Financial Review

Insert Clever Eclipse Headline

Sinclair Noe — August 21, 2017

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

Subscribe: iTunes | Android | RSS

DOW + 29 = 21,703
SPX + 2 = 2428
NAS – 3 = 6213
RUT – 0.89 = 1356
10 Y – .01 = 2.18%
OIL – 1.11 = 47.40
GOLD + 7.10 = 1292.30
BITCOIN – 2.81% = 3940.88 USD
ETHEREUM – 2.52% = 315.65

Since August 7, the Dow Industrials have given back 397 points or 1.7%. The S&P 500 has slipped 0.08%, and the technology-weighted Nasdaq has led the way lower with a 2.6% move. Second-quarter results from S&P 500 reporting companies have been solid with 65% beating expectations. Guidance has largely also been quite positive.

The recent price action in equities has left the uptrend under pressure but at this point it doesn’t look like anything more than a pause – at least for the big Blue-Chip names. Small caps are having a tougher time. The Russell 2000 index of small and mid-cap companies moved into negative territory year-to-date.

Most recent economic data suggest the US economy is on better footing that it was in the first half of the year; which seems to be part of a trend for the past few years. This week, the markets are waiting to hear from Fed chair Janet Yellen; she delivers a speech at the Jackson Hole Economic Summit on Friday.

We know that the Fed has been raising rates and plans to trim holdings on its balance sheet, but last week’s minutes paint a picture of a cautious Fed. European Central Bank President Mario Draghi will also speak Friday. Don’t expect any big news on central bank policy.

The central bankers will be talking about economic growth and there will be plenty of discussions about low inflation. US inflation fell to 1.4 percent in June, based on the Fed’s preferred gauge, and consumer prices in the euro area – currently at 1.3 percent – have wavered since the start of the year.

Today, the Federal Reserve published a new survey providing extra detail on the labor market. The survey will be published 3 times a year. Survey says, workers see little hope for higher paychecks, and while they are increasingly searching for new jobs, they expect fewer offers to fall into their laps.

Survey respondents on average said in July that the lowest annual salary they would accept in a new job would be $57,960, down from $59,660 only four months earlier. This measure has declined since November, with most of the changes coming from older and higher-income Americans.

Asked what salary they expected in job offers over the next four months, the average response declined to $50,790 from $54,590 when the last survey was taken in March. The survey, conducted since early 2014 but published for the first time on today, also showed 22.7 percent of respondents searched for a job in the last four weeks, up from 19.4 percent in the previous report. Young people accounted for most of the increase.

The respondents saw a 22 percent likelihood of receiving at least one job offer in the next four months, down from an average response of 25 percent eight months ago.

Trump will speak this evening at 6 p.m. about “the path forward” for US strategy in Afghanistan and South Asia. He is expected to authorize about 4,000 more U.S. troops for counter-terrorism missions as part of a new military strategy in Afghanistan. After 16 years of stuttering war in Afghanistan, the Taliban has returned to its strongest level since 2001.

His plan comes just days after he fired his chief strategist, Steve Bannon, a vehement voice against sending more troops to Afghanistan, and the architect of Trump’s “America First” policy of limiting foreign engagement to situations where the US can benefit directly.

Tomorrow, Trump travels to Phoenix for a campaign rally at the Civic Center. Trump has said he is seriously considering a pardon for former Maricopa County Sheriff Joe Arpaio, who was found guilty of criminal contempt for defying a judge’s order in a racial profiling case.

Even without an announcement of a pardon, the visit could roil grievances and rallying cries after a week of protests in major cities across the country. Both Trump supporters and opponents are planning to demonstrate outside the rally, fueling police concerns about potential clashes.

The Washington Post reports the Trump administration has decided to disband the federal advisory panel for the National Climate Assessment, a group aimed at helping policy makers and private-sector officials incorporate the government’s climate analysis into long-term planning.

The Post said the charter for the 15-person Advisory Committee for the Sustained National Climate Assessment was due to expire Sunday. On Friday, National Oceanic and Atmospheric Administration acting administrator informed the committee’s leader that the agency wouldn’t renew the panel. The next National Climate Assessment is due for release next year.

A bit of hopeful news out of Washington today. Senate Majority Leader Mitch McConnell insisted the government will raise the debt ceiling and avoid defaulting on its debt. Treasury Secretary Steven Mnuchin has called for Congress to pass a bill to increase the borrowing limit by the end of September.

By then, the Treasury will have exhausted its so-called extraordinary measures to continue its borrowing authority and risks defaulting on its debt. The Treasury secretary has called for a “clean” debt-ceiling increase, meaning lawmakers would not attach spending cuts or other provisions to it.

Some conservatives, particularly in the House, have previously tried to pair measures to raise the debt ceiling with spending cuts. Mnuchin said the debt ceiling was his top priority when lawmakers return from recess next month.

Sempra Energy has placed a bid to buy Oncor for $9.45 billion in cash after majority owner Energy Future Holdings abandoned a deal to sell the Texas-based power transmission company to Warren Buffett’s Berkshire Hathaway. This represents a rare blow to Buffett, who avoids bidding wars for companies and had swooped in two months ago to buy Oncor after Texas regulators blocked two previous attempts by Energy Future to sell it.

Energy Future, which has been in bankruptcy since 2014, had initially planned to seek court approval today for the sale of Oncor to Berkshire for $9 billion over opposition from its biggest creditor, hedge fund Elliott Management. Instead, Energy Future will go with Sempra because of the value of the bid, a lower break-up fee and, most importantly, support from Elliott.

San Diego-based Sempra said it expected to own about 60 percent of a reorganized Oncor after it completes the transaction, which is valued at $18.8 billion, including debt. Energy Future owns 80 percent, but Sempra plans to sell some of that equity to other outside investors. A hearing on the revised reorganization plan and creditor support agreement was set for Sept. 6.

Total is buying Maersk’s oil and gas business in a $7.45 billion deal which the French energy major said would strengthen its operations in the North Sea and boost earnings and cash flow. For Danish company A.P. Moller Maersk, the sale of Maersk Oil, with reserves equivalent to around 1 billion barrels of oil, fits with a strategy of focusing on its shipping business.

Fiat Chrysler shares jumped almost 7% today after Great Wall Motors confirmed that it is interested in acquiring at least part of the company. The interest focuses on Fiat’s Jeep and Ram brands of off-road vehicles and trucks. Reports surfaced recently that a Chinese automaker was interested in placing a bid for the brands. Fiat Chrysler said in a statement it has not yet been approached by the Chinese automaker.

Johnson & Johnson was ordered by a California jury to pay $417 million to a woman who claimed she developed ovarian cancer after using the company’s talc-based Baby Powder. The Los Angeles Superior Court jury’s verdict is the largest to date in lawsuits alleging J&J failed to adequately warn consumers about the cancer risks of talc-based products.

The verdict included $70 million in compensatory damages and $347 million in punitive damages. It followed 5 trials in Missouri state court; Johnson and Johnson lost 4 of those trials, resulting in more than $300 million in verdicts against J&J. The company says it will appeal today’s verdict.

Today was the big solar eclipse. And it was probably a grand experience for people in the path of totality. Not such a big deal in Arizona, where we just had a partial eclipse. Hopefully, you did not try to look directly at the sun, unless you had special eyewear.

The pictures of the eclipse were great. My favorite is a picture taken in Wyoming, showing the moon covering about half the sun, and if you look closely, perfectly timed images show a tiny International Space Station passing in front of the sun. That must be one of the all-time great photobombs.

Many people did try to take pictures. And you may have noticed something strange. Your photos probably show the sun blown out in a blaze of light — not the crescent shape of a partial eclipse. But in some photos, a crescent did appear; it was just far from the actual sun and maybe looked blue. The effect is called a “lens flare,” which happens when a camera is exposed to a bright light.

In response, the lens captures some of the light as a reflection. Lens flares generally show up as little dots or circles, but during an eclipse they appear as small crescents. If you were hoping to capture what the eclipse looked like from your location, the crescent reflections that come out as lens flares are actually a pretty good representation. They are similar to the projections you might have seen through leaves or pinhole cameras.

And if you missed this eclipse or can’t wait to do it again, don’t worry. The next one is only 2,422 days away, April 8, 2024.

Financial Review

Settling a Score

Sinclair Noe — May 24, 2017

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

Subscribe: iTunes | Android | RSS

DOW + 74 = 21,012
SPX + 5 = 2404 (record)
NAS + 24 = 6163
RUT + 1 = 1382
10 Y – .02 = 2.26%
OIL – .15 = 51.32
GOLD + 7.90 = 1259.60
BITCOIN + 4% = 2537.16
ETHEREUM + 1.83% =  185.00

After 5 straight winning sessions, the S&P 500 closed at a new record high. The Nasdaq Comp is near a record.

The Federal Reserve released minutes of their May 3^rd FOMC policy meeting. The statement points toward a rate hike as soon as the Fed’s meeting in mid-June. According to minutes: “Most participants judged that if economic information came in about in line with their expectations it would soon be appropriate for the committee to take another step in removing some policy accommodation.”

Officials opted at the May meeting to leave the target range for their benchmark lending rate unchanged at 0.75 percent to 1 percent. They have projected three rate increases in 2017. They made the first rate hike in March. If they follow with 2 more hikes this year, we would be looking at rates around 1.25% to 1.5% by the end of the year, with a strong possibility for 4 more hikes next year.

Fed officials discussed a brightening global economic picture and viewed recent soft inflation and output data as likely caused by transitory factors. Growth slowed in the first quarter to an annualized pace of 0.7 percent, although the Fed expects the economy to bounce back in the second quarter.

Unemployment continued to decline. Labor Department data released two days after the meeting showed the jobless rate in April fell to 4.4 percent, the lowest reading since 2007 and beneath most economists’ estimates of the lowest sustainable level, or what might be considered full employment.

Policy makers have also said they would like to start shrinking their $4.5 trillion balance sheet by year-end, a move that may lift longer-term borrowing costs and dampen growth. It sounds scary to think that the Fed will soon reduce its war chest of bonds. Still, today after the minutes were released, Treasury values rose and longer-term yields fell.

One interpretation is that traders aren’t taking the Fed seriously. But another is that investors just received an unexpectedly concrete sense of the Fed’s methodology for unwinding its balance sheet, and it clearly indicates moving at a slow, gradual, incremental pace.

Fed members said they favored a method that included allowing a certain amount of their holdings to pay down without reinvesting the proceeds. The Fed would cap the amount of debt they’d allow to roll off at a certain level, and then would adjust that level every three months. Officials agreed they should provide additional details of the plan “soon.”

The dollar weakened slightly. Oil prices posted their first decline in six sessions. US crude supplies fell a seventh week in a row. Following the supply data, the price action became a function of positioning ahead of the OPEC meeting tomorrow. OPEC is expected to extend production cuts for 9 months, until March of 2018.  Data from the U.S. Energy Information Administration Wednesday showed that domestic crude supplies fell by 4.4 million barrels for the week ended May 19.

The last time the Congressional Budget Office scored the Republican health care bill back in March, it forced lawmakers to make major changes in order to prevent millions of Americans from losing their health coverage and lower premiums for the elderly. Amendments were added and another vote was held, this time without waiting for a CBO analysis – and the bill passed in the House.

The Congressional Budget Office today released their updated score for the American Health Care Act (AHCA), and the results are just as ugly as the first time. The report from the CBO on the amendments added just before the AHCA was passed by the House shows that 23 million more Americans could be uninsured by 2026 compared to the current healthcare system, slightly lower than the 24 million estimated under the previous iteration of the bill.

The CBO estimates that 14 million people who are currently covered would be uninsured as soon as the House plan were to be signed into law. And another nine million people would lose coverage over the course of the next decade. The AHCA, would also spike coverage costs in many states for people with pre-exiting conditions, especially for older Americans.

Importantly, the score projects that the AHCA will cut the federal deficit by $119 billion, $32 billion less than the $151 billion cut in the previous report. This was key because Republicans plan to consider the bill under the reconciliation process in the Senate. By these rules, the bill must shave off at least $2 billion from the federal deficit to be considered.

The Senate is expected to craft their own version of a healthcare bill instead of using the current form of the AHCA. The practical ramifications of the CBO’s latest report were more limited than its immediate political implications.

The House bill, as written, will not become law. Whatever proposal the Senate comes up with will have significant differences and will need a separate assessment by the CBO before a vote.

President Trump today continued his overseas tour with a visit to the Vatican. Pope Francis gave Trump a medallion engraved with the image of an olive tree – a symbol of peace, he explained.

Francis also presented Trump a signed copy of “Laudato Si’: On Care for Our Common Home”, the first papal encyclical focused solely on the environment. The two men spoke privately for about an hour-and-a-half. Next stop, Brussels.

Testifying to the House Budget Committee, Office of Management and Budget Director Mick Mulvaney suggested the government’s borrowing limit may need to be raised earlier than originally anticipated, citing “slower-than-expected” tax receipts.

The latest monthly budget report from the Treasury shows receipts are up almost 1% for the fiscal year to date. The year before, receipts were up about 1.2% through April, and the year before that, nearly 9%.

Sales of previously-owned homes sputtered in April after a strong first quarter. Lean inventory continued to constrain demand. The National Association of Realtors said existing-home sales ran at a seasonally adjusted annual rate of 5.57 million.

That was a 2.3% decline from March’s selling pace, which was revised down a tick but still stood at a 10-year high, though 1.6% higher compared to a year ago in April.

The median national sales price was $244,800 in April, a gain of 6% compared to a year ago. It was the 62nd-straight month of annual price gains. Despite that, first-time buyers managed to stage a small comeback.

They represented 34% of all buyers in April, up from 32% in March, though still below their long-time average of about 40%. NAR’s report also showed that 52% of homes sold in April were on the market for less than a month, which is a new high.

Sentier Research reports that median annual household income, adjusted for inflation, was $59,361 in April, a big 1% gain from March and a statistically significant move. For the first time since the U.S. entered the worst recession of the post-war era, the typical U.S. household has more income than it did when the century started.

Moody’s Investors Service downgraded China’s sovereign rating one notch to A1, which is two grades above junk status. The previous ratings cut was in November 1989 in the wake of Tiananmen Square.

In a statement, Moody’s said, “The downgrade reflects Moody’s expectation that China’s financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows.” China’s total debt is estimated at around 220% of gross domestic product as of 2015, with a large chunk of it owed by corporations.

Global financial markets shrugged off the news because it is more confirmation than revelation.

Ministerial buildings were set ablaze in the Brazilian capital today as tens of thousands of protesters took to the streets to demonstrate against government corruption, renewing calls for Brazilian President Michel Temer to step down.

The federal government filed a lawsuit against Fiat Chrysler, accusing it of using illegal engine-control software to enable its diesel-powered vehicles to pass emissions tests. The filing occurred days after Fiat Chrysler proposed a modification to the software to ensure correct test results in hopes of resolving the issue.

The Environmental Protection Agency accused Fiat Chrysler in January of installing the software on about 104,000 Ram pickup trucks and Jeep Grand Cherokee sport utility vehicles sold from 2014 through 2016.

The Fiat Chrysler problem is very like the legal woes of Volkswagen, which admitted to using “defeat device” software to enable its cars to pass emissions tests while spewing far more pollutants than allowed in normal driving. Volkswagen ended up paying billions of dollars in fines, several of its executives have been investigated or charged with crimes.

Facebook has signed deals with news and entertainment creators Vox Media, BuzzFeed, ATTN, Group Nine Media and others to make shows for its upcoming video service, which will feature long and short-form content. It is an attempt to deliver on Facebook Chief Executive Mark Zuckerberg’s remarks to investors earlier this month that the company was looking for so-called “anchor content” that would draw people to the video tab on Facebook’s app.

Financial Review

Harbingers

Sinclair Noe — March 22, 2017

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

Subscribe: iTunes | Android | RSS

DOW – 6 = 20,661
SPX + 4 = 2348
NAS + 27 = 5821
RUT – 0.95 = 1345
10 Y – .04 = 2.39%
OIL – .09 = 48.15
GOLD + 4.00 = 1249.20

London was shaken today by the first major terrorist attack since the 2005 subway bombings. Witnesses told of hearing multiple gunshots after a policeman was attacked outside Parliament. On Westminster Bridge, a car mowed down pedestrians. Two pedestrians and a police officer were killed, and at least 20 people injured, some very seriously.

A vehicle ran over pedestrians before crashing into a fence outside Parliament. A man wielding a knife then ran into the grounds and stabbed a police officer before being shot. Police believe the man, who died from his injuries, was the only attacker and are treating the attack as terrorism.

Global stocks were in retreat mode, but losses were relatively minor. Investors were taking some money out of equities and they’re putting their cash into government bonds.  European markets declined with many indexes down by about 1%. Asian markets ended the day with losses.

Japan’s Nikkei notched the biggest drop of 2.1%. The moves follow a sizable drop for US stocks yesterday. The Dow Industrials fell 1.1%, the S&P 500 dropped 1.2% and the Nasdaq was down 1.8%.

It was the worst day for stocks since October, but it was the first day in which the S&P 500 index traded in a 1 percent range since Dec. 14. In that time, the market did see one other one-day move of 1 percent or greater, when the S&P rose nearly 1.4 percent on March 1 — but since stocks opened sharply higher that day, the S&P did not manage a 1 percent intraday move.

Consequently, the index went 64 days without such a move, which is easily the longest-ever streak according to data that dates back to 1962. The second-place streak, of 34 days in 1995. In the past, after periods of calm, the market tends to continue moving in the direction of the trend – which is up, but calm is not the normal state for the market, so we can expect a period of increased volatility.

So, watch out for some big dips ahead.

That’s the historical tendency, however we also need to watch out for other markets – notably bonds, as we discussed yesterday; where we see a flattening yield curve, and it flattened even more today. A flattening curve means the economic outlook is dampening. When it grows steeper, like it did after the election, the economic outlook is brightening. But a flattening yield curve also influences the stock market negatively.

And if you are waiting for more volatility, you might not have to wait long. Healthcare legislation is schedule for a vote in the House of Representatives tomorrow. This is the first big piece of legislation for the Trump administration, and could serve as a harbinger.

After the health care legislation, Trump’s budget proposal will take front and center and he may face resistance from members of his own party for cuts to environmental programs. That’s due to an Obama administration practice that spread billions of dollars in contracts to Republican as well as Democratic congressional districts. Members of Congress typically resist efforts to cut spending that brings projects and jobs to their district.

A Bloomberg analysis of federal contract data shows that spending related to the environment reached 423 congressional districts in fiscal year 2016 and totaled $5.9 billion. Almost half that spending—47 percent—went to districts represented by Republicans.

Federal contract spending isn’t just spread across congressional districts. It’s also spread across contractors: Last year, 4,462 vendors got contracts categorized as related to the environment, climate, sustainability or similar fields.

Twenty-five publicly traded companies earned more than $10 million each from those contracts. Distributing federal largesse has been standard practice for the Department of Defense for many years, a lesson not lost on the Department of Energy.

President Trump’s second choice to lead the Labor Department is about to get a hearing. Alexander Acosta, a Florida law school dean, testified today. He follows Andrew Puzder, who withdrew his candidacy in February.

The National Association of Realtors says existing home sales declined 3.7% to a seasonally adjusted annual rate of 5.48 million units last month. The NAR says a persistent shortage of houses on the market is pushing up prices and sidelining potential buyers.

Housing inventory has dropped for 21 straight months on a year-on-year basis. With supply remaining tight, the median house price surged 7.7% from a year ago, to $228,400 in February. That marked the 60th consecutive month of year-on-year price gains.

The Mortgage Bankers Association reports mortgage application activity fell from a nearly four-month peak as borrowing costs on 30-year home loans held at their highest level almost three years. Mortgage apps fell 2.7% for the week ended March 18. Average interest rates on 30-year, fixed-rate conforming mortgages, the most widely held type of U.S. home loan, held for a second week at 4.46%, a level last seen in April 2014.

According to a new study from Spectrem Group, the number of millionaire households in America increased by 400,000 in 2016, reaching a new record of 10.8 million. Since the 2008 financial crisis, the number of millionaire households has grown every year, adding a total of 4 million millionaire households.

The number of multimillionaire households has also grown. There are now 1.4 million households worth $5 million or more and 156,000 households worth $25 million or more.

Nike reported earnings that beat estimates but total revenue was up just 5% in the last quarter. The company’s outlook wasn’t that great either. Nike said it expects sales growth to slow a bit this quarter. And future orders, a measure investors look at as a proxy for sales during the next few quarters, were down 4%. Nike is still growing rapidly in emerging markets as well as Asia. Nike was the worst performing stock in the Dow last year, falling nearly 20%.

FedEx said some of its largest retail customers shipped fewer packages during the holiday season than forecast, after the delivery giant had ramped up spending and staffing in anticipation of a crush of deliveries. The outcome hurt FedEx’s bottom line during the fiscal third quarter ended Feb 28. While revenue surged 18%, helped by higher rates and more packages shipped, overall margins fell because of a 30% rise in fuel costs and investments to keep up with e-commerce growth.

Fiat Chrysler is the latest automaker to be named in a growing French investigation into diesel emissions cheating. The Paris prosecutor has opened an investigation into potential aggravated fraud at Fiat Chrysler.

Fiat Chrysler acknowledged it was under investigation for “alleged consumer protection violations” but denied wrongdoing. French prosecutors were already investigating Renault and might open an investigation into PSA Group. This follows the $19 billion settlement between US regulators and Volkswagen.  Last week, German prosecutors raided VW headquarters as part of an ongoing investigation.

ING has confirmed a Dutch criminal investigation, but wouldn’t comment beyond the information presented in the bank’s annual report. The investigation relates to the “on-boarding of clients, money laundering, and corrupt practices,” per the 10-K filing, and can result in “significant” penalties.

Just days after finance chiefs of the world’s top 20 economies dropped their pledge for open trade, the European Central Bank has published a study claiming protectionist trade policies may increase, rather than reduce, a country’s trade deficit.

 Separately, Italy is calling for unambiguous support for an open global economy at a G7 finance ministers summit in May, saying they hope the upcoming G7 meeting yield a strong and clear message… against any temptation of protectionist closure.

T+ 3 is history. The SEC voted unanimously on rules to shorten the amount of time it takes for a securities trade to settle from three to two business days. Wall Street and consumer groups are largely supportive of the effort, as it reduces credit and market risk exposure.

Modern technology lets investors make trades in a matter of milliseconds. But since 1993, the SEC’s rules have required brokers to wait for three business days between the time an investor’s order is executed, to when the cash and ownership of the security are exchanged.

Dutch paints and coatings maker Akzo Nobel rejected a second takeover proposal from US rival PPG Industries, saying an improved $24.1 billion offer was still too low and too risky.

AT&T, Verizon, Enterprise Holdings, GSK and other major US advertisers are pulling hundreds of millions of dollars in business from Google and YouTube, following similar moves by advertisers in the UK. The problem is offensive and extremist content. For example, an ad on YouTube for the new Mercedes E-Class ran next to an ISIL video praising jihad that has been viewed more than 115,000 times.

Google pledged this week to keep offensive and extremist content away from ads, but the cleanup can’t happen fast enough. AT&T said that it is halting all ad spending on Google except for search ads. That means AT&T ads will not run on Google’s video service YouTube and on a couple million websites that take part in Google’s ad network.

AT&T emailed a statement saying: “We are deeply concerned that our ads may have appeared alongside YouTube content promoting terrorism and hate. Until Google can ensure this won’t happen again, we are removing our ads from Google’s non-search platforms.”

Financial Review

Had to Happen

Sinclair Noe — January 12, 2017

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

Subscribe: iTunes | Android | RSS

DOW – 63 = 19,891
SPX – 4 = 2270
NAS – 16 = 5547
RUT – 12 = 1361
10 Y – .01 = 2.36%
OIL + .80 = 53.05
GOLD + 5.20 = 1197.30

It had to happen – the Nasdaq Composite suffered its first loss of 2017, but it was a record setting run to start the New Year. The Dow Jones industrial average closed lower, with Goldman Sachs and Walt Disney contributing the most losses. At session lows, the blue-chips index had fallen more than 180 points.

Donald Trump’s press conference on Wednesday was not what investors wanted to hear; there was talk of protectionism. Trump took shots at the pharmaceutical industry, which sent health care and biotechnology stocks reeling. He also failed to provide new details on three of his key policies: tax reform, deregulation of certain sectors and fiscal stimulus. The lack of details of the President-Elects administration’s plans for economic stimulus simply left bullish investors empty handed.

European markets and most Asian markets ended the day with modest losses. Despite the negative sentiment, many global stock markets are near record highs. The USDA issued its World Agriculture Supply & Demand Estimates with bullish projections for soybeans, wheat and corn.

On the economic front:  Initial claims for unemployment benefits increased 10,000 to 237,000 in the week ended January 7. This marks 97 consecutive weeks of initial claims below 300,000, the longest streak since 1970.

Import prices increased 0.4 percent last month after an upwardly revised 0.2 percent decline in November. In the 12 months through December, import prices jumped 1.8 percent, the largest gain since March 2012. Import prices are rising as the drag from lower oil prices fades. The report also showed export prices rose 0.3 percent in December after slipping 0.1 percent in November. Export prices were up 1.1 percent from a year ago.

Several Federal Reserve officials are scheduled to speak today. St. Louis Fed President James Bullard said he doesn’t see any need to rush to raise rates in the near-term. On the flip side, Philadelphia President Patrick Harker sees three rate hikes this year, stating that the U.S. economy is “displaying considerable strength.” Fed Chair Janet Yellen is holding a town hall event with teachers tonight.

After debating seven hours through the night, the Senate narrowly passed a budget resolution early today, clearing the first major hurdle in the GOP effort to repeal Obamacare. House leaders plan to take it up tomorrow. Today’s vote was technically on a budget blueprint that sets the stage for a formal repeal vote, potentially within a few weeks. The step is, for now, procedural, but it signals Republican lawmakers are following through on their longstanding promises to axe the law.

In his press conference this week, President-elect Donald Trump assured Americans once again that Obamacare will be repealed and replaced, “essentially, simultaneously.” And we are still waiting on the replace part. The iShares US Healthcare ETF (IHF) flip flopped between positive and negative territory during the first two hours of the trading day.

And as confirmation hearings continue for the Trump Cabinet nominees in Washington DC, there is a steady stream of business leaders in and out of Trump Towers in New York. President-elect Donald Trump’s transition team has been actively considering ways to revamp a temporary visa program used to bring foreign workers to the United States to fill high-skilled jobs. Eric Schmidt, Executive Chairman of Alphabet/Google was spotted at the Tower, although we haven’t heard details of the visit.

Other deal-makers (and prospective deal-makers) are lining up in front of Trump Tower to kowtow to the President Elect include: SoftBank CEO Masayoshi Son, who wants approval for Sprint to participate in wireless consolidation, perhaps by buying T-Mobile. Alibaba CEO Jack Ma met; his company is the major asset of Yahoo in the process of a major asset sale to Verizon.

After that came the Monsanto and Bayer CEOs, who seek merger approval. Next up, AT&T leaders are arriving to talk up their Time Warner deal, which is complicated by Trump’s dislike of his coverage on CNN.

French far-right presidential candidate Marine Le Pen was seen at Trump Tower today but a spokesman for President-elect Donald Trump said she was not meeting with him or his team. “No meetings with anyone,” transition spokesman Sean Spicer said. “It’s a public building.” Although it is safe to assume Le Pen was not just loitering.

The U.S. Justice Department is not expected to bring antitrust action against U.S. airlines after finding little proof the four major carriers – Delta, Southwest, American, and United – coordinated to raise fares by curbing the supply of seats. Investigators failed to uncover sufficient evidence of collusion among airlines to restrain seats, since the DOJ’s probe began in the summer of 2015.

Delta Air Lines reported a 37 percent decline in fourth-quarter net profit to $622 million from $980 million a year earlier. Delta forecast passenger unit revenue, a closely watched metric, to be flat to up 2 percent in early 2017.

Shares in Italy’s biggest bank – UniCredit – are weakening as the firm said it’s writing off €8.1 billion ($8.6 billion) in bad loans. Shareholders are also set to vote on its plans to raise €13 billion ($13.8 billion) to shore up its finances. Several of the largest US banks are scheduled to report fourth quarter earnings tomorrow.

Johnson & Johnson has tentatively agreed with Actelion on a price to acquire the Swiss biotechnology company. Bloomberg reports the talks are now focused on valuing what would be a new unit that would house research and development assets. Before the current round of negotiations started in late December, J&J had made an offer for Actelion valued at about $260 per share, or more than $28B.

More home buyers are getting cold feet and bowing out of deals before the closing. According to an analysis by real-estate website Trulia, the percentage of homes that had an offer but failed to close rose to 3.9% in 2016, compared with 2015, when 2.1% of sales fizzled. The company defined a failed sale as any listing with a preliminary buyer agreement that reverted to for-sale status.

The highest share of failed sales overall was in the starter-home market, where 6.3% of buyers backed out of deals in 2016, up from 3.4% the year prior. That’s in part because starter homes, those valued in the bottom third of the region’s market, saw an influx of first-time home buyers last year. These buyers were more likely to hit financing hurdles or underestimate closing costs.

The Arizona Regional Multiple Listing Service reports overall sales in the Phoenix market in December rose 5.9% year-over-year. Cash sales were down to 23.1% of total sales. Active inventory is down 2.9% year-over-year.

Over the past five years, Amazon created over 150,000 jobs in the United States, growing its workforce here from 30,000 employees in 2011 to over 180,000 at the end of 2016. Today, the company announced that it plans to create an additional 100,000 full-time, full-benefit jobs in the U.S. over the next 18 months.

Apple is said to be planning to build a significant new business in original television shows and movies, a move that could make it a big player in Hollywood and offset slowing sales of iPhones and iPads.

More individuals could be charged in an ongoing investigation by U.S. authorities into Volkswagen’s diesel emissions cheating. The announcement comes after VW agreed with the U.S. government to pay $4.3B in fines and penalties, while six high-ranking employees were indicted in connection with a conspiracy to cheat emissions tests.

Fiat Chrysler shares were briefly halted after plummeting nearly 16% in response to the Environmental Protection Agency accusing the automaker of using emissions cheating software. The EPA said the software allowed excess diesel emissions in just over 100,000 U.S. trucks and SUVs sold since 2014.

The EPA said it believes the software allowed vehicles to generate excess pollution in violation of the Clean Air Act. The EPA alleges that the software was installed in light-duty models of the Jeep Cherokee for the years 2014-2016, as well as Dodge Ram 1500 trucks with 3.0 liter diesel engines sold in the United States.

Japan’s Takata Corp is expected to plead guilty to fraud charges as early as tomorrow as part of a $1 billion settlement with the Justice Department over its handling of air bag ruptures linked to 16 deaths worldwide, sources said. The settlement includes a $25 million criminal fine, $125 million in victim compensation and $850 million to compensate automakers who have suffered losses from massive recalls. As part of the deal, Takata might plead guilty to wire fraud charges, or providing false test data to U.S. regulators.

Ireland-based Shire Pharmaceuticals has agreed to pay $350 million to settle allegations that it bribed clinics and physicians to use its diabetic ulcer treatment. The U.S. attorney general for the Middle District of Florida, said Advanced BioHealing, a company Shire acquired in 2011, bribed providers with dinners, entertainment, travel and medical equipment to promote the use of Dermagraft, a skin substitute used to help treat foot ulcers. The kickback scheme caused false claims to be submitted to the Department of Veterans Affairs. Shire did not admit wrongdoing as part of the settlement.

Financial Review

Rarely the First

Sinclair Noe — January 9, 2017

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

Subscribe: iTunes | Android | RSS

DOW – 76 = 19,887
SPX – 8 = 2268
NAS + 10 = 5531 (record close)
RUT – 9 = 1357
10 Y – .04 = 2.38%
OIL – 2.16 = 52.71
GOLD + 9.20 = 1182.40

Oil prices were sharply lower this morning, as Iran upped exports and U.S. drillers increased activity again, moves undermining efforts by international producers to curb global oversupply.

Treasuries rose with gold today as the risk-on trade wobbled. Treasury yields sit lower than where they were before the Federal Reserve raised interest rates last month, while the dollar remained near a 14-year high.

The Dow, S&P 500, and Nasdaq all hit intraday highs on Friday – the Dow came within a fraction of a point of 20,000. Earnings for the S&P 500 are expected to increase by 6.1 percent in Q4, with the S&P financial sector see having the biggest gains, up 15.7 percent, per estimates from Thomson Reuters. Fourth quarter earnings season ramps up Friday, when JPMorgan Chase, Bank of America, and Wells Fargo report. Financial stocks have gained more than 30 percent since Election Day.

This is a busy week for Federal Reserve policymakers. Today, Atlanta Fed President Dennis Lockhart said the recovery from the economic crisis is “largely done,” and officials should now turn to addressing longer-term issues like how to boost productivity, raise investment, and try to counter trends that are holding down potential growth.

Lockhart said, the economy is near full employment, inflation is close to the Fed’s two percent goal, and the United States appears locked in for steady growth of around 2 percent annually. Lockhart did not address rate hikes directly, though he said he expected any future increases to come at a “gradual” pace.

Boston Fed President Eric Rosengren at a speech in Boston this morning said, “economic circumstances have evolved and now imply the need for a different stance of monetary policy,” Including “somewhat more regular” increases in short-term interest rates.

Rosengren said that what happens with fiscal policy will play a role in the exact timing of rate hikes. The commentary from Fed policymakers has taken a decidedly hawkish tone, and after a yearlong delay between rate hikes, I’m starting to get the feeling they will be more aggressive this year.

The British pound was tumbling to two-month lows this morning after U.K. Prime Minister Theresa May said in her first interview of the year that she was not interested in keeping “bits of membership” of the European Union in the execution of Brexit. The one priority that May has marked out – limits on EU migration – implies that British companies will face new barriers in selling goods and services to hundreds of millions of consumers in Europe.

The prime minister’s position runs counter to rules that require all members of Europe’s single trading market to allow free movement of people across their borders. UK Foreign Secretary Boris Johnson was in Washington today to meet with some of Donald Trump’s top advisers as Britain looks to build ties with the incoming administration ahead of the country’s withdrawal from the European Union.

Nine confirmation hearings begin on Capitol Hill this week, starting tomorrow with lawmakers questioning Attorney General-designate Sen. Jeff Sessions and Homeland Security Secretary-designate retired Gen. John Kelly. The lineup also includes five hearings on Wednesday, including: Rex Tillerson, the nominee for secretary of state; Betsy DeVos, for education secretary; CIA director designate Mike Pompeo; commerce pick Wilbur Ross; and Labor nominee Andrew Puzder; the same day the Senate is expected to vote on a step toward repealing much of the Affordable Care Act, and Wednesday marks Trump’s first news conference since the election.

State-run Chinese tabloid Global Times warned President-elect Donald Trump that China would “take revenge” if he reneged on the one-China policy, only hours after Taiwan’s president made a controversial stopover in Houston.

McDonald’s unloads its business in China. The fast-food giant sold 20-year rights to most of its business in Hong Kong and China to Citic and Carlyle Group for up to $2.1 billion. About one-third of McDonald’s 2,400 restaurants in mainland China and Hong Kong are franchised; this deal will franchise the rest of them. The new partnership plans to add 1,500 in the two areas over the next five years.

Yum China, spun off by its U.S. parent last year, is relaunching the Taco Bell brand in the country, after a near-decade-long absence, opening the first store in Shanghai today.

Fiat Chrysler will invest $1 billion in 2 manufacturing plants in the Midwest, which will add 2,000 new jobs in the U.S. and expand its sports utility and truck lineup. Fiat Chrysler will retool factories in Ohio and Michigan to build new Jeep sport utility vehicles, including a pickup truck, and potentially move production of a Ram heavy-duty pickup truck to Michigan from Mexico. The announcement comes days after Ford decided to scrap a plan to build a facility in Mexico, instead opting to invest in a plant in Michigan.

General Motors CEO Mary Barra says GM  has no plans to change where the automaker produces small cars because of Trump’s Twitter threat of a border tax.

Self-driving cars are a big theme at the North American International Auto Show, which kicked off yesterday in Detroit. Alphabet’s Waymo revealed that it has built all of its sensor hardware in-house and was ready to offer its autonomous-drive technology in “millions” of vehicles at a competitive price. A package of LIDAR sensors and radar, which used to run approximately $75,000 a few years ago, has fallen by more than 90%.

The FBI has arrested Volkswagen’s regulatory compliance executive, Oliver Schmidt, who faces conspiracy charges linked to Dieselgate. The arrest comes as VW nears a deal to pay the Department of Justice more than $3 billion to settle the emissions scandal’s criminal investigation, on top of the nearly $18 billion the automaker will pay to resolve civil claims.

Japan’s Takeda Pharmaceutical will buy cancer drug maker Ariad Pharmaceuticals in a deal valued at $5.2 billion, to beef up its oncology pipeline. Takeda has agreed to pay $24 in cash for each Ariad share, a premium of about 75 percent to its Friday close.

United Health Group is buying Surgical Care Affiliates, an outpatient surgery chain for $2.3 billion. The deal is expected to close in the first half of this year. Surgical Care Affiliates operates 205 surgical facilities, including specialized hospitals, in partnership with surgeons in 30 states.

Candy maker Mars said it will buy VCA, which makes Whiskas and Pedigree pet food and is also the largest operator of pet hospitals in the country. Price tag $7.7 billion.  Mars became the No. 1 pet food maker in 2014, after buying Procter & Gamble’s pet foods business, known for brands such as Iams and Natura, for $2.9 billion.

HMD Global, the Finnish company that owns the rights to use Nokia’s brand on mobile phones, launched the first new smartphone carrying the iconic handset name since 2014 when Nokia chose to sell its entire handset unit to Microsoft. The new device, Nokia 6, runs on Google’s Android platform and is manufactured by Foxconn. It will be sold exclusively in China for about $246.

IBM is the patent winner, again; that’s a 24-year streak and counting. In 2016, IBM filed 8,088 patents (22 per day; 2,700 related to artificial intelligence, cognitive and cloud computing) granted across its more than 8,500 inventors in 47 states and territories, and 47 countries. Samsung filed the second most patents, a mere 5,518.

Ten years ago, today, Steve Jobs introduced a new device called the iPhone. Jobs took to the Macworld stage and announced that “we’re going to make some history together today.” There were skeptics, including Microsoft CEO Steve Ballmer, who in 2007 said there was “no chance” the iPhone would get “any significant market share.”

Since then Apple has sold more than one billion iPhones, passing its billionth last July. The iPhone has grown to dominate the U.S. smartphone market. Its mobile operating system, iOS, is ranked second globally, behind Alphabet’s Android. And Apple’s market cap has climbed to over $628 billion. Current Apple CEO Tim Cook says the “best is yet to come.”

That remains to be seen. A lot can happen in a very short period of time. Apps, touch screens, voice recognition, fingerprint scanners, selfies; that’s all within the past 10 years. What will the next 10 years bring? Many people say AI is the next wave – computers we can talk to; and right now, Apple does not have a leadership position.

Amazon.com has a hit with the voice-based assistant Alexa. Alphabet’s Google is close behind. Partners with both companies spent several days at the CES tech show in Las Vegas last week introducing a deluge of devices powered by these competing technologies. Apple is working on its own device but it doesn’t have one yet. That doesn’t mean Apple is out of the game though. The history of Apple is rarely about being first—think of the iPod—but becoming dominant through superior design and execution.

Tonight, the Alabama Crimson Tide will take on the Clemson Tigers for the national college football championship – and the winner is: Nike. Last year Nike’s stock was the biggest Dow dog – down 20% – and one of only three in the index to fall in 2016. (Coca-Cola and Disney were the other laggards.)

So far in 2017, Nike is up about 5% and tonight’s championship game is basically a 3-hour ad for Nike. Both Alabama and Clemson have multi-year agreements in place with Nike. The Crimson Tide has an eight-year, $30 million deal that runs out in 2018. Clemson’s agreement with Nike, also for eight years, is worth $23 million and lasts until 2022.

Financial Review

Welcome to Earnings Reporting Season

Sinclair Noe — October 11, 2016

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

Subscribe: iTunes | Android | RSS

DOW – 200 = 18,128
SPX – 26 = 2136
NAS – 81 = 5246
10 Y + .02 = 1.76%
OIL – .49 = 50.86
GOLD – 7.00 = 1253.40

Alcoa reported third quarter earnings before the bell today, in what has been traditionally known as the start of earnings season. The raw aluminum and specialty parts maker missed estimates on both top and bottom lines. S&P 500 companies are expected to post their sixth straight quarter of declining earnings, according to FactSet data. And while sales are expected to break their six-quarter streak of declines, that optimism may be overdone, based on the dozens of sales warnings to pop up in the last several weeks.

When you look at a chart of the S&P 500, you’ll see we’ve been in a sideways or consolidation pattern since mid-July. Earnings season could be the catalyst for a breakout or a breakdown; with the S&P 500 trading at an historical high valuation in terms of P/E and P/S, the pressure is towards the downside.

In fact, stocks must justify the current 12-month trailing P/E of 25 and the current CAPE ratio of 27 (cyclically adjusted price to earnings ratio) through positive earnings growth. Analysts are usually very conservative on their predictions. Actual earnings have beaten analyst’s estimates since 2014. As this is well known by investors, one should not get too optimistic over the possibility that earnings may beat estimates by a small margin.

In fact, be careful to buy on slightly better than expected earnings given that valuations are high. Now, the good news is that most of the bad news has already been baked into price; by that, I mean we are all aware of concerns with Brexit, China, the price of oil, the US election, and a possible Fed rate hike. The bad news is that the market is complacent. The VIX is low at around 15.

Except for a couple of weeks in September, where the S&P took a big hit and then bounced back, the tight range has been getting tighter, like a rubber band wound to the limit. A break above the September highs of 2180 would serve as a bullish sign that could lead to new all-time highs. Today’s close below 2140 exposes weakness and a break down below 2120 looks dangerous.

Long-term bond yields continued to rise. The yield on the 10-year Treasury note was slightly higher at 1.76%. Earlier Tuesday it hit 1.8% for the first time since early June, marking a four-month high. Futures markets are now pricing in roughly 70% odds of a rate hike at the Fed’s December meeting. We should learn more tomorrow, when the Fed releases minutes of its last policy meeting.

British cabinet ministers are being warned that the Treasury could lose up to £66-billion-pounds a year in tax revenues under a “hard Brexit,” according to leaked government papers seen by The Times. The document also cautions that leaving the single market and switching to WTO rules could cause GDP to fall between 5.4%-9.5%.

The British pound sterling slipped below $1.23 and €1.11 in morning trading to its lowest value since last week’s flash crash. The fall in the pound has boosted the FTSE 100 as many of the companies in the index generate most of their revenues abroad. The UK’s benchmark index broke through its previous record intra-day level to hit 7,129.83 before losing some ground.

Igor Sechin, Russia’s most influential oil executive and the head of state-controlled energy giant Rosneft, said his company will not cap oil production as part of a possible agreement with OPEC. Sechin told reporters that Rosneft planned this year to raise its oil production, already the world’s largest among listed producers. Sechin said he doubted some OPEC countries, such as Iran, Saudi Arabia and Venezuela, would cut their output. Yesterday, WTI pushed above $51 per barrel after Vladimir Putin said Russia was ready to join an output freeze, but not one world producer has willingly taken one solitary barrel off the table this fall.

Samsung’s Galaxy Note 7 has been permanently discontinued, following a problematic recall operation that replaced Note 7 phones with faulty batteries at risk of explosion… with new phones that have the same batteries. The replacement lithium ion batteries in the phone tend to catch fire. The cost to Samsung of the Galaxy Note 7 could be $17 billion, the amount the company was expected to bring in from the sales cycle of the phone.

That figure doesn’t include the damage to the Samsung brand, though. Samsung shares have lost $18 billion in market cap since the problems started. If you have a Galaxy Note 7, and it doesn’t matter if it was the original phone or a phone with a replacement battery, just turn it off and get a refund and buy a phone that doesn’t explode.

Although Salesforce was thought to be out of the mix as of this weekend, a new report suggests the company is still evaluating the benefits of a Twitter deal and what an appropriate valuation might be. Meanwhile, in an internal memo reportedly sent to Twitter employees last week, CEO Jack Dorsey made no mention of any deals, instead highlighting initiatives revolving around the company’s live strategy and other merits.

General Electric said it would buy LM Wind Power, a maker of rotor blades used in wind turbines, from private equity firm Doughty Hanson for $1.65 billion, as it looks to capture a bigger share of the fast-growing renewable energy market. GE separated its renewable energy business from its power unit last year, following the $13.6 billion acquisition of Alstom SA’s power business. Denmark-based LM Wind Power is the largest supplier of rotor blades to GE.

Fiat Chrysler has reached a tentative deal with unionized workers in Canada by agreeing to make more than $300 million in investments for local operations. The pact was announced just minutes ahead of a midnight strike deadline that could have sent more than 9,000 Fiat workers off the job. Union members will vote on the accord at ratification meetings on October 16.

Chicago’s schools and its teachers’ union agreed to a contract proposal late on Monday, averting a strike set for today in the third largest U.S. public school system. Teachers contribute 2 percent to their pension, with the school board chipping in an additional 7 percent. Under Monday’s deal, new hires will not get the 7-percent “pension pickup,” but will get a salary adjustment to compensate for that.

Airbus plans to slow the assembly rate of its A380 to one aircraft per month from 2018 as the European plane maker struggles to revive sales of the world’s largest passenger jet.  Airbus’ assembly rate for the superjumbo currently stands at 2.5 aircraft per month.

Theranos has been sued by one of the blood testing start-up’s biggest backers, Partner Fund Management, for attracting $96 million in investment “through a series of lies, material misstatements, and omissions.” The suit accuses Elizabeth Holmes of deceiving the hedge fund by claiming Theranos had developed “proprietary technologies that worked” and was close to getting regulatory approvals. The suit comes less than a week after Theranos stopped all of its clinical operations, cutting 340 positions and closing its Wellness Centers where blood tests were performed.

A recent update from the Arizona Multiple Listing Service shows Phoenix real estate sales in September were up 6.3% year-over-year. Active inventory was up 3.4% year-over-year, marking the seventh consecutive month of increases in inventory. Cash sales declined to 20.2% of total sales. Meanwhile, foreclosure inventory continues to plunge across the nation, with the foreclosure inventory rate at 0.9% in August, down 29.6% compared to last year. Arizona has one of the lowest levels of foreclosure inventory, at just 0.3%.

Americans are increasingly shopping online and we have been spending less at the malls; overall, we just got tighter with money following the financial crisis. According to a new report from Morningstar, we have a shopping mall problem. The US has 23.5 square feet of retail space per person, compared with 16.4 square feet in Canada and 11.1 square feet in Australia – the next two countries with the highest retail space per capita.

Department stores like Sears, Macy’s, and JCPenney have been closing stores to try and get rid of unprofitable stores, and that’s had a devastating effect on malls. When an anchor stores closes, it often triggers a downward spiral in performance for shopping malls that in some cases has led to massive losses on loans.

When an anchor store closes, shopping malls don’t only lose the income and shopper traffic from that store’s business. It often triggers “co-tenancy clauses” that allow the remaining mall tenants to exercise the right to terminate their leases or renegotiate the terms, typically with a period of lower rents, until another retailer moves into the vacant anchor space. The Morningstar report supports a recent analysis from Credit Suisse that said about 200 shopping malls are at risk of shutting down if Sears continues to close stores.

Financial Review

CoCo Pop

Sinclair Noe — February 9, 2016

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

Subscribe: iTunes | Android | RSS

DOW – 12 = 16,014
SPX – 1 = 1852
NAS – 14 = 4268
10 Y – .01 = 1.73%
OIL – 1.41 = 28.28
GOLD – .20 = 1189.80

Japanese stocks crashed 5.4%, making for the biggest daily drop since June 2013. The sell-off has the Nikkei hovering near a 16-month low. The weakness in stocks caused safe-haven buying of the yen, which strengthened to 114.21 per dollar, its strongest level since November 2014.

Japan also became the first G-7 country to see the yield on its 10-year debt fall below zero, finishing at a record-low -0.035%, but the Swiss 10-year note is already at negative -0.37%, and the German 10-year bund is barely positive at 0.2%.

More than $7 trillion of government bonds offered yields below zero globally as of Monday. Bond prices are indicating a hint of panic. What plunging rates tell us is that markets are expecting very weak economies and possibly deflation for years to come, if not full-blown crisis.

Today, Wall Street tried a couple of half-hearted attempts to rally or maybe to sell-off; nothing went very far. The trend is still down; the severity of the downtrend depends on where you look. The Nasdaq Composite is down 17.9% from its July 20, 2015, closing peak of 5,218.86. The drop is far worse than the descent suffered by the Standard & Poor’s 500 stock index, which is down 13% from its May peak.

The general definition of a bear market is a decline of 20% or more from a prior record peak. The Nasdaq is down 14% this year, compared to a drop of about half that for the Dow Industrials. When you’re in a bull market the Nasdaq is going to outperform to the upside. But once it starts coming under attack you’re going to see it go down a lot more than the rest of the market.

Many tech stocks have already succumbed to a bear market, including Amazon, Apple, Cisco, Netflix and Tesla. Biotech stocks are also getting crushed, with the closely-watched iShares Nasdaq Biotechnology ETF down 26% so far in 2016.

Certainly, losers are not confined to the Nasdaq; think energy and financials. KBW Bank Shares are down about 20% this year. When investors sell bank shares or bet against the banks in credit markets, it can be a signal that a period of financial turbulence has entered a new, potentially more serious phase. It suggests that banks are becoming more vulnerable to the market volatility and any underlying economic weaknesses. Some of the big US banks have been hammered: Citigroup has lost more than a quarter of its price since the start of the year, same for Bank of America.

Markets have been nervously watching Deutsche Bank bonds, with CreditSights saying the bank may struggle to pay coupons on some of its riskiest securities next year, if financial results miss expectations. Deutsche Bank shares dropped 9% yesterday; however, this morning the share price is holding steady after the bank issued a statement saying it has the cash to meet coupon payments, and may even buy back some of its own debt.

Deutsche Bank’s CEO said today the bank is “rock solid”, which sounds good but it also sounds eerily similar to pronouncements from Bear Stearns in the days before it collapsed. The problem for Deutsche is CoCo bonds, or contingent convertibles, debt that can be converted into equity in the event of nonpayment; think of it as a bail-in.  Before I sound alarmist, remember central banks have become adept at keeping megabanks on life support.

The banks have a problem, several actually. They made loans to energy companies that could result in big losses. European banks lent to other commodities players, not just energy concerns, and many were active in lending in emerging markets (Deutsche Bank, the most under-capitalized of the megabanks, is almost certainly exposed to all these trades, and its stock has been swooning accordingly).

And that’s before you get to the fact that many banks already had corporate loans they had not written down sufficiently and those books can only be getting worse given low growth and borderline deflation in Europe.

The International Energy Agency says there is even more oil coming to market than they estimated.  Supply may exceed consumption by an average of 1.75 million barrels-per-day in the first half of 2016, compared with an estimate of 1.5 million last month, and the excess could swell if OPEC members increase production. The IEA report says: “With the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term.”

In other energy news: Responding to an earlier report that has cut the share price in half, Chesapeake Energy declared it “has no plans to pursue bankruptcy,” but is looking at its restructuring options “to maximize value for all shareholders.” Meanwhile, Cheniere Energy is closing its newly formed crude oil trading desk, just two months after the company’s board fired the CEO and promised to increase its focus on core businesses.

The Labor Department’s Job Openings and Labor Turnover Summary, or JOLT, shows job openings rose 5% to 5.6 million in December, the second-highest ever recorded, behind only July 2015, when it touched 5.7 million. Hires rose to 5.36 million from 5.25 million. That shows that employers and workers are matching up. When openings are much higher than hires, it may signal workers don’t have the skills employers need.

The number of Americans leaving jobs voluntarily rose 7% to 3.1 million in December. That was the highest “quits” rate since December 2006, and it shows worker confidence in the ability to find another job is picking up. Job switching is an important source of an individual’s wage growth. In addition to firms having to compete with better wages as the labor market tightens, the bump in wages reflects the presumed productivity enhancements of better matching workers with available jobs.

Janet Yellen goes to Congress tomorrow to deliver the Fed’s semiannual monetary policy report to the House Financial Services Committee on Wednesday and Senate Banking Committee on Thursday. Yellen’s prepared testimony will be released tomorrow morning and then she will subject herself to questioning from the politicians.

Despite the Fed’s constant drumbeats for transparency, Yellen will probably not make any major announcements about monetary policy; rather, look for acknowledgment that the Fed is monitoring global economic and financial developments, and maybe a hint that the Fed is not rushing to more rate hikes.

Meanwhile the San Francisco Fed has just published research showing that an economic expansion doesn’t just die of old age. Glenn Rudebusch, director of research at the San Francisco Fed and author of the study said, “The current recovery is no more likely to end simply because it’s approaching its seventh birthday.” In other words, an 80-month old expansion has the same chance of ending as a 40-month-old expansion.

Coca-Cola reported net income of $1.23 billion, or 28 cents a share, in the fourth quarter, up from $770 million, or 17 cents a share, in the year-earlier period. The results were a penny better than estimates.

Wendy’s reported fourth-quarter profit that beat expectations as it continues to see benefits from operating fewer of its restaurants itself. The company also said it anticipates same-store sales growth around 3%, slightly above what analysts were expecting, while its earnings forecast was in-line with analyst projections.

Sears Holdings warned that its fourth-quarter revenue would fall short of expectations. Based on the disappointing performance during the holiday shopping season, Sears said it will speed up the shuttering of unprofitable stores and look to further reduce costs. The company has recently flagged 50 stores for closure in the coming months and suggested today that it may raise that number.

In other earnings news: 21st Century Fox dropped in after reporting a downbeat full-year outlook. Toymaker Hasbro reported earnings topped estimates. Yelp dropped 11% yesterday after reporting heavy spending and announcing their CFO was leaving.

Disney reported its best earnings ever. Earnings jumped to $2.88 billion, or $1.73 a share, from $2.18 billion, or $1.27 a share, in the same quarter last year. Revenue grew 14%. Top line and bottom line beat estimates. Disney dropped almost 2% in after-hours trade because they don’t have another Star Wars movie ready for release in February I suppose.

SolarCity swung to an adjusted loss of $232 million in the fourth quarter, or $2.37 a share, compared with an adjusted per-share loss $1.47 in the year-ago period. Revenue reached $115 million in the quarter, up from $72 million a year ago.

But installations in the current quarter will drop almost 80% as they close operations in Nevada. SolarCity and other residential solar installers pulled out of Nevada as utility regulators there imposed new rules that made solar less attractive in the state. SolarCity down about 25% in after-hours trade.

Viacom is adding a new phase to a fledgling partnership with Snapchat, allowing it to sell advertising on the mobile app’s behalf. Under the deal, Viacom will have exclusive third-party rights to directly sell advertising surrounding Snapchat’s owned and operated content, and will add two new channels to Snapchat Discover, the media-centric story section of the popular service.

So what happened at Chipotle’s all-employee meeting? Co-Chief Executives Steve Ells and Montgomery Moran laid out plans to improve restaurant safety, such as central processing and increased testing of ingredients, while discouraging sick workers from coming to the restaurant by offering paid sick leave.

Chipotle also said it would spend about $10M to help local suppliers adhere to the company’s new safety measures. CMG shares have lost nearly a third of their value and sales have plunged about 30% since November, following reports of E. Coli sickness and two separate norovirus outbreaks.

Fiat Chrysler fell to a 52-week low yesterday after the NHTSA released documents that suggested that some of its vehicles can roll away when a driver thinks the transmission has been set to park. The probe into three Fiat Chrysler models affects about 856,000 cars; 121 incidents have led to crashes, with 30 leading to injuries.

CBS fell short of setting a new U.S. television-watching record as its Sunday night broadcast of the 50th Super Bowl averaged 111.9M viewers. The Broncos’ win over the Panthers ranked third in U.S. TV program history, behind last year’s NBC broadcast of the game, which drew 114.4M watchers and the 2014 Super Bowl on Fox, with an audience of 112.2M. Online streams of the game through CBS and the NFL averaged 1.4M viewers per minute.

Can you name the person with the most registered patents? If you guessed Thomas Edison, you are close but no cigar. Edison registered 1,093 patents. Artur Fischer registered 1,100. The German born Fischer passed away last week at the age of 96. He invented such things as the synchronous camera flash and the drywall anchor, plus hundreds of other gadgets and gizmos.

He started as a locksmith who spent much of his time tinkering.  In 1948, he founded his own company, the Fischer Group, which today has 42 international subsidiaries, employs 4,000 people worldwide and sells its 14,000 products in more than 100 countries.