Financial Review

23K(ish)

Sinclair Noe — October 17, 2017

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

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DOW + 40 = 22,997 (Record)
SPX + 1 = 2559 (Record)
NAS – 0.35 = 6623
RUT – 5 = 1497
10 Y – .01 = 2.30%
OIL + .14 = 52.01
GOLD – 9.70 = 1285.80

Cryptocurrency

• Number of Currencies: 881
• Total Market Cap: $164,018,283,218
• 24H Volume: $4,954,812,161

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	5,358.1	$89.65B	$1.86B	37.48%	1	-4.27%	+12.45%
	Ethereum	ETH	304.46	$29.07B	$530.61M	10.71%	0.0568999	-3.54%	+1.24%
	Ripple	XRP	0.22479	$8.75B	$412.24M	8.32%	0.00004228	-1.92%	-13.77%
	Bitcoin Cash	BCH	345.00	$5.95B	$942.47M	19.02%	0.0663392	-6.41%	+12.14%
	Litecoin	LTC	56.180	$3.01B	$208.32M	4.20%	0.0105002	-5.10%	+11.48%
	Dash	DASH	287.68	$2.21B	$41.24M	0.83%	0.0538494	-3.45%	-0.64%
	NEM	XEM	0.21036	$1.89B	$3.05M	0.06%	0.00003909	-5.30%	-2.68%
	NEO	NEO	29.112	$1.45B	$78.17M	1.58%	0.00540911	-8.06%	-4.17%
	Monero	XMR	89.19	$1.36B	$44.46M	0.90%	0.016648	-1.85%	+2.95%
	BitConnect	BCC	186.401	$1.34B	$13.34M	0.27%	0.0347181	-4.43%	+14.14%

The Dow Industrials and the S&P 500 hit another record high close. The Nasdaq Composite barely missed. The Dow briefly moved above 23,000 intraday – for the first time ever. Wait for 24,000 before you buy a hat.

It took 53 trading days for the Dow industrials to move from 22,000 to the 23,000 mark. Don’t know how long you might have to wait. Valuations seem a bit high at these levels. But a 1,000-point move isn’t what it used to be. If the Dow picks up another 1,000 points to reach 24,000, that will represent a 4.3% advance from the 23,000 mark.

Two senators announced a bipartisan breakthrough to shore up Obamacare, a least for the short-term. The agreement worked out by Republican Senator Lamar Alexander and Democratic Senator Patty Murray would meet some Democratic, including a revival of the subsidies for Obamacare and restoring $106 million in funding for a federal program that helps people enroll in insurance plans.

In exchange, Republicans would get more flexibility for states to offer a wider variety of health insurance plans while maintaining the requirement that sick and healthy people be charged the same rates for coverage. The deal still has to make it through both houses of Congress and be signed by Trump.

If it becomes law, it could end a chaotic situation for insurers after the White House moved last week to dismantle parts of the Affordable Care Act. Shares of U.S. hospital operators moved higher after news of the deal. Tenet shares were up 4 percent, while HCA was 2.3 percent higher. Shares of some health insurers also extended their gains on the day, with Anthem up 2.5 percent and Centene rising 2.8 percent.

UnitedHealth, the largest US health insurer, is the first health insurer to report and its third-quarter net earnings rose 26.3 percent, beating analysts’ expectations. Its shares rose more than 5 percent

Trade ministers from the United States, Canada and Mexico wrapped up a contentious round of NAFTA negotiations. The three sides agreed to carry on with talks and said they would negotiate into the first quarter of 2018, beyond the end-year framework initially envisaged to complete the negotiations.

Canada and Mexico have rejected U.S. proposals involving the dairy and auto sectors, dispute resolution, government procurement and a sunset clause that would effectively end NAFTA after five years unless all parties agree to extend it.

A federal judge in Hawaii on Tuesday granted a temporary restraining order against Trump’s third travel ban, just hours before it was set to take effect at midnight. Trump issued a proclamation last month restricting travel to the US from nationals of eight countries, including Iran, Syria, Yemen, Somalia, Venezuela, Chad, Libya, and North Korea.

Those restrictions came after the first two iterations of the travel ban, which targeted majority-Muslim nations, faced court challenges. Trump’s second travel ban was partly implemented, and the Supreme Court was scheduled to hear arguments on its constitutionality in October. But the justices removed oral arguments from the schedule after part of the second ban expired and Trump issued the third ban as a replacement in September.

The third ban will likely make its way to the Supreme Court, as well, though it must go through the appellate court system first. Another federal court is also expected to rule on the ban in a separate legal challenge. Almost immediately, the Department of Justice announced it would appeal the ruling.

Morgan Stanley and Goldman Sachs reported earnings and they followed a pattern of weak results due to calm markets. Like JPMorgan Chase and Citigroup, the firms that reported today showed a decline in fixed-income trading revenue. Low volatility has been problematic for Wall Street, especially compared with what was an active trading environment in the third quarter of 2016.

Goldman’s fixed-income trading revenue dropped 26 percent from a year ago, while Morgan Stanley posted a 21 percent decline. Still, both banks’ debt trading units slightly beat analyst expectations for the quarter. Morgan Stanley, Wells Fargo and JPMorgan all posted record revenue from their wealth- and asset-management units as stock markets hit records and after the Federal Reserve hiked interest rates three times in the past year.

Goldman Sachs also gained from rising markets, as its revenue from equity investments climbed to the highest in almost four years. JPMorgan, Citigroup, Bank of America and Wells Fargo boosted provisions for consumer loan losses from the previous quarter, which could be a leading indicator of a turn in the credit cycle. Goldman Sachs reported earnings of $5.02 per share vs. $4.17 expected.

Also, revenue of $8.33 billion also easily beat expectations of $7.54 billion. Goldman Sachs was down 2.6%. Morgan Stanley posted earnings of 93 cents a share – topping estimates of 81 cents. Morgan Stanley was up slightly.

IBM reported third-quarter net income of $2.7 billion, or $2.92 a share, compared to $3.2 billion, or $2.98 a share, in the year-ago period – still, that beat estimates. Revenue fell slightly to $19.1 billion from $19.2 billion in the year-ago period, marking the 22-consecutive quarter of revenue declines. IBM shares popped 4% in after-hours trade.

Yesterday, after the closing bell, Netflix reported earnings – a modest beat, but they added a whole bunch of subscribers. And one of the major reasons they keep adding subscribers is because they keep adding movies. Netflix has released at least 34 original movies so far in 2017. It plans to release 80 next year. That’s more titles than most movie studios release in a year.

Disney—which also owns Pixar, Marvel Studios, and Lucasfilm—released 13 movies in the US in 2016; Time Warner’s Warner Bros., New Line, Fine Line, Warner Independent, and Picturehouse studios released a combined 23 films; and Sony, which released the most, put out 38 movies throughout its studio portfolio last year, less than half of what Netflix is proposing.

Netflix is padding its already massive content budget to support the ambitious movie-release schedule it has planned. It expects to spend between $7-8 billion on content overall next year, up from $6 billion in 2017. Even with a recently announced hike in subscription fees, you have to wonder if Netflix is experiencing a bit of cash burn. Netflix shares dropped about $3 today.

Volvo and Chinese parent company Geely unveiled the first model of its new Polestar electric brand, and announced a more than $750 million investment to develop the brand further. It is the first step to developing high-performance electric cars that are aimed at some of the same customers targeted by makers such as Tesla.

The first production car will be the Polestar 1, a hybrid 600-horsepower two-door, four-seater hybrid coupe, with just above 90 miles of pure electric range. That car will go into production in 2019. It will be followed soon by an all-electric car aptly named the Polestar 2.

Industrial production in the U.S. rebounded in September after two straight declines, rising 0.3% in September. Capacity utilization rose to 76% from 75.8% but remained below summer levels.

Production for July, meanwhile, was revised to show a small decline instead of a 0.4% gain. The decline in August lowered to 0.7% from 0.9%. Most industries boosted output in September, led by construction and utilities.

Manufacturing production edged up 0.1%. The most notable decline was in chemicals, an industry concentrated in the South. A pair of major storms that swept through the region from Texas to Florida held down U.S. production by about 0.25 percentage points.

Industrial production fell at a 1.5% annual rate in the third quarter, but the Fed said its index would have risen at least 0.5% if not for the hurricanes. Other indicators of heavy industry points to steadily rising sales and production and that’s likely to help keep the U.S. on its current 2% annual growth path.

The cost of imported goods jumped 0.7% in September in the biggest gain in more than a year, led by fuel prices and industrial supplies. Excluding fuel, import prices rose a smaller 0.3%.

Sentiment among home builders spiked in October after faltering over the summer. The National Association of Home Builder’s monthly confidence gauge jumped four points to a reading of 68, the highest reading since May. The NAHB warned that builders need to be mindful of long-term repercussions from the recent hurricanes, such as intensified material price increases and labor shortages.

And a final note, if you follow the metals markets you may have noticed that palladium is now trading around $980, while platinum is just $938 an ounce. That reverses long-term price trends.

Financial Review

Monday, Maybe

Sinclair Noe — September 22, 2017

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

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SPX + 1 = 2502
NAS + 4 = 6426
RUT + 6 = 1450
10 Y – .02 = 2.26%
OIL + .11 = 50.66
GOLD + 6.50 = 1298.10

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	3,625.6	$60.47B	$1.18B	42.84%	1	+0.75%	-1.90%
	Ethereum	ETH	263.70	$25.09B	$405.81M	14.78%	0.0730023	+0.58%	3.57%
	Bitcoin Cash	BCH	410.63	$6.85B	$226.51M	8.25%	0.113792	+0.40%	-3.41%
	Ripple	XRP	0.17235	$6.61B	$34.62M	1.26%	0.00004755	-0.35%	-6.26%
	Dash	DASH	345.00	$2.61B	$69.79M	2.54%	0.0951904	+1.07%	17.61%
	Litecoin	LTC	47.230	$2.52B	$216.55M	7.89%	0.0130959	-1.21%	-5.23%
	NEM	XEM	0.20813	$1.89B	$2.88M	0.10%	0.00005792	+1.80%	-3.43%
	IOTA	MIOTA	0.51489	$1.43B	$8.98M	0.33%	0.00014143	+1.96%	3.79%
	Monero	XMR	87.75	$1.33B	$27.17M	0.99%	0.0242851	+0.29%	-13.39%
	Ethereum Classic	ETC	10.2433	$981.34M	$29.54M	1.08%	0.00282523	+0.42%	-3.95%

Is that true? Is it possible that the Dow Industrial Average went down for two consecutive sessions? It has been about a month since we have had back to back loses on the Dow. For the week, the Dow rose 0.4%, the S&P rose 0.1%, and the Nasdaq fell 0.3%.

Sen. John McCain announced today in a statement that he cannot “in good conscience” vote for the GOP’s latest plan to overhaul Obamacare, likely ending Republicans’ latest effort to repeal and replace the Affordable Care Act.

McCain wrote: “I believe we could do better working together, Republicans and Democrats, and have not yet really tried. Nor could I support it without knowing how much it will cost, how it will (affect) insurance premiums, and how many people will be helped or hurt by it. Without a full CBO score, which won’t be available by the end of the month, we won’t have reliable answers to any of those questions.”

McCain’s “no” vote means it is likely Republicans won’t be able to repeal and replace Obamacare before September 30, as Sen. Rand Paul of Kentucky said he would not back Graham-Cassidy and Sen. Susan Collins of Maine has said she is leaning “no” on the proposal. But there are still questions as to where Alaska Sen. Lisa Murkowski now.

Bottom line, 3 no votes kills the Graham-Cassidy bill but it won’t really die – not yet. Republicans can now write and pass another budget for fiscal 2018 that uses the same reconciliation procedure for health care legislation.

The trick would be combining it with a major tax overhaul, since the GOP is aiming to use reconciliation for that as well. Senate Finance Committee Chairman Orrin Hatch said today there’s “a chance” of combining the two efforts in a 2018 budget resolution.

McCain torpedoed the last GOP bill in July, returning to the Senate after being diagnosed with brain cancer only to cast a surprising and dramatic 50th vote against a limited-repeal of Obamacare offered by Majority Leader Mitch McConnell. But until today, he was officially undecided on the Graham-Cassidy proposal, apparently torn between his disgust for the party’s rushed, partisan legislative process and his famously close friendship with Graham, its most vocal salesman.

McCain acknowledged that his friendship with Graham put him in a difficult spot. “I take no pleasure in announcing my opposition. Far from it,” he said. “The bill’s authors are my dear friends, and I think the world of them. I know they are acting consistently with their beliefs and sense of what is best for the country. So am I.”

After the announcement, Graham tweeted: “My friendship with @SenJohnMcCain is not based on how he votes but respect for how he’s lived his life and the person he is.” Absolutely correct.

The latest repeal and replace defeat deepens doubt surrounding the GOP’s ability to get healthy on tax reform. The Senate’s late-July rejection of the initial push to repeal and replace Obamacare gave Republicans a chance to cut their losses. Congress could have begun a limited bipartisan effort to stabilize insurance marketplaces – which have grown in popularity during this year’s repeal battle — while the GOP moved on to the tax debate that unites the party more.

The much-anticipated tax plan crafted by the Trump administration and Republican congressional leadership is expected to be unveiled Wednesday, and that could provide positive momentum for stocks in the final week of the quarter. The S&P 500 is up 3.3 percent for the quarter so far. The Dow is up more than 4.6 percent for the quarter. The Nasdaq is up 4.7 percent for the quarter.

From what we have learned about the Graham-Cassidy bill, it wasn’t any better than earlier repeal efforts, and maybe worse. The ACA has plenty of problems but those problems would not be corrected by Graham-Cassidy. It probably didn’t help that all 50 Medicaid directors – that is every state – opposed the GOP’s latest health care bill, and a Brookings report indicated at least 21 million would lose insurance.

Have you heard that the world will end tomorrow? I am not making this up, someone else is. The Armageddon rumors sparked when a Christian numerologist called David Meade suggested Nibiru would plough into our planet on September 23. It’s all over the inter-webs.

Meade says Arizona is a good place to survive the collision. I don’t really know why that is. But I think, if there was a mystery planet headed for a collision with Earth, we might have seen it by now. So, will the world end tomorrow? Computer says… no.

But the People’s Democratic Republic of Korea might just blow up a hydrogen bomb in the Pacific Ocean. On Tuesday, during his speech at the United Nations, President Trump said his government would “totally destroy North Korea” if necessary to defend the United States or its allies.

On Friday, Kim Jong Un responded, saying North Korea “will consider with seriousness exercising of a corresponding, highest level of hard-line countermeasure in history.” The North Korean leader didn’t elaborate on the nature of this countermeasure, but his foreign minister provided a hint: North Korea might test a hydrogen bomb in the Pacific Ocean.

Atomic weapons are typically tested underground. An explosion on or above water would have nasty repercussions. More than 60 years after the United States tested a series of atomic bombs near Bikini Atoll in the Marshall Islands, the island remains “unlivable”.

There are signs that Mexico and Canada are increasingly less worried by the idea of the North American Free Trade Agreement (NAFTA) falling apart. Mexico’s foreign minister Luis Videgaray says “Mexico is much bigger than NAFTA,” arguing that an average 3% increase in tariffs that he thinks would come if NAFTA ended wouldn’t stop trade with the US. With negotiations among the US, Mexico, and Canada due to resume this weekend, he went further: “If NAFTA goes away…it’s not the end of the world.”

Shares of Sprint gained about 6% and T-Mobile gained about 1%, after Reuters said the companies are close to agreeing to tentative terms on a merger. Japan’s Softbank Group, Sprint’s majority shareholder, will own 40% to 50% of the combined entity. T-Mobile parent Deutsche Telekom will own a majority stake.

Apple launched its new line of smartphones and watches, and turned in their worst weekly performance for the week of a major product launch since the original iPhone was released back in 2007, following less-than-stellar product reviews.

There has been a tendency for Apple to slip after a product launch – buy the hype and sell the reality – but this week was particularly bad as Apple dropped 5%. That’s a loss of $50 billion dollars in market cap – Still, many investors are looking at it as a chance to buy.

On Tuesday, shares barely managed a gain after ho-hum iPhone 8 reviews. On Wednesday, shares dropped 1.7% after a few prominent Apple Watch Series 3 reviews complained about spotty connectivity, an issue Apple acknowledged it was seeking to solve. Thursday’s 1.7% decline followed an announcement that Google is spending $1.1 billion on a cooperation agreement with smartphone manufacturer HTC to produce the Pixel smartphone.

The FAANG companies – Facebook, Apple, Amazon.com, Netflix and Google holding company Alphabet have been able to put up stellar growth numbers for quite some time, without competing very much with each other. That’s starting to change.

Consider the case of Oracle, which announced fairly solid growth in its cloud business but offered up weak guidance – shares were slammed. It looks like Oracle might not have a big slice of the Cloud Pie. That leaves Amazon and Google, and maybe Microsoft to slug it out.

Google is investing in smartphones to battle it out with Apple. Facebook has been vying with Google over ad clicks. Amazon and Google are fighting over which device will power your home – Alexa or Google assistant. And how will you watch TV in the future? On YouTube, Apple TV, Amazon Instant video, or Netflix, which now comes complimentary with a subscription on T-Mobile.

The most amazing thing of all is that it has taken us the better part of two decades to arrive at a moment when tech companies actually see themselves as competitors. It will be very interesting to see how this new-found competition plays out because the future of the FAANGs is going to tell us a lot about the future of Wall Street, considering the FAANGs represent over $3 trillion in market capitalization — roughly 13% of the entire S&P 500.

London is one of Uber’s largest and most lucrative markets, with 40,000 drivers and 3.5 million people who use the app once every 90 days. But that number may soon be reduced to zero. The city’s regulator, Transport for London, said it denied the license because Uber’s “approach and conduct demonstrate a lack of corporate responsibility.”

Its license will expire on Sept. 30, although the company has 21 days to appeal—which it intends to do—and can carry on operating during the appeal process. The move is a win for taxis, but maybe not so much for customers.

The federal government told election officials in 21 states, including Arizona, that hackers targeted their systems last year, although in most cases the systems were not breached.

The government told The Associated Press last year that more than 20 states were targeted by hackers believed to be Russian agents before the 2016 elections. But for many states, the calls Friday from the Department of Homeland Security were the first official confirmation of whether their states were on the list.

Financial Review

Buckle Up

Sinclair Noe — September 5, 2017

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

Subscribe: Android | RSS

DOW – 234 = 21,753
SPX – 18 = 2457
NAS – 59 = 6375
RUT – 13 = 1399
10 Y – .09 = 2.07%
OIL + 1.33 = 48.62
GOLD + 5.60 = 1340.40

Top Cryptocurrencies

	Name	Symbol	Market Cap	Vol.	Total Vol. %	Price USD	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	$74.02B	$2.53B	34.53%	$4,473.09	1	9.96%	-2.61%
	Ethereum	ETH	$30.80B	$1.45B	19.87%	$326.11	0.0723002	17.46%	-13.15%
	Bitcoin Cash	BCH	$9.22B	$301.69M	4.12%	$556.93	0.123474	16.29%	1.71%
	Ripple	XRP	$8.50B	$224.64M	3.07%	$0.22	0.00004916	13.04%	0.95%
	Litecoin	LTC	$3.92B	$1.02B	13.97%	$74.33	0.0164803	20.61%	18.46%
	NEM	XEM	$2.67B	$7.12M	0.10%	$0.30	0.00006579	15.05%	3.75%
	Dash	DASH	$2.53B	$50.39M	0.69%	$335.99	0.0744907	16.05%	-7.81%
	Monero	XMR	$1.79B	$107.32M	1.47%	$119.10	0.0264057	20.18%	-8.73%
	IOTA	MIOTA	$1.75B	$38.18M	0.52%	$0.63	0.00013958	23.10%	-23.10%
	Ethereum Classic	ETC	$1.69B	$241.48M	3.30%	$17.78	0.00394118	19.44%	12.06%

Well, this is a rough start to a new month. It will be a wild September on Capitol Hill as Congress faces a massive number of legislative deadlines and initiative launches.

There’s must-pass legislation — like raising the debt ceiling and a bill to fund the government — and some long-gestating projects like the Republican plan to overhaul the tax code and a bipartisan effort to stabilize the individual health-insurance exchanges.

Throw in unexpected issues like funding for the Hurricane Harvey recovery effort, plus re-writing immigration policy with DACA rescinded, plus trying to avoid nuclear winter with North Korea and you might want to keep your seat belt buckled for the remainder of September.

A week after Hurricane Harvey made landfall, devastating Texas with torrential flooding, meteorologists are now intently focused on Hurricane Irma’s dangerous growth and projected path. The storm formed off the coast of western Africa last week and almost immediately started barreling toward the Caribbean Sea.

It has now metastasized into a Category 5 hurricane with winds up to 185 mph and possible storm surge of 11 feet. It is expected to hit or possibly just graze the US Virgin Islands and Puerto Rico tomorrow. It might hit southern Florida by Sunday, or it might skirt to the south of mainland Florida and move into the Gulf of Mexico.

Insurance stocks were the biggest decliners in the S&P 500 Index, with Barclays estimating insured losses in a worst-case scenario at $130 billion. Shares in Carnival, Royal Caribbean Cruises and Norwegian Cruise Line Holdings tumbled as Irma aimed at the South Florida hub for cruise-line operators. Orange juice futures for November jumped over 6% today. Category 5 is the top of the scale.

As of this morning, FEMA’s Disaster Relief Fund, which pays for the agency’s disaster response and recovery activity, had just $1 billion on hand. And of that, just $541 million was “immediately available” for response and recovery efforts related to Hurricane Harvey.

Republicans are planning to attach a provision to raise the debt ceiling to their initial Hurricane Harvey relief package, a move that could limit resistance to the effort to increase caps on government borrowing.

The $7.85 billion aid package to help re-fill FEMA’s coffers is scheduled to be taken up by the House tomorrow and will likely have a debt ceiling increase added when it makes it to the Senate. If the combined bill passes the Senate, it would then be sent back to the House for consideration.

The move is favored by the Republican leadership as a way to gain broader support for the debt ceiling increase, which must be raised by the end of the month to avoid an economic disaster. A bigger question is whether other stuff will be added to the debt ceiling increase. The more that is tacked on, the greater the chance of failure.

By the end of September, Congress must pass a bill to keep the government funded, or it risks a shutdown of nonessential functions. It must also raise the debt ceiling by early October to prevent breaching it and to avoid a default.

The bond market continues to reflect fears that the US government may soon run out of funding. A $20 billion auction on Tuesday for Treasury bills that expire in four weeks — just after the deadline for a bill to fund the government — drew the highest yield since the 2008 financial crisis.

This indicates that bond traders want a premium in return for expecting the government to repay them just as it may be running out of funding. For some perspective, the high yield, at 1.30%, was higher than when the government shut down in 2013.

Deferred Action for Childhood Arrivals or DACA, will end in 6 months. Attorney General Jeff Sessions announced the end of the program this morning, leaving almost 900,000 Dreamers in legal limbo.

No new DACA applications will be accepted after Tuesday. People already enrolled in DACA will continue to be protected until their permits expire, and those whose permits expire before March 5, 2018 can apply to renew for as long as two years.

Renewal applications must be received by October 5 of this year. People whose permits expire after March 5 cannot renew them. Sessions gave no details on how the program would be wound down, but a press release from the Department of Homeland Security — first reported by the news website Axios — said the program would be phased out over six months.

DHS did not rule out that anyone with expired DACA would then be subject to deportation. There will be no formal guidance that former DACA recipients are not eligible for deportation, and ICE officers in the field who encounter them will be making a case-by-case judgment as to whether to arrest that individual and process them for deportation.

The president’s statement makes it sound like Dreamers are often violent members of society who, even when they’re not committing crimes, are busy stealing native-born Americans’ jobs and draining scarce government resources.

The facts, however, paint a different picture.  According to an analysis by the Cato Institute, the typical Dreamer is young and employed at a job that earns about $17 per hour, 95% are either employed or in school, and they pay taxes but they are not eligible for federal welfare.

More than 70 percent of them are pursuing (or have attained) a bachelor’s degree. Dreamers over the age of 25 are more than twice as likely to start a new business than the national average. Cato estimates that ending DACA could cost nearly $280 billion in lost tax revenue over the next decade.

Business leaders and lawmakers from both parties have warned the president that ending the program would have economic and social consequences. Some Republicans, including House Speaker Paul Ryan of Wisconsin, said while they don’t agree with the executive action that began the policy five years ago, it should be up to Congress to come up with a more permanent solution.

The delayed repeal effectively kicks the issue to Congress for a resolution. There are a few legislative possibilities, including two bills introduced by Republican senators. The Dream Act of 2017 would codify parts of the DACA program, and the Bridge Act would extend those same protections for three years to give lawmakers more time to work out a more permanent solution.

So, now the question is whether Congress can get the job done. They still must deal with legislation to fund the government, raise the nation’s borrowing authority and increase disaster relief for victims of Hurricane Harvey and possibly Irma.

Now add in immigration reform – and if they try to tack DACA onto spending or debt ceiling legislation, or if they try to add building the wall onto immigration reform, it will be like throwing a monkey wrench in the sprocket.

What about tax reform legislation? Yea, not this month.

And remember, over the weekend North Korea exploded a test nuclear bomb. South Korea’s Asia Business Daily reported that North Korea had moved what looked like an intercontinental ballistic missile toward its west coast, possibly in preparation for a launch.

There are no good options for dealing with North Korea. The administration had threatened fire and fury, but no fire or fury – just a speech to by Nickie Haley before the UN. The administration wants China to impose economic muscle on North Korea, even threatening to retaliate against Chinese steel dumping and intellectual-property infringements, and vowing an implausible trade war with the U.S.’s largest trading partner.

Even less rationally, the administration has dropped hints it’s about to scrap a free-trade agreement with ally South Korea. The two main proposals put forward so far are tougher international sanctions, an idea promoted by the U.S., and the so-called “freeze for freeze,” favored by China, in which the U.S. freezes military exercises with South Korea in exchange for the North freezing its missile and nuclear tests.

Meanwhile, there are ongoing talks to renegotiate Nafta, so Mexican President Enrique Peña Nieto was in China to pursue his country’s Plan B. Rumblings of a free-trade deal between the two nations have grown since President Trump took office this year, but they’ve mostly been seen as political posturing.

But with Trump threatening regularly to dump the deal—even taking time last Sunday, during Hurricane Harvey, to say he “may have to terminate” NAFTA—the possibility of Mexico opening up to China seems ever more real. Trump’s stated goal to end NAFTA is to raise tariffs and incentivize U.S. companies to stop outsourcing jobs.

Whether that will work is a separate matter, but what he has done is to push Mexico, which counts the U.S. as its largest trading partner by far, into pursuing other options.

The Dow Jones Industrial Average lost 234 points, with the bulk of that downturn driven by declines in shares of Goldman Sachs and United Technologies. United Tech’s stock lost about 5.7%, after the industrial conglomerate said it had reached a deal to buy airplane-parts maker Rockwell Collins for $23 billion. The acquisition would be the largest in aerospace history.

The Commerce Department reports factory goods orders tumbled 3.3 percent with a slump in demand for transportation equipment. That was the biggest drop since August 2014 and followed a 3.2 percent surge in June.

Two weeks ago, Federal Reserve Governor Jerome Powell said low inflation allowed the Fed to be patient on a hike. Today, Fed Governor Lael Brainard said the U.S. central bank should go so far as to make clear it is comfortable pushing prices modestly above the Fed’s 2 percent target. The Fed’s preferred gauge stands at 1.4 percent.

Financial Review

A Deluge and an Eclipse

Sinclair Noe — April 27, 2017

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

Subscribe: iTunes | Android | RSS

DOW + 6 = 20,981
SPX + 1 = 2388
NAS + 23 = 6048 (record high close)
RUT – 2 = 1417
10 Y – .02 = 2.29%
OIL – 1.01 = 48.61
GOLD – 5.50 = 1264.50

Today brought a deluge of earnings.

Google parent Alphabet posted a 29 percent rise in quarterly profit, driven by a surge in advertising on mobiles and its popular YouTube video service. Alphabet’s net income rose to $5.43 billion. The company’s consolidated revenue rose 22 percent to $24.75 billion.

Google’s ad revenue, which accounts for a lion’s share of its business, rose 18 percent to $21.4 billion in the first quarter. Revenue from its Google Other unit, which includes Pixel smartphone, Play Store and cloud business, rose 49 percent to $3.10 billion.

Alphabet sales from its moonshots projects like Fiber and Nest also grew to $244 million in the quarter, up from $165 million a year earlier. However, Google’s loss for these ambitious projects ticked up slightly to $855 million. Up 5% in after-hours trade.

Also, after the closing bell, Amazon reported revenue of $35.7 billion, versus Wall Street estimates of $35.3 billion. A nice beat. This compares to $29.1 billion a year ago. EPS of $1.48, versus estimates of $1.13 per share. A big beat.

Analysts were also closely watching the performance of Amazon’s cloud computing unit, Amazon Web Services. AWS reported $3.66 billion in sales, and 43% percent growth, which is not quite as strong as the growth seen in the past 3 quarters but it is still a big beat. Amazon up almost 5% in after-hours trade.

Microsoft net income rose to $4.8 billion, or 61 cents per share, from $3.7 billion, or 47 cents per share, a year earlier. That was an earnings miss. Revenue climbed 6 percent to $23.5 billion, missing estimates.

Microsoft said LinkedIn, which it bought for about $26 billion, contributed $975 million in revenue in the quarter. Revenue from Microsoft’s personal computing unit, its largest by revenue, fell 7.4 percent. Demand for its cloud computing services failed to offset weak growth in its personal computing division. Microsoft down about 2% in after-hours.

Intel reported lower-than-expected revenue for the first quarter. Intel still gets most of its revenue from selling PC chips, a business that returned to growth in 2016 due to stabilizing demand in the second half of the year.

Revenue from Intel’s higher-margin data center business rose 6 percent to $4.2 billion in the quarter, missing analysts’ expectations. Revenue from client computing rose 6 percent to $8 billion. Intel’s net income rose to $2.96 billion, or 61 cents per share, from $2.05 billion, or 42 cents per share, a year earlier. That was a miss of 4 cents per share. Intel dropped about 3.5% after-hours.

Starbucks reported fiscal second-quarter profit of $652 million, or 45 cents per share – in line with estimates. Revenue of $5.29 billion was a slight miss. Comparable-store sales rose 3%, below analysts’ forecast for 3.6%.

United Parcel Service reported a higher-than-expected quarterly net profit as revenue grew across its domestic and international package delivery segments and as well as freight and supply chain operations.

Often seen as a bellwether of US economic activity, UPS said revenue increased to $15.3 billion in the first quarter from $14.4 billion in the year-ago period. Revenue beat estimates. Net income rose 2.4% to $1.15, also beating estimates.  During the quarter, UPS invested to expand its new Saturday deliveries, with $35 million in increased costs.

Ford Motor’s first-quarter profit fell 35% from a year earlier to $1.6 billion, down from $2.5 billion in 2016’s first period, when strong demand for a newly redesigned F-150 pickup truck helped Ford post its best quarterly operating profit in history.

Earnings per share were 39 cents in the latest quarter, beating analysts’ consensus of 36 cents. Revenue for the first quarter rose 4% to $39.1 billion, driven by a favorable mix of pickup trucks and sport-utility vehicles. Ford plans to cut $3 billion in costs this year and expects profit to rebound in 2018, driven by continued strength in the pickup-truck market.

American Airlines Group has a healthy track record with respect to earnings. The company has delivered positive earnings surprises in three of the last four quarters, with an average beat of 20%. The first quarter down 60% from the year ago quarter but it was another beat. Adjusted earnings per share came in at 61 cents per share, beating estimates of 57 cents. American shares dropped about 5% today.

American Airlines announced it was increasing pilot and flight attendant salaries an average of 6.5 percent, or by a total of $930 million through 2019. A JPMorgan analyst described it as a “wealth transfer” to labor groups. American CEO Doug Parker described the higher wages as a correction to years of “incredibly difficult times” for airline employees. American employees had been underpaid compared to other airline employees. Parker called the pay hikes an “investment” in better service.

Southwest Airlines dropped about 2%, after the air carrier reported first-quarter profit and revenue that missed expectations. CEO Gary Kelly announced that Southwest will no longer overbook its flights, ending a practice that sometimes leaves paying passengers without a seat.

It’s impossible for an airline to guarantee it will never have to bump a passenger. Carriers still must transport other pilots and crew members to work, and an air marshal could also need a seat. But ending overbooking does make it less likely.

Comcast beat expectations ahead of the bell and jumped 3%, while Abbvie performed similarly. Those companies were joined by railroad company Union UNP, which also gained 3% in early trade, and another pharmaceutical giant, Bristol-Myers Squibb + 3.5%. Other post-earnings gainers included KKR +5% and Domino’s Pizza, up 2.5%.

European markets closed slightly lower Thursday. The European Central Bank kept interest rates unchanged. ECB President Mario Draghi surprised some investors by explicitly recognizing the bloc’s economic recovery.

The euro initially reached the day’s peak of $1.0930 as Draghi struck an optimistic tone when answering questions from reporters. The ECB maintained a deposit rate of -0.4% for banks, a base interest rate of 0.0%, and a quantitative easing (QE) program of up to €60 billion per month.

President Trump said he’ll give the re-negotiation of the North American Free Trade Agreement a “good, strong shot” but reiterated he would “terminate” U.S. participation if he doesn’t get what he called a fair deal. He said he decided to have talks since pulling out would be a “shock to the system.”

House Speaker Paul Ryan said he’s confident Congress will pass a “short-term extension” of current government funding that would keep operations going past Friday. Ryan did not give a time for a vote.

A gauge of pending home sales declined in March as inventory continued to tighten. The National Association of Realtors’ index fell 0.8% to a reading of 111.4. The index forecasts future sales by tracking real estate transactions in which a contract has been signed, but the deal has not yet closed.

Thanks to a strong first quarter, the Realtors forecast sales in 2017 to rise 3.5% compared to 2016. But supply isn’t keeping up with demand. There were 3.8 months of supply in March, and properties stayed on the market an average of only 34 days. A balanced market is usually thought to have 6 months of supply.

West Virginia is coal country. Chris Beam, president of Appalachian Power, the state’s largest utility, is not a coal guy. Beam told the West Virginia Gazette-Mail he had a recent conversation with the governor of West Virginia, who asked him to burn more coal.  Beam responded, “That’s not going to happen.” And the reason is customers don’t want it.

Beam says the debate over climate change, and the role of coal in it, is essentially over. Appalachian Power’s parent company AES believes the regulation of carbon dioxide is inevitable. In the coming decades, renewable energy and natural gas are poised to dominate the fuel mix. Appalachian Power’s residential and industrial customers are now asking about switching to 100% renewables.

To get out in front of this growing demand, the utility, which serves more than a million customers across the US mid-Atlantic region, has begun preparing power plans that would allow customers to stop using fossil fuels. Appalachian Power estimates it will reduce its coal capacity from 60% of its energy mix to about 50% by 2020.

At the same time, wind and solar will rise from about 4% of capacity to 20% by 2031. And yes, West Virginia trails most of the rest of the country in its switch to renewables.

And we finish with a special note for the philatelists among us. The Postal Service will debut a new shape-shifting Forever stamp in June ahead of a rare solar eclipse set for Aug. 21. The new issue will transform from an image of a total solar eclipse into an image of the moon when you press it with your finger. The back will feature a U.S. map tracking when the eclipse will appear across the country.

It’s the first time a stamp will make use of thermochromic ink, which is sensitive to body heat (and changing temperatures — which means stamps should be kept away from direct sunlight). The stamp’s photo of the eclipse was taken in Libya in 2006 by an Arizona-based astrophysicist, Fred Espenak, aka Mr. Eclipse, of Portal, AZ.

Financial Review

Devil in the Detail

Sinclair Noe — April 26, 2017

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

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DOW – 21 = 20,975
SPX – 1 = 2387
NAS – 0.27 = 6025
RUT + 8 = 1419 (record close)
10 Y – .02 = 2.31%
OIL – .41 = 49.15
GOLD + 5.00 = 1270.00

Here’s the good news – it wasn’t a big down day.

Today was the big reveal on the president’s tax plan. White House chief economic advisor Gary Cohn and Treasury Secretary Steven Mnuchin presented the plan in a briefing to reporters at the White House. It largely echoes the proposal Trump outlined as a candidate and did not include some key details.

Trump’s plan will cut the number of income tax brackets from seven to three, with a top rate of 35 percent and lower rates of 25 percent and 10 percent. It is not clear what income ranges will fall under those brackets. The plan would exempt the first $24,000 of income from taxation.

It would also double the standard deduction. It would eliminate tax deductions, with only a few exceptions, including the mortgage interest, retirement savings and charitable contribution deductions. Trump’s plan would also repeal the alternative minimum tax and 3.8 percent Obamacare taxes.

The plan would get rid of the estate tax. The estate tax affects only a very small portion of Americans – individuals with a net worth above $5 million, or $10 million for a married couple, who otherwise do no planning. Eliminating the Alternative minimum and the estate tax are largely benefit wealthy taxpayers.

The proposal will cut the corporate tax rate to 15 percent from 35 percent. The White House said there will be a “one-time tax” on the trillions of dollars held by corporations overseas. However, Mnuchin said the rate for that tax has yet to be determined but the White House is “working with the House and Senate” on a repatriation rate, saying it would be “very competitive.”

Markets were expecting a lot of specifics and a specific rate on repatriation and they didn’t get it. Repatriation might have limited impact on the dollar. At Apple, which has the most overseas cash among S&P 500 members, more than 90 percent of its $216 billion stash is in US dollars.

For Microsoft, the second-largest holder of money abroad, dollar-denominated bonds alone make up more than 60 percent of total cash, based on securities filings. Repatriation could impact stock prices, as many companies would use repatriated dollars for share buybacks.

There are a few problems, and one of the first you may have noticed is that there would be a big difference between the proposed rates for individuals and for corporations. Any individual taxed above 15% would be sorely tempted to be taxed at the corporate rate.

Mnuchin also said the U.S. would go to a “territorial” tax system. Though further details were not forthcoming, such systems typically exclude most or all the income that businesses earn overseas. The proposal didn’t include any mention of a border-adjusted tax.

Mnuchin would not answer if the plan would be “revenue neutral,” meaning whether it would result in a larger budget deficit. He contended that it would “pay for itself with growth and with … reduction of different deductions and closing loopholes.”

Mnuchin’s argument is that tax cuts will lead people to work harder, but economic theory is ambiguous on this point, as some people will maintain their same after-tax income while working less. And, of course, most people can’t tweak their work schedules like this anyway when the tax code changes. “Accounting for the economic growth” allegedly generated by a tax plan is called “dynamic scoring”.

The Tax Policy Center is known for careful, state-of-the-art analysis, and their early analysis finds that the tax-cut plan losing between $6.15 trillion and $5.97 trillion in revenue over 10 years. If the revenue loss means less investment in public goods, including both productivity-boosting physical and human capital, growth could be slower.

Mnuchin claims the tax cuts would result in 3% growth. Getting to 3% growth and staying there would require a burst of productivity growth that’s never been seen in this country before. The administration is banking on tax cuts and deregulation to deliver that productivity revolution, but there’s no historical evidence that either policy can deliver the magnitude of investment that would be needed.

There is no historical precedent that confirms tax cuts create strong growth that could make this tax cut plan revenue neutral. Investment should have boomed when tax rates were low, and faltered when Presidents George H.W. Bush and Bill Clinton raised the top marginal rate in the early 1990s. But that didn’t happen: Investment increased in the mid-1980s as the economy improved, then faded even as tax rates were lowered further.

Investment boomed after the Bush-Clinton tax hikes, and increased again after the tax cuts early in President George W. Bush’s first term. It appears investment is driven largely by economic forces, not by marginal tax rates. The tax rate isn’t totally irrelevant, but it’s not that important either.

The plan that has been announced today is very aggressive, and unlikely to pass, at least in its current form; which is basically a rough draft.

There was a Q&A session with Mnuchin and Cohn following the presentation. They could not answer some basic questions such as: what is the overall size of the tax plan in dollars? What would it mean to a median American family of four making about $60,000? – How about their tax bill? The response was that they were working on details. Of course, the devil is in the details, which means that any chance of timely change in the tax code will be wicked hard to pass.

The House Freedom Caucus, a group of conservatives who were instrumental in blocking President Trump’s plan to repeal the Affordable Care Act last month, gave its approval today to a new, more conservative version. The bill has a chance to get through the House, possibly as early as Friday or Saturday.

It was not clear whether conservative support for the revised legislation would be matched by losses in the center. The latest proposal would allow states to obtain waivers from federal mandates that insurers cover certain “essential health benefits,” like emergency services, maternity care, and mental health and substance abuse services.

The new plan would still allow an age-rating scheme that allows older people to be charged more, and would dramatically inflate costs for older low-income people. It would permit states to waive requirements that insurers charge the same rates for people the same age, essentially ending the current ban on rejecting coverage for pre-existing conditions if state governments establish high-risk pools where sick people can purchase health care.

While the law doesn’t allow insurers to bar coverage for sick and elderly people, it doesn’t limit how much they can be charged, which means they can be functionally priced out of coverage.

The White House is considering a draft executive order to withdraw the United States from the North American Free Trade Agreement. The possible executive order, first reported by Politico, sent stocks and currencies falling in Mexico and Canada.

It was not clear what the language of the executive order would be, or what steps would come next. But an executive order could start a required six-month notification period for withdrawal, during which time talks on renegotiation could be pursued.

The chairman of the Federal Communications Commission, Ajit Pai, has outlined a sweeping plan to loosen the government’s oversight of high-speed internet providers. Pai, said high-speed internet service should no longer be treated like a public utility with strict rules, as it is now. Instead, he said, the industry should largely be left to police itself.

The existing rules are meant to prevent broadband providers like AT&T and Comcast from giving special treatment to any streaming videos, news sites and other content. The rules were intended to ensure an open internet, meaning that no content could be blocked by broadband providers and that the internet would not be divided into pay-to-play fast lanes for internet and media companies that can afford it and slow lanes for everyone else.

Pai said he was generally supportive of the idea behind net neutrality but said the rules went too far and were not necessary for an open internet. The new plan could include only voluntary commitments by broadband companies. Consumer groups and tech companies have warned of a legal challenge. The current net neutrality rules were affirmed by a federal appeals court, which could put an extra burden on Mr. Pai to justify his changes.

The Trump administration hosted senators for an extraordinary White House briefing on North Korea. All 100 senators were invited and transported in buses for the unprecedented, classified briefing. President Trump’s secretary of state, secretary of defense, top general, and national intelligence director outlined the North’s escalating nuclear capabilities and US response options. The briefing team was to meet later with House members in the Capitol.

Congress inched toward a deal to fund the government through September but was preparing to possibly extend a midnight Friday deadline to wrap up negotiations and avoid an imminent government shutdown. The one-week extension would give leading Republicans and Democrats “a little breathing room” to finish negotiations.

US Steel reported a first quarter loss of 83 cents per share. Analysts were expecting a profit of 35 cents per share. US Steel also cut its 2017 profit outlook in half. The stock plunged 27% in very heavy volume; its worst day of trading since it went public 26 years ago.

Paypal posted earnings of 44 cents per share on revenue of $2.98 billion, up from a year earlier and beating estimates. Shares rose 6% in after-hours trade.

Dow Makes Another Run Toward 20,000

Charles Schwab: On the Market

Posted: 1/24/2017 4:15 PM ET

Dow Makes Another Run Toward 20,000

U.S. stocks finished solidly higher, with the Dow again nearing the elusive 20,000 mark, amid a plethora of mixed earnings and economic reports, as well as a number of actions by President Donald Trump, including reviving the Dakota Access and Keystone XL oil pipelines. Treasuries were lower and crude oil prices recovered from yesterday's decline, while the U.S. dollar was slightly higher and gold lost ground.

The Dow Jones Industrial Average (DJIA) rose 113 points (0.6%) to 19,913, the S&P 500 Index was 15 points (0.7%) higher at 2,280 and the Nasdaq Composite jumped 48 points (0.9%) to 5,601. In moderate volume, 865 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.43 to $53.18 per barrel and wholesale gasoline added a penny to $1.60 per gallon. Elsewhere, the Bloomberg gold spot price fell $8.60 to $1,209.63 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—ticked 0.1% higher to 100.29.

Dow member 3M Co. (MMM $176) reported 4Q earnings-per-share (EPS) of $1.88, one penny above the FactSet estimate, as revenues ticked 0.4% higher year-over-year (y/y) to $7.3 billion, roughly in line with projections. MMM reaffirmed its 2017 EPS guidance. Shares lost ground.

Dow component Verizon Communications Inc. (VZ $50) posted adjusted 4Q profits of $0.86 per share, three cents south of forecasts, as revenues declined 5.6% y/y to $32.3 billion, compared to the expected $32.1 billion. VZ said its earnings and revenue for 2017 are expected to be fairly consistent with 2016. The company said in regard to its acquisition of Yahoo Inc. (YHOO $44), it continues to work with the search engine to assess the impact of data breaches. VZ traded solidly lower. Late yesterday, YHOO reported 4Q EPS and revenues that topped forecasts and shares were nicely higher.

Dow member Johnson & Johnson (JNJ $112) announced 4Q EPS ex-items of $1.58, above the estimated $1.56, with revenues rising 1.7% y/y to $18.1 billion, below the projected $18.3 billion. JNJ issued 2017 EPS and revenue guidance that came in just shy of expectations. Separately, JNJ announced that it is evaluating potential strategic options for its diabetes care companies, LifeScan Inc., Animas Corp., and Calibra Medical Inc. JNJ traded lower.

Dow component DuPont (DD $76) achieved 4Q earnings ex-items of $0.51 per share, above the estimated $0.41, with revenues decreasing 2.0% y/y to $5.2 billion, below the projected $5.3 billion. DD issued 1Q EPS guidance that came in south of expectations. DD said it expects to close its merger with Dow Chemical Co. (DOW $60) in the first half of 2017, pending regulatory approval. DD gained solid ground.

Dow member Travelers Companies Inc. (TRV $117) reported 4Q EPS of $3.20, compared to the estimated $2.80, as net written premiums rose 3.0% y/y to $6.1 billion, roughly in line with forecasts. Shares traded lower.

Steel companies based in the U.S., including United States Steel Corp. (X $33) and Nucor Corp. (NUE $61), saw nice gains after President Donald Trump signed executive orders today to restore the controversial Dakota Access and Keystone XL oil pipelines that were shuttered during the Obama administration. During the signing, Mr. Trump said that he is "very insistent that if we're going to build pipelines in the United States, the pipe should be made in the United States."

Housing sales slip, while manufacturing activity accelerates more than expected

Existing-home sales in December fell 2.8% month-over-month (m/m) to a 5.49 million annual rate, compared to the Bloomberg forecast of a 5.52 million pace. November's figure was upwardly revised to a 5.65 million annual rate. Compared to last year, sales were only 0.7% higher, but existing homes sold in 2016 (5.25 million) were the highest since 2006. The median existing-home price was up 4.0% y/y at $232,200. Housing supply came in at a 3.6-month pace at the current sales rate, versus 3.9 months in December 2015, and the inventory of homes for sale fell to the lowest since 1999. Sales in the Northeast, Midwest and West all declined m/m, but were higher y/y, while the South was flat m/m and down y/y.

National Association of Realtors (NAR) Chief Economist Lawrence Yun said solid job creation and exceptionally low mortgage rates translated into a good year for the housing market, but higher mortgage rates and home prices combined with record low inventory levels stunted sales in December. For analysis of the real estate sector, see Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, latest Schwab Sector Views: Sectors and Politics at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch.

The preliminary Markit U.S. Manufacturing PMI Index for January improved to the best level since March 2015 after rising to 55.1 from December's 54.3 level, and versus forecasts of 54.5. A reading above 50 denotes expansion in activity and Markit said the solid improvement was led by a sharp increase in new work.

The Richmond Fed Manufacturing Activity Index unexpectedly jumped further into expansion territory (a reading above zero), rising to 12 for January from the 8 posted in December, and versus expectations of a 7 reading.

Schwab’s Chief Investment Strategist Liz Ann Sonders notes in her latest article, Not Fade Away: Will High Consumer/Business Confidence Fade or Persist?, measures of both consumer and business confidence have recently surged, with the former resting on fairly strong pillars, but the latter may be on weaker pillars and subject to post-inauguration volatility. Read more at www.schwab.com/marketinsight and be sure to check out our article, The Trump Effect: Can the Post-Election Rally Continue at www.schwab.com/insights for analysis of the late-2016 rally to record highs. Follow Liz Ann on Twitter: @lizannsonders.

Treasuries finished lower, as the yield on the 2-year note rose 4 basis points (bps) to 1.19%, while the yields on the 10-year note and the 30-year bond advanced 6 bps to 2.46% and 3.05%, respectively.

The U.S. dollar and Treasury yields have been volatile but remain elevated amid political uncertainty in the wake of last week's inauguration of President Donald Trump, while economic data continues to be relatively positive. Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend and Vice President of Trading and Derivatives, Randy Frederick offer their latest video, How Could the Items on the Republican Agenda Impact Investors?, at www.schwab.com/insights. Follow Schwab on Twitter: @schwabresearch.

Schwab's Chief Fixed Income Strategist, Kathy Jones discusses the bond markets and the recent rally in the greenback in her articles, Anatomy of a Bond Bear Market: What to Look For When Yields Rise and Will the U.S. Dollar Bull Market Continue in 2017?, at www.schwab.com/marketinsight. Follow Kathy on Twitter: @kathyjones.

The only report slated for release on tomorrow's economic calendar is MBA Mortgage Applications.

Europe rebounds slightly, Asia mixed

European equities rebounded modestly, despite some mixed data in the region and as the global markets remained skittish after U.S. President Trump took actions yesterday to withdraw from the Trans-Pacific Partnership (TPP) and renegotiate the North American Free Trade Agreement (NAFTA). The British pound pared solid early losses and finished modestly lower versus the U.S. dollar amid festering "hard" Brexit uncertainty even as the U.K. Supreme Court ruled that the government will need parliamentary approval to start Brexit negotiations. With the global markets remaining jittery to begin 2017, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers Five Reasons to Stay Invested Despite Heightened Uncertainty, at www.schwab.com/oninternational. The euro also dipped versus the greenback and bond yields in the region gained ground.

In economic news, Markit's preliminary Eurozone Composite PMI Index—a gauge of business activity in both the manufacturing and services sectors—dipped to 54.3 in January, from 54.4 in December, and compared to the 54.5 reading that was expected. However, a reading above 50 denotes expansion. Schwab's Jeffrey Kleintop, CFA, offers his article, The CURE for a calm Market: Four risks for 2017, at www.schwab.com/oninternational, where you can also find his commentary, 5 Reasons International Stocks May Underperform In 2017. Follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia finished mixed, with global sentiment remaining jittery amid U.S. President Donald Trump's actions in the first few days following his inauguration that have caused protectionism concerns to flare up, notably yesterday's executive order to withdraw from the Trans-Pacific Partnership (TPP). Japanese equities declined, with the U.S. trade concerns being met with the yen holding onto most of yesterday's rally, overshadowing a report that showed growth in the nation's manufacturing output accelerated slightly in January. For more on Trump's trade policies, see Schwab's Chief Global Investment Strategist Jeffrey Kleintop's, CFA, article, President Trump and Global Trade: How Will Campaign Promises Play Out? at www.schwab.com/oninternational, where you can also find Schwab's Director of International Research, Michelle Gibley's, CFA, latest article, Currency Hedging: 5 Things You Need to Know.

Mainland Chinese stocks and those traded in Hong Kong both rose, with the markets continuing to coast into the long Lunar New Year holiday break beginning at the end of the week. Markets in Australia advanced, buoyed by a rally in basic materials, while Indian securities gained solid ground following some upbeat earnings reports in the region and yesterday's drop for the U.S. dollar. Finally, South Korean stocks finished flat. Schwab's Michelle Gibley, CFA, offers timely analysis of emerging markets in her latest article, Emerging Markets: Why They Deserve a Place in Your Portfolio at www.schwab.com/oninternational, and be sure to check out our release, Why Your Portfolio Needs International Stocks—Despite 2017 Risks at www.schwab.com/insights.

Tomorrow's international economic calendar will hold GDP from South Korea, trade data from Japan, CPI from Australia, confidence figures from France, PPI from Spain, the Ifo Business Climate Survey from Germany, and industrial orders and sales from Italy.