Financial Review

How the Net Dies

Sinclair Noe — November 21, 2017

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DOW + 160 = 23,590 (Record)
SPX + 16 = 2599 (Record)
NAS + 71 = 6862 (Record0
RUT + 15 = 1518 (Record)
10 Y – .01 = 2.36%
OIL + .70 = 57.12
GOLD + 4.00 = 1281.00

Cryptocurrency

• Number of Currencies: 914
• Total Market Cap: $241,204,261,304
• 24H Volume: $8,939,291,607

Top Cryptocurrencies

	Name	Symbol	Price USD	Market Cap	Vol.	Total Vol. %	Price BTC	Chg. % 1D	Chg. % 7D
	Bitcoin	BTC	8,133.4	$135.92B	$4.20B	46.93%	1	+0.67%	+20.13%
	Ethereum	ETH	360.70	$34.71B	$923.27M	10.33%	0.0443685	+0.24%	+7.57%
	Bitcoin Cash	BCH	1,178.80	$19.88B	$737.15M	8.25%	0.14492	+0.64%	-7.95%
	Ripple	XRP	0.23480	$9.03B	$209.98M	2.35%	0.00002865	+1.58%	+11.73%
	Dash	DASH	503.22	$3.86B	$182.14M	2.04%	0.0613699	+2.15%	+16.47%
	Litecoin	LTC	70.630	$3.80B	$228.36M	2.55%	0.00863742	+0.90%	+11.70%
	IOTA	MIOTA	0.89000	$2.52B	$123.20M	1.38%	0.00011133	+1.01%	+45.73%
	NEO	NEO	34.600	$2.26B	$107.73M	1.21%	0.00426002	+0.95%	+16.41%
	Monero	XMR	141.74	$2.19B	$76.82M	0.86%	0.0174976	-0.18%	+16.47%
	NEM	XEM	0.20368	$1.84B	$9.07M	0.10%	0.0000251	+0.28%	+5.01%

Record high closes for the Dow, S&P, Nasdaq, and Russell 2000. The S&P technology index gained 1.2 percent, helped by a nearly 1.9 percent rise in Apple. The index has risen 38.6 percent this year, by far more than any other sector.

The S&P 500 is up 16.1 percent for the year so far. Healthcare stocks also rose after bullish results from medical device maker Medtronic, whose shares rose 4.8 percent after the company reported better-than-expected results and backed its full-year forecast.

Shares of Urban Outfitters gained 3.7 percent while Hormel Foods was up 3.4 percent. Both reported quarterly results.

Signet Jewelers tanked 30.4 percent after reporting a surprise quarterly loss. Shares of HP fell 4% late Tuesday after the company reported fiscal fourth-quarter earnings and sales above expectations.

Hewlett Packard Enterprise managed to close out its year with an earnings beat Tuesday, but the company’s forecast for the first quarter of its new fiscal year and Chief Executive Meg Whitman’s impending departure sent shares down more than 5%.

Facebook was up more than 1%, but it managed to drop in ranking. Tencent is now valued at $534.5 billion in market capitalization, making it the fifth most valuable public company globally. Facebook falls to number 6.

Goldman Sachs raised its earnings estimate for S&P 500 companies in 2018 and 2019 based on expectations of U.S. corporate tax reform, above-trend global and U.S. economic growth and slowly rising interest rates from a low base.

The Justice Department sued to block AT&T’s planned $85 billion acquisition of Time Warner. The move is unusual because the government does not typically challenge so-called vertical mergers like this one, which do not involve the combination of direct competitors.

The government hasn’t challenged a vertical merger since 1973 in a case involving Fruehauf Corporation, then the nation’s biggest maker of truck trailers. And in that case, an appeals court ruled for Fruehauf.

Many mergers that have sparked criticism for hurting consumers — like those of airlines — have involved direct competitors. But, as the Justice Department alleges in its complaint against AT&T and Time Warner, vertical mergers can arguably raise prices for consumers, too. Guidelines for these types of vertical mergers have not been updated since 1984, and they favor companies that want to merge rather than antitrust regulators.

AT&T will now try to get a court to allow the merger, but there are no guarantees they will prevail. Usually, these problems result in some sort of settlement but that might not happen here. The DOJ had reportedly warned AT&T that it would need to sell either Turner Broadcasting—CNN’s parent company—or DirecTV to receive approval for the merger.

AT&T said that was a non-starter. DOJ then filed suit. And that raises the question of why the Department of Justice is trying to block this case. Many other larger mergers seem to get rubber stamped for approval. Makan Delrahim, the DOJ’s chief antitrust enforcer, publicly stated in 2016 that an AT&T–Time Warner merger would pose no serious legal problems, declaring: “I don’t see this as a major antitrust problem.”

Now he has completely reversed his position. Why the change of heart? Did Delrahim engage in a sincere re-evaluation of the data and doctrines? Or was he acting on pressure from the White House?

The Trump administration’s sudden and selective antitrust enforcement may very well be a front for an unconstitutional effort to punish expression it opposes. AT&T will have ample opportunity to make this objection in court. And if it argues this position persuasively, it may obtain access to government records to prove that Trump’s bias against CNN illegally influenced the DOJ’s antitrust crackdown.

Once again, Trump’s own words may wind up undermining his administration’s legal position in court. Bloomberg reports that AT&T will request access to communications between the White House and the Justice Department regarding the merger, apparently to determine whether Trump exerted improper influence.

If the president did use antitrust as a pretense for penalizing CNN, he likely ran afoul of the First Amendment’s protection against government retaliation for protected expression. Even if AT&T could not find direct evidence of retaliation, any documentation of political motive would fatally undermine the DOJ’s antitrust arguments. Trump’s own comments about Muslims persuaded courts to block his first and second travel bans, holding that his words undermined the legal justifications for both executive orders.

Even more glaringly, Trump’s FCC just eliminated regulations that might have blocked Sinclair Broadcast Group’s proposed merger with Tribune Media. Thanks to the FCC, Sinclair, a vigorously pro-Trump company, will now be able to buy 42 new TV stations, allowing the firm to dominate local media markets in many regions.

In its complaint, the Justice Department argues that AT&T, which already owns DirecTV, would “use its control of Time Warner’s popular programming as a weapon to harm competition.” Specifically, the government argues, AT&T would use the merger to strong-arm its competitors into paying hundreds of millions more per year for Time Warner’s networks. This could ultimately lead to higher bills and fewer options for American families, the Justice Department argues.

The government also alleges that a merged AT&T/Time Warner would have the power to stymie the growth of online TV options that it views as a threat to traditional TV.

Under Trump-appointed chairman Ajit Pai, the FCC plans to repeal net neutrality – the principle that all traffic on the internet is treated equally. Repeal of net neutrality rules would allow internet service providers to favor their own content and block or throttle access to their competitors’ material, a move that could allow a company like AT&T to charge websites a fee to reach users at faster speeds, or even block content.

In other words, the FCC wants to permit what the DOJ purportedly wants to prohibit by blocking the AT&T-Time Warner merger. The move to kill net neutrality is likely to spark a furious battle before the FCC’s vote on the proposals on 14 December. About 21-million comments were submitted to the regulator as it discussed the proposals, and activists have flooded legislators with more than 250,000 calls condemning Pai’s plans. The FCC’s plans will be challenged in court.

Meanwhile, media merger and acquisition activity is probably on hold until this deal is worked out through the courts or some other resolution. Whatever happens – it has suddenly become one of the most interesting and important mergers in years.

The National Association of Realtors says sales of previously-owned homes jumped 2% to a seasonally adjusted annual pace of 5.48 million in October. The median sales price was $247,000, up 5.5% from 12 months ago, and October marked the 68th-straight month in which prices rose compared to a year ago. First-time buyers made up 32% of the total, up from 29% in September but still well below long-time averages.

At the current sales pace, it would take 3.9 months to exhaust the available supply of homes, down from 4.4 months a year ago. October’s inventory, when seasonally adjusted, was the second-lowest on record going back to 1999. Inventory declined 3.2% during the month, to 1.80 existing homes. That’s 10.4% lower than a year ago, the 29th month of lower inventory versus the year-earlier period.

NAR expects only a 3.7% increase in existing-home sales in 2018, but continues to warn that the tax reform bills working their way through Congress would “disincentivize” homeownership.

A recent White House report claims that corporate tax cuts would boost the economy and result in GDP growth  of as much as five percentage points. The Initiative on Global Markets at the University of Chicago’s Booth School of Business asked 42 economists if they agreed or disagreed that GDP – gross domestic product would be “substantially higher” in 10 years if a tax bill like the one congressional Republicans and the White House are pushing is enacted.

Of those 42, only one economist said that cutting corporate tax is likely to grow GDP. Most others — 22 economists — disagreed. Fifteen said they were uncertain and four didn’t answer.

Financial Review

5 Straight

Sinclair Noe — February 15, 2017

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

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Financial Review by Sinclair Noe for 02-15-2017
DOW + 107 = 20,611
SPX + 11 = 2349
NAS + 36 = 5819
RUT + 7 = 1404
10 Y + .03 = 2.50%
OIL – .23 = 53.48
GOLD + 5.40 = 1234.20

The consumer price index, or cost of living, rose by a seasonally adjusted 0.6% in January. The prices Americans pay for goods and services jumped in January by the largest amount in four years, mostly because we paid more for gasoline. Also, rents and medical costs have increased.

Food costs rose slightly in January but are down 2% in the past year. Headline inflation rose 2.5% over the prior year. Stripping out the volatile food and energy categories, Core consumer prices advanced a slower 0.3% in January. The core rate has moved up 2.3% in the past year.

Real hourly wages fell by 0.5% in January, reflecting the squeeze put on consumers by higher gasoline prices. Real or inflation-adjusted wages are flat over the past 12 months.

Most US retailers posted strong sales in January. Retail sales rose 0.4% last month, and December sales were revised up to 1% from 0.6%. Every major retail sector reported higher sales except for auto dealers, whose business tends to tail off after the Christmas shopping season. Auto purchases account for about one-fifth of all retail spending.

If autos and gasoline are excluded US retail sales rose 0.7%. Electronics and appliance stores saw a 1.6% rise in sales, the largest gain in a year and a half. Stores that sell clothing and sporting goods also posted sales gains of 1% or more. Sales at bars and restaurants advanced 1.4%.

Non-store retailers — which includes online retailers like Amazon — saw sales rise 12% over last year. One negative was a 2.3% spike in sales at gas stations.

The New York Fed’s Empire State manufacturing report came in at 18.7, better than 7.0 that was expected. Any reading over 0 indicates expansion of activity in the region. This was the best reading for the index is over two years, and the unfilled orders index rose above 0 for the first time in 5 years. All this data follows Tuesday’s latest Small Business Optimism report from the NFIB, which showed an additional increase in optimism about the economy from America’s small business owners.

World stocks hit 21-month peaks, and the dollar rose for the 11th straight day after Federal Reserve Chair Janet Yellen flagged a possible interest rate rise next month during upbeat comments on the US economy. Treasuries sold off on her testimony. Probabilities for a March rate hike jumped to 34 percent, but some are still worrying that the Fed will have to move faster than the market currently expects.

Yellen continued her semi-annual Humphrey-Hawkins testimony today, this time before the House Financial Services Committee. The hearing was contentious from the start. Republicans pressed Chair Yellen relentlessly to concede that the American economy is broken, that the Fed has failed to fix the underlying problems, and that excessive regulation is making things worse.

Members of the committee frequently interrupted Yellen. She acknowledged that economic growth has been “quite disappointing,” but she said the Fed’s efforts had contributed to strong job growth since the financial crisis, and she defended the value of the changes in regulation that followed it. She did not endorse a rollback of regulation of big banks.

The chief executives of major retailers including Target, JCPenney, Best Buy and Gap met with President Trump today. They made the trip to lobby against a “border adjustment tax” proposed by congressional Republicans.

Retailers are particularly vulnerable to such a tax because they sell a high volume of imported items – clothes, electronics or general merchandise – that could be 20% more expensive under the proposal. Retailers called the hour-long meeting positive and productive, though they offered few details.

Humana said it will pull out of the Affordable Care Act marketplace in 2018, making the announcement after it ended a merger agreement with Aetna. Humana also announced plans to repurchase $2 billion worth of its own shares. The company has steadily scaled back its presence, selling policies for 2017 in just 11 states.

In early January, the company said the number of its customers buying coverage through the exchanges had dropped to about 150,000. President Trump immediately seized on the company’s decision as evidence that the Affordable Care Act needed to be repealed and replaced; tweeting that “Obamacare continues to fail.” So far Trump has not come up with a replacement.

There have been plenty of distractions. Trump’s nominee for labor secretary abruptly withdrew his nomination today. Andrew Puzder, the CEO of CKE Restaurants (parent of Carl’s Jr. and Hardees) pulled out when it became obvious he did not have enough Republican support for confirmation.

This follows the firing of Trump’s first national security advisor, Michael Flynn, after he lied about his communications with Russians. And this follows news that a number of associates linked to President Trump’s campaign and business interests are part of the federal inquiry into communications with Russian government officials who sought to meddle in the November election.

The extent and purpose of those alleged contacts continue to be weighed, including whether the associates were aware they were communicating with Russian intelligence officials or those working on behalf of the Russian government.

Also today, Trump met with Israeli Prime Minister Benjamin Netanyahu and urged him to curb settlement construction even as Trump dropped a U.S. commitment to a two-state solution to the Israeli-Palestinian conflict, a longstanding bedrock of Middle East policy.

Time Warner shareholders met today to decide on the company’s proposed $86 billion merger with AT&T, and 79% voted “yes”. The transaction still needs approval from federal regulators.

Japanese telecommunications, internet and solar company SoftBank Group is buying US investment company Fortress Investment Group for $3.3 billion. SoftBank has set up a $25 billion private fund for technology investments that it says may grow to $100 billion. It already owns the US wireless company Sprint and Britain’s ARM Holdings.

Verizon is close to a revised deal to buy Yahoo’s core internet business for $250 million to $350 million less than the original agreed price of $4.83 billion. Since last year, Verizon had been trying to persuade Yahoo to amend the terms of the acquisition agreement to reflect the economic damage from two cyber-attacks.

Today, Yahoo was warning users that their accounts had potentially been compromised, but it declined to say how many people were affected. The newly reported malicious activity revolved around the use of “forged cookies” — strings of data that are used across the web and can enable people to access online accounts without reentering their passwords.

In its biggest year to date, the US solar market nearly doubled its annual record, per Greentech Media, topping out at 14,625 megawatts of solar PV installed in 2016. For the first time, US solar ranked as the number one source of new electric generating capacity, while growth of nonresidential installations surpassed residential solar for the first time since 2011.

The National Safety Council released estimates that 40,200 people died in motor vehicle crashes in 2016. It would be the first time that more than 40,000 people died on U.S. roads since before the Great Recession. The council pointed to low gas prices and an improving economy as contributors to the uptick.

The National Safety Council also estimated the cost of traffic deaths, injuries and property damage was $432 billion in 2016. The estimate is a 6% increase in deaths from 2015, and the council pointed to low gas prices and an improving economy as contributors to the uptick.

Warren Buffet continues to shine. Berkshire Hathaway, disclosed in a regulatory filing yesterday that it loaded up on Apple’s stock during the fourth quarter, increasing its stake to 57.36 million shares as of Dec. 31, up from 15.23 million shares as of September 30.

Apple stock was up 2.5% in the fourth quarter, and up 16.6% since the start of the year, to close at record highs yesterday. If the stake remained unchanged, Buffett’s Apple shares would be worth $1.1 billion more than they were just a little over six weeks ago.

Financial Review

Go Figure

Sinclair Noe — February 8, 2017

Podcast: Play in new window | Download (Duration: 12:09 — 7.0MB)

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DOW – 35 = 20,054
SPX + 1 = 2294
NAS + 8 = 5682
RUT – 2 = 1358
10 Y – .04 = 2.35%
OIL + .19 = 52.97
GOLD + 8.10 = 1242.50

Another record high for the Nasdaq Composite, its 12th all-time close of 2017.

The American Petroleum Institute reported crude supplies rose by 14.2 million barrels last week, undermining OPEC’s efforts to re-balance global markets. The Energy Information Administration said that the U.S. will pump the most crude next year since 1970, as OPEC cuts lift prices and benefit domestic producers.

And in its weekly report this morning, the EIA reported a larger-than-expected increase in crude-oil supplies—their fifth weekly rise in a row and the second-biggest on record, based on EIA data going back to 1982.

Crude inventories climbed by 13.8 million barrels in domestic crude-oil supplies for the week ended Feb. 3. Weekly crude stockpiles haven’t climbed by this much since the week ended Oct. 28. Crude oil prices reversed an earlier loss and eked out a gain on the day. Go figure. Best guess is that the report also showed gasoline supplies fell by 900,000 barrels. Sorry, but that’s about the best excuse I can come up with.

Intel will invest $7 billion to build a new chip factory in Arizona. Brian Krzanich (pronounced Krah-ZAN-nitch – you're welcome) the CEO of Intel says that tax cuts and deregulatory policies pushed by President Trump prompted the company to move forward with its plans to complete the Fab 42 plant.

The completion of Fab 42 in 3 to 4 years will directly create approximately 3,000 high-tech, high-wage Intel jobs for process engineers, equipment technicians, and facilities-support engineers and technicians who will work at the site. Combined with the indirect impact on businesses that will help support the factory’s operations, Fab 42 is expected to create more than 10,000 total long-term jobs in Arizona.

The 7-nanometer semiconductor manufacturing process targeted for Fab 42 will be the most advanced semiconductor process technology used in the world.

Japanese display maker Sharp Corp may start building a $7 billion plant in the United States in the first half of 2017, taking the lead on a project initially outlined by its Taiwanese parent Foxconn. Japanese Prime Minister Shinzo Abe is scheduled to meet President Trump in Florida this weekend. Abe will reportedly unveil a package of investments to create as many as 700,000 US jobs. The investment will be by a Japanese consortium that will also include manufacturing equipment makers.

Britain’s House of Commons gave its final approval Wednesday to a bill authorizing the government to start exit talks with the European Union, despite fears by opposition lawmakers that the U.K. is setting out on the rocky path to Brexit with a sketchy road map. The bill now goes to the House of Lords, which has the power to delay — but not to derail — the legislation; it should become law within weeks.

Volkswagen has launched a U.S. subsidiary designed to oversee $2 billion in investments to promote zero-emission vehicles, a commitment the German auto giant made in the wake of Dieselgate. The Electrify America unit will open more than 500 EV charging stations as it works toward building out a national network. VW will also launch a “Green City” initiative in a yet-to-be-identified California city to pilot future concepts.

According to a court filing, Takata will plead guilty on Feb. 27 to a single felony count of wire fraud to resolve a DOJ investigation into ruptures of its air bag inflators linked to at least 16 deaths worldwide. Last month, the auto parts firm agreed to the guilty plea as part of a $1 billion settlement in the world’s largest-ever recall.

Time Warner reported higher-than-expected fourth-quarter results, largely due to box office hits such as the “Harry Potter” spinoff “Fantastic Beasts.” Time Warner reported an 11.5% rise in quarterly revenue and said the planned $84 billion merger with AT&T remained on track to close later this year.

Swiss pesticides and seeds group Syngenta pushed back the expected closure of its agreed $43 billion takeover by ChemChina to the second quarter of 2017, but said it was making progress in winning regulatory approval for the deal.

Humana earned an adjusted $2.09 per share for its latest quarter, while revenue was slightly below projections. Humana said that it added members in its Medicare Advantage business, and that it would give an update on its transaction to be bought by Aetna by February 16. That deal was blocked in a court ruling last month.

Allergan earned an adjusted $3.90 per share for its latest quarter, beating estimates of $3.76 a share. Its revenue also came in above forecasts on increased sales of Botox and other therapeutic treatments.

Shares of Microchip Technology are up, continuing last night’s gains, after the chip maker yesterday afternoon beat fiscal Q3 expectations and topped consensus as well.

Shares of Panera Bread surged to a record high and the biggest one-day move in almost two years after the company gave an upbeat forecast and said technology investments at its restaurants were paying off.

Whole Foods Market reported revenues and comparable sales that fell short of Wall Street’s expectations. Whole Foods also lowered full-year sales and earnings guidance in wake of the weak results.

Alaska Air, the fifth-largest U.S. carrier, beat estimates by 16 cents a share, with adjusted quarterly profit of $1.56 per share. Revenue beat forecasts and the company also increased its quarterly dividend.

Canada’s government will provide $282 million in support for Bombardier to help fund two jet programs, including the C Series, the single-aisle plane that competes with Boeing and Airbus Group SE products. After landmark sales of the jetliner to Air Canada and Delta Air Lines in 2016, the company is now seeking new orders while also targeting the first delivery of the Global 7000, its largest business aircraft.

Bank of America is opening robo branches. The bank has opened three automated branches over the past month and has plans to roll out more over the next year. Customers can use ATMs and have video conferences with employees at other offices. BofA is set to open 50 to 60 new branches over the next year, but will also be closing some in certain markets, so they will not represent a net increase.

At its height, back in 2000, the US cash equities trading desk at Goldman Sachs’ New York headquarters employed 600 traders, buying and selling stock on the orders of the investment bank’s large clients. Today there are just two equity traders left. Automated trading programs have taken over the rest of the work, supported by 200 computer engineers.

The experience of its New York traders is just one early example of a transformation of Goldman Sachs, and increasingly other Wall Street firms, that began with the rise in computerized trading, but has accelerated over the past five years, moving into more fields of finance that humans once dominated.  Some areas of trading, like currencies and even parts of business lines like investment banking are moving in the same automated direction that equities have already traveled.

Today, nearly 45 percent of trading is done electronically, per Coalition, a UK firm that tracks the industry. Complex trading algorithms, some with machine-learning capabilities, first replaced trades where the price of what’s being sold was easy to determine on the market, including the stocks traded by Goldman’s old 600.

Now areas of trading like currencies and futures, which are not traded on a stock exchange like the New York Stock Exchange, are coming in for more automation as well. To execute these trades, algorithms are being designed to emulate as closely as possible what a human trader would do.

Goldman Sachs has already begun to automate currency trading, and has found consistently that four traders can be replaced by one computer engineer. Some 9,000 people, about one-third of Goldman’s staff, are computer engineers.

Goldman’s new consumer lending platform, Marcus, aimed at consolidation of credit card balances, is entirely run by software, with no human intervention. Next, will be the automation of investment banking tasks, work that traditionally has been focused on human skills like salesmanship and building relationships.

Though those “rainmakers” won’t be replaced entirely, Goldman has already mapped 146 distinct steps taken in any initial public offering of stock, and many can – and will – be automated. Reducing the number of investment bankers would be a great cost savings for the firm. Investment bankers working on corporate mergers and acquisitions at large banks like Goldman make on average $700,000 a year, per Coalition, and in a good year they can earn far more.

Financial Review

Merger Monday

Sinclair Noe — October 24, 2016

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

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DOW + 77 = 18,223
SPX + 10 = 2151
NAS + 52 = 5309
10 Y + .02 = 1.76%
OIL – .36 = 50.49
GOLD – 1.30 = 1265.40

Merger Monday is alive and well. AT&T announced it will acquire Time Warner for $85 billion; or at least it will try. The biggest deal in the world this year will give AT&T control of cable TV channels HBO and CNN, film studio Warner Bros and other media assets.

The deal is subject to regulatory approval, and right now it looks like it will face opposition. The Justice Department has the power to reject such a deal if it violates antitrust laws. AT&T said it is unclear if the Federal Communications Commission will also have jurisdiction to review the deal. Remember that regulators blocked Comcast’s planned acquisition of Time Warner.

AT&T has described the deal as a “vertical merger” because there is no overlap between the two companies and hopes that such a tie-up will get the regulatory green light by the end of 2017. The reason we are seeing this deal now is because in the next couple of years, wireless will be changing over to 5G, the next generation technology which will provide high-speed broadband and television service and allow wireless companies to compete with cable companies.

Toronto-Dominion Bank and TD Ameritrade are buying Scottrade Financial Services for $4 billion in a deal that would combine two of the biggest U.S. discount brokerages. TD Ameritrade, the largest U.S. discount brokerage by trade executions, said it would pay $2.7 billion for Scottrade’s brokerage business. Toronto-Dominion Bank, TD’s largest shareholder, is acquiring Scottrade Bank for $1.3 billion.

Rockwell Collins has struck a deal to buy aircraft interior maker B/E Aerospace for $62 a share in cash and stock. The acquisition, valued at $6.4 billion plus the assumption of $1.9 billion in debt, expands the range of products Rockwell Collins supplies to major commercial and business aircraft and broadens its customer base internationally. The acquisition, which is expected to be completed next spring, allows both companies to sell to each other’s customers and to deploy Rockwell’s capability with on-board connectivity to make internet-enabled seats, galleys, lavatories and other cabin systems that B/E Aerospace provides.

Chinese aviation and shipping conglomerate HNA Group said it would buy a stake of about 25 percent in hotel operator and manager Hilton Worldwide Holdings from biggest shareholder Blackstone Group for $6.5 billion. HNA will buy the stake for $26.25 per share, representing a premium of 14.6 percent to Hilton’s closing price on Friday and valuing the hotel company at about $26 billion.

Genworth Financial, a dominant carrier in U.S. long-term-care insurance, agreed to sell itself for $2.7 billion, to a Chinese investment firm, China Oceanwide Holdings Group. The deal comes as China Oceanwide has been pouring hundreds of millions of dollars into U.S. commercial and residential properties in the past two years. Genworth has struggled since the financial crisis, one of the insurers hardest hit by the bursting of the real-estate bubble and later by ultra-low interest rates.

American Midstream Partners LP said it would buy JP Energy Partners LP in an all-stock deal, creating a $2 billion midstream master limited partnership. The combined company will own and operate more than 3,100 miles of gathering and transportation pipelines.

According to S&P Global Market Intelligence, October 2016 currently stands as the third-strongest month ever for US M&A announced deal value. To date, October has seen $279 billion in announced M&A involving US companies, the highest since July 2015. It’s good news for Wall Street banks, which could bring in up to $200 million in fees from advising on the mergers. You add in financing costs and just the AT&T- Time Warner deal could top $400 million.

Iraq doesn’t want to participate in the OPEC freeze. Iraq, OPEC’s second largest oil producer, says it wants to be exempt from the OPEC production freeze, which is expected to be decided at the November 30 meeting in Vienna, Austria. Comments from Iran’s deputy oil minister, however, helped to push prices higher earlier in the session. He said Tehran would encourage other OPEC members to join an output freeze, adding that $55-$60 a barrel is a fair price to bring stability to the market. All the talk of capping production has managed to push oil above $50 a barrel, but in the past, OPEC has not been able to deliver on holding firm to output cuts.

Credit card giant Visa said its fiscal fourth-quarter results rose 28 percent from a year earlier, as the company processed more payments. The company’s results were also lifted by the recent purchase of Visa Europe. Visa reported net income of $1.9 billion for the period ended Sept. 30, compared with $1.5 billion in the same period a year earlier.

T-Mobile reported a better-than-expected quarterly profit and raised its forecast for customer additions for the year as heavy discounting helped attract subscribers. T-Mobile said it benefited from the launch of the iPhone 7 in the quarter and an increase in branded prepaid customer migrations to postpaid plans.

Earnings season is in full swing with Apple, Alphabet, Amazon.com, Exxon Mobil and Caterpillar among big names scheduled to announce third quarter results this week.

Apple reports earnings on Tuesday and we’ll see if the new iPhone 7 sales live up to expectations; on Thursday, Apple will unveil a new line of Mac computers, which are long overdue for an update and have seen only sluggish sales in recent quarters. And just to drive home the importance of constant updating and reinvention – yesterday the iPod turned 15 years old.

Google has been given an extra week to respond to European antitrust charges that some of the company’s advertising products hampered consumer choice. Google denies any wrongdoing. But it represents the first of three separate responses that Google must give to European competition authorities by early November to allegations that some of its services and products, including the popular Android smartphone operating system, hindered rivals and limited competition in Europe. Alphabet reports quarterly earnings on Thursday.

Tesla reports third quarter earnings on Wednesday – more accurately, Tesla will report a loss. Tesla previously disclosed that deliveries rose 70 percent to 24,500 cars in the July-to-September period. But a loss is likely because the company is spending heavily to introduce a new car, the Model 3, and to start up its gigantic Gigafactory in Nevada, where it will produce batteries.

We’ll also hear from the major car-makers; GM, Ford, and Fiat Chrysler report this week. Today, Consumer Reports said General Motors’ Buick has become the first domestic car brand in more than 30 years to be among the top three most reliable brands; trailing Toyota and Lexus.

Goldman Sachs analysts have cut their outlook for S&P 500 earnings through 2018. They now see earnings per share climbing 5% to $105 (from $110) in 2016, 10% to $116 in 2017 (from $123), and 5% to $122 (from $130) in 2018. The analysts blame disappointing earnings growth from the financials and information technology sectors. Furthermore, they blame the impact of low interest rates on telecom sector pension liabilities.

This week we will also see third quarter reports from most of the major Euro-banks, including BNP Paribas, Santander, UBS, Barclays, Lloyd’s, the Royal Bank of Scotland, and Deutsche Bank. We’ll keep an eye on Deutsche Bank for any update on its negotiations with the Justice Department, which has proposed a $14 billion fine for the bank’s underwriting of mortgage backed securities during the financial crisis.

And as we work our way through earnings the market is holding up relatively well. We’ve talked about a strong level of support for the S&P 500 at the 2120 level, which represents both the highs from June and the lows from September. So far, 2120 is holding up quite well, and we are consolidating in October, a month that can be quite scary. Although right now, the scariest event on the horizon is the election in November.

This Friday we get the first estimate of third quarter GDP growth; look for 2.5% growth. Last month, the Commerce Department reported that GDP grew 1.4 percent in the second quarter of 2016, up from 0.8 percent in the first quarter of 2016.

James Bullard, president of the Federal Reserve Bank of St. Louis and a voting member of the Federal Open Market Committee says low interest rates will likely be the norm during the next two to three years. Bullard’s comments come one month after he voted against hiking the federal funds rate.

The Fed continues to grapple with deciding when it will increase rates from the current target range of 0.25 to 0.50 percent. The last time the Fed raised rates was in December 2015, when it did so for the first time in nine years. Fed watchers expect the next increase to come by year end. Fed fund futures show implied odds of nearly 70 percent for a December rate hike.

And while Bullard seems to indicate rates can be nudged slowly higher, Chicago Fed President Charles Evans said today that the Fed needs to “demonstrate commitment to achieving the inflation target sustainability, symmetrically, and sooner rather than later.” This might require undershooting the unemployment rate and overshooting the 2% inflation target. Even so, Evans expects 3 rate hikes by the end of 2017.

Stocks Manage Gains Amid Major M&A Moves

On the Market

Posted: 10/24/2016 4:15 PM ET

Stocks Manage Gains Amid Major M&A Moves

U.S. stocks began the week with solid gains in the wake of a heavy dose of M&A news, headlined by AT&T's $85.4 billion agreement to acquire Time Warner, while a preliminary read on domestic manufacturing activity for October topped expectations. Global sentiment received an early boost on the heels of some favorable Japanese economic data and as growth in Eurozone business activity bested forecasts. Meanwhile, Treasuries, gold and crude oil prices were lower and the U.S. dollar managed an advance.

The Dow Jones Industrial Average (DJIA) increased 77 points (0.4%) to 18,223, the S&P 500 Index was 10 points (0.5%) higher at 2,151 and the Nasdaq Composite gained 52 points (1.0%) to 5,310. In moderate volume, 782 million shares were traded on the NYSE and 1.5 billion shares changed hands on the Nasdaq. WTI crude oil decreased $0.33 to $50.52 per barrel, wholesale gasoline ticked $0.02 lower to $1.49 per gallon and the Bloomberg gold spot price lost $1.95 to $1,264.52 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.1% higher at 98.79.

AT&T Inc. (T $37) announced an agreement to acquire Time Warner Inc. (TWX $87) for $107.50 per share in stock and cash, for a total equity value of about $85.4 billion. Under the terms of the deal, TWX shareholders will receive $53.75 in cash and the same amount in T stock for each share they own. T also reported 3Q results yesterday, where it matched earnings forecasts and missed on revenues, while raising its quarterly dividend by a penny to $0.49 per share. Both companies traded lower.  

Aerospace and defense company Rockwell Collins Inc. (COL $79) reported an agreement to acquire aircraft cabin interior products maker B/E Aerospace Inc. (BEAV $59) for $62.00 in cash and stock, valued at about $6.4 billion. Under the terms of the deal, BEAV shareholders will receive $34.10 in cash and $27.90 in COL stock for each share they own. COL fell, while BEAV surged. 

TD Ameritrade Holding Corp. (AMTD $35) announced an agreement to acquire Scottrade Financial Services Inc for about $4.0 billion in cash and stock. AMTD saw some pressure as the company also reported fiscal 4Q results, missing expectations and raising its quarterly dividend by 5.9% to $0.18 per share.

T-Mobile US Inc. (TMUS $51) reported 3Q earnings-per-share (EPS) of $0.42, above the $0.22 FactSet estimate, as revenues rose 17.8% year-over-year (y/y) to $9.2 billion, compared to the projected $9.5 billion. TMUS raised its adjusted operating earnings guidance. Shares rallied.

Preliminary manufacturing report tops forecasts to kick off economic week

The preliminary Markit U.S. Manufacturing PMI Index for October unexpectedly improved to 53.2 from September's 51.5 level, where the Bloomberg forecast expected it to remain, with a reading above 50 denoting expansion in activity. Markit said output and new order growth hit one-year highs, and manufacturers reported the fastest expansion of input buying since June 2015, while input cost inflation accelerated to the strongest for almost two years.

Treasuries declined, with the yield on the 2-year note ticking 2 basis points (bps) higher to 0.84%, while the yields on the 10-year note and the 30-year bond gained 3 bps to 1.76% and 2.51%, respectively. Schwab's Chief Fixed Income Strategist, Kathy Jones discusses the interest rate environment in her latest article, Are Bond Yields About to Rise?, at www.schwab.com/onbonds and follow Kathy on Twitter: @kathyjones.

Tomorrow, releases from the U.S. economic calendar  will include manufacturing and housing data, in the form of the S&P CoreLogic Case-Shiller Home Price Index, expected to show housing prices in the 20-city composite were 5.0% higher y/y and 0.1% higher on a seasonally-adjusted month-over-month (m/m) basis, and the Richmond Fed Manufacturing Index, forecasted to improve to -4 during October from the -8 the month prior, with a reading below zero denoting contraction in manufacturing activity. Consumer Confidence will round out the day, expected to decline to 101.5 in October from the prior month’s 104.1.

The political landscape also remains in focus as the November election approaches, and Schwab's Vice President, Legislative and Regulatory Affairs, Michael T. Townsend offers his latest article, Where Do the Candidates Stand? Key Issues for Investors, as part of our election 2016 commentary at www.schwab.com/insights/category/election-2016, where you can also find timely analysis of The Stock Market and Election Cycles, along with Michael's latest article, Final Clinton-Trump Debate Sets Up a Sprint to the Finish Line. Moreover, for analysis of the potential impact of the election on the muni bond markets, see Schwab's Senior Fixed Income and Planning Research Analyst, Cooper Howard's, CFA, and Director of Income Planning, Rob Williams' latest article, Opposing Views: How the Candidates' Tax Plans Could Affect Muni Bondsat www.schwab.com/marketinsight and follow Schwab on Twitter: @schwabresearch.

Europe gains ground, Asia mostly higher

European equities traded mostly higher, with financials leading the way, while some political uncertainty in Spain was cleared up over the weekend after the Socialist party voted not to block incumbent Prime Minister Rajoy from leading a minority government. Economic data was on the positive side, with Markit's Eurozone Composite PMI Index—a gauge of business activity in both the services and manufacturing sectors—rising to 53.7 in October, from 52.6 in September, and compared to the modest increase to 52.8 that was expected. A reading above 50 denotes expansion, and the upbeat read came as growth in German services and manufacturing output accelerated, while French manufacturing activity moved out of contraction territory. The euro was little changed versus the U.S. dollar, while bond yields in the region finished mixed. The British pound declined and earnings season continued to roll on in the region. For analysis of earnings and the stock markets, Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his latest article,  Three Reasons Stocks May Avoid Another Lost Decade, at www.schwab.com/marketinsight, and follow Jeff on Twitter: @jeffreykleintop.

Stocks in Asia finished mostly to the upside, with some relatively upbeat Japanese economic data lending support, while optimism that the Chinese government will increase infrastructure spending and expedite reform of state-owned enterprises lifted the markets in China, per Bloomberg. Japanese equities managed to tick higher, though gains were held in check by some late-day strength in the yen and caution as earnings season is set to ramp up in the nation. Japan's September exports fell by a smaller amount than anticipated and the nation's PMI Manufacturing Index showed expansion in the sector accelerated for October. Schwab's Jeffrey Kleintop, CFA, offers timely analysis of the global economic picture in his article, World Tour: An Around The World Look At the Economic Landscapeat www.schwab.com/oninternational. Mainland Chinese stocks rose and those traded in Hong Kong advanced, while equities in South Korea and India also increased. However, Australian securities declined, with consumer goods, oil & gas, technology and financials seeing some pressure.

The international economic docket for tomorrow will be light, yielding a weekly consumer confidence read from Australia, the Ifo business climate survey from Germany and industrial orders from Italy.

Financial Review

Wallonia World

Sinclair Noe — October 21, 2016

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

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DOW – 16 = 18,145
SPX – 0.18 = 2141
NAS + 15 = 5257
10 Y – .01 = 1.74
OIL + .57 = 51.00
GOLD + .50 = 1266.70

The Dow and S&P 500 ended well off their lows of the session, while the Nasdaq rallied and all three indexes ended a string of back-to-back weekly declines. For the week, the Dow advanced 0.04%, the S&P gained 0.38% and the Nasdaq picked up 0.83%.

And we are seeing higher oil prices even as the dollar continues to strengthen, back to the highest level since February; the Dollar Index topped 98. A higher dollar should affect commodity prices as well as US exports. The US is likely to embark on raising interest rates in December while others such as England and the EU are still discussing easing monetary policies. The CME FedWatch Page now puts the odds of a rate hike in December at slightly over 74%.

There are no economic reports on today’s calendar but we do have speeches from a couple of Federal Reserve officials; Fed Governor Daniel Tarullo is kind of the Fed’s point person on regulation; he spoke today at the Columbia Law School and said the Fed may introduce new more measures to test big banks’ capital and liquidity levels are strong enough to safeguard the financial system.

San Francisco Federal Reserve Bank President John Williams called for gradual rate hikes “sooner than later,” saying that waiting too long to do so could end up forcing sharp rate hikes that could choke economic growth. Williams is not a voting member of the FOMC this year. For Williams, raising rates soon and gradually has the best chance of keeping the economy growing without letting inflation get out of control, a circumstance that would require aggressive rate increases that could tip the economy into recession.

Last week Fed Chair Janet Yellen suggested that running a “high pressure economy” may be the best way to reverse damage from the financial crisis. That phrase was taken to mean a willingness to overshoot on the Fed’s inflation and employment goals for some time.

British American Tobacco has offered to acquire the 58% in Reynolds American it doesn’t already own for $47 billion in cash and shares. BAT’s proposal is worth $56.50 a share, or 20% above Reynold’s closing price of $47.17 yesterday. The deal would bring together Newport, Kent and Pall Mall cigarettes under one umbrella and create the world’s largest publicly traded tobacco company.

Qualcomm might finally put its cash to work. CNBC reports they have agreed in a handshake deal that Qualcomm will pay $110 a share for NXP Semiconductors, in a deal that would be close to $40 billion. Qualcomm has about $30 billion in cash, most of which is overseas, so acquiring a foreign company is attractive. NXP works on chips for cars, security and the internet of things, all emerging business for Qualcomm, which specializes in wireless technology like mobile phones.

AT&T and Time Warner are reportedly discussing a merger. The two sides held informal talks to discuss potential business opportunities, including a merger. Time Warner has a stock market value of nearly $73 billion. AT&T is much larger, with a market value of $231 billion. There seems to be a theme for wireless carriers to diversify by acquiring companies that offer content. And if you are experiencing a little déjà vu right now, it means you are probably old enough to remember the last time that Time Warner was one-half of a massive merger, a catastrophically ill-fated marriage to AOL 16 years ago.

At the time, AOL was an Internet juggernaut at the peak of the dot-com bubble, with a market cap of $224 billion and an aggressive appetite for growth. The deal made a certain sort of sense: Buying Time Warner would give AOL access to the old media company’s deep well of movies, TV programming and news, while Time Warner would be vaulted into the future of online distribution. “Synergy” was the buzzword. The deal went wrong; very, very wrong. AOL Time Warner had to write off $99 billion in goodwill. Just sayin.

Yesterday we told you the Wall Street Journal was planning major revisions to the newspaper, including combining sections. Today, word the paper is telling all news employees worldwide they are eligible for an “enhanced voluntary severance benefit” – that’s the first step; the next step is “involuntary layoffs”.

The earnings season is picking up pace as investors gauge the strength of corporations amid uneven economic growth. More than 80 percent of the S&P 500 Index’s companies that have released third-quarter results so far beat expectations, but it might not be enough to avoid another quarter of declining earnings.

Schlumberger reported earnings that beat estimates, but 82 percent lower than a year ago. The oilfield services company’s revenue fell slightly short of analyst forecasts. Schlumberger said there were early signs of recovery in most parts of the world, following a two-year slump in oil prices that put the brakes on global drilling activity.

McDonald’s reported third-quarter results that beat estimates. Global same-restaurant sales increased 3.5%, and same-restaurant sales in the U.S. grew 1.3%.

General Electric posted worse-than-expected revenue growth in its latest quarter. GE’s power, aviation and renewable energy segments drove industrial revenue growth, as transportation and oil and gas continued to post declines. GE said it would increase its stock-buyback program by $4 billion.

Two weeks ago, Honeywell lowered its sales and profit outlooks and preannounced the third-quarter results, saying an unexpectedly weak September and lackluster performance in the aerospace segment hurt profit. This morning, they reported results that matched the lowered expectations. For the fourth quarter, Honeywell expects sales to fall 7% to 9% due to weakness in the business jets, defense and space areas.

SAP SE climbed as it boosted its earnings and sales estimates.

Daimler AG fell amid a lower revenue forecast.

Ericsson AB slid after posting a loss.

Dyn is one of a number of outfits that host the Domain Name System, or DNS, which functions as a switchboard for the internet. The DNS translates user-friendly web addresses into numerical addresses that allow computers to speak to one another. Without the DNS servers operated by internet service providers, the internet could not operate.

And today, the internet stopped operating, at least for a while, mainly along the east coast. Dyn was attacked, a distributed denial of service attack where hackers flood the servers that run a target’s site with too much internet traffic, until the site collapses. In this case, the attack was aimed at the Dyn infrastructure that supports internet connections.

The result is that millions of internet users temporarily lost access to some of the world’s most popular websites, including: Twitter, Spotify, Reddit, CNN, Etsy and PayPal. It was a big attack, but it is too early to determine who was behind the attacks, but they appear to be precisely calibrated and on a very large scale.

It’s not just Samsung products that are overheating — Apple now has a problem, but with counterfeits. Apple said it has been buying accessories on Amazon bearing the Apple name and found that a whopping 90 percent of those are counterfeit. Even more troubling, Apple said, the phony products “pose an immediate threat to consumer safety,” because they haven’t been put through the rigorous industry standard testing Apple uses. Apple filed a lawsuit in U.S. District Court in San Francisco against Mobile Star, the company selling many of the products Apple bought on Amazon.
 
Will Japan ever escape deflation? This should come as no surprise to anyone, but Bank of Japan Governor Haruhiko Kuroda says the Bank of Japan may once again push back its 2% inflation target, which currently sits somewhere in fiscal 2017. Kuroda started his job in early 2013 and began his turbo-charged asset-purchase policy that continues to this day; he originally hoped that inflation would hit 2% by late 2014 or 2015. Almost four years later, inflation has disappeared after an initial rise.

U.K. Prime Minister Theresa May marks her first 100 days in office today, a term that has thus far been completely dominated by the Brexit debate. Prime Minister May clashed with her European counterparts in her first EU summit, where she was only allowed to give a brief update on Brexit over dinner. Though British diplomats have been calling for preparatory talks, EU leaders have remained united that no negotiations will occur until Article 50 of the EU’s treaty, which begins the official process to leave the EU, is triggered.

Have you ever heard of Wallonia? It is not some fictional country from a Marx Brothers movie, rather it is a province in Belgium, and it is the unlikely cog in the wheel of a trade deal between Canada and The Euro Union.

The fate of the trade pact with Canada — the Comprehensive Economic and Trade Agreement, or CETA — has become a symbol of how the European Union’s ability to act decisively on the world stage is losing out to parochial concerns and rising discontent with globalization. Belgium’s prime minister can only sign off on the trade pact if all provinces approve. Wallonia’s prime minister opposes the deal because he says the accord could undermine public services and industries like farming.

MetLife decided earlier this year to cut most of its U.S. life-insurance business. Now it is cutting ties with Snoopy. The 148-year-old company first used the Peanuts’ cartoon character in advertising 31 years ago as it tried to connect with U.S. consumers.

Snoopy, created by cartoonist Charles Schulz, now appears on everything from MetLife blimps to the company’s marketing and sales materials. But that need to reach consumers will shrink when MetLife spins off the bulk of its U.S. life-insurance business in the first half of 2017. Afterward MetLife will sell mostly to corporate clients in the U.S.

Financial Review

Addiction to Oil

Sinclair Noe — April 25, 2016

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

Subscribe: iTunes | Android | RSS

DOW – 26 = 17,977
SPX – 3 = 2087
NAS – 10 = 4895
10 Y + .02 = 1.90%
OIL + .26 = 42.90
GOLD + 5.70 = 1238.90

The Federal Reserve FOMC meets this week to determine monetary policy; they are not expected to raise interest rates this week, however they might set the stage for a rate hike in June. Earlier this month, Fed Chair Janet Yellen said the U.S. economy was on a solid course with some hints of inflation, so the Federal Reserve was on track for further interest rate hikes.

First quarter GDP, to be released on Thursday, is expected to slump to a paltry 0.7% annual rate from a 1.4% rate in the last three months of 2015. It might be tough for the Fed to sound hawkish if it is followed by a weak GDP report.

Traders are also keeping an eye on the outcome of a Bank of Japan meeting on Thursday, with expectations that Japan could push deeper into negative interest rate territory.

Investors have been assessing first-quarter earnings, FactSet just released its latest update of earnings season stats for S&P 500 companies. And the numbers are pretty bad; 76% of companies have beaten analysts’ estimates, but the aggregate earnings decline is -8.9%. That’s actually worse than the -8.6% decline analysts expected on March 31.

This will mark the fourth straight quarter of declining year-over-year earnings, which hasn’t happened since 2009. Throughout this bull market, companies have managed to squeak past very low expectations. Now, we can’t meet lousy expectations.

An avalanche of first-quarter earnings reports is on tap, with 186 companies in the S&P 500 slated to report results. The big news in earnings will be tomorrow, when Apple reports. Apple is expected to report a year-over-year decline in revenue for the first time since 2003. Along with the revenue decline, many are predicting that iPhone sales will fall year-over-year for the first time in the device’s history.

New U.S. single-family home sales fell in March, but the decline was concentrated in the West region. The Commerce Department said new home sales decreased 1.5 percent to a seasonally adjusted annual rate of 511,000 units. Sales were up in the Midwest and the South, and flat in the Northeast, but sales plunged 23.6 percent in the West, reversing February’s 21.7 percent jump; which leads me to believe we’re dealing with some statistical noise in the report.

While the inventory of new homes on the market rose in March to the highest since September 2009, new housing stock remains less than half of what it was at the height of the housing bubble. At March’s sales pace it would take 5.8 months to clear the supply of houses on the market. That was the most since last September and was up from 5.6 months in February.

Saudi Arabia unveiled “Saudi Vision 2030,” a plan to overhaul the kingdom’s economy in order to reduce its massive reliance on oil revenues, which account for 80% of its income but are taking a battering amidst the plunge in crude prices. Prince Mohammed bin Salman said the kingdom will try to break its “addiction to oil” by creating the world’s largest sovereign-wealth fund with over $2 trillion in diversified assets and to sell under 5% in state oil monopoly Saudi Aramco in an IPO.

The existing state-controlled Public Investment Fund will be transformed into a giant sovereign wealth fund to manage the kingdom’s petrodollars. Instead of direct subsidies, Saudis will receive payments as a form of benefit, while the government will attempt to cut unemployment to 7 percent from 11.6 percent by an unspecified date.

While volatility in the oil market may be pushing the Saudis to reform, low oil prices are also cutting the resources they can use to manage the change. And if the Saudis are willing to sell, who will step up to buy? Although the Saudi stock market opened up to direct foreign investment last June, total foreign ownership of the market remains tiny at less than 1 percent.

With prices so low, it hardly seems like a good time for an oil IPO. Perhaps even more important than the price of oil is the political component. The Saudis are not known for openness and transparency; this plan will surely draw opposition both from within the kingdom and from outside investors who will likely demand to see change before investment.

Oil was pretty strong last week in the face of a lot of bad news, including no agreement in Doha to freeze output, so don’t count out a repeat performance this week, especially since oil managed to crawl off the lows today. Crude oil has been the driving force behind equities since the February 11 low.

You may recall a few years back, the US tried to break its addiction to oil; the result was the shale oil revolution, which helped to ease our dependence on foreign oil, even if it didn’t break our addiction. Imagine what could happen if the US actually tried to break the addiction by starting a renewable energy revolution. Today’s announcement from the Saudis tells us that they are imagining that scenario.

China’s debt load is at a record high. The Financial Times reports China’s debt total climbed to 237% of GDP in the first quarter, an all-time high. Data from the Bank of International Settlements shows China’s debt load is far greater than emerging markets as a whole, which carry debt at an average of 175% of GDP. According to the FT, China’s debt has exploded since 2007, when it was 148% of GDP.

Gannett, the publisher of USA Today, said it offered to buy Tribune Publishing Co but the owner of the Los Angeles Times refused to begin “constructive” talks. Gannett said it made an offer to buy Tribune Publishing on April 12 for $815 million, including the assumption of $390 million of debt. Tribune Publishing said in a statement that it had told Gannett it would engage financial and legal advisers to review the proposal and its “numerous contingencies.”

The Justice Department gave antitrust approval to Charter Communications’ proposed purchase of Time Warner Cable and Bright House networks, which would create the second-largest U.S. broadband provider and third-largest video provider. The DOJ says online video will provide competition, and one condition to the deal is that Charter must agree to refrain from telling its content providers that they cannot also sell shows online.

The Federal Communications Commission must also approve the deal, and the agency’s chairman said he, too, is looking to protect competition. It was not immediately clear when the FCC would decide. Charter has valued the deal at $56 billion for Time Warner Cable, excluding debt, and $10 billion for Bright House Networks.

Ball is selling its beverage-can assets. Ball will sell 17 can factories and other facilities to European-based packaging company Ardagh for $3.42 billion. Ardagh will sell $2.85 billion of bonds to help fund the deal. Apollo Global Management, Blackstone Group LP and Madison Dearborn Partners were said to be other interested bidders.

Goldman Sachs has entered online banking. The investment bank is now allowing ordinary citizens to open a bank account. Goldman’s digital savings account offers a rate of 1.05%, and can be opened for as little as $1. The bank accounts are available after Goldman acquired about 150,000 retail customers through its GE Capital deal that closed last week.

Xerox reported a 4.2 percent fall in quarterly revenue, hurt by a strong dollar and lower sales of printers and copiers. Net income attributable to the company fell to $34 million, or 3 cents per share, in the first quarter ended March 31, from $225 million, or 19 cents per share, a year earlier. Revenue fell to $4.2 billion from $4.4 billion.

Halliburton is delaying earnings. The oil services provider announced it’s taking a $2.1 billion charge for the first quarter after cutting more than 600,000 jobs and taking a write off. Additionally, Halliburton’s earnings will be delayed from April 25 to May 3 in order to account for the Baker Hughes deal which is expected to close before the end of the month.

It looks like Chipotle’s free burrito strategy might be working: a survey shows that 41% of respondents who received a free burrito coupon visited Chipotle 3.8-times over the prior 30 days, compared to 1.4-visits for the 59% who didn’t receive a coupon. Brand perception was also higher in the coupon group. Meanwhile, analysts at Credit Suisse found that Google searches for food-safety issues related to Chipotle have dropped sharply since the beginning of the year. We’ll see how the free food strategy is working when Chipotle reports earnings tomorrow after the bell.

Philips is leaning towards holding an IPO of its lighting unit – its original line of business – rather than selling the operations. The divestment of the lighting operations will leave the company to focus on healthcare technology. Philips’ also reported better-than-expected earnings; adjusted earnings before interest, taxes and amortization climbed 14% to $420 million.

Carlyle has joined up with former Barclays CEO Bob Diamond to bid for the U.K. bank’s 62% holding in its African operations. Barclays Africa Group is listed in Johannesburg with a market capitalization of $8.5 billion, putting the value of the stake at $5.27 billion. Barclays is selling the unit due to increasing regulatory pressures.

Google is building a startup incubator called Area 120 in which teams of employees will be able to submit business plans to join the initiative. Those accepted will work on their projects full-time for a few months, after which they’ll be able to pitch Google on creating a new company that the parent firm would take a stake in. Area 120 is an attempt to prevent entrepreneurial employees from leaving Google entirely to found their own businesses.