Financial Review

2500

Sinclair Noe — September 15, 2017

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DOW + 64 = 22,268
SPX + 4 = 2500
NAS + 19 = 6448
RUT + 6 = 1431
10 Y +0.005 = 2.20%
OIL – .06 = 49.83
GOLD – 9.80 = 1320.20

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	3,689.4	$60.27B	$4.15B	37.92%	1	-0.21%	-13.21%
	Ethereum	ETH	257.83	$23.70B	$1.94B	17.69%	0.0673473	-0.33%	-14.46%
	Bitcoin Cash	BCH	432.00	$7.04B	$705.39M	6.45%	0.11414	+0.91%	-26.06%
	Ripple	XRP	0.18480	$6.98B	$289.31M	2.64%	0.00004905	+0.33%	-13.27%
	Litecoin	LTC	52.090	$2.55B	$1.55B	14.16%	0.0129764	-0.38%	-27.30%
	Dash	DASH	287.80	$2.15B	$72.67M	0.66%	0.0767005	+20.32%	-12.96%
	NEM	XEM	0.22458	$1.91B	$13.23M	0.12%	0.00005694	-0.01%	-19.81%
	Monero	XMR	100.13	$1.51B	$176.06M	1.61%	0.0269888	-0.00%	-14.16%
	IOTA	MIOTA	0.47700	$1.34B	$41.98M	0.38%	0.0001292	-0.56%	-9.95%
	OmiseGO	OMG	9.8760	$978.29M	$156.53M	1.43%	0.00267568	-1.19%	-11.09%

The Standard & Poor’s 500 index closed above 2,500 for the first time. The S&P is up 12% since the start of the year.

The Dow Industrials posted their fourth consecutive record high close. The Dow gained 2.2% for the week, the best weekly gain since December 9. The S&P was up 1.5% for the week.

The Nasdaq hit an intraday high but trended down to miss a record close. The Nasdaq registered a weekly advance of 1.4%.

Exactly nine years ago, on September 15, 2008, Lehman Brothers became the largest bankruptcy in US history.

For the second time in less than a month, Pyongyang has fired a ballistic missile that flew over Japan, prompting the UN Security Council to call an emergency meeting for today. Arms race? South Korea responded by conducting live fire drills that mimicked attacking Pyongyang’s launch site, and completed its own ballistic missile test into the sea.  Wall Street seems inured.

Prime Minister Theresa May announced the U.K. terror threat level has been raised to critical, its highest level, as police hunt for a suspect who set off an improvised bomb on a packed London commuter train. At least 22 people were injured in the blast.

Brazilian President Michel Temer has been charged with obstruction of justice and racketeering, related to the plea-bargain testimony by executives at JBS, the world’s largest meat-packer. It will now be up to the lower house of Congress to vote on whether the president should stand trial before the Supreme Court.

Retail sales dropped 0.2% last month after a 0.3% gain in July. It was the biggest one-month decline since a 0.2% decline in February. Auto sales sank 1.6% in August, the most in seven months.

Excluding autos and gas, which tend to be volatile from month to month, sales dipped 0.1% in August after having risen 0.5% in July.

Sales rose last month at general merchandise stores, a category that includes big-box retailers such as Target.

For August, gasoline sales were up 2.5%, the biggest jump since last December; we weren’t buying more gasoline, just paying more.

Non-store retail spending dropped 1.1% in August after a 1.6% gain in July – this is the category that includes internet purchases. You will recall that Amazon Prime Day was July 11, so it looks like shoppers bought the deals, then took a break.

Industrial production in the U.S. fell 0.9 percent in August, the biggest drop in eight years, as Harvey knocked numerous oil refining, plastics and chemicals factories out of business for a time. Many of those factories are based in the Gulf Coast region that Harvey hit. The Federal Reserve said the weather and flooding was responsible for almost all the loss.

Oracle shares had their roughest day in more than four years following the company’s earnings report, and the kicker is that earnings were better than expected. The problem was worse-than-expected outlook for the coming quarter. Shares dropped 7.7%

Amazon Web Services, the cloud computing unit of Amazon, has a new market for its analytics and storage services. This week, the U.S. Defense Department granted the company a provisional authorization to host Impact Level 5 workloads, which are the military and Pentagon’s most sensitive, unclassified information. Only two other companies, IBM and Microsoft, can store the material.

Equifax said two of its senior executives are leaving. The firm’s chief information and chief security officers are retiring immediately. Equifax “Chief Security Officer” Susan Mauldin has a bachelor’s degree and a master of fine arts degree in music composition from the University of Georgia.

Her LinkedIn professional profile lists no education related to technology or security. This is the person who oversaw keeping your personal and financial data safe — and whose apparent failings have put 143 million of us at risk from identity theft and fraud. The credit reporting industry behaves as a governor of our credit relations, reputations and identities.

In the late 1960s and early 1970s, Congress recognized that power embedded in data is a political matter and created a regulatory regime for these bureaus. What we are seeing now is that this regulatory regime is inadequate and that the regulators ― like the Federal Trade Commission and the Consumer Financial Protection Bureau ― are weak.

So, the credit-reporting regime to which we’ve entrusted our identities and our commercial lives remains opaque and vulnerable to abuse. Senator Elizabeth Warren has begun an investigation into Equifax’s massive data breach, and along with 11 other Democratic senators, introduced a bill to allow consumers to freeze their credit for free.

A credit freeze restricts access to an individual’s credit report, which prevents thieves from applying for credit using another person’s information. Connecticut Attorney General George Jepsen and more than 30 others in a state group investigating the breach said that while Equifax has agreed to give free credit monitoring to hack victims, they asked Equifax to stop collecting any money to monitor or freeze credit.

There was good news in the Census Bureau’s poverty report for most age groups in America. The national poverty rate declined by 0.8 percentage points to 12.7%. Poverty rates, while still the highest among wealthy nations, fell across the board for groups including whites, blacks, Hispanics, males, females, children, American citizens, and immigrants.

Individuals ages 65 and older had the unique distinction of being the only population segment to experience a significant increase in the number of individuals in poverty, with 367,000 more older Americans in poverty in 2016.

Airline seats are too small, and the problem is not that it is uncomfortable – it is dangerous. This summer a federal court ordered the Federal Aviation Administration (FAA) to consider shrinking seat sizes in coach on airline carriers and determine its effect on passenger safety. In the court case, a judge called the situation “a plausible life-and-death safety concern.”

The FAA requires that an airplane, regardless of size, can be evacuated in 90 seconds or less with at least half of the exits blocked. Besides limiting egress, another concern of tight airplane seats is the risk of head trauma in the event of a crash or hard landing.

The space between rows has shrunk from 35 inches to between 28 and 31 inches. The DOT requires at least 35 inches for flight attendants, but no airline offers any more than 32 inches for passengers. The FAA has until December 28th to respond to the court’s ruling.

You could take the train instead. Amtrak has launched a new advertising campaign focused heavily on why so many airlines have been despised by so many for so very long. From free Wi-Fi to the absence of middle seats to the two bags you may check for free, Amtrak is pitching itself as a more comfortable, civilized travel alternative to an airline. A coach seat on a train is more comfortable than a first-class seat on a domestic flight.

The Yellow Pages will be ceasing its 50-year print run in January 2019. Launched in 1966, the Yellow Pages is perhaps the best known classified business directory. The most recent version stretches from abattoirs to yoga, covering everything from taxidermists to graffiti removal.

Inevitably the rise of the internet has led to a dwindling interest in artifacts of a slower age. The comparative slimness of the recent editions is testament to this: the book is getting smaller with each passing year.

What will you use as a door stop now? Check Google for ideas.

Financial Review

Take 65

Sinclair Noe — June 22, 2017

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

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DOW – 12 = 21,397
SPX – 1 = 2434
NAS + 2 = 6236
RUT + 5 = 1404
10 Y – .01 = 2.15%
OIL + .21 = 42.74
GOLD + 3.70 = 1251.00

BITCOIN – 0.11% = 2709.21 USD
ETHEREUM – 2.77% = 328.37

BITCOIN + 1.13% = 2771.78 USD
ETHEREUM – 1.81 % = 330.40

BITCOIN – 0.11% = 2709.21 USD
ETHEREUM – 2.77% = 328.37

The Senate health care bill was unveiled today. The 142-page bill was written entirely behind closed doors and today is the first time the public and most senators have seen the bill. The latest version of Trumpcare is officially titled as the Better Care Reconciliation Act of 2017, which is a rewrite of the House of Representatives American Health Care Act, which is a rewrite of the Affordable Care Act.

The bill would repeal Obamacare’s individual mandate, drastically cut back federal support of Medicaid, and eliminate Obamacare’s taxes on the wealthy, insurers and others.

The bill will have to undergo scrutiny to ensure that it meets the strict requirements on what can or can’t be included in a bill under the budget reconciliation process. The non-partisan Congressional Budget Office, will analyze and score the bill and present its findings early next week.

The CBO analysis will shed light on how much money the bill would cost and how many people would be covered. Senate Republicans hope to see better headlines from this CBO report than the one that the House GOP legislation received. CBO said the House bill would result in 23 million fewer people insured in 2026 than under Obamacare.

Here are some of the key points that we know. The Senate bill would require insurers to cover those with pre-existing conditions and charge everyone the same regardless of health history. But it would allow states to waive the federal mandate on what insurers must cover, known as the essential health benefits.

This would allow insurers to offer less comprehensive policies, so those with pre-existing conditions may not have all their treatments covered.

The bill would continue the enhanced Medicaid expansion funding from Obamacare until 2021 and then phase it out over three years. The Senate bill would keep the House plan to send a fixed amount of money to states each year based on enrollment or as a lump sum block grant.

But it would shrink the program even more over time by pegging the annual growth rate of those funds to standard inflation, rather than the more generous medical inflation, starting in 2025.

This would likely force states to cut enrollment, benefits or provider payments. Several independent analyses have concluded that this funding structure would lead to large-scale shortfalls in every state, which would need to be closed by reducing enrollment or benefits, and cutting capacity to respond to disasters and public-health crises.

Those affected most would be poor children, people with mental-health issues, and disabled people.

The Senate bill would also largely maintain Obamacare’s premium subsidies structure, but tighten the eligibility criteria starting in 2020. Fewer middle class folks would get help because only those earning up to 350% of the poverty level would qualify, rather than the 400% threshold contained in Obamacare.

It also allows even less generous plans to stand as benchmarks for exchange and employer coverage, which could likewise contribute to disruptions and deductible increases. In recognition of the disruptions to the state-level exchanges through which individuals purchase coverage, the House bill set up a “Patient and State Stability Fund,” which would inject over $100 billion into state high-risk pools and reinsurance funds.

The Senate largely replicates this approach with slightly less funding, although it does add an additional $2 billion fund for fighting the opioid crisis in 2018.

The bill would also aim to shore up the existing Obamacare market by allocating funds for the cost-sharing subsidies until 2019. This might placate insurers, who were upset by Trump’s refusal to commit to continue making these payments, leading many carriers to hike rates or drop out of the exchanges for 2018.

The draft bill proposes repealing the 3.8 percent net investment income tax on high earners retroactively to the start of 2017, not at some point in the future. The tax cut will be offset by reducing aid to the poor to cut costs. We’ll have to wait for the CBO score to see if the math works, and how many people would see higher premiums or see coverage eliminated. That could be followed by a vote on the bill as soon as next week.

Democrats appear to have a solid bloc of opposition; if 3 Republicans oppose the bill, it will not pass. The bill could be changed over the next few days. Sens. Rand Paul of Kentucky, Ron Johnson of Wisconsin, Ted Cruz of Texas and Mike Lee of Utah said in a joint statement they’re “not ready to vote for this bill.”

Many other GOP senators are avoiding outright supporting the new health care bill, saying they need more time to read the fine print before taking a stand. The CBO score will be key – if it is not significantly better than the score of the House version, this bill could be DOA.

Hospital stocks traded sharply higher after the bill was released, adding to gains from earlier in the session. HCA Healthcare Inc rose 3.8 percent, while Tenet Healthcare Corp surged 8.4 percent. Health insurers also traded broadly higher, with large players Aetna and UnitedHealth Group each up more than 1 percent. Insurers that specialize in Medicaid also gained, with Centene up 3.4 percent and Molina Healthcare rising 2.6 percent.

About those tapes President Donald Trump suggested (or warned) that he (or someone) may have had of his one-on-one conversations with then–FBI Director James Comey: They don’t exist. Or, if they did, he didn’t make them. Trump took to Twitter today to say: “I have no idea… …whether there are “tapes” or recordings of my conversations with James Comey, but I did not make, and do not have, any such recordings.”

Thirty-four of the largest banks operating in the U.S. cleared a Federal Reserve stress test of their ability to withstand economic shocks. Every bank subject to the annual tests’ first phase exceeded minimum thresholds, though Morgan Stanley trailed the rest of Wall Street on a key measure of leverage — the second year it performed worse than peers on one of the test’s main metrics.

The Conference Board’s leading economic index climbed 0.3% in May and offered further proof the U.S. continues to grow at a steady clip, suggesting the economy is likely to remain on, or perhaps even moderately above, its long-term trend of about 2% growth for the remainder of the year.

Mortgage rates are keeping close pace with U.S. Treasury yields, and the yield on the 10-year Treasury note is hovering around the lowest levels of the year, and the lowest since the November election. Mortgage rates fell to one of the lowest levels of the year in the most recent week, following a short-lived rebound. Freddie Mac said  the 30-year fixed-rate mortgage averaged 3.90% in the June 22 week. The 15-year fixed-rate mortgage averaged 3.17%

The number of Americans filing for unemployment benefits increased 3,000 to a seasonally adjusted 241,000 last week.

Qatar Airways, the Gulf country’s state-owned airline, has expressed interest in buying as much as a 10 percent stake worth at least $808 million in American Airlines Group. The potential investment comes against the background of diplomatic and competitive turbulence for Qatar Airways, its home country and U.S. airlines.

Operations at Qatar Airways were disrupted after four Arab nations cut diplomatic and economic ties with Qatar this month in the worst diplomatic crisis in the region in years. Separately, American, United Continental, and Delta have pressed the U.S. government to act to curb U.S. flights by Qatar Airways and rival Gulf carriers Emirates Airline and Etihad Airways. The U.S. carriers charge that their Gulf rivals have received billions of dollars in unfair state subsidies.

Qatar Airways said in a statement that it sees a “strong investment opportunity” in American and that it “intends to build a passive position in the company with no involvement in management, operations or governance.” American said its rules prohibit “anyone from acquiring 4.75 percent or more of the company’s outstanding stock without advance approval from the board.”

As expected, Sears Canada has filed for bankruptcy protection and 2,900 employees countrywide are losing their jobs.

Warren Buffett’s Berkshire Hathaway is extending a 1.5 billion credit facility to Home Capital Group, Canada’s largest non-bank lender. Berkshire also agreed through its Columbia Insurance unit to buy up to $300 million of Home Capital shares for a 38.4 percent stake, pending shareholder and regulatory approvals. The credit line carries an interest rate of at least 9 percent.

Reuters reports Staples is in advanced talks to be acquired by Sycamore Partners in a $6 billion deal.

After leading the stock market for months, the big name tech stocks hit pause to catch a breath. And that allowed an old name to sneak into rally mode. Oracle was late to the cloud revolution, allowing upstarts like Salesforce.com Inc. to find significant market share with software delivered over the internet, and has suffered while making an acquisition-fueled push into the space.

But it looks like Oracle is figuring out the cloud. Late yesterday, they reported fiscal fourth quarter earnings, and today, shares topped $50, sending the market cap over $200 billion. Oracle posted full-year revenue growth of 1.8% and profit growth of 4.9%, and raised guidance.

Facebook CEO Mark Zuckerberg revised the world’s largest online social network’s mission statement. The previous mission was “to give people the power to share and make the world more open and connected.” Facebook’s new mission is to “give people the power to build community and bring the world closer together.”

Financial Review

What Are the Odds?

Sinclair Noe — November 7, 2016

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

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DOW + 371 = 18,259
SPX + 46 = 2131
NAS + 119 = 5166
10 Y + .05 = 1.83%
OIL + .85 = 44.92
GOLD – 22.80 = 1282.20

Wall Street this week is all about the election. The FBI’s decision to bring no charges against Hillary Clinton appears to be giving some investors peace of mind. At least momentarily; at least enough to break a string of 9 consecutive declines on the S&P 500, the longest losing streak since 1980.

It was uncertain whether the FBI announcement came in time to change voters’ minds; it’s estimated that 42 million Americans have already cast early votes. Maybe the best news is that in a little over 24 hours, it will be over. Finally.

Until then, we can look at the bookies and the polling sites. Here is a quick rundown of the foreign bookies – so these are betting odds, not percentage of the vote.

PredictIt, an online trading platform jointly run by Victoria University in Wellington, New Zealand, and Washington, D.C.-based political consulting firm Aristotle International Inc: Clinton – 81 percent, Trump – 20 percent.

Iowa Electronic Markets, winner-takes-all trading market: Clinton – 71 percent, Trump – 28 percent.

UK-based Betfair, internet betting exchange: Clinton – 83 percent, Trump – 18 percent.

Ireland’s Paddy Power, bookmaker: Clinton – 83 percent, Trump – 18 percent.

Foreign gamblers can bet on more than the outcome. A survey of foreign betting sites comes up with some interesting ways to bet the election, including voter turnout, the over/under on toss-up states, and even the time of a concession speech, or for that matter, whether there will be a concession speech. But for American voters, the choice is more basic – pick one or the other.

Among the major news outlets: Fox News shows Clinton holds a 4-point lead over Trump among likely voters – 48 percent to 44 percent. A CBS News poll shows Clinton holding a 4-point lead over Trump – 45 percent to 41 percent.

A Washington Post/ABC poll released earlier on Monday also found Clinton with a 4-percentage point lead. A separate Bloomberg Politics-Selzer & Co poll found a 3-point lead for Clinton. NBC News|SurveyMonkey Weekly Election Tracking Poll shows Clinton with a 6-point lead over Trump.

Trump led by 5 points in the Los Angeles Times/USC daily tracking poll 48%-43%. And the IBD/TIPP tracking poll also had Trump ahead by 2 points.

Polling aggregators are also leaning toward Clinton. RealClearPolitics figures Clinton has a 2.2 percentage point lead in a four-way race. Clinton also leads in state polls. If every state voted according to its RCP average, she would win with 297 electoral votes to Trump’s 241, surpassing the needed 270.

Fivethirtyeight.com calculates Clinton has a 67 percent chance of winning compared to 32 percent for Trump, with Clinton taking 295 electoral votes compared to 241 for Trump. The Upshot gives Clinton an 84 percent chance to win.

Quinnipiac University released polls in Florida and North Carolina – two states where Clinton and Trump have been locked in tight races that could help decide the winner – show Clinton ahead by 1 point in Florida and 2 points in North Carolina. Both polls fall well within the 3.3-point margin of error and put the two candidates at a virtual tie. Meanwhile, a new CBS poll has Trump with a 1 percentage point lead in Ohio, and Florida is a tie.

After a long year of seemingly endless polling, the final batch of polls give a slim advantage to Clinton. Nobody calls it a slam dunk, even though Wall Street started the celebration a couple of days early. And then this sets up the Wall Street traders for the possibility of a Brexit-like come-uppance.

You will recall that the UK vote on a referendum to exit the Euro Union, while close among the polling firms, was considered a near impossibility by traders and betting parlors. You will also recall that financial markets had a sharp sell-off followed by a strong rebound.

Here is what we think we know: Clinton will probably win, possibly with a majority in the Senate but not the House. That is not a guarantee, I am just reporting on probabilities; and this is the scenario now priced into the markets. A Clinton sweep or a Trump sweep would likely result in a sell-off and then we wait for rebound, or not.

Typically, the day after the election sees a sell-off and today’s relief rally may be short-lived. In other words, trading based on the election is a big gamble right now. The worst-case scenario is that we don’t have a decision tomorrow night; the worst-case scenario involves recounts, (fivethirtyeight assigns an 8% chance of a recount in a state that decides the Electoral College), which would almost surely make its way to the Supreme Court, which is of course one justice shy and split 4-4.

Feel free to let your paranoia run wild and create your own variations.

Most likely, sometime Tuesday evening, we will have a new president-elect. The markets will probably react. You don’t have to jump into that initial reaction but you should be formulating some longer-term strategies, not based on emotional reaction. And don’t forget to follow the Fed; Fischer, Bullard, Evans, Kashkari and Williams are all slated to speak this week.

Stock markets in Asia and Europe moved higher to start the week. The US dollar index is stronger by roughly 0.5%. Volatility as measured by the VIX, which had surged on the recent downwards moves, dropped by 4 points to roughly 18.5, reversing all its jump over the past week. Gold dropped. Oil prices moved higher after 7 losing sessions.

Not much economic data today and certainly nothing to move markets. A Federal Reserve survey shows banks continued to tighten lending standards to commercial real estate loans in the third quarter. The Fed survey also found that demand for home mortgages strengthened over the third quarter. Demand for auto and credit card loans also rose. Standards for consumer loans were unchanged.

The largest U.S. gasoline pipeline restarted its main gasoline conduit Sunday morning after a deadly explosion shut Line 1 for six days and forced Gulf Coast refiners to cut rates. Colonial anticipates fuel products leaving the pipeline’s Houston origin to arrive in Linden, New Jersey, where the system ends, within approximately three days.

An earthquake with a preliminary magnitude of 5.0 struck near Cushing, Oklahoma, prompting evacuations, but there were no reports of injuries. Oil pipelines intersect in Cushing, which is considered a hub for crude shipments. Oil is sharply higher this morning after a statement said OPEC producers were committed to a deal made in September to cut crude output to try to boost the market.

Berkshire Hathaway missed estimates on earnings but beat on revenue. Other information in the report suggested the Warren Buffett-run firm maintained its 10 percent stake in Wells Fargo despite the bank’s sales practices scandal. The filing shows Warren Buffett is sitting on more cash than ever. Berkshire Hathaway had almost $85 billion on its books at the end of the quarter.

In other earnings news: HSBC posted a 46% drop in pretax profit following a big loss on the sale of its Brazilian business. Nissan Motor cut its first-half net income forecast as a strong yen offset rising sales, but maintained its full-year dividend plan. Softbank’s second quarter profit rose nearly 7%, boosted by a strong performance in its domestic telecoms division.

Oracle has narrowly overcome opposition to its $9.3 billion offer for NetSuite after threatening to walk away if stakeholders held out for a higher price. Nearly 56% of NetSuite shareholders who were eligible to vote chose to take its offer, laying the groundwork for the deal to close today. The tie-up will add nearly $1 billion to Oracle’s revenues from cloud software.

T. Rowe Price had pushed Oracle to pay more, arguing that Oracle’s executive chairman and CTO, Larry Ellison, had a conflict of interest that stopped NetSuite from getting alternative bids and top dollar. Instead, Oracle issued a take-it-or-leave-it offer deadline of Friday at midnight. And if the deal hadn’t gone through, NetSuite would have found itself competing increasingly with Oracle, which now has its own financial software cloud.

Looking to rebound from its Note 7 fiasco, Samsung Electronics plans to adopt a voice-based digital assistant for its upcoming Galaxy S8, scheduled for release next year. Last month, Samsung acquired  U.S.-based artificial-intelligence software company Viv Labs, which will outfit the Galaxy S8 with AI-enabled features “significantly differentiated” from those in the market, such as Apple’s Siri or Google.

While it didn’t invent China’s Singles Day sale, Alibaba made it a fixture of the retail calendar. Now the company plans to use the excitement around the event to launch itself beyond mainland China, catering to shoppers in Hong Kong and Taiwan. Last year, Alibaba sold over $14.3 billion on November 11, more than double the $5.8 billion in total U.S. e-commerce sales for Black Friday and Cyber Monday.

Financial Review

Wound Tight

Sinclair Noe — July 28, 2016

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

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DOW – 15 = 18,456
SPX + 3 = 2170
NAS + 15 = 5154
10 Y un = 1.51%
OIL – .82 = 41.10
GOLD – 5.10 = 1335.60

The Federal Reserve FOMC wrapped up their FOMC policy meeting yesterday, announcing no change in interest rates – no surprise there. The Fed’s statement said, “Near-term risks to the economic outlook have diminished”; a signal that the Fed is considering a rate hike in September, although it is doubtful they actually will hike rates in September.

Traders cut their bets on a September Fed move from 20% just before the announcement to just 17%. Benchmark 10-year U.S. government bond yields fell back to 1.5%.

The dollar took its biggest tumble in almost two months and stocks were mixed as cautious sounds from the Fed left focus firmly on Japan’s next round of money-printing measures. The greenback was down 0.5% against six other major currencies. The yen notched its fourth rise in six days, as news that Tokyo had unveiled a $265 billion fiscal stimulus package left traders wondering how aggressive the Bank of Japan would be when it meets tomorrow. Costs to insure against dollar/yen swings hit their highest in 8 years.

Tomorrow is going to be a very interesting day as the Bank of Japan monetary policy meeting wraps up, we’ll also get results of the stress tests on Eurozone banks, plus new growth figures from the Eurozone, plus the first estimate of second quarter GDP in the US. We also continue with earnings reporting season and we had a couple of big reports after the closing bell, which will surely influence tomorrow’s trading – more on that in a moment.

So, maybe tomorrow will be a big day, one way or the other, on Wall Street. Something has to give; the market is wound tighter than a 2-dollar watch. LPL Financial, noted on Twitter  that today marked the 11th straight day the S&P 500 closed inside a 1% trading range, the first time this has ever happened in at least 45 years.

Meanwhile, the VIX index — also known as the “fear index” and measures market volatility — is approaching a low hit back in January 2007 and is well below its long-run average. Typically, this kind of consolidation is followed by a move to the upside, but we are entering into the August-through-October period, which is typically the most volatile for the markets. The dog days of summer don’t last. So, enjoy the calm while you can.

The nation’s trade gap widened in June to $63.3 billion, as imports rose faster than exports. Meanwhile, wholesale inventories were unchanged and retail inventories inched higher.

The number of people who applied for unemployment benefits last week rose by 14,000 to 266,000, that’s bouncing off historic lows, and still a low number that reflects a fairly strong labor market. Whatever the case, claims have been below the key 300,000 benchmark for 73 weeks and counting — a feat last duplicated in the early 1970s. The nation’s official unemployment is 4.9% – in the range generally considered as maximum employment or the full employment level.

In a June 6 speech, Federal Reserve chair Janet Yellen said that “the economy is now fairly close to the FOMC’s goal of maximum employment.” And there was a minor change in the wording of yesterday’s FOMC policy statement. In describing the jobs market, the FOMC chose not to refer to “underutilization of labor resources” – a phrase it’s used in the past to suggest the U.S. was still short of maximum employment. Instead, it pointed to “some increase in labor utilization.”

In other words, the Fed is signaling that the labor market is in good shape; they are saying they have fulfilled their mandate for maximum employment; that, in and of itself, is not a reason to raise interest rates, but it is no longer a restriction.

Oil markets continued to slip today, pushing crude prices back to fresh three-month lows; down about 20% from the highs of early June. Low oil prices continued to weigh on European oil majors Royal Dutch Shell and Total in the second-quarter of 2016. Royal Dutch Shell said profit crashed by more than 70% in the second quarter to $1 billion, while Total’s adjusted net income fell 30% to $2.2 billion. Between late May and the middle of June, the price of Brent crude rose above $50 per barrel, but has since come off to trade in the low $40s.

Oracle has agreed to acquire NetSuite, a cloud company, in a deal valued at $9.3 billion. Oracle is paying $109 a share. The deal is expected to close in 2016, subject to regulatory and shareholder approval. Oracle expects the acquisition to be “immediately accretive” to earnings. The NetSuite purchase is at the heart of Oracle’s fight to remake itself for the modern world of cloud computing. This transition has shaken up the software business for the last several years, as companies like Google, Microsoft and Amazon have created markets worth billions, and older companies like IBM, Hewlett-Packard and Oracle have struggled to change the way they make and sell their products.

This was a big afternoon for earnings reports from mega-tech companies. Let’s start with Alphabet, Google’s parent, posted a 21.3% increase in second-quarter revenue, exceeding analysts’ expectations, driven by strong advertising sales on mobile devices and for video content.

The strong revenue growth suggests that Google is successfully navigating the transition to mobile. Advertisers typically pay less for user clicks on mobile ads than on desktop ads, Google’s traditional strength, but the strong earnings performance suggest that is beginning to change.

Alphabet’s consolidated revenue rose to $21.5 billion in the quarter, from $17.7 billion a year earlier. Net income rose to $4.88 billion, or $7 per Class A and B common stock, from $3.93 billion, or $4.93 per share. Google’s ad revenue increased 19.5%. Alphabet gained about 5% in after-hours trade at around $804 per share.

Amazon.com reported a 31% rise in quarterly revenue, powered by blockbuster growth in its cloud services unit and an increase in subscriptions for its Prime loyalty program. Net sales rose to $30.4 billion from $23.2 billion a year earlier. The company’s net income rose to $857 million, or $1.78 per share, from $92 million, or 19 cents per share, a year earlier.

That doesn’t sound like strong margins but remember that Amazon continues to plow money back into the business. It’s a beat across the board, with Amazon setting another record-high quarterly profit for the third consecutive quarter. Amazon gained about 2% in after-hours trade.

On Tuesday, Apple reported better than expected earnings; today Apple rose, giving the S&P 500 its biggest lift. Yesterday, Apple announced it had sold its billionth phone, but that left plenty of market share for Samsung. Strong sales of its flagship Galaxy S7 propelled Samsung Electronics to its most profitable quarter in two years. Operating profit rose 18%. Samsung anticipates solid earnings to continue in the second half and is expected to unveil its new Galaxy Note smartphone next week – before Apple launches new iPhones in September.

Ford Motor reported weaker-than-expected profit in the second quarter, and said its full-year earnings forecast was at risk with U.S. auto sales expected to fall in the second half, sending shares tumbling. Auto sales in the United States and China were lower than anticipated in the quarter, and Ford reported its first quarterly loss in the Asia Pacific in three years.

It’s worth noting that Ford notched its most profitable first half in North America in company history. Still, Ford dropped about 8% today. The dynamics of the US market are getting more sluggish. New car and truck sales are still good — on track to come in over 17 million for the year, a bit lower than last year, but millions above a so-called replacement-rate market — but the automakers are beginning to smell a downturn, so incentive spending has been creeping up.

Toyota is in danger of losing its crown as the world’s biggest automaker this year as sales fall behind Volkswagen. Toyota, which has held the title for four years running, sold 4.99 million vehicles in the six months through June, compared to the 5.12 million of VW (despite the German automaker’s emissions scandal). General Motors holds third place with 4.76 million vehicles sold in the first half of 2016.

The U.S. homeownership rate fell to the lowest in more than 50 years as rising prices put buying out of reach for many renters. The Census Department says the share of Americans who own their homes was 62.9% in the second quarter, the lowest since 1965. It was the second straight quarterly decrease, down from 63.5% in the previous three months.

First-time buyers have been struggling to find affordable properties as low mortgage rates and an improving job market spur competition for a tight supply of listings. Home prices rose 5.2% in May from a year earlier, according to the S&P CoreLogic Case-Shiller index released this week.

The largest publishing event of the summer isn’t a novel or a tell-all biography. It’s a script. Harry Potter and the Cursed Child, the top pre-order for both Amazon and Barnes & Noble, is slated to hit shelves on Sunday.

Financial Review

Java for All

Sinclair Noe — May 26, 2016

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

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DOW – 23 = 17,828
SPX – 0.44 = 2090
NAS + 6 = 4901
10 Y – .05 = 1.82%
OIL – .23 = 49.33
GOLD – 4.50 = 1220.50

The National Association of Realtors said its pending home sales index, based on contracts signed last month, increased 5.1 percent to 116.3, a level not seen since February 2006. Contracts rose in three of the nation’s four regions, with the West reporting an 11.4 percent jump.

Orders for durable or long-lasting goods made in the U.S. jumped 3.4% in April but a key measure of business investment fell again. The increase in new orders last month was powered by a spike in demand for commercial planes. Those orders accounted for 85% of the increase in April bookings.

Typically, large planes are built or delivered five years after they are ordered. Orders for new autos and parts also rose nearly 3%. Stripping out transportation, durable-goods orders increased a modest 0.4% in April after a 0.1% advance in March.

In April, orders for a category known as core capital goods that’s viewed as a proxy for business investment declined 0.8%. They’ve fallen in five of the past six months. While much of the slowdown does seem limited to the oil and gas industry there isn’t much in today’s report that shows investment in other business sectors.

The number of Americans filing for unemployment benefits fell last week, moving back to near cycle lows. Initial claims for state unemployment benefits declined 10,000 to a seasonally adjusted 268,000 for the week ended May 21. Claims for the prior week were not revised. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 2,750 to 278,500 last week.

Claim levels are at 40 year lows, with the normal range around 350,000 weekly initial unemployment claims of levels seen historically during times of economic expansion. The rolling averages generally have been equal to or under 300,000 since August 2014.

WTI crude popped through the $50 a barrel level this morning. Prices are now up about 80% from February, when they hit a 12-year low. The latest bullish news was a greater-than-expected inventory build reported by the EIA yesterday. Producers inside of OPEC – Iran in particular – are set to increase output, and wildfire-related Canadian production declines are coming to an end.

St. Louis Fed president James Bullard says inflation could be on the rise. “In short, labor markets are relatively tight,” Bullard said while speaking in Singapore. “This may put upward pressure on inflation going forward.” Bullard noted that market expectations remained misaligned with the Fed’s projections.

Also today, Federal Reserve Governor Jerome Powell laid out a clear argument for raising interest rates while stressing that global risks, including the Brexit vote in the week following the next meeting of the U.S. central bank, meant there was no reason “to be in a hurry.” Powell said a rate hike might be appropriate fairly soon and any hikes should be gradual.

Federal Reserve Chair Janet Yellen is due to speak tomorrow, just a bit before the bond market closes for the holiday weekend. Yellen could use the appearance to signal that the Fed’s meeting next month is in play, or she might not mention rate hikes. Stay tuned.

Of course, the Fed has 2 mandates: maximum employment and price stability. On the employment front they are close, with the unemployment rate at 5%; there is still plenty of slack and much more room for wage growth – but close.

On the price stability mandate, the Fed’s biggest concern is likely oil prices, which are up significantly from February, and will impact almost all other parts of inflation throughout the economy. The Fed does not control oil prices, but they might not have to. Higher prices could encourage more producers to turn up output, particularly the more cost-sensitive U.S. shale producers, and present the world with another wave of oversupply.

Japan’s prime minister is warning of another “Lehman-scale crisis.” Speaking at the G-7, Japanese Prime Minister Shinzo Abe compared the current situation to the global financial crisis of 2008-2009. Abe noted the 55% drop in commodities prices since 2014 and said fiscal spending was necessary to combat a global slowdown. Abe presented data showing global commodities prices fell 55 percent from June 2014 to January 2016, the same margin as from July 2008 to February 2009, after the Lehman collapse. The summit is set to conclude Friday.

Bayer might receive financing from the ECB to help fund its possible takeover of Monsanto, according to a Reuters analysis of the terms of the ECB’s bond-buying program. The ECB can buy bonds issued by companies that are based in the euro area, have an investment-grade rating and are not banks, provided that they are denominated in euros and meet certain technical requirements. The ECB bond buying program is running out of sovereign debt and now they are looking around new sources. While the purpose for the bonds is not among the criteria set by the ECB, the bank will start buying corporate paper on the market and directly from issuers next month.

The jury is in and Google has won a $9 billion battle, killing Oracle’s claim to Google’s Android phone business. Oracle contended that Google needed a license to use its Java programming language to develop Android, the operating system in 80 percent of the world’s mobile devices. Jurors in San Francisco federal court rejected that argument and concluded Google made fair use of the code under copyright law.

A decision against Google had the potential to give significantly more weight to software copyrights, and could have resulted in lawsuits against any number of startups. Oracle started the trial at an advantage; Oracle won a 2012 verdict that Google infringed its copyrights, but that jury couldn’t agree whether it was justified under the fair use legal doctrine. Google claimed it was within its rights to use the organization and labeling of the Java code to develop Android because programmers were already familiar with them. Google’s message was that Oracle shouldn’t own programmers simply because they had taken the time to learn Java.

Microsoft and Facebook have announced plans to build the highest capacity data link between the US and Europe. The subsea cable will run 6,600 kilometers between Virginia in the US and Spain with an expected capacity of some 160 terabytes per second of data. The project will be managed by Spanish telecommunications firm Telefonica, which will sell any unused capacity on the cable to other customers.

Tech companies typically have to pay telecommunications firms to use their cables, which can be costly. And the large amounts of data moving across those lines can make them slower. It is not the first subsea cable to be sponsored by a tech company. In 2014 Google paired up with five telecommunications firms to build a subsea cable across the Pacific Ocean. Construction starts in August and will take over one year to complete.

French workers are protesting labor law reforms. The 35-hour week remains in place, but as an average. Firms can negotiate with local trade unions on more or fewer hours from week to week, up to a maximum of 46 hours. Firms are given greater freedom to reduce pay. The law eases conditions for laying off workers, strongly regulated in France. Employers given more leeway to negotiate holidays and special leave, such as maternity or for getting married. These are currently also heavily regulated.

So, French workers are protesting; it started with oil refinery workers; now one-third of France’s 12,000 gas stations are dry. Demand is three times normal levels because of panic buying. Electricity workers have joined in the strike. France’s largest power company has reduced nuclear power output by more than 5,000 megawatts, roughly 10% of demand. Flights at major French airports have been delayed or cancelled. Train service has been curtailed.

Here in the US we have our own problems with transportation. Airport screening delays have caused more than 70,000 American Airlines customers and 40,000 checked bags to miss their flights this year, and that’s just American Airlines. The delays have several causes, including cheaper airfare driving record numbers of travelers to the skies and a miscalculation on part of the TSA concerning the number of travelers who would sign up for a pre-clearance program.

The airlines, too, may have a hand in what’s happening, as travelers opt to carry their bags on flights rather than check them in order to avoid fees. Lawmakers have authorized the TSA to take steps to deal with the influx of flyers, but it remains to be seen if the agency can react quickly enough to accommodate what is expected to be a record number of passengers this summer.

The $34 million that Congress just sent over to the TSA to use for overtime to boost staffing wouldn’t cover the combined salaries of three major airline executives at Delta, United and American. The airlines say the problem is not baggage fees. But really, the only way to prove that is to drop the baggage fees and see what happens. At least then, if the lines are still long, the people in the lines might not be so cranky.

We’ve all heard the stories of the massive recalls of Takata air bag inflators, the largest-ever U.S. safety recall. You may be wondering how Takata can stay in business; it seems Takata is wondering the same thing. Takata named an outside committee in February to lead an overhaul and they hired investment bank Lazard to counsel on the financial restructuring. Takata is in bailout talks with a number of potential investors including private equity firm KKR, which might take a 60 percent stake. I don’t know why they would want a 60 percent stake in Takata.

Financial Review

Go Figure

Sinclair Noe — May 24, 2016

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

Subscribe: iTunes | Android | RSS

DOW + 213 = 17,706
SPX + 28 = 2076
NAS + 95 = 4861
10 Y + .02 = 1.86%
OIL + 1.02 = 49.10
GOLD – 21.30 = 1227.90

Yesterday, Wall Street couldn’t figure out which way to go; today stocks rallied for their best day since March 11. The S&P 500 rallied back above its 50 day moving average; we’ll have to see if it can hold on.

What was behind the rally? Who knows? Jeffrey Gundlach, CEO of DoubleLine Capital, said the rally feels like a short squeeze and characterized U.S. stocks as “dead money.” Gundlach says the market is not healthy and earnings have come in weak. On the Federal Reserve, Gundlach says the odds of a rate hike in June are 50-50, and it is Janet Yellen’s opinion that matters the most.

Expectations are rising for a rate hike next month after Philly Fed President Patrick Harker reinforced the central bank’s message that it’s getting ready to act now that the U.S. economy has recovered from a weak winter. Harker says he “can easily see the possibility of two or three rate hikes over the remainder of the year,” he told an audience in Philadelphia. “If the data comes in… I think a June rate increase is appropriate.” Markets are also awaiting this week’s main event – a speech from Janet Yellen on Friday.

The Census Bureau reports New Home Sales in April increased to a seasonally adjusted annual rate of 619,000 – an 8 year high; that’s an increase of 16.6% from March, and a 23.8% increase from April 2015. The median price also jumped, rising 9.7% from 12 months ago to $321,100. The big increase in sales took supply sharply lower. At the current pace, it would take 4.7 months to exhaust all inventory.

French investigators raided Google’s Paris headquarters this morning as part of a tax evasion inquiry. Google has based its regional headquarters in Dublin where corporate tax rates are lower than elsewhere in Europe. The company, now part of Alphabet, has been under pressure in recent years over its practice of channeling most profits from European clients through Ireland to Bermuda, where it pays no tax on them.

The raid was part of an investigation to determine if Google Ireland Ltd has a permanent base in France and if, by not declaring parts of its activities carried out in France, it failed its fiscal obligations, including on corporate tax and value added tax.  The raid was carried out as part of an investigation into aggravated tax fraud and the organized laundering of the proceeds of tax fraud. If Google is found guilty, it could face fines up to 10 million euros or a fine of half of the value of the laundered amount involved.

Separately, attorneys for Oracle and Google presented their closing arguments in a lawsuit over Google’s use of Java APIs owned by Oracle in Android. Oracle accused Google of stealing a collection of APIs, while Google suggested that Android transformed the smartphone market and Oracle sued out of desperation when its own smartphone attempts failed to launch. If the jury finds that Google did indeed steal code from Oracle, it could disturb the way engineers at small startups build their products and expose them to litigation from major companies whose programming languages they use.

By the way, API refers to application program interface, which is the set of tools for building software applications. Google has argued that Sun Microsystems, which created Java, always intended for its programming language and accompanying APIs to be used freely. Oracle purchased Sun in 2010 and claimed that Sun executives believed Google had infringed their intellectual property and simply hadn’t brought legal action.

An appeals court has already decided that the Java APIs in question are copyrightable. This case, which has stretched over two weeks in a district court in San Francisco, aims to determine whether Google’s implementation of the APIs can be considered fair use. Now we wait for the jury.

The head of SWIFT will present a plan today to fight back against a wave of recent cyber thefts at members of the world’s top payments network. The speech follows three high profile hacks since the beginning of last year: an $81 million heist at the Bangladesh central bank, a $12 million theft from Banco del Austro in Ecuador, and an attack on a Vietnamese lender that was unsuccessful.

Deutsche Bank was downgraded. Moody’s cut Deutsche Bank’s credit rating to “Baa2,” down from “Baa1.” The credit-rating agency said the downgrade was a result of the bank’s difficulty in stabilizing itself amid a world of low growth and low interest rates. Moody’s said, “Deutsche Bank’s performance over the last several quarters has been weak, and substantial operating headwinds, including continuing low interest rates and macroeconomic uncertainty, will challenge the firm.”

Monsanto has rejected Bayer’s $62 billion takeover offer as too low while saying it’s still open to further deal talks. Bayer will likely come back with a higher bid. Buying Monsanto would create the world’s biggest supplier of farm chemicals and seeds, so even if they can agree on a price, they face regulatory scrutiny and will likely have a hard time making the case that this deal will make for a more competitive market. The consolidation of two big industry players may also limit farmer choice and bargaining power, with increasing seed prices expected to be passed on to the grocery aisles.

There is also a question about biodiversity and the potential risks to food safety. As Monsanto rejected the Bayer bid, they left the door open, saying they “believe in the substantial benefits an integrated strategy could provide to growers and broader society, and we have long respected Bayer’s business.”

ExxonMobil will face a revolt from some of its biggest and most influential shareholders on Wednesday as they fight to force the world’s largest oil company to open up about the effect of climate change on its future profits. Investors, including pension funds of the governments of Norway, Canada, California, New York, and even the Church of England are expected to vote in favor of a resolution calling on Exxon to “publish an annual assessment of long term portfolio impacts of public climate change policies.” The resolution is also supported by ISS and Glass Lewis, the world’s leading proxy advice services which advise institutional investors how to vote on such issues.

The resolution states that the company “should analyze the impacts on ExxonMobil’s oil and gas reserves and resources under a scenario in which reduction in demand results from carbon restrictions and related rules or commitments adopted by governments consistent with the globally agreed upon 2-degree target”. ExxonMobil has tried to block the resolution.

Exxon is currently under investigation by New York’s attorney general over claims that it lied to the public and shareholders about the risks of climate change. It follows reports that internal company documents from the 1980s and 90s show Exxon’s in-house scientists were warning company executives about the dangers of climate change, while Exxon was publicly claiming that climate science was not proven.

The strongest El Nino in nearly 20 years has ended, according to the Australian Bureau of Meteorology, as sea surface temperatures across the Pacific Ocean cool to their neutral levels. El Niño led to damaged crop production (such as wheat, palm oil and rice) due to scorching weather across Asia and east Africa, and heavy rains and floods in South America. A majority of climate models suggest that the climate pattern La Niña will develop in the wake of El Niño, according to the Bureau of Meteorology. La Niña—a climate phenomenon characterized by significantly below-average temperatures in the Equatorial Pacific—brings dry and warm weather to the southern U.S. and Mexico, and wet weather throughout much of the Pacific.

Mandatory evacuation orders were lifted yesterday for the last of Alberta’s oil sands production sites endangered by wildfires, starting the process of inspections by forestry and health officials to make sure the facilities are safe for workers to return. Since late Friday, Alberta has removed orders that had prevented all but critical staff from remaining on sites.

Deere & Co. is tightening conditions for renting equipment as a slump in farming incomes has led customers to prefer leasing rather than buying its agricultural machinery. In the face of lower crop prices, farmers in the U.S., South America and elsewhere have cut back sharply on equipment spending despite planting big crops.

For nine straight quarters, the slump has eaten into Deere’s sales and profits, and it is now bleeding into the company’s customer-finance arm. Leases now account for about a quarter of Deere’s customer-financing deals, compared with about 15% in the past. But Deere’s finance unit and dealers have been burdened with used equipment as customers walk away when short-term leases expire. That has forced the company to tighten the terms for renting equipment that has rapidly depreciated in value.

Deere took a write-down on used equipment in the latest quarter. It is restructuring leases to share more of the risk of further declines with dealers and new leases will likely cost farmers more as the company lowers residual equipment values at the end of the leases to reflect the depressed prices for used equipment.

Toyota is recalling almost 1.6 million additional American vehicles for front passenger side Takata air bag inflators that could rupture. Toyota said the new recall includes some but not all Corolla, Matrix, Yaris, 4Runner, Sienna, Scion xB, Lexus ES, GX and IS vehicles built between 2006 and 2011. Other reports from 17 automakers recalling Takata’s faulty devices are also due this week.

Financial Review

Trending Now

Sinclair Noe — May 10, 2016

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

Subscribe: iTunes | Android | RSS

DOW + 222 = 17,928
SPX + 25 = 2084
NAS + 59 = 4809
10 Y un = 1.76%
OIL + 1.22 = 44.66
GOLD + 1.90 = 1266.30

The price of oil matched a six-month high, and companies that drill for oil and refine it also rose. All 10 industrial sectors of the Standard & Poor’s 500-stock index finished higher.

The number of available jobs rose to an eight-month high in March. The Labor Department said 5.76 million jobs were created in March, up from 5.61 million in February. The quits rate — a measure of worker willingness to leave one job for another — stayed at 2.1% in March. The quits rate staying the same shows there’s little evidence of meaningful wage pressure. The Job Opening and Labor Turnover Summary shows the number of job openings are up 11% year-over-year compared to March 2015.

A measure of small-business sentiment rose in April, snapping a three-month losing streak that took it to a two-year low. The National Federation of Independent Business’s optimism index rose 1 point to 93.6, slightly better than the 93.1 forecast by economists. Most of the index’s sub-gauges rose or stayed neutral. Only one, the index that tracks views about the future path of the economy, slipped.

It is too early to assess precisely the economic impact of the Alberta wildfire, according to the Bank of Canada, adding that it will have more to say in its interest rate decision later this month. Markets have ratcheted up the odds of a Canadian rate cut by year-end as the blaze disturbs oil production, but economists say the temporary interruption alone is unlikely to force the central bank’s hand on May 25.

As Washington remains deadlocked over a solution to Puerto Rico’s rapidly worsening debt situation, Treasury Secretary Jacob Lew traveled to the US territory on Monday to put a face on the crisis. Policymakers in the House of Representatives will unveil a new version of emergency legislation tomorrow, which will clarify how to prioritize the different creditors in Puerto Rico’s labyrinthine web of bond issuers.

Greece’s 10-year bond yields have fallen below 8% for the first time in over six months after Eurozone finance ministers offered debt relief to the cash-strapped country. The deal appears to be a compromise between Germany, which does not believe Athens needs additional debt relief, and the IMF, which insists it is necessary, and will be fleshed out by deputy finance ministers by May 24.

Federal authorities are investigating the market-making arms of Citadel LLC and KCG Holdings, looking into the possibility that the two giants of electronic trading are giving small investors a poor deal when executing stock transactions on their behalf. The Justice Department has subpoenaed information from Citadel and KCG related to the firms’ execution of stock trades on behalf of clients.

Institutional Investor just released its annual list of the top-earning hedge fund managers, and six of the top eight are quants, or managers who rely on computer programs to guide their investing. The list includes Ken Griffin of Citadel, Jim Simons of Renaissance Technology, and John Overdeck and David Siegel of Two Sigma. The vast majority of stock trading is now completed electronically. Tech-driven high-frequency trader firms now dominate the US Treasury market. That obviously means there is less need for the traders of old. Unsurprisingly, that has a lot of people worried.

After plunking down more than $2.5 billion for drilling rights in U.S. Arctic waters, Royal Dutch Shell, ConocoPhillips and other companies have quietly relinquished claims they once hoped would net the next big oil discovery. The pullout comes as crude oil prices have plummeted to less than half their June 2014 levels, forcing oil companies to cut spending.

Gap warned. The retailer announced that same-store sales cratered 7% in April. Gap was hit especially hard by an 11% slide in Banana Republic same-store sales. The company issued downside EPS guidance of $0.31 to $0.32, far worse than the $0.44.

Lumber Liquidators’ net loss quadrupled in the first quarter, as the retailer suffered after regulators revealed that certain types of laminate flooring previously sold by the company had a greater cancer risk than once thought. The company’s net loss widened to $32.4 million from $7.8 million, in the year-ago quarter, and they missed estimates.

SolarCity was gob smacked.  The Elon Musk-led solar company lost a whopping $2.56 a share, missing the $2.31 loss that was expected. Revenue surged 81.6% versus last year to $122.6 million, topping the $110 million consensus. Second-quarter guidance came in at a loss of $2.70 to $2.80 a share, worse than the $2.13 loss that Wall Street was anticipating. SolarCity shares are down about 20%.

At a time when falling prices, renewed U.S. tax breaks and the Paris climate deal are fueling solar sales worldwide, solar shares are performing even worse than coal stocks. Despite the ups and downs, the general trend is up. Developers will install 48.4 gigawatts of solar by the end of 2020, more than double the amount in the prior five years. Soaring installations and growing global demand for clean energy is being trumped by investor concerns that the debt-fueled strategies employed by SunEdison and SolarCity are endemic to the industry and dangerous for shareholders. Many solar companies have “growth-at-any-cost’’ business models that are neither profitable nor sustainable. Problems at a few major companies don’t necessarily carry over to the rest, but the problems are forcing the good companies to show proof they can deliver. There might be some bargains, if you can uncover them.

Earnings roundup: Credit Suisse swung to a 302-Million-Swiss-franc net loss, as it plowed ahead with restructuring its investment bank, and cautioned that subdued market conditions could continue into the second quarter. Hit by a lower demand for mobile networks, Nokia reported a net loss of €513-million-euro, warning of further cuts and layoffs following the acquisition of Alcatel-Lucent. SoftBank’s quarterly profit plummeted more than 36%, as turnaround efforts continued at Sprint, the struggling wireless carrier it bought in 2013. ING posted a 29% fall in first quarter profit, blaming the drop on higher regulatory costs in Europe and weakness in its financial markets division.

After the closing bell, Walt Disney posted fiscal second-quarter results that missed analysts’ estimates as earnings at the company’s ABC TV network and consumer-products division declined. Sales grew 4% to $13 billion, missing estimates. Earnings rose 2% as Star Wars and Disney resorts’ performance helped offset flat revenue, but again, short of estimates.

NASA reveals the latest Kepler findings. The space telescope, launched in 2009, aims to find planets in the Milky Way. The number of known alien planets has just gone up by more than 60 percent. Astronomers announced today (May 10) that NASA’s Kepler space telescope has discovered 1,284 new exoplanets, including nine rocky worlds that might be capable of supporting life as we know it. This is by far the largest haul of alien planets ever unveiled at one time.

Two of tech’s biggest companies are slugging it out in court. On one side, Oracle co-founder Larry Ellison; on the other, Alphabet’s Google Executive Chairman Eric Schmidt. Their beef? A six-year legal skirmish over software copyrights with billions of dollars in damages at stake. Oracle is seeking $8.8 billion because, it claims, Google’s Android violated its copyright on parts of the Java programming language. Google says the fair-use provision of copyright law allows it to use Java without paying a fee. Oracle is also asking for an injunction against Google’s future use of Java in Android.

Amazon has announced Amazon Video Direct, a new self-service program that will let video creators post videos on the company’s streaming platform and either sell them, rent them, make them available to Amazon Prime members or offer them for free with advertising. It’s the ad-supported videos that pose the biggest threat to YouTube. The Google-owned video site has come to dominate the world of online video by amassing a huge repository of videos and convincing marketers to sell ads against them. YouTube went largely unchallenged in this space for years, until Facebook’s aggressive push into video in 2014. Now Amazon will be another competitor with the deep pockets and technical infrastructure to be a potential threat.

In an April 27 conference call to discuss Facebook’s first quarter results this year, Mark Zuckerberg announced a high point in his company’s history. Advertising revenue grew by more than 50 percent since 2015, the company was hard at work on a future for artificial intelligence and virtual reality, and the average Facebook user is spending 50 minutes per day on Facebook and its other products, Instagram and Messenger. That means Facebook has a lot of power.  Yesterday, several former Facebook news “curators” who edited the Trending section beside the News Feed told Gizmodo that they were asked to suppress stories about Republicans and withhold news from predominantly conservative websites. It basically follows the plot from House of Cards. Facebook has denied the allegations.

The defense is that the news sorting is based on algorithms, and the algorithms are based on the credibility of the source. So, if something isn’t trending, well, consider the source. Facebook has become a powerful media gatekeeper, and allegations that it is somehow suppressing conservative voices is basically catnip for conservative media. Conservative media has always thrived on playing the underdog; Fox News still refers to the “mainstream media” even though it is the most popular cable news channel in the country. The simple reality is that there is always a middle man in the dissemination of news, so it is appropriate that it comes under scrutiny. By the way, the top trending story on Facebook over most of the past day has been the story of Facebook suppressing news.