following the Istanbul attacks, which took place outside security checkpoints, U.S. airports are likely to focus on surveillance and armed personnel in similar public spaces not subject to screening.

The security measures are not limited to airports; look for more officers at July 4^th celebrations as well. A record number of Americans, 43 million, are expected to travel between June 30 and July 4, according to AAA. The vast majority will go by car, AAA said, but 3.3 million are expected to fly.

Financial Review

Heating Up

Sinclair Noe — June 16, 2016

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DOW + 92 = 17,733
SPX + 6 = 2077
NAS + 9 = 4844
10 Y – .04 = 1.56%
OIL – 1.84 = 46.17
GOLD – 11.30 = 1281.20

Well, this was a strange day. The major market indices started the session lower and looked ready to slide into a sixth consecutive loss, but after about an hour of trade, prices started moving higher. Even with the weakness we have seen over the last week or so, the S&P 500 is still only a little more than 2% off its 2016 closing high for the year. From that perspective, can you recall a time when the S&P 500 was this close to a high for the year but where there was this much angst on the part of investors? At one point, the Dow was down almost 170 points, with a 280-point range from sessions low to session high.

Yesterday, the Federal Open Market Committee left the fed funds rate unchanged at 0.25% to 0.50%, as expected. And the Fed’s economic forecasts are even more pessimistic now than they were just a few months ago. Fed chair Janet Yellen held a press conference and mentioned the weak labor market, low business investment and productivity, and concerns about a possible Brexit next week. The Fed’s own forecast sees U.S. growth topping out at 2% in the long run, well below the nation’s historic 3.3% growth rate. Looming in the background is persistently weak global growth. Today, other central banks delivered their policy messages.

The Bank of Japan kept monetary policy steady and lowered its inflation forecast, stating the consumer price index’s year-on-year change is likely to be slightly negative or flat for the time being. The yen surged against the dollar following the news, sparking speculation on whether Japanese policymakers would intervene to halt the strengthening currency, while the Nikkei tumbled 3.1%.

Reiterating its warning that the franc is significantly overvalued, the Swiss National Bank left its negative interest rates unchanged at record lows, conserving ammunition ahead of a British vote on EU membership. As expected, the SNB held its deposit rate at negative-0.75%.

The Bank of England kept its key interest rate at a record low of 0.5% and made no changes to its 375-billion-pound asset-purchase program. The decision marked the last before the June 23 referendum in the U.K. on whether the country should stay or exit the European Union. And the bank warned that a Brexit “could materially alter the outlook for output and inflation.”

“Leave” has surged to a 6-point lead in an important Brexit survey. A new Evening Standard newspaper poll, conducted by the reputable polling firm Ipsos MORI, shows that 53% of respondents favor Leave while 47% favor Remain. This was the first time a poll conducted by Ipsos MORI poll had favored Leave. But both sides of the Brexit campaign have temporarily stopped campaigning after Jo Cox, a Member of Parliament was shot and killed while meeting with constituents in a library. The motive behind the shooting is unknown but many people think it might be Brexit related.

Investors continued to buy up investments considered safe in times of economic uncertainty: United States government bonds, and stocks with high dividends. The yield on the benchmark 10-year Treasury note dropped to 1.52% in intraday trading; the lowest since 2012.

The number of people seeking U.S. unemployment benefits rose last week, but to a low level that indicates employers are still cutting relatively few jobs. Weekly applications rose 13,000 to a seasonally adjusted 277,000, the highest in four weeks. The less volatile four-week average declined slightly to 269,250.

Consumer prices, or prices at the retail level, rose 0.2% in May largely because of higher gasoline prices and rising rents. Although the cost of most goods and services aren’t increasing much, fuel has become more expensive. The energy index climbed 1.2% in May. Rents also jumped 0.4% in May to mark the largest monthly gain since February 2007. And they are rising at the fastest 12-month pace in almost nine years: 3.4%.

Overall price pressures are still muted, however, as the price of groceries dropped 0.6% in May, and prices are now down 0.7% in the past year. The consumer price index has risen just 1% in the past 12 months. The core rate that excludes food and energy has risen at a sharper but still low 2.2% annual pace.

Confidence among U.S. homebuilders climbed to a five-month high in June. The National Association of Home Builders/Wells Fargo builder sentiment gauge rose to 60 from 58. Home builders report cheap borrowing costs and steady improvement in the labor market have bolstered Americans’ abilities to buy homes. Builder sentiment in the West reached a five-month high.

The Philly Fed index rebounded into expansionary territory in June, with the headline index rising to 4.7 from -1.8. The key forward-looking indicators all moved in the wrong direction, with sentiment on new orders, employment, unfilled orders, inventories and capital expenditure intentions all weakening, while the hours worked sub-index remained firmly in contractionary territory in June.

Arizona’s seasonally adjusted unemployment rate increased one-tenth of a percentage point from 5.5% in April to 5.6% in May. The U.S. seasonally adjusted unemployment rate decreased three-tenths of a percentage point from 5.0% in April to 4.7% in May. A year ago, the Arizona seasonally adjusted rate was 5.8% and the U.S. rate was 5.5%.

Arizona lost 19,400 Non-farm jobs in May. Three of the eleven sectors posted gains, one remained unchanged, and seven sectors posted losses. The gains were recorded in Manufacturing, Construction, and Trade, Transportation, and Utilities.  The losses were recorded in Financial Activities, Information, Education and Health Services, Leisure and Hospitality, Professional and Business Services (-5,400 jobs); and Government (the big loser -13,100 jobs). Natural Resources and Mining remained unchanged.

Disneyland debuts in Shanghai. The theme park, which cost $5.5 billion and took five years to build, opened its doors today. Disney hopes it can tap into China’s growing middle class, as 330 million people live within a three-hour drive or train ride from the park.

California’s insurance commissioner called on the U.S. government to block Anthem’s $48 billion takeover of rival health insurer Cigna, saying the deal would limit competition in the state’s health-insurance market. While Commissioner Dave Jones doesn’t have legal authority to block the merger, his opposition, plus a 22-page letter he sent to the U.S. Justice Department, adds an influential voice to the debate. The takeover would give the combined Anthem-Cigna a greater than 50 percent market share in 28 counties in California, and a market share exceeding 40 percent in 38 counties.

Volkswagen  unveiled a major restructuring today, the broadest overhaul of the company in decades. VW announced plans to deliver 30 electric plug-in models by 2025. The product overhaul and pledge to cut $9 billion in spending come as VW is already facing a bill of more than $18 billion to cover the costs of its emissions scandal.

The company rigged some 11 million diesel cars worldwide with software to cheat emissions standards. The admission triggered a litany of government investigations, a U.S. sales slump, and a management shakeup. This also follows a mandate from the German government that as of 2030, all new cars registered in Germany must be emissions free. The plan is to add one million hybrid and all-electric cars by 2020 and 6 million by 2030.

After three successes, a leftover SpaceX rocket booster crashed Wednesday while trying to land on an ocean barge. In fact, the rocket’s failed landing was, according to a Twitter post by Elon Musk, “Maybe [the] hardest impact to date.” The attempt came minutes after the Falcon 9 rocket successfully launched two satellites into orbit from Cape Canaveral, Florida.

Facebook founder Mark Zuckerberg’s philanthropy venture has made its first major investment, leading a funding round in a startup that trains and recruits software developers in Africa. Google Ventures was also part of the $24 million funding round. The startup, which has nearly 200 engineers currently employed by its Nigeria and Kenya offices, will use the funds to expand to a third African country by the end of 2016.

Philadelphia is set to become the first major American city with a soda tax despite a multimillion-dollar campaign by the beverage industry to block it. The City Council is expected to give final approval today to a 1.5 cent-per-ounce tax on diet and regular soda, iced tea, energy drinks, juice drinks with less than 50% juice, and other sugary beverages.

Microsoft is getting into the marijuana business, announcing a partnership to begin offering software that tracks marijuana plants from “seed to sale,” as the pot industry puts it. The software is meant to help states that have legalized the medical or recreational use of marijuana keep tabs on sales and commerce, ensuring that they remain in the daylight of legality. But until now, even that boring part of the pot world was too controversial for mainstream companies. It is apparent now, though, that the legalization train is not slowing down: This fall, at least five states, including the biggest of them all — California — will vote on whether to legalize marijuana for recreational use.

Get ready, here it comes. An excessive heat watch has been posted for California and Arizona, warning of temperatures that could hit 119-degrees this weekend. The forecast calls for record highs and record high-lows. High lows can sound a bit funny to say but what they translate to is misery: Temperatures stay so warm overnight that there is little relief from the heat even after the sun has set. The only consolation is that we are not expected to break the all-time record high of 122-degrees from June 26, 1990. Small consolation.

Financial Review

Glitch/Print

Sinclair Noe — July 24, 2015

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DOW – 163 = 17,568
SPX – 22 = 2079
NAS – 57 = 5088
10 YR YLD un 2.27%
OIL – .31 = 48.14
GOLD + 9.10 = 1100.50
SILV + .08 = 14.84

Well, this turned out to be an ugly week. The Dow lost 600 points from the high a week ago. The Dow lost 2.8% on the week, dropping below its 200 day moving average. The S&P lost 2.1%; Nasdaq down 2.2%. The Russell 3000 was down 3.1% for the week. Amazon gave back about half of yesterday’s gain. Crude oil hit a 4-month low.

And if you are not quite sure what to make of the markets, that is understandable; they aren’t going up and they aren’t going down, we are in a sideways market; this might be the mother of all sideways markets. The Dow is in slightly negative territory year to date. The Dow has moved on either side of breakeven 21 times so far this year. According to research from Bespoke Investment, no other year has been so fickle, the closest being the 20 times the blue chip index swung in both 1934 and 1994. The S&P 500 went through the first half of the year without moving more than 3.5 percent in either direction.

Hedge funds are holding the first ever bet on a decline in gold prices since the government started collecting the data in 2006. The Commodity Futures Trading Commission shows hedge funds shifted to a net-short position of 11,345 contracts in New York futures and options.

The Federal Reserve accidentally published internal staff five-year forecasts on their website today. Then they pulled the forecasts down. Oops. And when you look at the forecast, it got weirder. The numbers just don’t work. Potential GDP is forecast to run about a half a percent below real GDP for the next 5 years; inflation edges right up to 1.9% but can’t top 2%; interest rates move up on a very slow, very gradual glide path reflecting one rate hike this year and 3 more incremental hikes next year; the unemployment rate drops down to just over 5% and stays there – right at that magical level that many think represents full employment.

And that brings us to the Definition of the Day; confirmation bias is a tendency to search for or interpret information in a way that confirms ones preconceptions, leading to statistical errors.

Now normally we don’t think the economists at the Fed are clueless buffoons but that is not out of the question. It is possible that they intended to leak the forecast. It could be a big prank. Maybe a trial balloon. Hey markets, this is what it looks like when the Fed hikes rates; the economy gets better, we reach full  employment without inflation or volatility of any kind.  The Fed said it was a glitch. Apparently the glitch button is right next to the print button.

Speaking of glitches; Fiat Chrysler is recalling about 1.4 million cars and trucks after Wired magazine published a story about software programmers who were able to take over a Jeep Cherokee being driven on a Missouri highway. Fiat Chrysler already issued a software update. They say no vehicles have been hacked, other than the one; they say they are just recalling cars “out of an abundance of caution”.

Meanwhile, in the world of economic data:
The flash reading of the Markit manufacturing purchasing managers index rose slightly to 53.8 in July from a 20-month low of 53.6 in June. The rebound was led by stronger output and order book growth.

Markit’s Eurozone composite PMI fell to 53.7 this month from June’s four-year high of 54.2. Despite the loss of momentum, “the PMI suggests the Eurozone continues to enjoy its strongest performance seen over the past four years” and “indicates that the economy grew 0.4% in Q2.”

Activity in China’s factory sector contracted at the fastest pace in 15 months in July, suggesting that the world’s second-largest economy is struggling to stabilize and halt a broad slowdown. The flash Markit China PMI dropped to 48.2, the lowest reading since April last year and the fifth straight month under 50 – the level that separates growth from contraction.

So, the recap: China contracting, Eurozone with moderate growth that is slowing, and the US has moderate growth that is improving.

Sales of new single-family homes in the U.S. fell 6.8% in June to an annual rate of 482,000, the slowest pace in seven months. June’s sales pace was up 18.1% from a year earlier. The median price of new homes, meanwhile, fell 1.8% to $281,800 compared with June 2014. The supply of new homes was 5.4 months at June’s sales pace, compared with 4.8 months in May.

For the first half of 2015, volume in U.S. commercial real estate – properties like office buildings, shopping malls, and apartment complexes priced above $2.5 million – grew 36% compared to the same time last year, According to data compiled by Real Capital Analytics a total of 15,610 of such commercial properties changed hands with an average transaction price of $16.3 million for a total of $255 billion in transactions, which tops 2006.

Following downgrades by major credit rating agencies, UBS is backing away from its Puerto Rico bond funds, warning clients that they can no longer use them as collateral. By doing so, the bank is effectively admitting that it sold a bad product and that the funds are too risky for itself and average investors. Puerto Rico has been looking to restructure and postpone bond payments since dropping a bombshell on holders of its $72 billion debt in June.

The State-Boston Retirement System filed a class action lawsuit against 22 financial companies that have served as primary dealers of US Treasury securities. The suit filed in federal court, alleges a conspiracy to manipulate Treasury auctions. The suit names Goldman Sachs, JPMorgan Chase and Bank of America’s Merrill Lynch among the other usual suspects. The complaint alleges the banksters illegally profited on the sale of Treasury bills, notes and bonds at investors’ expense, by using chat rooms, instant messages and other means to swap confidential customer information and coordinate trading strategies in the roughly $12.5 trillion Treasury market. This enabled the banks to inflate prices on Treasuries they sold to investors in the pre-auction “when issued” market, and deflate prices when they bought Treasuries to cover their pre-auction sales, violating antitrust laws.

The pension fund said its “expert economists” observed wide gaps between when-issued and auction prices around December 2012, but that these gaps narrowed significantly as the Department of Justice and other regulators began probing alleged manipulation of the London interbank offered rate. At that point the banksters clearly felt they were under scrutiny, and they stopped their manipulation.

Remember when an Amtrak train derailed in Philadelphia back in May? It shut down train traffic on the eastern seaboard for a couple of days. The Transportation Department is now investigating whether 4 airlines intentionally raised prices following the incident. That would be price gouging, and very ugly.

U.S. authorities have initiated investigations into whether banks should have raised alarms about money flows linked to alleged corruption at soccer’s governing body. Prosecutors have questioned lenders, including HSBC, Standard Chartered, Delta National Bank and Trust Company, in connection with the FIFA scandal. The probes could also create a headache for the financial industry over its money-laundering controls, which are increasingly under the regulatory microscope.

Anthem has agreed to buy Cigna in a deal valued at $54 billion, wrapping up a year of negotiations and creating the largest health insurer in the US. Cigna shareholders will get $103.40 per share in cash and 0.51 Anthem shares. The deal comes three weeks after Aetna struck a deal to buy Humana for $37 billion and is part of an industry-wide consolidation that could result in the Big 5 health insurers merging into the Big 3. The deals are still subject to regulatory approval.

AT&T’s proposed $48 billion purchase of DirecTV has cleared its final regulatory hurdle after the FCC voted to approve the merger. At least three of the five commissioners voted in favor of the deal, which will combine the country’s No. 2 wireless carrier with the largest satellite-TV provider.

Meiji Yasuda Life Insurance has agreed to acquire US insurer StanCorp Financial Group for about $4.8 billion, joining several other Japanese insurers that are expanding abroad to counter the shrinking domestic market.

After nearly 30 years of development and testing, the world’s first malaria vaccine – called Mosquirix – has gotten approval from European drug regulators. The shot, which was developed by GlaxoSmithKline in partnership with the PATH Malaria Vaccine Initiative, is expected to be endorsed by the European Commission within a couple of months. Malaria infects around 200 million people a year and killed an estimated 584,000 in 2013.

Financial Review

A Spidey Monday

Sinclair Noe — June 22, 2015

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DOW + 103 = 18,119
SPX + 12 = 2122
NAS + 36 = 5153
10 YR YLD + 9 = 2.36%
OIL + .07 = 59.68
GOLD – 14.40 = 1186.90
SILV + .09 = 16.27

The Nasdaq Composite set a new closing and intraday record, topping the highs set on Thursday. The Russell 2000 gained 7 to close at 1292, a record high. The S&P 500 is a stone’s throw from record highs at 2130.

Eurozone leaders are held an emergency summit today to “urgently discuss the situation of Greece at the highest political level.” The summit comes just eight days before Athens needs to make a crucial €1.6-billion-euro payment to the IMF. Over the weekend, Greek PM Alexis Tsipras submitted a new reforms package to foreign creditors, signaling eleventh-hour concessions to avoid a possible default. The Greek government said its proposals included steps to eliminate early retirement options, hike the sales tax, increase tax surcharges that middle- and high-income earners pay and to introduce a levy on companies with annual net income of more than about $570,000.

Eurozone finance ministers welcomed the Greek proposals for a cash-for-reform deal but said they required detailed study and it would take several days to determine whether they can lead to an agreement to avert a default. The ministers agreed to reconvene later this week. And even if there is a deal between Greece and the Troika, Tsipras still faces a hard sale with his own parliament and Greek voters.

The European Union has extended sanctions against Russia by six months to the end of January, keeping up pressure on the Kremlin to bring peace to eastern Ukraine. The restrictions outlaw financing for major Russian banks, ban the export of sophisticated energy-exploration equipment, and prohibit the sale of weapons and some civilian goods with military uses. Debt-stricken Greece, which has been courting Russian economic aid, shied away from a veto.

The National Association of Realtors reports existing home sales increased 5.1 percent to an annual rate of 5.35 million units, the highest level since November 2009. The increase unwound April’s surprise drop in purchases. First-time buyers accounted for 32 percent of transactions, the largest share since September 2012. Relatively low borrowing costs are still supporting would-be buyers who can qualify for credit. The average rate for a 30-year fixed mortgage reached 4.04 percent in the week ended June 11. While that was the highest rate this year, it’s below the average 4.17 percent for all of 2014.The NAR said the median price of an existing home rose 7.9 percent from May 2014 to $228,700.

According to the NAR, sales of U.S. residential real estate to overseas buyers between April 2014 and March 2015 reached a record $104 billion, or about 8 percent of total existing home sales. While the number of properties sold slowed to 209,000 from 232,600 last year, buyers acquired more expensive properties, which brought up the sales total. Chinese were far and away the top foreign buyers of real estate last year, accounting for $28.6 billion in sales. Canada ranked second, with $11.2 billion, followed by India with $7.9 billion. Florida was the top state for overseas real estate buyers, accounting for 21 percent of all U.S. sales to foreign buyers. California ranked second, with 16 percent, followed by Texas with 8 percent and Arizona with 5 percent.

The Senate is scheduled to end the debate on “fast-track authority” for trade deals tomorrow, with a vote that will likely send the Trans-Pacific Partnership to the President’s desk. TPP would create a free trade zone covering 40% of the world economy – making it the largest trade deal since NAFTA.

Big decisions from the US Supreme Court. Rulings on 11 cases are expected to be announced this week, as the highest court in the US approaches the end of its spring term.

The Supreme Court this morning denied Google’s appeal and Google will have to defend claims that its Street View mapping software violates patents held by Vederi. The high court’s decision not to hear the case leaves intact a March 2014 ruling by the U.S. Court of Appeals for the Federal Circuit, which threw out a district judge’s finding that Google had not infringed on four different patents. The case will now return to lower courts for further proceedings.

In another case, the Supremes sided with a renegade raisin farmer in his battle against a federal program designed to keep excess raisins off the market. A majority of justices ruled that the Agriculture Department program, which seizes excess raisins from producers in order to prop up market prices during bumper crop years, amounted to an unconstitutional government “taking.” But they limited their verdict to raisins, lest they simultaneously overturn other government programs that limit production of goods without actually seizing private property.

In a 5-4 decision the Supremes boosted privacy rights by striking down as unconstitutional a Los Angeles city ordinance requiring hotel operators to show a list of registered guests to the police on demand.The court held that the guest-registry law violated the Fourth Amendment’s protection against unreasonable searches because the legislation gave hotel managers no chance to seek a ruling from a judge or magistrate before complying with a police request.

And in the case of Kimble v Marvel, aka, the Spider Man case, the court ruled that patent holders may not collect royalties on a patent after it expires. The case dealt with a toy that shoots out fake webs, à la Spider-Man. Justice Kagan, writing for the majority said, the parties set no end date for royalties, apparently contemplating that they would continue for as long as kids want to imitate Spider-Man (by doing whatever a spider can). Patents endow their holders with certain superpowers, but only for a limited time.

Things will get more serious later in the week with big announcements on the fate of gay marriage and Obamacare.

There is a merger and acquisition scramble going on in the healthcare insurance sector. Cigna’s board of directors has rejected a $47 billion takeover offer from Anthem, saying in a letter Sunday they were “deeply disappointed” in Anthem’s actions. The Cigna board was unanimous in their decision, which they called “inadequate” in their letter. Anthem announced its $184 a share offer on Saturday.

Others have been quietly maneuvering as well. UnitedHealth Group, the biggest American health insurer by revenue, recently made a preliminary approach to Aetna. And a number of companies (including Cigna) have indicated their interest in buying Humana, one of the smaller major insurers but one with a valuable Medicare franchise. It is still early to say how this will play out, but there is a good chance the Big 5 health insurers will soon be the Big 3.

Williams Companies has rejected an unsolicited buyout offer worth $48 billion from Energy Transfer Equity, but has hired banks to explore alternatives, including a merger, a sale of the company or simply continuing on its current path. Williams said the $64/share bid, a 33% premium to Friday’s closing price, “significantly undervalued” the company and would not deliver value commensurate with what it “expects to achieve on a standalone basis.”

Sequential Brands Group has reached a deal to acquire Martha Stewart Living Omnimedia for $353 million. The deal marks the end of Martha Stewart’s run as an independent company. (It went public in a 1999 IPO.) In recent years, it has suffered from sagging sales related to its core publishing business, as licensing and merchandising emerged as the company’s prime driver.

Over the last year, Facebook’s stock has jumped roughly 30% as the broader S&P 500 has barely managed to keep its head above water. The climb has added more than $65 billion to Facebook’s market value, and it is now bigger than Walmart. Market cap leapfrogging like this happens all the time. But this one might feel particularly ridiculous to many. If we size up Facebook and Walmart, there’s no contest as to which one has the larger economic footprint. By revenue, Walmart is the largest company in the world, with annual sales clocked in at $476 billion last year. Facebook recorded revenue of roughly $12.5 billion, bringing its market cap to more than $236 billion, just above Walmart’s $235 billion.

It represents a shift in the economy, from brick and mortar and industrial to technology. Of the 5 largest US companies in terms of market cap, 3 are tech companies; in order: Apple, Microsoft, Exxon Mobile, Berkshire Hathaway, and Google. The information sector’s share of economic output has stayed remarkably flat, at about 5% of GDP in 2014, roughly where it was in 1997. This is largely because GDP, the benchmark measure of “the economy”, is calculated by adding up monetary transactions. So while Facebook’s advertising sales contribute to GDP, the millions of users logging on for free each day don’t register at all. (The same goes for Google searches and visits to Wikipedia.) That benefit is what’s known as a “consumer surplus,” a benefit to well-being that’s not captured in traditional economic statistics.

Apple is about to launch a new $9.99 monthly music subscription service, Apple Music, on June 30, and to get folks to try it out, Apple will offer free three-month trial subscriptions. At the same time, Apple has told musicians it won’t pay royalties during this period because no money is coming in. At least that was the deal until Taylor Swift stepped up. Swift wrote a blog to Apple, saying: “We don’t ask you for free iPhones. Please don’t ask us to provide you with our music for no compensation.” Apple changed its tune and now says it will pay artists during the free three-month trial.