Stocks Lose Ground in First Action of 4Q

Charles Schwab: On the Market

Posted: 10/03/2016 4:15 PM ET

Stocks Lose Ground in First Action of 4Q

U.S. stocks pared losses, finishing lower following some domestic economic reports that showed mostly better-than-expected reads for manufacturing activity and a surprising decline in construction spending. Treasuries and gold were lower, while the U.S. dollar and crude oil prices were higher. M&A action was in play on the equity front as Cabela's agreed to be acquired by Bass Pro Shops in a cash deal and Janus Capital and Henderson Group inked a deal for a merger of equals in an all-stock transaction.

The Dow Jones Industrial Average (DJIA) lost 54 points (0.3%) to 18,254, the S&P 500 Index decreased 7 points (0.3%) to 2,161, and the Nasdaq Composite declined 11 points (0.2%) to 5,301. In moderate volume, 809 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.57 to $48.81 per barrel, wholesale gasoline increased $0.01 to $1.47 per gallon and the Bloomberg gold spot price declined $2.98 to $1,312.89 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.2% higher at 95.70.

Cabela's Inc. (CAB $63) and Bass Pro Shops revealed that they have entered into a definitive agreement under which Bass Pro Shops will acquire CAB for $65.50 per share in cash for an aggregate transaction value of approximately $5.5 billion. Shares of CAB rallied.

Janus Capital Group Inc. (JNS $16) and Henderson Group Plc. (HNDGF $4) announced that their Boards of Directors have unanimously agreed to an all-stock merger of equals with the combined company to be named Janus Henderson Global Investors Plc. HNDGF and JNS are expected to own approximately 57% and 43%, respectively of the combined company with the deal anticipated to close in the 2Q of 2017. Shares of both companies traded sharply higher.

Tesla Motors Inc. (TSLA $214) announced that it had delivered approximately 24,500 vehicles in 3Q, of which 15,800 were Model S and 8,700 were Model X. Quarter-over-quarter (q/q) this represents about a 70% increase for deliveries, while TSLA also announced production increased by 37% q/q. TSLA shares made solid gains.

The major automakers reported U.S. September sales today. Ford Motor Co's(F $12) sales of its combined Ford and Lincoln brands fell 7.7% y/y versus the FactSet estimate of an 8.5% drop, while General Motors Co's (GM $32) sales declined 0.6%, compared to the projected 1.6% decrease. Fiat Chrysler Automobiles NV's(FCAU $6) Chrysler brand's sales shed 0.9% y/y, compared to the expected 5.1% decline, and Toyota Motor Corp's (TM $115) sales gained 1.5% y/y, versus the projected 2.0% advance. F, GM and FCAU closed higher, while TM was lower.

Schwab's experts detail in the recent Schwab Market Perspective: Crunch Time, that we’re seeing some signs of potential weakening of the auto market, which had been on a solid run. According to Cornerstone Macro Research, the percentage of banks tightening auto loan standards is now over 8%, not a lot but up from negative territory in the first quarter (indicating more banks were loosening standards). Read the whole perspective at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch.

Manufacturing mostly better than expected, construction spending miss's estimate

The Institute for Supply Management (ISM) Manufacturing Index (chart) for September moved back to expansion territory (above 50) after increasing to 51.5 from August's 49.4 level, and compared to the Bloomberg forecast of a modest rise to 50.4. The new orders gauge of the report jumped to its highest level in six months, while the production measure also improved markedly.

The final Markit U.S. Manufacturing PMI Index was revised slightly higher to 51.5 for September from the 51.4 preliminary level, where it was expected to remain. The index is down from the 52.0 level posted in August. A reading above 50 denotes expansion. The release is independent and differs from ISM's manufacturing report, as it has less historic value and Markit weights its index components differently.

Construction spending (chart) unexpectedly declined 0.7% m/m in August, versus projections of a 0.3% advance, and following July's downwardly revised 0.3% decrease. Residential spending was 0.2% lower, while non-residential spending declined 1.1%.

Treasuries finished lower, with the yield on the 2-year note rising 3 basis points (bps) to 0.79% and the yields on the 10-year note and the 30-year bond increasing 2 bps to 1.62% and 2.33%, respectively. Schwab's Chief Fixed Income Strategist, Kathy Jones points out in her article, With a Whimper Instead of a Bang: Is the Great Bond Bull Market Over?, the end of the bull market doesn't mean a bear market is starting, as slow global growth, deflationary pressures abroad, a firm dollar and demographic trends are likely to keep yields low. Investors should focus less on short-term changes in the market and more on structuring a fixed income portfolio that can work for them over the long run. Read the whole article and other bond market commentary at www.schwab.com/onbonds. Follow Kathy on Twitter: @kathyjones. 

Tomorrow, the U.S. economic calendar will be void of any major releases, but will heat back up on Wednesday with some reads on the all-important services sector in the form of the ISM non-Manufacturing Index and Markit's Services PMI Index. Mid-week we will also see reports on factory orders and the ADP Employment Change report, ahead of Friday's widely followed nonfarm payrolls release, with expectations of an increase of 174,000 jobs for September after gaining 151,000 the month prior.

Schwab's experts note in the recent Schwab Market Perspective, some recent U.S. economic data has been weaker than expectations and we’ll be watching for coming releases to see if it’s only a soft spot or something more concerning. We lean toward the former but the answer will go a long way to determining if we see a rate hike in 2016. Read the whole perspective at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

Europe pares early advance to finish mixed, Asia gains despite lower volume

European equities finished mixed, with Deutsche Bank(DB $13) again commanding investors' attention despite a national holiday in Germany, which kept markets there shuttered. Stocks in the U.K. were nicely higher, with exporters in the country benefitting from some weakness in the British pound as it approached lows reached shortly after the Brexit referendum. U.K. Prime Minister Theresa May announced that she will begin the withdrawal process from the European Union in the 1Q of 2017, to which the European Commission said that the announcement to trigger the exit clause by March changes nothing and it still won't start to negotiate until she does. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, notes in his recent article World Tour: An Around The World Look At the Economic Landscape, there has been little evidence of any impact from the Brexit vote on Europe’s economy, so far. August data for the United Kingdom on job growth, service sector sentiment, and retail sales have been resilient. Read the rest of the article at www.schwab.com/oninternational and follow Jeff on Titter: @jeffreykleintop. In economic news, manufacturing reads in the euro area accelerated in September.

Stocks in Asia finished higher in lighter volume with equity markets in China and South Korea closed for holidays and amid some investor optimism that the U.S. Department of Justice and Deutsche Bank may soon reach an agreement. Japanese equities gained ground despite a somewhat downbeat read for the island nation's 3Q Tankan business sentiment survey, though the results did reveal that large companies from all industries plan to slightly increase capital spending through March of next year. Though mainland Chinese shares were sidelined in observance of the golden week holiday break, securities trading in Hong Kong rallied with strength stemming from casino operators following some better-than-expected Macau gambling numbers. An advance for Australian stocks was aided by an upbeat manufacturing read, while the Reserve Bank of Australia met today and is expected to announce no change to its current cash target rate later tonight. Finally, Indian stocks jumped on some strength in automakers and as recent regional border tensions have eased, while the Reserve Bank of India will conclude a monetary policy meeting tomorrow, with no changes expected to its current stance.

The international economic docket for tomorrow will be light, offering the Consumer Confidence Index from Japan, the Commodity Index from Australia and PPI for the Eurozone.

Stocks Settle Down Ahead of Yellen's Speech

Charles Schwab: On the Market

Posted: 8/25/2016 4:15 PM ET

Stocks Settle Down Ahead of Yellen's Speech

U.S. stocks closed mildly lower and European equities snapped a winning streak as caution prevailed ahead of tomorrow's speech from Federal Reserve Chairwoman Janet Yellen. Some upbeat domestic data included better-than-expected reads on weekly jobless claims and durable goods orders, while a preliminary report on services sector activity unexpectedly declined but remained in expansion territory. Treasuries and gold were lower, the U.S. dollar was little changed and crude oil prices were higher.

The Dow Jones Industrial Average (DJIA) declined 33 points (0.2%) to 18,448, the S&P 500 Index lost 3 points (0.1%) to 2,173, and the Nasdaq Composite decreased 5 points (0.1%) to 5,212. In moderately light volume, 705 million shares were traded on the NYSE and 1.5 billion shares changed hands on the Nasdaq. WTI crude oil gained $0.56 to $47.33 per barrel, wholesale gasoline added $0.01 to $1.42 per gallon and the Bloomberg gold spot price declined $1.64 to $1,322.64 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was nearly unchanged at 94.76.

HP Inc. (HPQ $14) reported fiscal 3Q earnings-per-share (EPS) ex-items of $0.48, above the $0.44 FactSet estimate, as revenues declined 4.0% year-over-year (y/y) to $11.9 billion, versus the projected $11.5 billion. HPQ issued softer-than-expected 4Q EPS guidance, while lowering the high end of its full-year profit outlook. Shares pared sharp early losses.

Tiffany & Co. (TIF $73) posted 2Q profits of $0.84 per share, north of the forecasted $0.72, with revenues declining 6.0% y/y to $932 million, compared to the expected $933 million. 2Q same-store sales decreased 8.0% y/y, compared to the expected 7.8% drop. TIF maintained its full-year EPS outlook and shares rallied.

PVH Corp. (PVH $107) announced 2Q EPS ex-items of $1.47, well above the projected $1.28, as revenues increased 4.0% y/y to $1.9 billion, roughly in line with forecasts. The parent of Calvin Klein and Tommy Hilfiger issued mixed 3Q guidance, while raising its full-year profit forecast and reaffirming its revenue outlook. Shares gave up early gains and finished lower.

Dollar General Corp. (DG $76) reported 2Q earnings of $1.08, one penny below forecasts, with revenues growing 5.8% y/y to $5.4 billion, just shy of the expected $5.5 billion. 2Q same-store sales increased 0.7% y/y, versus the estimated 2.7% gain. DG confirmed its full-year EPS outlook, while announcing an additional $1.0 billion in share repurchases. DG closed sharply lower.

Dollar Tree Inc. (DLTR $86) posted 2Q EPS of $0.72, one cent south of expectations, as revenues rose 66% y/y to $5.0 billion—reflecting results from its acquisition of Family Dollar—compared to the projected $5.1 billion. 2Q same-store sales rose 1.2% y/y, compared to the 2.4% gain that was anticipated. DLTR issued stronger-than-expected 3Q earnings guidance, though it raised and lowered its full-year EPS and revenue forecasts, respectively. Shares were decisively lower.

Durable goods orders easily top forecasts, jobless claims unexpectedly dip

July preliminary durable goods orders (chart) jumped 4.4% month-over-month (m/m), compared to Bloomberg's estimate of a 3.4% gain and June's downwardly revised 4.2% drop. Ex-transportation, orders gained 1.5% m/m, easily topping the 0.4% forecasted increase, and June's favorably revised 0.3% decline. Orders for non-defense capital goods excluding aircraft, considered a proxy for business spending, increased 1.6%, well above projections of a 0.2% increase, and following the upwardly revised 0.5% rise in the month prior. Gains were widespread, notably surges in the volatile aircraft and parts and a sharp jump in computers and related products, though motor vehicles were flat and communications declined.

The business spending component of the report has posted back-to-back monthly gains, and a continuation of this trend could give the U.S. economy a needed boost to escape this prolonged period of stagnant growth. As noted in the Schwab Market Perspective: The Calm Before the…., consumer confidence has firmed, with the labor market continuing to improve, housing is looking good, and wages are finally starting to rise. Additionally, we've seen signs that consumers may be more comfortable taking on debt. However, it will be difficult to get the U.S. economy rolling without an improvement in productivity, which is undoubtedly being constrained by ongoing tepid capital spending. Read the whole perspective at www.schwab.com/marketinsight, and follow Schwab on Twitter: @schwabresearch.

Weekly initial jobless claims (chart) dipped 1,000 to 261,000 last week, versus estimates of a rise to 265,000, with the prior week's figure unrevised at 262,000. The four-week moving average declined 1,250 to 264,000, while continuing claims fell 30,000 to 2,145,000, south of the estimated level of 2,155,000.

The preliminary Markit U.S. Services PMI Index for August unexpectedly declined to 50.9 from July's final reading of 51.4, compared to forecasts of a modest rise to 51.8, though a reading above 50 indicates expansion. The release is independent and differs from the Institute for Supply Management's (ISM) report, as it has less historic value and its index components are weighted differently.

Treasuries were lower, with the yields on the 2-year note and the 30-year bond ticking 2 basis points (bps) higher to 0.79% and 2.27%, respectively, while the yield on the 10-year note increased 1 bp to 1.58%. For analysis on the fixed income markets see the video from Schwab's Managing Director of Trading and Derivatives, Randy Frederick and Fixed Income Director Collin Martin, CFA, titled Tempered Expectations for Bond Returns: Why Hold Bonds? Also, Schwab's Chief Fixed Income Strategist, Kathy Jones addresses in her article, What Does Strong Job Growth Mean for Bond Investors?, at www.schwab.com/marketinsight. Follow Randy and Kathy on Twitter: @randyafrederick and @kathyjones.

Tomorrow, the U.S. economic calendar will close out the week with the first revision (of two) of 2Q GDP, projected to be adjusted slightly lower to a 1.1% quarter-over-quarter annualized rate of growth, after 1Q's 0.8% expansion. The University of Michigan Consumer Sentiment Index will follow, expected to be revised modestly higher to 90.8 from 90.4, and an improvement from July's 90.0 figure, while wholesale inventories will close out the day, projected to tick 0.1% higher m/m in July following June's 0.3% gain. However, the highlight of the morning will be the 10:00 a.m. ET speech from Federal Reserve Chairwoman Janet Yellen at the Central Bank's annual policy symposium in Jackson Hole, Wyoming.

Schwab's Chief Investment Strategist, Liz Ann Sonders discusses in her latest commentary, With a Little Help From My Friends: On Africa, Economy and Earnings, we continue to believe a rate hike is on the table for this year. The combination of Fed policy uncertainty and the contentious election season could mean the recent lull in volatility will not persist into the fall. Read more at www.schwab.com/marketinsight. Follow Liz Ann on Twitter: @lizannsonders.

Europe and Asia lower as global markets eye Yellen's speech

European equities finished lower, declining for the first time in four days, with basic materials stocks lower on the continued pressure on the mining sector and as the markets digested some mixed economic data in the region, headlined by a disappointing read on August German business sentiment. Global caution persisted ahead of tomorrow's key speech from U.S. Federal Reserve Chairwoman Yellen at the Central Bank's annual policy symposium in Jackson Hole, Wyoming. Healthcare issues came under pressure amid concerns about a potential pricing crackdown following comments from U.S. Democratic nominee Hillary Clinton. In other economic news, Spain's 2Q GDP growth was unexpectedly revised higher and U.K. August retail sales figures rebounded. The U.K. report added to recent data to suggest the U.K. economy is seeing a limited impact from the late-June vote to leave the European Union, known as Brexit. For commentary on the Brexit vote fallout, see Schwab's Director of International Research, Michelle Gibley, CFA, discusses Keep Calm and Carry On: The Brexit Shock That Wasn't at www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch. The euro was higher and the British pound lost ground on the U.S. dollar, while bond yields in the region finished mostly higher.

Stocks in Asia finished lower in subdued volume as the global markets remained cautious ahead of tomorrow's key speech from U.S. Fed Chair Janet Yellen, while the recent drop in crude oil prices and dampened sentiment in the mining sector weighed on commodity-related issues. Japanese equities declined despite some weakness in the yen, while basic materials led Australian securities lower. Stocks in India fell amid some choppy trading on the expiration of monthly derivatives contracts and South Korean listings finished flat. Equities trading in mainland China fell and those in Hong Kong were little changed as liquidity concerns resurfaced and reports that the government may act to cool speculation in the financial and real estate markets fostered some uneasiness. Amid the uncertain global backdrop, Schwab's Chief Global Investment Strategist, Jeffrey Kleintop, CFA, offers Three Reasons Why Now is Not the Time to Retreat from Global Diversification and Your portfolio may be less diversified than you think. Read both articles at www.schwab.com/oninternational and be sure to follow Jeff on Twitter: @jeffreykleintop.

Tomorrow, the international economic docket will deliver consumer price inflation for Japan, consumer confidence from Germany, preliminary 2Q GDP from France and business investment, the Index of Services and preliminary 2Q GDP from the U.K.

Financial Review

Déjà vu All Over Again

Sinclair Noe — September 23, 2015

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

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DOW – 50 = 16,279
SPX – 3 = 1938
NAS – 3 = 4752
10 YR YLD + .02 = 2.14%
OIL – 1.67 = 44.69
GOLD + 5.70 = 1131.40
SILV + .03 = 14.89

Pope Francis visited the White House this morning. Speaking from the South Lawn before a crowd of about 15,000, the Pope said “climate change is a problem which can no longer be left to a future generation. When it comes to the care of our common home, we are living at a critical moment of history”; this was also a reference to his encyclical published in May, “Laudato Si – On Care for Our Common Home”, which addressed climate change. Francis has been a frequent critic of the damage caused to the world’s poor and the environment by capitalism’s excesses.

He also urged more attention be paid to the millions in poverty now overlooked by society, quoting Martin Luther King that “we have defaulted on a promissory note and now it is time to honor it.” Pope Francis said he will encourage Congress to guide the U.S. in fidelity to its founding principles including religious liberty. He referred briefly to the issue of immigration, and called on the U.S. to build a “truly tolerant and inclusive” society. Francis described himself as the son of an immigrant Italian family in Argentina. “I am happy to be a guest in this country, which was largely built by such families,” he said. Francis said that his teachings on economic fairness and climate change are “all in the social doctrine of the Church.” Tomorrow Pope Francis will address a joint session of Congress.

 Chinese president Xi Jingping arrived in Seattle yesterday, on his way to an official State visit in Washington DC tomorrow. Xi toured a Boeing aircraft plant and apparently liked what he saw. Boeing has signed deals to sell 300 aircraft to three Chinese firms and set up an aircraft plant in China. The aircraft deals, potentially worth $38 billion in total, are collectively the largest order the aerospace firm has received from Chinese companies.

Activity in China’s factory sector fell to the lowest level in over six years. The preliminary China manufacturing purchasing managers’ index dropped to 47.0 in September, down from 47.3 in August. The decline was led by a weak read for new orders and new export orders. Several investment firms lowered their estimates on China growth after factoring in the new manufacturing data.

Financial data firm Markit said its preliminary U.S. Manufacturing Purchasing Managers’ Index for September was 53. That was the same as August, which was its lowest since October 2013. A strong dollar, flagging demand in many export markets and reduced capital spending by energy and other companies were all dragging on U.S. manufacturing. The survey is indicating the weakest manufacturing growth for almost two years, meaning the sector will have acted as a drag on the economy in the third quarter.

The Markit Eurozone Manufacturing PMI fell to 53.9 in September, down from 54.3 in August, but roughly in line with activity over the last eight months. Service sector growth outpaced manufacturing by a small margin. European Central bank President Mario Draghi said it’s too soon to say whether risks to the economic outlook warrant a step-up in the European Central Bank’s stimulus, saying: “Should some of the downwards risks weaken the inflation outlook over the medium term more fundamentally than we project at present, we would not hesitate to act.”

Bond guru Bill Gross, formerly with Pimco and now with Janus Capital, has long called for the Federal Reserve to raise interest rates. Now Groww is urging the Fed to “get off zero and get off quick” as zero-bound levels are harming the real economy and destroying insurance company balance sheets and pension funds. In his October Investment Outlook report, Gross wrote that the Fed, which did not raise its benchmark interest rates at last week’s high-profile policy meeting, should acknowledge the destructive nature of zero percent interest rates over the intermediate and longer term.

Gross writes: “Zero destroys existing business models such as life insurance company balance sheets and pension funds, which in turn are expected to use the proceeds to pay benefits for an aging boomer society.” Adding, “These assumed liabilities were based on the assumption that a balanced portfolio of stocks and bonds would return 7-8 percent over the long term.” But with corporate bonds now at 2-3 percent, Gross said it was obvious that to pay for future health, retirement and insurance related benefits, stocks must appreciate by 10 percent a year to meet the targeted assumption. “That, of course, is a stretch of some accountant’s or actuary’s imagination.”

At a time when fears are high about market liquidity comes a significant shift in the primary players in the corporate bond market. Households, hedge funds and nonprofits, historically considered to be long-term holders of fixed-income instruments, ditched corporate debt in the second quarter, selling $122 billion after reducing their holdings by just $24 billion over the previous three months.

Conversely, purchases by foreigners more than doubled, from $80 billion to $172.2 billion. Foreigners now own more than a quarter of the $8.1 trillion corporate bond market, with a 25.9 percent stake that is just shy of the 26.5 percent portion owned by mutual and exchange-traded funds. Households, a category that for statistical purposes also includes hedge funds, now own just 4 percent of the group. So, the fastest growth in ownership of corporate bonds is foreign investors and mutual funds/ETFs, otherwise considered short-term traders, not long-term investors.

A hallmark of the $18 trillion mutual-fund industry is that it promises easy entry and exit for investors. U.S. regulators now want new protections to ensure that pledge can be met due to concerns that firms have loaded up on hard-to-sell assets. The five-member Securities and Exchange Commission voted unanimously to pass a measure Tuesday that funds would have to maintain a minimum cushion of cash or cash-like investments that can be sold within three days. Funds also could charge investors who pull their money on days of elevated withdrawals.

The executive committee of Volkswagen’s supervisory board met today in Germany, with the automaker facing an unprecedented scandal. The company has now admitted that over 11 million diesel vehicles globally have software with programming aimed at defeating emissions control testing. One of their first moves was to hire Kirkland & Ellis – that’s the legal firm that represented BP in the Deepwater Horizon oil spill disaster. Next step, CEO Martin Winterkorn resigned. He had been CEO for the past 10 years. If he knew about the emissions fraud scheme, that’s bad. And it is almost as bad to imagine that he didn’t know what was going on.

Shares of Volkswagen managed to bounce about 2% but are still down about 37% for the week. In Germany, one in six jobs are dependent upon the automobile industry in some way. Economists are trying to estimate the broad impact of the Volkswagen scandal on German GDP.

If you’re wondering why the Volkswagen story is attracting so much attention, you are wise to be skeptical. The recent General Motors problem involving defective ignition switches resulted in more than 120 deaths, and about a $900 million dollar fine for GM. VW would probably take that deal in a New York minute. Then there is the problem with Takata airbags exploding with such force that they spray shrapnel through the passenger compartment.

You may even recall a story about emissions controls from 1998 involving Caterpillar, Cummings, Detroit Diesel, Volvo, Renault, and Navistar. They created their own defeat device – one setting for the emissions tests and another, dirtier setting for regular driving. That deal involved 1.3 million engines. The fines amounted to a little over $80 million, plus a pledge to spend more than $800 million to develop cleaner diesel engines, with no admission of guilt. So, it has happened in the past; which means it isn’t a stretch to imagine that other car companies are trying to game emissions tests. Like Yogi Berra once said, “It’s déjà vu all over again.”

The American Petroleum Institute indicated U.S. crude stockpiles fell 3.7 miillion barrels last week. Stocks at the Cushing, Oklahoma delivery location were down almost 500,000 barrels.

Patriot Coal disclosed that Blackhawk Mining won a bankruptcy auction for the majority of its assets. The terms of Blackhawk’s bid were not disclosed, but it did not include cash; instead, the company offered Patriot’s creditors new debt and a stake in the entity that would own the auctioned assets. The sale is subject to approval by the U.S. bankruptcy court in Richmond, VA.

The Brazilian real hit an all-time low against the U.S. dollar today. Brazil has been hit hard by the steep plunge in commodities prices and the economic slowdown in China. The real has tumbled almost 35 percent against the dollar year to date. Earlier this month, S&P cut Brazil’s credit rating to below investment grade. Brazil’s Treasury bought back fixed-rate notes but failed to sell new notes at two auctions earlier in the week.

A federal judge has ruled that Warner/Chappel does not have a valid copyright to the song “Happy Birthday To You.” The music to Happy Birthday To You was written in the late 19th Century by two sisters who called their version Good Morning To All. That song later evolved into the version popular today and was copyrighted by the sisters’ publisher.

The publisher and the rights to the song were eventually purchased by Warner/Chappell for $25 million in the 1980s. Warner/Chappell earns about $2 million a year from the song. A group of artists who challenged Warner/Chappell’s ownership said over the summer that they had proof that the song belonged in the public domain. They said a songbook from 1922 includes the song, predating its 1935 copyright. Yesterday, the judge agreed. You are free to sing to your heart’s content.