Financial Review

Good Luck

Sinclair Noe — August 23, 2017

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

Subscribe: Android | RSS

DOW – 87 = 21,812
SPX – 8 = 2444
NAS – 19 = 6278
RUT – 1 = 1369
10 Y – .04 = 2.17%
OIL – .06 = 48.35
GOLD + 5.90 = 1291.30
BITCOIN + 0.29% = 4203.23 USD
ETHEREUM – 1.81% = 318.06

Stocks fell for the first time in three days, the dollar slumped and Treasuries gained.

So, Trump was in Phoenix yesterday. Maybe you heard about that. He spoke for a little over an hour at a campaign rally at the Civic Center. We won’t try to recap everything he said (full transcript here), but there were a couple of important lines that have received particular attention.

First, in what almost seemed like an aside, Trump said, “If we have to close down our government, we’re building that wall. One way or the other, we’re going to get that wall.” That’s not what markets wanted to hear.

Congress needs to pass a spending measure by September 30 to keep the government open —the same time it’s facing a deadline to raise the nation’s debt limit. Failure to do so could cause a multitude of problems, as we have seen in the past. Fitch Ratings  warned the country risks a review of its sovereign rating if it fails to raise the limit next month.

Yesterday, Senate Majority Leader Mitch McConnell said there was zero chance of a government default on its debts; today the chance of a default is significantly higher than zero. Whether it was just a bluff or not, one thing is clear – it doesn’t look like Mexico will pay for the wall.

Trump also spoke about the difficulty in trying to negotiate a better trade agreement with Canada and Mexico, saying: “So I think we’ll end up probably terminating NAFTA at some point, OK? Probably.”

There were no details on what a post-NAFTA world might look like or how it might affect American business.  There was a brief mention of tax reform but absolutely no details of an actual plan.  The Dollar Index dropped .039% today, continuing a sharp downtrend for the year as investors have been looking for alternative safe havens in other markets, from Switzerland to Japan.

Trump spent about half the speech blasting the media and denying he is a racist, while recapping his response to Charlottesville and completely omitting his remarks of Tuesday, August 15. He went on to suggest that he would pardon convicted former Maricopa County Sheriff Joe Arpaio but did not make a formal pardon.

Then he ripped into Arizona’s two Republican senators, without naming names. However, it was clear he was talking about Senator Jeff Flake when he said, “nobody wants me to talk about your other senator, who’s weak on borders, weak on crime.” Last week Trump tweeted: “Great to see that Dr. Kelli Ward is running against Flake Jeff Flake.”

McCain cast the deciding vote that led to the Senate’s rejection of the “skinny repeal” bill, a watered-down version of a plan to repeal parts of the Affordable Care Act. McCain, who has been diagnosed with brain cancer, was one of three Republican senators who voted against the bill. And Trump decided to blast McCain, the longtime senior senator, former Republican presidential candidate, and war hero who is currently undergoing treatment for brain cancer.

If you thought you would never live long enough to hear a president mock a guy going through chemo for brain cancer, congratulations. You made it.

So, I guess vacation time is over. And after a visit to Reno, it is back to work on tax reform, infrastructure, funding the government, not defaulting on the debt, passing the defense authorization bill, NAFTA and all that.

These are important issues and there is no room for legislative error. Meanwhile, the New York Times reports the relationship between Trump and Senator Mitch McConnell has disintegrated to the point that they have not spoken to each other in weeks, and McConnell has privately expressed uncertainty that Trump will be able to salvage his administration after a series of summer crises.

What was once an uneasy governing alliance has curdled into a feud of mutual resentment and sometimes outright hostility. In a series of tweets this month, Trump criticized McConnell publicly, and berated him in a phone call that quickly devolved into a profane shouting match. A Republican “super PAC” aligned with McConnell released a web ad on Tuesday assailing Kelli Ward as a fringe-dwelling conspiracy theorist.

West Texas Intermediate crude dipped 6 cents to settle at $48.35 a barrel. The EIA reported today that oil stockpiles have dropped every week since late June and gasoline inventories also fell, while crude production climbed for a second week.

Meanwhile, Harvard University researchers have published a study showing Exxon Mobil misled the public about climate change for years even as its research echoed the growing scientific consensus that global warming is real and caused by human activity.

The findings potentially add grist to the mill as several attorneys general continue to investigate whether Exxon misled shareholders. The Securities and Exchange Commission is also probing how the oil major values its fossil fuel reserves considering global warming.

New-home sales tumbled in July. The Commerce Department reports sales of newly-constructed homes were at a seasonally adjusted annual rate of 571,000. That was 9.4% lower than an upwardly-adjusted June rate of 630,000, and 8.9% below the year-ago level.

The median sales price in July was $313,700, 6.3% higher than a year ago. At the current pace of sales, it would take 5.7 months to exhaust all supply, among the highest ratios of the past few years. The median sales price in July was $313,700, 6.3% higher than a year ago. At the current pace of sales, it would take 5.7 months to exhaust all supply, among the highest ratios of the past few years.

Newly built homes are more expensive than they’ve ever been before. They are also more expensive when compared to similar existing homes than they’ve ever been before. So, that’s why.

Lowe’s, the home-improvement retailer, dragged down the S&P 500 after it reported profit and revenue for the latest quarter that were weaker than analysts expected. It gave a profit outlook for the year that fell short of Wall Street’s forecast, and its stock fell 3.7 percent.

WPP is the world’s largest advertising agency and today the company lowered its full year forecast for net sales growth to 1 percent or even less, blaming the pull back on lowered spending by packaged goods companies. The packaged goods sector has become a battleground between online shopping giant Amazon and other e-commerce sites and traditional brick-and-mortar grocery stores and discount retailers.

Price wars and changing consumer tastes have turned some of the once mainstay brands into virtual commodities, with less supermarket shelf space and now less marketing clout. Weakness in advertising spending by major consumer product companies rippled through the global media industry. And WPP shares dropped about 10 percent.

Amazon has become the 800-pound gorilla of online retail, with the spillover effect of shutting down brick and mortar retailers. Who could fight such a behemoth? How about two 800-pound gorillas? Google and Walmart are testing the notion that an enemy’s enemy is a friend.

The two companies said Google would start offering Walmart products to people who shop on Google Express, the company’s online shopping mall. It’s the first time the world’s biggest retailer has made its products available online in the United States outside of its own website. The two companies said the partnership was less about how online shopping is done today, but where it is going in the future.

They said that they foresaw Walmart customers reordering items they purchased in the past by speaking to Google Home, the company’s voice-controlled speaker and an answer to Amazon’s Echo. The eventual plan is for Walmart customers to also shop using the Google Assistant, the artificially intelligent software assistant found in smartphones running Google’s Android software.

Walmart customers can link their accounts to Google, allowing the technology giant to learn their past shopping behavior to better predict what they want in the future. Google said that because more than 20 percent of searches conducted on smartphones these days are done by voice, it expects voice-based shopping to be not far behind.

There are more than 50 retailers on Google Express, including Target and Costco. Walmart is partially repurposing its stores into e-commerce fulfillment centers. Customers can now order their groceries online and then pick them up at hundreds of stores. For some items that they purchase online and pick up in a store, customers receive a discount.

Meanwhile, the Federal Trade Commission said today it’s decided not to pursue an investigation of Amazon’s purchase of Whole Foods – so, no antitrust problem.

Samsung announced the successor to the ill-fated Note 7 smartphone today, an updated phone named the Note 8. The new phone resembles a larger version of Samsung’s flagship devices, the S8 and S8+, but is slightly larger and includes a stylus called an “S pen,” which slips into the device. The Note 8 is big for a phone; it is also important for the success of Samsung.

The most important thing is that it doesn’t explode, hopefully.

The Powerball jackpot for Wednesday’s drawing is up to a little more than $700 million. After taking the lump sum and paying the taxes, you would end up with less than half that amount, but that’s still a lot of money. Even if you had to split the jackpot with another winner, it is still a lot of money.

Your odds of hitting the jackpot are about 292-million to one, so you really don’t have to worry about what to do if you win. Good luck.

Financial Review

The Last Man on the Moon

Sinclair Noe — January 17, 2017

Podcast: Play in new window | Download (Duration: 12:15 — 5.6MB)

Subscribe: iTunes | Android | RSS

DOW – 58 = 19,862
SPX – 6 = 2267
NAS – 35 = 5538
RUT – 19 = 1352
10 Y – .05 = 2.33%
OIL + .13 = 52.50
GOLD + 12.80 = 1216.40

Major market indices dropped at the open this morning and couldn’t recover. In a Friday interview with The Wall Street Journal, President-elect Trump said the U.S. currency, which touched a more-than 14-year high about two weeks ago, has gotten “too strong,” especially considering the China’s yuan is “dropping like a rock.”

Trump told the Wall Street Journal, “Our companies can’t compete with them now because our currency is too strong. And it’s killing us.” The stock market has been taking its cue from the dollar, and the dollar has been saying the US economy is strong and growing, and the prospects of the Fed raising rates only confirms the strength of the economy.

This is not the first time we’ve talked about the strong dollar, and the long dollar trade is already crowded, followed by short Treasuries. And there is another problem – while stocks have enjoyed a strong dollar, with money flowing in, dollar strength is generally bad for the rest of the world; which in turn makes US goods and services tougher to sell.

So, the markets are pricing in a strong dollar. And that brings us round to earnings season.  Companies in the S&P 500 are expected to report their bottom lines grew by 6.2% in Q-4, the latest data shows, the strongest growth since a 7.0% increase in Q-1 of Y 2014. And that has already been baked into the cake.

One thing is for sure, with a pricey market – the S&P 500 is trading at almost 17 times forward earnings estimates – investors need to be cautious as any miss or weak forward guidance will probably be punished with some steep selling.

Morgan Stanley said its quarterly earnings climbed 83% and beat analyst expectations as the bank logged its strongest fourth-quarter profit since the financial crisis. Morgan Stanley reported a profit of $1.6 billion, or 81 cents a share, in a quarter that included a surge of post-election trading activity. Revenue grew 17% to $9 billion.

Comerica reported fourth quarter earnings of 99 cents per share, 4 cents better than estimates. Comerica posted revenues of $722 million, which missed estimates. However, it compared favorably with the year-ago number of $699 million. Comerica, for instance, is up a tidy 85% Y/Y, including a 38% run over the last three months. And it looks like more than a 4-penny beat was anticipated.

MS down 3.7%. CMA down 6.5%. Most of the financials down today, including BAC, JPM, C, GS. And the banking ETFs  KRE is down 3.6% and the KBE down 3.4%. Bank earnings have been running hot, but having bid the sector sharply higher for nearly all of 2016, and particularly since the election, investors are selling the news.

UnitedHealth Group earned an adjusted $2.11 per share for the fourth quarter, 4 cents a share above estimates. Revenue also beat forecasts. UnitedHealth saw strength in its pharmacy benefit management business and noted a large increase in medical benefits customers during 2016.

Tiffany, The luxury goods retailer reported a 4 percent drop in holiday-period same-store sales, pointing to a decline in consumer spending. It also said sales at its flagship New York location were hurt by traffic disruption near Trump Tower.

Forget about a “soft Brexit”. U.K. Prime Minister Theresa May said Britain will leave the EU’s single market when it exits the European Union. May said she would seek an equal partnership with the EU but that she would not adopt models already used by other countries that have free trade agreements with the bloc. The EU says it won’t consider single-market access for the U.K. unless it accepts the “four freedoms”—goods, capital, services, and people.

She also warned the EU against taking punitive actions against the U.K. for leaving the bloc. Her announcement that she will put the final Brexit deal to a vote in both houses of parliament comes ahead of a court decision on whether she has the power to start the process of withdrawing without parliamentary approval. The British pound sterling posted big gains after May’s speech.

Making the first appearance by a Chinese leader at the World Economic Forum in Davos, Switzerland, President Xi Jinping said the world’s most important task is to revive the global economy and pressed his case for free trade. “Protectionism is like locking oneself in a dark room,” he declared. “No one will win a trade war.” He said economic globalization has become a “Pandora’s Box” for many, but that it was not the cause of many global problems. He added that international financial crises were caused by the excessive pursuit of profits, not globalization.

Deutsche Bank has reached a final settlement with the U.S. Justice Department over its handling of mortgage-backed securities before 2008, resolving one of its biggest litigation risks. The bank agreed to pay $7.2 billion and admitted to misleading investors. The penalty was in line with the bank’s Dec. 23 announcement that it had reached an agreement in principle in the matter. It will pay a $3.1 billion civil penalty and provide $4.1 billion in relief to homeowners. It is believed the settlement will leave Deutsche Bank thin in capital reserves.

The bank still faces investigations into whether it manipulated foreign-currency rates and precious metals prices and whether it facilitated transactions that helped investors illegally transfer billions of dollars out of Russia. And today, the U.S. Supreme Court refused to stop antitrust lawsuits that accuse some of the world’s biggest banks, including Deutsche Bank, of conspiring to rig the London Interbank Offered Rate, known as Libor.

British American Tobacco has agreed a $49 billion takeover of U.S. rival Reynolds American, creating the world’s biggest listed tobacco company after it increased an earlier offer by more than $2 billion. BAT already owned 42 percent of Reynolds. The deal, which values the whole of Reynolds at around $86 billion, will mark the return of BAT to the lucrative and highly regulated U.S. market after a 12-year absence, making it the only tobacco giant with a leading presence in American and international markets.

Exxon Mobil said it will buy companies owned by the Bass family of Fort Worth, Texas in a deal worth up to $6.6 billion that would more than double its output from the Permian basin. The acquired companies hold about 275,000 acres of leasehold that produces more than 18,000 net oil equivalent barrels per day.

Saudi Arabia says OPEC is on track to wrap up its production curbs by the middle of the year. Twenty-four nations signed up to a joint cutback of 1.8 million barrels a day on Dec. 10. OPEC and Russia won’t need to prolong output cuts beyond June because the agreed reductions will have already ended the oversupply in world crude markets. However, it is doubtful the production cuts will eliminate the existing supply glut.

General Motors announced long-held plans to invest about $1 billion in its U.S. factories. The investment will help GM create or retain more than 1,000 jobs; at least that was the initial report – now GM says it will add 5,000 jobs over several years. GM will also move production of some truck axles from Mexico to the United States, creating another 450 jobs.

Another 1,500 jobs will be created or “retained” from other investments; or 7,000 jobs in total. GM recently said it plans to lay off 2,700 US workers at plants in Ohio and Michigan that build slow-selling models such as the Chevy Cruze and the Cadillac ATS. So, let’s drop it down to 4,300. Still, that’s good, and you must give credit to GM – they have deflected a tweet-storm for now.

Hyundai Motor said it will invest as much as $3.1 billion in its existing U.S. manufacturing facilities, and is considering a new plant. Hyundai’s latest investment plan represents a nearly 50% increase from $2.1 billion the group invested in the U.S. during the previous five-year term. Hyundai currently has a factory in Montgomery, Alabama, while Kia runs a factory in Georgia.

Walmart plans to add about 10,000 retail jobs in the U.S. as it opens new stores and expands existing locations. The company plans $6.8 billion in capital investments in the U.S. in the coming fiscal year, which begins on Feb. 1. There will be 59 new, expanded and relocated Walmart and Sam’s Clubs locations. Walmart says there will also be about 24,000 construction jobs generated by its expansion plans.

Lowe’s, the home improvement retailer, plans to cut about 3,000 jobs, or about 1% of its workforce.

Gene Cernan, a U.S. Navy captain, veteran of three spaceflights, and the last man to walk on the moon, has died. He was 82. In December 1972, Cernan spent 3 days on the moon. At the end of the mission, Cernan scrawled his daughter’s initials into the lunar dust and climbed into the Challenger module behind his fellow crewmates; saying: “We leave as we came and, God willing, as we shall return, with peace and hope for all mankind.” No one has returned to the moon since.

Financial Review

A Go Figure Bounce

Sinclair Noe — February 24, 2016

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

Subscribe: iTunes | Android | RSS

DOW + 53 = 16,484
SPX + 8 = 1929
NAS + 39 = 4542
10 Y – .01 = 1.74%
OIL + .36 = 32.23
GOLD + 3.00 = 1229.40

Stock markets closed down in Asia and European shares dropped the most in two weeks. Investors continue to use oil prices as a gauge of the global economy. At an event in Houston on Tuesday, Saudi oil minister ruled out production cuts anytime soon, sending crude sharply lower despite talk of a mid-March oil producer meeting. New API figures showing a further build in U.S. stockpiles are also weighing on oil. Oil’s retreat, together with slowing growth in China, has dragged down global stocks about 8% since the start of the year.

Miners fell again, with Glencore and BHP Billiton losing more than 8% on the day. Statoil and Royal Dutch Shell were leading energy-related companies lower. Iran said the plan to freeze oil production was “ridiculous.”  Every member of the Stoxx 600 Banks Index declined.

For most of the session today, Wall Street was down. The Dow Industrial average started the morning with a 250-point drop, and was down about 150 points for most of the session, until the final hour of trade when suddenly and without much reason, stocks turned higher, oil turned higher, treasuries turned lower, and gold tanked. I wish I could offer some clear reason for the turnaround, but I haven’t really seen anything to explain the move. About 3 weeks ago we saw a turnaround that erased a 1.5% loss in the S&P; over the following week the index lost 3%. Go figure.

How low could the pound go? The British pound is worth less than $1.40 for the first time since 2007. While currencies move for a variety of different reasons, most speculate the drop this week is to do with uncertainty over the Brexit referendum in June. The pound fell hard on Monday after London Mayor Boris Johnson decided to support the UK leaving the European Union. Britons get to vote on whether the UK should stay in or leave the European Union in the EU referendum on June 23.

The dollar index is at 97.5, and trading in a range between 95.5 and 100. If the dollar can just hold steady at these levels. A stable dollar would be a boost to multi-nationals, commodity traders across the board, and almost everybody except American tourists. The strength of the dollar might well be determined by the direction of the Fed.

It is “still too early” to assess the implications of recent volatility in financial markets for the U.S. economy, so says Fed Vice Chairman Stanley Fischer. With regards to the FOMC’s upcoming policy meeting in March, Fischer said he couldn’t predict what officials are going to do “because, as I’ve emphasized in the past, we simply do not know.” Still, Fischer thinks there is a chance the recent sell-off on Wall Street may not damage the economy.

Meanwhile, Richmond Fed President Jeffrey Lacker said there is more room for the Federal Reserve to raise interest rates because the current level remains below the economy’s so-called natural real rate of interest. And Kansas City Fed President Esther George says it’s too soon to say whether the stock market selloff had “fundamentally” altered the outlook, and a rate hike should “absolutely” be on the table for mid-March. She even suggests that the Fed could surprise markets with a hike.

Investors currently view the probability of a single rate rise in 2016 at around 45 percent, according to trading in federal funds futures contracts. The FOMC next meets on March 15-16, and the best bet is that the Fed will hit the pause button.

For evidence, we look to the Fed minutes from the January FOMC meeting: “Almost all participants cited a number of recent events as indicative of tighter financial conditions in the United States; these events included declines in equity prices, a widening in credit spreads, a further rise in the exchange value of the dollar, and an increase in financial market volatility. Some participants also pointed to significantly tighter financing conditions for speculative-grade firms and small businesses, and to reports of tighter standards at banks.”

Purchases of new homes dropped more than forecast in January. Sales declined 9.2 percent to a 494,000 annualized pace after a 544,000 rate in December that was the strongest in 10 months. The supply of homes increased to 5.8 months from 5.1 months in December. There were 238,000 new houses on the market at the end of January, the most since October 2009. The median sales price of a new house declined 4.5 percent from January 2015 to $278,800.

Markit Economics’ monthly flash services purchasing manager’s index, a preliminary reading on the sector, fell into contraction for the first time in over two years. The tentative February index was reported Wednesday at 49.8. That’s below 50, the border between expansion and contraction. The services sector, which covers about two-thirds of the economy, is essentially having its worst month since the recession. The only exception is when the government shutdown disrupted business activity in October 2013.

The US is exporting liquefied natural gas. The first shipload is pulling out of port in Louisiana right about now. The United States expects to transition from a net importer of gas to a net exporter by 2017 as the nation’s shale gas production continues to grow. For now, prices remain low, around $2.61 per million British thermal units in 2015, the lowest annual average since 1999; and there is a glut. The first shipment is headed to Petrobras in Brazil.

Sugar futures on the Intercontinental Exchange staged their biggest daily gain in nearly 23 years, jumping 8.9% to settle at $0.139 a pound, after forecasts suggested supply may fall short of demand due to bad weather conditions. This year’s supply loss will be the first deficit in five years as harvests are hit by the El Nino weather phenomenon and heavy rain in Brazil, the world’s largest producer.

Brazilian police have charged the chief executive of Samarco – a joint venture between BHP Billiton and Vale – and six others with criminal homicide following the collapse of the miner’s dam last November that killed at least 19 people. The report concluded that the accident was caused by excess water in the dam, lack of proper monitoring, faulty equipment and failure in the drainage system. The police report also said that Samarco’s emergency plan to warn nearby villagers was insufficient.

New York State’s comptroller and four Exxon Mobil shareholders have asked the SEC to force the company to include a climate change resolution in its annual shareholder proxy. The move, the first since the Paris climate accord, ratchets up the tension between the oil producer and investors concerned that climate change or legislation designed to curb it will harm the business’s ability to operate profitably. It also comes as Exxon fights an inquiry by NY’s attorney general into whether it misled the public and shareholders about climate change risks.

Sharp’s board has begun a two-day meeting to decide if it should accept a $5.9 billion takeover by Taiwan’s Foxconn Technology. That figure is more than double the offer by the Innovation Network Corp of Japan, which was previously considered the more likely suitor for Sharp due to its government backing.

Viacom has launched a process to explore a strategic minority investment in Paramount Pictures, after being ranked last among Hollywood “majors” at the box office for four straight years. The news comes as the company faces pressure to consider spinning off assets from its core TV business.

Target posted a fourth-quarter profit of $1.4 billion, helped by a gain on the sale of its pharmacy and clinic businesses and lower overhead expenses.

Lowe’s said profit dropped in its latest quarter following its decision to exit an Australian joint venture, though adjusted earnings rose and the company offered upbeat guidance for the year. Last month, the home-improvement retailer said it would sell its 33.3% stake in an unprofitable Australian home-improvement store venture to Woolworths.

Chesapeake Energy reported its fourth-quarter loss widened and it unveiled further capex cuts and asset sales. The company said it had a net loss of $2.23 billion.

Airbus Group posted a 15% rise in profit for 2015 and reported sales grew 6%. Airbus and Boeing have enjoyed a prolonged period of high aircraft order bookings as airlines renew aging fleets and add planes to deliver growth. Investors have increasingly become concerned, though, the boom period may be nearing an end. Despite those worries, Airbus said it would lift production next year of the A330 wide body to seven planes a month from six.

The pharmaceutical group GlaxoSmithKline has been fined $3 billion after admitting bribing doctors and encouraging the prescription of unsuitable antidepressants to children. Glaxo is also expected to admit failing to report safety problems with the diabetes drug Avandia in a district court in Boston on Thursday.

The company encouraged sales reps in the US to misrepresent three drugs to doctors and lavished hospitality and kickbacks on those who agreed to write extra prescriptions, including trips to resorts in Bermuda, Jamaica and California. The company admitted corporate misconduct over the antidepressants Paxil and Wellbutrin and asthma drug Advair. GSK also paid for articles on its drugs to appear in medical journals and supposedly “independent” doctors were hired by the company to promote the treatments.

German luxury automaker Audi has topped the annual ranking of new vehicles by Consumer Reports despite the brand’s emissions-cheating scandal. In November, Audi admitted using separate software that allowed its diesel U.S. SUVs and larger cars to emit excess emissions.

Tesla’s Model S electric car was named Consumer Reports’ best overall car in 2014 and 2015, but this year the magazine opted not to name any best overall vehicle.

Financial Review

Most Powerful Might Not Be Enough

Sinclair Noe — February 3, 2016

Podcast: Play in new window | Download (Duration: 13:17 — 6.1MB)

Subscribe: iTunes | Android | RSS

DOW + 183 = 16,336
SPX + 9 = 1912
NAS – 12 = 4504
10 Y + .02 = 1.88%
OIL + 2.41 = 32.29
GOLD + 13.20 = 1143.20

Activity in the services sector slowed to a near two-year low in January. The Institute for Supply Management (ISM) said its index of non-manufacturing activity fell to 53.5 last month, the lowest level since February 2014, from 55.8 in December. A reading above 50 indicates expansion in the service sector. Service industries reported growth in new orders continued to slow, with export orders contracting last month.

Private-sector employment gains increased in January but at a slower pace than in the prior month. Employers added 205,000 jobs in January, according to Automatic Data Processing Inc. ADP tweaked December’s gain to 267,000 from a prior estimate of 257,000. The ADP report is used as an early predictor of the government’s monthly jobs report, due out Friday morning.

The Fed’s adding a new twist to its severely adverse scenario in this year’s stress test – asking lenders how they would handle a prolonged period of rates below zero. Ninety-day bill rates slipped below 0% a number of times over the past few years, but never stayed there for very long. Negative rates, of course, are breaking out all over Europe, and the Bank of Japan last week introduced negative deposit rates as part of its latest attempt to spur the economy into faster growth.

Japan could introduce more stimulus. Speaking this morning, Bank of Japan governor Haruhiko Kuroda said last week’s decision to introduce negative interest rates was “the most powerful monetary-policy framework in the history of modern central banking.” Kuroda also noted that if the policy weren’t enough to jump-start the economy, new tools could always be invented. Minutes released by the BOJ overnight showed an intense debate by board members over Friday’s sub-zero measures. Nikkei-3.2%.

ChemChina is offering to buy Switzerland’s Syngenta in a deal worth more than $43 billion – which would be the largest ever international takeover by a Chinese company. Syngenta’s board has recommended the 480 francs per share deal (a 20% premium based on Tuesday’s closing price) to shareholders. If completed, the transaction would help ChemChina transform into the world’s biggest supplier of pesticides and agrochemicals, and a major supplier of seeds.

China, the world’s largest agricultural market, is looking to secure food supply for its population. Only around 10 percent of Chinese farmland is efficient. Years of intensive farming combined with overuse of chemicals has degraded land and poisoned water supplies, leaving China vulnerable to crop shortages. Syngenta’s portfolio of chemicals and patent-protected seeds fits into Beijing’s plans to modernize agriculture over the next five years.

Home Depot is hiring more than 80,000 workers nationwide for its busy spring season, the same level as in recent years. The retailer estimates that more than half of the temporary workers stay on for permanent employment. The part-time and full-time jobs include sales, operations and cashier positions across all departments in stores as well as jobs at its distribution centers.

Home improvement and appliance giant Lowe’s is buying smaller Canadian counterpart RONA in a $2.3 billion deal. Lowe’s is expected to pay cash and acquire all issued and outstanding common shares of RONA for $24 in Canadian dollars per share. The estimated $2.3 billion transaction represents a premium of 104% to RONA’s closing share price on Tuesday.

General Motors posted a record net profit of $9.7 billion last year; more than double GM’s 2014 earnings and aided by a $3.9 billion fourth-quarter accounting gain because prospects for turning a profit in Europe are good. The company expects to break even there this year. Excluding special items, GM earned $5.02 per share for the year, beating Wall Street estimates of $4.82. Profits were fueled by strong SUV and truck sales largely in North America. Earnings were so strong that most of GM’s 49,600 hourly workers will get $11,000 profit-sharing checks on Feb. 26.

Toyota has issued an official statement that Scion will be killed off and folded into the Toyota brand. As of August, Scion models will be sold as Toyotas. Toyota didn’t specify how the company will support the 1,004 dealers selling Scion vehicles. Resolving franchise agreements with dealers of discontinued brands can be costly.

Sandeep Mathrani, CEO of General Growth Properties, was asked on an earnings call about mall traffic over the holiday season. He answered that traffic was up and attributed some of the increase to the number of items consumers buy online and then return to brick-and-mortar stores. Then he added, “and this case in point, you’ve got Amazon opening bricks and mortar bookstores and their goal is to open as I understand 300 to 400 bookstores.” Amazon said it does not comment on rumors.

Merck, the second-largest US drug maker behind Pfizer, forecast full-year earnings of $3.60 to $3.75 per share, well below the average estimates. Fourth-quarter revenue fell 3 percent to $10.2 billion, below analysts’ expectations of $10.3 billion. Sales would have risen 4 percent if not for the stronger dollar. Net income fell to $976 million from $7.3 billion. Merck reported disappointing fourth-quarter sales of its Januvia diabetes treatment and its Remicade arthritis drug.

British-based drug maker GlaxoSmithKline posted a loss of $616 million for the fourth quarter of 2015.

Comcast posted better-than-expected fourth-quarter revenue and added the most video customers in any quarter in eight years.

Just ten days after Moody’s put over half a trillion dollars in energy debt on review for downgrade, S&P decided it wanted to be the first one out of the gate with actual cuts. Companies that saw their ratings cut by one notch: Chevron, Apache, Continental Resources, Devon Energy, EOG Resources, Hess, Hunt Oil, Marathon Oil, Murphy Oil and Southwestern Energy. Oil futures settled below $30 a barrel again yesterday, but prices have taken a positive turn this morning after two days of steep declines.

Looking to return to the international capital markets, Argentina has agreed to pay $1.35 billion to a group of Italian investors whose bonds the country defaulted on in 2001, marking the first time the Latin American nation has reached an accord with holdout creditors. The deal sets a tough precedent for parallel negotiations taking place in New York between Argentina and another group of holdouts led by billionaire Paul Singer’s Elliott Management, who are seeking to be paid around $3.50 on the dollar, or a total of around $9 billion.

The European Union and United States have reached a deal over trans-Atlantic data sharing that would potentially extinguish the risk of costly litigation against companies by consumers worried about their privacy. The two sides have been trying to forge an agreement since October, when Europe’s top court struck down the previous pact in existence since 2000, known as the Safe Harbor agreement. Separately, the EU and U.S. are trying to bring the Transatlantic Trade and Investment Partnership to a close by the summer.

Some of the biggest names on Wall Street have piled into one trade – shorting the Chinese yuan. This, despite the fact that the Chinese government has threatened to punish anyone trying to pull the currency down. These aren’t empty threats, either. China has used its reserves to buy yuan and squeeze short sellers out of their positions. The country has $3 trillion in foreign exchange reserves to do this.

And yet no one is afraid – especially guys with huge funds like Pershing Square’s Bill Ackman and Hayman Capital’s Kyle Bass, who have admitted to being on the short side.  Barclays thinks that the country will, later this week, announce the largest single-month drop in its reserves in modern history.

This was surely a painful day for yuan-shorts. The dollar had its biggest decline in 7 years, and the drop started right after the ISM report on the service sector. The dollar’s pullback this week has reversed all the yen’s decline against the greenback on Friday when Bank of Japan introduced negative interest rates.

Currency traders are catching up to the bond market, where 10-year yields sank to the lowest in a year Wednesday, while futures are sending the strongest signal yet that traders expect the Fed to stand pat this year. The January employment report on Friday may determine whether the dollar selloff will continue. The jobs report will probably show the economy created fewer than 200,000 jobs for the first time since September.

As the dollar dropped, oil prices jumped higher, in part because oil is priced in dollars and a weaker dollar means more dollars to buy the same amount of oil. The markets shrugged off government data showing U.S. crude and gasoline inventories rose to record levels last week. Crude soared 7.8 million barrels higher, topping analysts’ expectations for a rise of 4.8 million barrels, as imports jumped and refiners trimmed throughput.

So, there is still a glut of oil. Total U.S. supplies stood at 503 million barrels a day for the week ended Jan. 29. The EIA said that’s “near levels not seen for this time of year in at least the last 80 years.” But now when the price moves, it squeezes the short positions, and that’s why we see so much volatility in oil prices, to the tune of 8% in one session; it is just plain old gambling, and that is a volatile game. And as oil moves it has been dragging stocks with it. Today, Exxon Mobil and Chevron were the big gainers in the Dow Industrials.