Early Gains Fall Flat

Charles Schwab: On the Market

Posted: 9/19/2016 4:15 PM ET

Early Gains Fall Flat

U.S. equities finished mixed and near the unchanged mark, as early strength amid a rebound in crude oil prices lost steam along with the commodity, while global conviction continued, and will likely remain hamstrung, ahead of the mid-week monetary policy decisions from the Fed and Bank of Japan. News on the equity front again surrounded M&A activity, while shares of Sarepta Therapeutic surged after an FDA approval of its muscular dystrophy drug. Treasuries were nearly flat, despite a jump in home builder sentiment, and gold gained ground, while the U.S. dollar was lower.

The Dow Jones Industrial Average (DJIA) fell 4 points to 18,120, the S&P 500 Index was unchanged at 2,139, and the Nasdaq Composite declined 10 points (0.2%) to 5,235. In moderate volume, 764 million shares were traded on the NYSE and 1.8 billion shares changed hands on the Nasdaq. WTI crude oil inched $0.24 higher to $43.62 per barrel, wholesale gasoline lost $0.04 to $1.42 per gallon and the Bloomberg gold spot rose $2.92 to $1,313.27 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 95.84.

Tech Data Corp. (TECD $85) announced an agreement to acquire the technology solutions unit of Avnet Inc. (AVT $42) for stock and cash valued at about $2.6 billion. Under the terms of the deal, AVT will receive $2.4 billion in cash and 2.8 million shares of TECD. TECD rallied over 20% and shares of AVT gained solid ground.

Isle of Capri Casinos Inc. (ISLE $22) announced an agreement to be acquired by Eldorado Resorts Inc. (ERI $14) for $23.00 per share in cash, in a deal with a total consideration of about $1.7 billion, including debt. The deal will create a combined company that owns and operates 20 regional gaming facilities in 10 states. ERI closed slightly lower, while ISLE was up nearly 30%.

Sarepta Therapeutics Inc. (SRPT $49) surged nearly 75% after the U.S. Food & Drug Administration (FDA) granted accelerated approval of its drug to treat Duchenne muscular dystrophy.

Homebuilder sentiment jumps

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month jumped to 65 from August's downwardly revised 59 figure, and versus the Bloomberg estimate of 60. Builder confidence moved further above the key 50 mark, which separates good and poor conditions, reaching the highest level since October 2015. The NAHB said as household incomes rise, builders in many markets across the nation are reporting they are seeing more serious buyers, a positive sign that the housing market continues to move forward.

Today's report kicks off an economic week that will bring a plethora of key reports to digest tilted toward the housing sector, headlined by the releases of August housing starts and building permits and existing home sales. Tomorrow, housing starts are projected to decline 1.7% month-over-month (m/m) to an annual rate of 1,190,000 units, while building permits are expected to rise 1.8% to an annual rate of 1,165,000 units. For a look at investing in the housing market, see Schwab's Director of Market and Sector Analysis, Brad Sorensen's, CFA, article, Real Estate Sector: Marketperform at www.schwab.com/marketinsight.

However, the attention of the global markets will likely be undivided as the Bank of Japan (BoJ) will deliver its monetary policy decision early Wednesday, hours before the Federal Open Market Committee (FOMC) will announce their policy stance. Uncertainty regarding if the BoJ will deploy further stimulus measures and/or move further into negative interest rate territory remains, while odds of a FOMC rate hike have diminished in the wake of the aforementioned economic data. However, odds of a December FOMC rate hike remain near 50%, per Bloomberg, and the markets will be dissecting its statement, which will be followed by the customary press conference from Chairwoman Janet Yellen and accompanying updated economic projections looking for clues to whether a rate hike this year is in the cards.

As noted in the Schwab Market Perspective: Round and Round We Go…, after August’s all-time highs followed by a stall, stocks were once again jolted into action by mixed messages from the Federal Reserve (Fed). We continue to believe the bull market is intact but near term risks are elevated. Economic data continues to have a groundhog day quality to it—perking up some before then pulling back again. The Fed isn’t the only game in town and other global central banks have added to the uncertainty, with many catalysts this fall potentially adding to the monetary mashup. Read the whole perspective at www.schwab.com/marketinsight.

Treasuries finished nearly unchanged, as the yield on the 2-year note ticked 1 basis point (bp) higher to 0.78%, while the yields on the 10-year note and the 30-year bond were flat at 1.70% and 2.45%, respectively. For a timely discussion of the recent ramp up in market volatility see the video from Schwab's Vice President of Trading and Derivatives, Randy Frederick and Chief Global Investment Strategist, Jeffrey Kleintop, CFA, titled Is the Bear Back: What's Behind the Renewed Volatility? at www.schwab.com/insights and follow Randy and Jeff on Twitter: @randyafrederick and @jeffreykleintop.

Europe rebounds as energy and miners rally, Asia mostly higher 

European equities traded higher, with the Stoxx Europe 600 Index recovering from recent weakness as oil & gas issues gained solid ground amid a rebound in crude oil prices, while a rally in mining stocks boosted the basic materials sector. However, the political landscape garnered attention following weekend elections in Germany and Russia, while global caution remained ahead of this week's key monetary policy decisions in the U.S. and Japan. Amid the backdrop of heightened global volatility as of late, Schwab's Jeffrey Kleintop, CFA, reminds investors, Three Reasons Why Now is Not the Time to Retreat from Global Diversification and why Your portfolio may be less diversified than you think at www.schwab.com/oninternational. The euro and the British pound gained ground on the U.S. dollar, while bond yields in the region finished mixed. In economic news, eurozone construction output rebounded in July.

Stocks in Asia finished mostly to the upside, with markets in China and South Korea returning to action following last week's holiday, while volume was muted as Japanese markets took the day off for a holiday and Australian markets were halted for the day due to a technical glitch that disrupted the trading session. The yen has shown some strength as the global markets await this week's monetary policy decision, which will precede the policy announcement from the Fed. Uncertainty remains regarding what the BoJ will announce, while the central bank is expected to release its comprehensive review of the efficacy of its policy measures thus far. For more on Japan's monetary policy, see Schwab's Jeffrey Kleintop's, CFA, article, What investors need to know about helicopter moneyat www.schwab.com/oninternational. Mainland Chinese stocks and those listed in Hong Kong advanced amid ramped up mainland buying of Hong Kong shares via the trading link between the two exchanges, while a read on August property prices rose the most in more than six years, per Bloomberg. Meanwhile equities traded in South Korea and India finished to the upside.

Economic news abroad will be sparse tomorrow, with the only reports of note being housing prices from Australia and PPI from Germany.

FINANCIAL REVIEW

King Dollar and the Eurozone

Sinclair Noe — October 10, 2014

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Financial Review

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

DOW – 115 = 16,544
SPX – 22 = 1906
NAS – 102 = 4276
10 YR YLD – .02 = 2.30%
OIL – .25 = 85.52
GOLD – .60 = 1224.00
SILV + .05 = 17.50

The 10 year German bund has a yield that is 141 basis points lower than the US 10 year Treasury note. The yield on German debt will get you 0.89%. Standard & Poor’s lowered France’s credit outlook today, and you can still get a 10 year French note with a yield of 1.25%. A 10 year note from Spain will only get you 2.06%. Is this because the US debt is riskier than the Spanish debt? No, just the opposite.

The problem in the Eurozone is deflation, and it threatens to bring the economy to a grinding halt, and send the EU into a triple dip recession. The president of the European Central Bank, Mario Draghi, gave no indication of any further monetary stimulus beyond what was announced this summer, suggesting in a speech in Washington that governments needed to do more on the fiscal side. Draghi said in effect that Eurozone countries that have enough money should spend it, a clear reference to Germany. His comments echoed remarks this week from Christine Lagarde, the head of the International Monetary Fund.

Today, German Chancellor Angela Merkel said her government was examining how to encourage investment, particularly in the “digital sphere” and the energy sector. Merkel did not elaborate, but the hint was that Germany might use government spending to stimulate growth, a possible shift in position that could ripple across the entire Eurozone. Merkel’s remarks may have been less a declaration of policy change than a signal that her thinking on stimulus was evolving.

On Wednesday, the Federal Reserve released minutes from the September FOMC meeting, and they expressed concern about the global economy and the dollar. In the past 4 months the dollar has jumped about 8% versus the euro; that kind of swing can prove a threat to trade and to financial markets. The Fed normally focuses on the US economy, unless there are global developments that are important enough that they could intrude. Fed officials pointed with concern to the slowdown in China, Europe and Japan. They also worried that the concurrent strengthening of the dollar would add to the risk of price deflation.

We know that a strong dollar could weaken US export performance and hold back growth, but the recent global slowdown represents a more ominous problem. Global economic weakness would undermine the ability of the Fed to maintain financial asset prices well above the levels strictly warranted by the fundamentals. Of course this has been how the Fed has addressed the crisis and the recovery for the past 6 years, they pumped up Wall Street with easy money. A global slowdown threatens that tactic.

The events of the past week indicate the Eurozone and especially Germany might be closer to a move away from the single minded focus on budget austerity that has, to date been an absolute failure. The bigger question is whether the Eurozone countries and the ECB will take action, and if they can actually do anything before the continent slips into full-fledged deflation; and further, what role that might mean for the Federal Reserve.

Finance ministers and central bankers gathered in Washington for the annual meetings of the World Bank and International Monetary Fund and today, Treasury Secretary Jack Lew urged the Group of 20 major economies to refrain from competitive currency devaluations. Federal Reserve officials are hunting for new tactics to raise price increases to their target as slowing global growth, cheaper commodities and flat wages sound warnings that inflation is descending toward the danger zone.

With inflation at 1.5% according to the Fed’s preferred index, low-flation is getting to be a real issue again. We know a stronger dollar makes US exports overseas less affordable, but a strong dollar makes it cheaper for Americans to pay for imported goods. A 10% increase in the dollar versus currencies of major trading partners could trim inflation by a quarter percentage point, and the Fed has not yet communicated a plan for how they will lift inflation to their desired target of 2%.

An inflation rate approaching zero is bad for the economy because of its impact on behavior by businesses and consumers. Companies’ inability to raise prices hurts profits, and they rarely compensate by cutting wages, so they fire workers instead. Consumers anticipating falling prices may postpone discretionary purchases. This can combine to create a vicious circle of less spending and further downward pressure on prices. Think about your own situation; in the past couple of weeks you’ve seen prices at the pump drop. Were you tempted to drive another day or two before you fill up the tank in the hope that you might save a few pennies per gallon?

And what we are seeing in the Eurozone is that once low-flation becomes deflation, the central bankers don’t really have the tools to deal with the problem. It is known as pushing on a string. They can flood the markets with easy money, but they can’t create demand, because, you know, prices will be lower next week. As we are seeing in the Eurozone, and as we saw in Japan, if you let it go on for too long it becomes a lock-in, it reinforces a bad outcome.

Substantial rallies in the dollar have the power to slam the brakes on GDP growth in a way that Fed tightening even doesn’t. GDP growth could decline by a percentage point if the rapid move in the dollar continues through early 2015. That fall in GDP is even larger than what would occur as a result of a 50-basis-point rise in long-term interest rates, and it works with a lag, too. Even when the dollar rally tapers off, it would be expected to constrain GDP through early 2016.

And for now at least, you might reasonably expect the dollar rally to continue; there is a trend in place. The long dollar bets mean money is being parked in the US, and that means continued downward pressure on long-term interest rates, at least for now. And another thing, when there are very rapid and pronounced changes in the exchange rate there is a tendency for investors to lock in gains from previously accumulated US assets. In other words, there is a tendency to sell stocks, and companies with overseas exposure are more likely to experience a greater decline. And the selloff in stocks is yet another hit to US GDP. It’s a nasty cycle.

On Wall Street, stocks closed out a volatile week with another triple digit loss for the Dow, giving the market the worst week since May 2012. The Dow industrials have now turned negative year to date. Yes, that was fast. The Dow lost 2.7% for the week. The S&P 500 dropped 3.1% on the week. The VIX, the volatility index jumped 45% for the week. The Stoxx Europe 600, Europe’s benchmark stock index posted its biggest slide in 2 years, down 4.1% for the week. The S&P 500 is sitting right at its 200 day moving average. The Dow Industrial dropped below the 200 day moving average, about 40 points lower.

A moving average is simply an average of a certain number of data points. The 200-day moving average is calculated by summing the past 200 days and dividing the result by 200. The 200-day moving average represents the average price over the past 40 weeks. This helps to smooth out day to day volatility and give a longer-term look at the overall trend. The 200 day moving average is considered a very important level of resistance or support; in this case, support. When a stock or an index breaks down below this key level of support you sometimes see a bounce, because there will be some investors who think they are now able to buy stocks cheap. But the bounce can sometimes be misleading; that’s known as a dead cat bounce. If dropped from high enough, even a dead cat will bounce. So the next few days will be critical to see if the markets can bounce, and if they can bounce, will they rally, or will prices just keep falling from here. If we don’t see a turnaround, it would confirm a downward trend.

This week the Nobel Committee handed out prizes for a better lightbulb, the LED; a better microscope, that sees nanoparticles; and a French author that I had never heard of. Today, Malala Yousafzai and Kailash Satyarthi have won the Nobel Peace prize. If you have not heard the story of Malala or heard her speak, you should; she will inspire you. She is the daughter of a teacher, and she grew up in and around schools, at least until 2008, when the Taliban took control of the Swat region of Pakistan, where she lived. The Taliban tried to close down schools for girls. That year, her father took her to Peshawar where she made a speech in front of national press titled “How Dare the Taliban Take Away My Basic Right to Education?” She was only 11 years old. In early 2009, Malala started blogging anonymously for the BBC about what it was like to live under the Taliban.

Two years ago, armed men boarded the converted truck that Malala and her classmates used as a makeshift school bus and they shot Malala in the head. She survived. Nine months after she was shot, Malala gave a now famous speech at the UN, where she said: “They thought that bullets would silence us. But they failed.” She’s continued her high-profile campaign for girls’ education with The Malala Fund, which raises money to promote girls’ education.

At 17, Malala is the youngest winner of the Nobel Peace prize, which she will share with 60 year old Kailash Sayarthi. In 1980 Satyarthi founded the Save the Childhood Movement, and he has helped rescue more than 80,000 children from bondage, trafficking and exploitative labor in the past three decades; he also spearheaded a movement to make free and compulsory education a constitutional right for children in India in 2009.

The Nobel committee said it “regards it as an important point for a Hindu and a Muslim, an Indian and a Pakistani, to join in a common struggle for education and against extremism”.

FINANCIAL REVIEW

Thanks Hank

Sinclair Noe — October 7, 2014

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Financial Review

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

DOW – 272 = 16,719
SPX – 29 = 1935
NAS – 69 = 4385
10 YR YLD – .07 = 2.35%
OIL – 1.91 = 88.43
GOLD + 1.50 = 1209.30
SILV – .16 = 17.29

The S&P 500 dropped below its 50-day moving average last week and has yet to move back above that level. Coincidentally, the S&P 500 has been sliding for a few weeks, going back to September 19, which was the day of the Alibaba IPO, just coincidentally. The Dow is also trading below its 50 day moving average. Welcome to the start of earnings season.

In the past 3 months the US dollar has jumped by 8% against the euro. That makes American goods more expensive relative to European goods. And it wasn’t just the dollar against the Euro, but against a basket of foreign currencies. It is estimated that a 5% rise in the dollar versus the euro results in a drop of about $1 for full-year Standard & Poor’s 500 Index per-share earnings; current estimates for the S&P are running around $118. Partly because of the dollar and the related decline in oil prices, earnings estimates have seen one of the largest downward revisions over the last few years aside from the weather-beaten first quarter of this year.

Earnings-per-share are projected to have grown 4.9% in the third quarter, that’s down from 7.8% earnings growth 3 months ago. At the end of March, third quarter earnings were forecast to grow 9%. The strong dollar may have an even greater impact on guidance for the fourth quarter. Alcoa marks the unofficial start of the earnings season with their report after markets close tomorrow.

US job openings hit a 13-year high in August. According to a report published by the US Labor Department, there were 4.84 million open jobs to fill in the US in August, up from 4.61 million the previous month. The good news is economists were only expecting 4.7 million job openings. The bad news: Hiring in August dropped to 4.6 million from 4.9 million in July.

Americans boosted their use of credit in August by the slowest rate in nine months. Consumers increased borrowing by a seasonally adjusted $13.5 billion in August, or by a 5% annual rate. The gain was the smallest since last November and marks a big deceleration from the 8.1% increase in July. Consumers took out more loans to buy cars or pay for college, with non-revolving credit rising by 7%. Yet Americans actually cut credit-card use a touch, as revolving credit dropped 0.2%. Consumer credit increased by an annual pace of 6.2% in 2012 and 6% in 2013 and it’s on track to grow even faster in 2014 despite the slowdown in August.

A gauge that tracks delinquencies in eight major types of closed-end loans, such as credit to buy cars or pay for property improvements, dropped in the second quarter to 1.57%, the lowest rate in the data’s four-decade history; the data does not include home purchase mortgages.

The International Monetary Fund trimmed its forecast for global economic growth to 3.3%, down from the earlier forecast of 3.4%, forecast in July. The IMF predicts the US economy will grow at a 2.2% pace, which is up from the July forecast. The 17-nation euro zone is expected to expand by just 0.8% this year. If you are thinking you’ve heard this story before, and I’m just repeating myself, well, not exactly; the IMF has developed a nasty habit of missing economic forecasts, and when the misses are exposed, they are forced to revise.

Three scientists win a Nobel for making the world a little brighter. Isamu Akasaki, Hiroshi Amano, and Shuji Nakamura won the Nobel Prize for physics for their discovery of how to produce blue light from semi-conductors, which allowed for the creation of white-light LEDs. So, the Nobel goes to the inventors of a new light bulb, but that is a major deal.

Nearly a fourth of global electricity consumption is used to brighten dark spaces. Traditional incandescent and fluorescent lights are notoriously inefficient with much of the energy used to produce light lost in the form of heat. Meanwhile, LED lamps last longer and use a fraction of the energy to produce the same, if not more, light. That has huge consequences for the developed world, and cities, offices, and homes are already swapping out old bulbs for the brighter, more efficient LEDs. But the technology has perhaps even greater significance for the more than 1.5 billion who lack access to electricity grid. In Sub-Saharan Africa, that’s two out of three people. By requiring less power, LEDs perform better than traditional lights on portable, scale solar energy, which makes spreading electricity to rural, off-grid regions much easier.

Federal officials asked a group of large banks and other financial institutions last month to check if they had seen indicators associated with the cyberattack that resulted in the theft of account information for millions of JPMorgan customers this summer. A number of financial institutions responded that they had seen traffic from the suspect computer addresses linked to the hackers, but that they didn’t believe they had been breached. Rather, the hackers, whose identity remains unknown, appeared to be “probing,” or searching for weaknesses on the firms’ digital perimeters. So, who has the weakest cyber security? Either the other financial institutions have been hacked and they just don’t realize it yet, or JPMorgan was a pathetically weak link.

The New York Times reports that the Department of Justice is preparing to charge several of the world’s biggest banks with colluding to alter the price of foreign currencies; essentially rigging the Forex market. Deutsche Bank, Citigroup, JPMorgan Chase, Barclays and UBS are among the dozen or so banks under investigation. Prosecutors are reportedly planning to indict individual bank employees for currency manipulation. They will not be going after the bank executives, but rather the traders. That is a familiar story. Everyone knows that the CEOs of big banks know absolutely nothing about what’s actually going on in their banks. The execs offer up a sacrificial lamb and go on with their unsavory practices, but this time might be different.

The idea is that prosecutors would use the currency rigging to reopen earlier settlements in the Libor interest rate rigging cases. Those rate rigging cases have already led to settlements with 5 banks, and part of the deal there was not to do bad things like rig markets. Meanwhile, some banks also remain under investigation. In the last major rate-rigging case against a bank, prosecutors are discussing the possibility of forcing Deutsche Bank or one of its subsidiaries to plead guilty to manipulating Libor. And the Libor case could quite easily result in criminal charges, if the DOJ has the spine for it. That remains to be seen. So far the Department of Justice has been afraid of the impact of a wounded bank on the world economy, and so they have done little more than levy “slap-on-the-wrist” fines, essentially taking a cut of the ill-gotten gains; like allowing a Cocaine Cartel to pay its criminal fines in crack.

The AIG bailout trial started last week. The trial is largely the result of former AIG CEO Maurice “Hank” Greenberg arguing that AIG wasn’t treated as well as the banksters when it came time to pass out taxpayer bailouts. The banksters got sweetheart deals, and for AIG, the government demanded 80% of the company stock, and used it as collateral against the loan, and charged 12% on the loan, and later, started sweeping all the dividends. Greenberg and his companies, notably Starr International, were the biggest AIG investors at the time, and the government’s bailout effectively crushed their shares.

Of course, AIG had been playing fast and loose with derivatives of subprime mortgages, and they had been forced to restate earnings, and their entire operation was a big, greedy hot mess that likely would have collapsed without a taxpayer bailout. AIG had become the industry leader in credit default swaps, essentially insuring the big banksters on large swaths of toxic mortgage deals. If AIG did not unravel all that credit default insurance, the entire banking structure likely would have collapsed.

Yesterday, former Treasury Secretary Hank Paulson admitted that certain firms were treated differently than others; AIG was treated tougher than Citigroup; Paulson said that circumstances warranted it because those banks were more essential to keeping the financial system afloat. He said that the government had to treat AIG harshly to win political support. Of course, the government didn’t treat AIG that harshly, gifting them a carryover tax benefit worth $35 billion and letting their executives take bonuses in 2009. Hank Greenberg argues that AIG could have survived; that other potential suitors were ready to step in with offers, but the government made them an offer they couldn’t refuse, and then the government changed the terms of the offer. There has been no testimony that a gun was held to anyone’s head. AIG took the deal at the time.

Today, Tim Geithner took the stand; Geithner was the president of the New York Fed in 2008, before he succeeded Paulson as Treasury Secretary. Geithner admitted that he had described an AIG bankruptcy as an unacceptable option and that the company represented a “systemic risk” in September 2008 that required government intervention. And that seems to be Greenberg’s argument; that the bailout of AIG was punitive and confiscatory. And it looks like it probably was. That’s what it should have been. AIG was forced to pay the credit default swap insurance, the banks survived; the taxpayers were paid back for their bailout of AIG, and now Hank Greenberg and Starr International want an extra $40 billion.

Of course, AIG might have gone completely bust, they could have dragged down the banksters with them, and the entire financial system could have melted down, and Hank Greenberg could be scrounging for a meal in the dumpster. Instead, he was left with a few billion, just enough to hire some high priced lawyers to spit in the face of taxpayers who saved his bacon. Thanks Hank.

http://dealbook.nytimes.com/2014/10/06/big-banks-face-another-round-of-u-s-charges/

FINANCIAL REVIEW

Third Quarter Wrap

Sinclair Noe — September 30, 2014

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Financial Review

Podcast: Play in new window | Download (Duration: 13:15 — 6.1MB)

DOW – 28 = 17,042
SPX – 5 = 1972
NAS – 12 = 4493
10 YR YLD + .02 = 2.51%
OIL – 3.14 = 91.43
GOLD – 6.30 = 1209.70
SILV – .49 = 17.07

We wrap up the third quarter of 2014.

The Dow Jones Industrial Average is up 3.4% year to date; and it is up about 11% from the lows of February. Ten of the 30 Dow stocks are up more than 10% year to date. Eight of the Dow stocks are in negative territory for the year, even after adding in divdends. The best performing Dow stocks are Intel (up 37% ytd) and Microsoft (up 28% ytd). The worst performing Dow stocks are Boeing (down 5% ytd) and United Technologies (down 6% ytd).

The Dow lost 55 points, or 0.3%, for the month, and for the third quarter the Dow added 217 points or 1.3%. The S&P 500 dropped 31 points, or 1.5% in September, and added 12 points for the quarter; and that was good enough for the seventh consecutive quarterly gain, the best run for the S&P 500 since 1998. The Nasdaq Composite lost 87 points, or 1.8%, for the month, but added 85 points for the third quarter. The Russell 2000 index of small cap stocks lost 69 points, or 5.8% in September; and posted a loss of 98 points, or 8.1% for the third quarter.

In other markets: Oil prices dropped from $105.51 to $91.43 per barrel, a decline of more than $14 for the quarter. Gold is down $122 for the quarter. Silver is down almost $4.

The yield on the ten year Treasury note finished the quarter essentially unchanged, but it was a wild ride; one month ago the 10-year yield had dropped to 2.34%. Sovereign bonds around the world beat corporate debt this quarter by the most in three years as consumer-price gains slowed in the U.S. and disinflation threatened Europe. Government securities returned 1.4 percent from the end of June through yesterday, while company debt earned 0.3 percent. But don’t forget the dollar rally; even if you made money in foreign stocks or sovereign debt, you likely have a loss when you try to bring the gains home and have to re-price into dollars.

The dollar index of major currencies rose 0.4% to 85.95. The index has gained 7.7% over the last three months, the biggest quarterly gain since 2008 and a record-breaking 11 successive weeks of gains. Of course a stronger dollar is not always a good thing; it could lead to weaker trade performance, less exports, and more imports. Supposedly a strong dollar is indicative of a strong economy as spending switches from US goods toward foreign goods it will likely result in less output and lower employment than it otherwise would be in the absence of dollar appreciation. In other words, a strong dollar might reduce GDP by almost 0.5%.

Of course a weak currency can be problematic as well, just look at Russia. The ruble is down almost 17 percent against the dollar this year and weakened to a record low this week. The dollar-denominated RTS stock index is in a bear market and yields on government ruble bonds due in 2023 have jumped 1 percentage point since June to 9.42 percent, more than the yield on similar-maturing debt securities sold by Greece.

Net outflows from Russian assets totaled $75 billion in the first half of 2014, compared with $61 billion in all of last year. The Russian central bank is reportedly considering capital controls to limit the outflows. Yuan-ruble trading is growing faster than any other pair of currencies on the Moscow Exchange, and the Russians would like to increase the Chinese currency’s role in local money markets. Some doom and gloomers think that spells the end of the US dollar, but what it actually means is that sanctions are working. The dollar is strong and it dominates world markets.

The S&P/Case-Shiller US National Home Price Index, which covers all nine U.S. census divisions, recorded a 5.6% annual gain in July 2014. The 10- and 20-City Composites posted year-over-year increases of 6.7%. Although all cities but one gained on a monthly basis, 17 saw smaller increases in July as compared to last month.

For those worried that home prices have gotten too high, consider this: In many major cities, prices are still below bubble peaks. In 18 of 20 major US cities, home prices in July were between 3% and 42% below the bubble peaks that were hit in the local markets. Las Vegas is still down 42%, and Phoenix has the second worst recovery, with prices still 35% below the peak. In the most recent Case-Shiller report, Phoenix posted a gain of 5.7% for the past 12 months, and a gain of just 0.3% from June to July.

Consumer confidence fell in September for the first time in five months. The Conference Board, an industry group, said its index of consumer attitudes fell to 86.0 in September from a upwardly revised 93.4 the month before. Consumer confidence was hurt by concerns over the job market and expectations that economic growth will slow in coming months. A variety of factors are impacting consumers. Employers appear to be picking up hiring and laying off fewer employees, but workers are still concerned about their career prospects. Home prices are on the rise, but many households are wary of taking on too much debt, with Americans’ credit-card balances recently hitting the lowest tally in more than a decade. According to the sentiment report: “Tiny wage gains meant that nearly half of all households anticipated declines in inflation-adjusted incomes during the year ahead.”

Even as the U.S. economy reached a milestone in May with employment exceeding the prerecession peak, 29 of 50 states have yet to match that accomplishment. Bloomberg recently compiled Labor Department data shows the weakest jobs rebound has been in the states central to the 2002-2006 housing bubble and the subsequent price collapse. Nevada, Arizona and Florida are among those furthest from their peak employment during the December 2007-June 2009 downturn. The energy industry is driving the economic expansion in 12 of the 13 states leading growth since the recession ended. Leaders include Texas, North Dakota, Oklahoma and Louisiana, with Oregon the only non-energy state among the standouts. Oregon has been boosted by technology manufacturing and fast growth in exports.

Median household income is now 8 percent below what it was in 2007, adjusted for inflation. It’s 11 percent below its level in 2000. It used to be that economic expansions improved the incomes of the bottom 90 percent more than the top 10 percent. Since the current recovery began in 2009, all economic gains have gone to the top 10 percent. The bottom 90 percent has lost ground. We’re in the first economic upturn on record in which 90 percent of Americans have become worse off. And this month, that was reflected in the confidence figures.

Next week the International Monetary Fund hosts a gathering of the top finance officials from around the world. The IMF plans to again revise down its outlook for the global economy next week. Central banks have tried to rev up growth with cheap cash, but printing money can only go so far. The IMF has been arguing for a while that governments must restructure their economies to make them more competitive and capable of consistence growth. Next week they are expected to say that the best idea for many governments is to spend more on infrastructure and invest in roads, bridges, power plants, ports, and other big, expensive projects.

The IMF argues that taking advantage of low borrowing costs to finance infrastructure can boost near-term growth with cash injections and long-term output by increasing the efficient flow of commercial goods. If projects are carefully chosen, that public investment can add two percentage points to growth in industrialized economies, cut debt levels by up to 8% of gross domestic product and increase private investment by a half-percentage point of GDP. The extra debt from financing the projects would be more than offset by the growth returns.

A follow-up on the story about the New York Fed, which is supposed to serve as a banking regulator. ProPublica ran a story about a former New York Fed bank examiner, who noted that her ex-bosses weren’t willing to stand by her claims that Goldman Sachs didn’t have any conflict-of-interest policies, or at least a version that could pass muster. They fired her, but she made secret recordings before she was fired, and now she’s suing. The day this all broke, last Friday, Goldman issued a new conflict-of-interest policy that prohibits investment bankers from trading individual stocks and bonds. That wouldn’t have anything to do with the fact that, like Goldman Sachs itself, one of its investment bankers was on both sides of Kinder Morgan’s acquisition of El Paso, would it? Steve Daniel, a Goldman banker, had an undisclosed $340,000 personal investment, and Goldman Sachs had a $4 billion stake, in Kinder Morgan while both were selling El Paso advice on the deal. And of course there are multiple examples of when Goldman made bets against their clients.

The first case of deadly Ebola diagnosed in the U.S. has been confirmed in Dallas, in a man who was traveling in Liberia and arrived in the U.S. on Sept. 20. The man is being kept in isolation. He had no symptoms when he left Liberia, then began to show signs of the disease on Sept. 24; he was admitted to the hospital on September 26; he is now critically ill. At the same time, another suspected case is being evaluated at a National Institutes of Health facility, the 13th such possible infection in the U.S. All others have tested negative.

There is no approved treatment for Ebola, though drugmakers are attempting to develop vaccines or medicines that could be used in this or a future outbreaks. Current care involves isolating the patient so they can’t infect others, and providing supportive treatment such as intravenous fluids and antibiotics to fight opportunistic infections. There are some drug companies that are working on Ebola vaccines and treatments, and yes, they saw their stock prices jump today. Here’s a quick rundown: NewLink Genetics, an Ames, Iowa, company working on an Ebola vaccine, up 14% today; Tekmira Pharmaceuticals, up about 20 percent; BioCryst Pharmaceuticals, up 12 percent; and Sarepta Therapeutics, up 7 percent.