Tax Reform Again Provides Fuel for Stock Rally

Charles Schwab; On the Market

Posted: 12/18/2017 4:15 PM EST

Tax Reform Again Provides Fuel for Stock Rally

 

U.S. stocks joined their foreign counterparts in a global rally, courtesy of optimism regarding tax reform which is expected to make its way through Congress this week. An unexpected jump in homebuilder sentiment to a more than 18-year high and a host of global M&A deals also aided in providing support. Treasury yields were mostly higher and the U.S. dollar lost ground, while gold was higher and crude oil prices were mixed.

The Dow Jones Industrial Average (DJIA) increased 140 points (0.6%) to 24,792, the S&P 500 Index was 15 points (0.6%) higher at 2,691, and the Nasdaq Composite jumped 58 points (0.8%) to 6,995. In heavy volume, 921 million shares were traded on the NYSE and 2.1 billion shares changed hands on the Nasdaq. WTI crude oil decreased $0.11 to $57.22 per barrel and wholesale gasoline added $0.02 to $1.67 per gallon. Elsewhere, the Bloomberg gold spot price moved $4.99 higher to $1,261.43 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—was 0.3% lower at 93.70.

Hershey Co. (HSY $114) announced an agreement to acquire Amplify Snack Brands Inc. (BETR $12), for $12.00 per share in cash, or about $1.6 billion including debt. HSY was higher, while BETR surged over 70%.

Campbell Soup Co. (CPB $50) announced an agreement to acquire Snyder's-Lance Inc. (LNCE $50) for $50.00 per share in cash, or about $4.9 billion. Shares of both companies were higher.

Penn National Gaming Inc. (PENN $29) announced an agreement to acquire Pinnacle Entertainment Inc. (PNK $31) for $32.47 per share in cash and stock, valued at about $2.8 billion. Under the terms of the deal, PNK stockholders will receive $20.00 in cash and 0.42 shares of PENN for each share owned. In connection with the deal, Boyd Gaming Corp. (BYD $35) agreed to acquire four assets of PNK for $575 million in cash. Shares of PENN were lower, while PNK and BYD were higher.

CSX Corp. (CSX $54) announced that Chief Executive Officer (CEO) Hunter Harrison passed away over the weekend after taking a medical leave due to unexpected severe complications from a recent illness. The board has named Chief Operating Officer James Foote as acting CEO. Shares were higher.

Homebuilder sentiment unexpectedly jumps to 18-year high, kicking off busy week

The National Association of Home Builders (NAHB) Housing Market Index showed homebuilder sentiment this month unexpectedly jumped to over an 18-year high of 74, versus the Bloomberg forecast calling for a 70 reading and November's downwardly revised 69 level. The index sits decisively above the 50 mark, the point of separation for good versus poor conditions. The NAHB said housing market conditions are improving partially because of new policies aimed at providing regulatory relief to the business community.

The NAHB added that with low unemployment rates, favorable demographics and a tight supply of existing home inventory, we can expect continued upward movement of the single-family construction sector next year. Tomorrow, we will get a look at November housing construction activity in the form of housing starts and building permits (economic calendar). Starts are projected to decline 3.2% month-over-month (m/m) to an annual rate of 1,249,000 units and permits are forecasted to decrease 3.1% to an annual rate of 1,275,000 units.

New home construction rebounded in October to the fastest pace in a year, suggesting a potential boost for Q4 GDP growth as construction spending subtracted from GDP in the second and third quarters, per Bloomberg. Schwab's Chief Investment Strategist Liz Ann Sonders notes in our 2018 Market Outlook: U.S. Stocks and Economy, animal spirits are keeping business optimism alive and broad U.S. growth should remain healthy in 2018, however late cycle tendencies should be on investors’ radar screen.

Treasuries were mostly lower, with the yield on the 2-year note flat at 1.84%, while the yield on the 10-year note rose 3 bps to 2.39% and the 30-year bond rate gained 4 bps to 2.75%. Schwab's Chief Fixed Income Strategist Kathy Jones provides a look at the bond markets heading into the New Year, in her video, What Could Fixed Income Investors Expect in 2018?.

Treasury yields have diverged and the U.S. dollar has fallen, though the stock markets continue their ascent, as the House and Senate are expected to vote on a final tax bill this week. Schwab's Vice President of Legislative and Regulatory Affairs, Michael T. Townsend offers a look at the tax bill and the votes in his latest commentary, Sweeping Tax Bill Poised to Become Law. Also, Schwab's Director of Tax and Financial Planning, Hayden Adams, CPA, delivers his article, Tax Reform: Frequently Asked Questions and as you conduct your year-end tax planning, check out our, Tax Reform: 11 Questions to Ask Your Advisor.

Europe and Asia higher, bolstered by U.S. tax reform optimism

European equity markets finished broadly higher, with the global markets rallying on hopes that U.S. tax reform will face final votes this week, while a flood of M&A deals buoyed global sentiment. Stocks gained ground despite gains in the euro and British pound versus the U.S. dollar, while bond yields in the region traded mixed. In economic news, eurozone consumer price inflation rose in line with expectations for November. Schwab's Chief Global Investment Strategist Jeffrey Kleintop, CFA, offers his, 2018 Global Market Outlook: Three Actions to Take for the Year Ahead, in which he says 2018 global stock market gains could potentially be in the double-digits and international stocks may outperform U.S. stocks. Jeff urges investors to rebalance as 2018 gains in stocks may result in a higher risk asset allocation ahead of a potential recession and bear market.

Stocks in Asia finished higher with growing optimism of U.S. tax reform, as lawmakers are set to vote on the final bill this week, lifting global economic sentiment. The global markets have rallied this year, bolstered by the broadest economic growth in a decade and is expected to continue in 2018 as discussed by Schwab's Jeffrey Kleintop, CFA, in his article, 5 Reasons Investors Should Give Thanks. Japanese equities rallied, with the yen holding onto Friday's losses, while a report showed the nation's exports grew more than expected. Mainland Chinese stocks and those traded on Hong Kong were higher, with the People's Bank of China continuing to raise short-term interest rates and home price data came in mostly positive. Meanwhile, markets in Australia and India rose, and shares listed in South Korea finished flat.

From tomorrow's international economic calendar, investors will get the minutes from the Reserve Bank of Australia's last monetary policy meeting, PPI from South Korea, and the Ifo Business Climate Survey from Germany.

Financial Review

The Other Shoe

Sinclair Noe — April 19, 2016

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

Subscribe: iTunes | Android | RSS

DOW + 49 = 18,053
SPX + 6 = 2100
NAS – 19 = 4940
10 Y + .01 = 1.78%
OIL + 1.30 = 41.08
GOLD + 17.80 = 1251.30

The Dow Industrial Average closed above 18,000 yesterday for the first time since last July and the rally continued today, although the Dow lost about half its early gains. The S&P 500 topped the psychologically key 2,100 level this morning. We’re not far from the record highs of last May; a couple of strong days and we’re there.

China looks stable, at least today. The Eurozone is preparing for more stimulus from the ECB in its battle against deflation. Oil prices are rising. Analysts are predicting earnings for the first quarter will decline anywhere from 8% to 10% and it appears that weak first quarter corporate earnings are almost fully discounted. Share prices are going up. This is when you should get nervous.

After the close Monday, IBM posted results that beat on both the top and bottom line. However, they did not raise full-year guidance. Netflix also disappointed with lower-than-expected subscriber growth for the second quarter. IBM was down 5% today, and Netflix lost almost 13%, which was a major drag on the Nasdaq.

Early morning reports include Goldman Sachs posting first-quarter earnings dropped 60 percent from a year ago, the fourth-straight quarter of profit declines. Still, earnings beat lowered expectations. Revenue dropped about 40 percent from the year ago period, missing estimates. Johnson & Johnson, which posted quarterly earnings that beat, while revenue matched forecasts. The firm raised its full-year forecast. UnitedHealth reported earnings that beat on both the top and bottom line, and raised its full-year forecast.

After the closing bell, Intel said it would cut 12,000 jobs globally, or 11 percent of its workforce.  The cuts will include “voluntary and involuntary departures” from its operations around the world. Most of the affected workers will be notified in the next 60 days. Intel said it had net income of $2 billion, or 42 cents a share, and revenue of $13.7 billion; a miss on both the top and bottom lines. PC sales are down; you knew that. Intel is trying to get into chips for smartphones, sensors, and cloud computing but they aren’t quite there yet.

 A strike by oil workers in Kuwait has reduced output to 1.1 million barrels per day from 2.8 million. However, the gains may be short-lived. Russia’s Deputy Energy Minister said the country is considering raising its production this year. A deal to freeze oil output by OPEC and non-OPEC producers fell apart after Saudi Arabia demanded that Iran join in production cuts. Iran has repeatedly said it would prioritize regaining pre-sanctions crude output levels over discussing an output freeze.

New-home construction in the U.S. slumped more than projected in March. Residential starts decreased 8.8 percent to a 1.09 million annualized rate. Permits decreased 7.7 percent to a 1.09 million annualized rate, the fewest in a year. Construction of single-family houses dropped 9.2 percent to a 764,000 rate from 841,000 the previous month that was the strongest since October 2007.

Work on multifamily homes, such as townhouses and apartment buildings, declined 7.9 percent to an annual rate of 325,000, the fewest since February 2015. First-quarter gross domestic product growth estimates are currently as low as a 0.2 percent annualized rate. The economy grew at a 1.4 percent rate in the fourth quarter.

The Federal Reserve is set to hike interest rates more rapidly than investors currently expect, so says Boston Fed President Eric Rosengren, again pushing back on what he said was investors’ too pessimistic view of the U.S. economy and monetary policy. It was the second time in as many weeks that Rosengren warned that futures markets, which see only one modest rate hike in each of the next few years, are off the mark.

He said U.S. inflation was now “much closer” to the Fed’s goal, downplayed weak growth in the first quarter, and said the economy is “fundamentally sound.” The Fed’s policy-setting committee meets on April 26-27. The probability that the FOMC will increase the fed funds rate by 25 basis points at the June 14-15 policy meeting is 18%, which compares to 11% yesterday.

Argentina has officially returned to the global bond markets following a 15-year hiatus, unveiling the biggest sovereign issuance by an emerging-market nation in two decades. The country is raising up to $15 billion, but demand for the bond issue (which will pay an interest rate of between 6.4% and 8%) was strong and attracted orders worth $65 billion. Most of the cash raised will go toward paying off a small number of holdout creditors, led by US hedge funds Elliott Management and Aurelius Capital.

The International Monetary Fund and the World Bank are joining forces with other international organizations to cooperate on tax issues and develop new tools and standards for taxing multinational enterprises. The decision by the organizations to formally cooperate predates the release of the Panama Papers, but an IMF official said the groups welcomed the heightened attention on tax issues that the controversy has stoked.

I know the news cycle moves fast, and since there were almost no Americans named in the massive document dump, coverage of the Panama Papers has faded quickly. But wait, there’s more. US officials have taken part in two global meetings about the Panama Papers. The IRS acknowledged participating in a “special project meeting” of the Joint International Tax Shelter Information and Collaboration network, about the papers in Paris last week.

The IRS also encouraged any U.S. citizens and companies that may have money in offshore accounts to contact the agency now before any possible illegal activity on their part is identified. It is now believed the documents contain information on potentially thousands of US citizens and firms that have at least an indirect connection to offshore accounts affiliated with Mossack Fonseca. Waiting for the other shoe… to drop.

Anheuser-Busch InBev has accepted Asahi Group Holdings’ offer to buy the Peroni, Grolsch and Meantime beer brands for $2.9 billion, clearing another hurdle in its efforts to win regulatory approval for its $100 billion-plus takeover of SABMiller. The purchase is conditional on the SABMiller deal going through.

A consortium backed by sovereign fund China Investment Corp. has expressed interest in buying a majority stake in Yum! Brands’ China business, which runs more than 7,100 KFC and Pizza Hut eateries across the nation. The investor group includes KKR and Baring Private Equity Asia. A deal could value Yum! China at $7 billion to $8 billion.

Privately held outdoors retailer Bass Pro Shops has partnered with Goldman Sachs Group’s private equity arm to make an offer for hunting and fishing store chain Cabela’s. The move gives Bass Pro the equity financing necessary to pursue Cabela’s. In December, Cabela’s said it was working with investment bank Guggenheim Securities to explore strategic alternatives including a sale, following pressure from activist hedge fund Elliott Management.

Who wants Yahoo? The deadline to bid for Yahoo has passed with YP Holdings (formerly Yellowpages.com) the latest name in the fray, although Verizon is still considered the front-runner. Yahoo posted earnings today; adjusted earnings came in at $0.08 per share on $1.09 billion in revenue, both down significantly from the same quarter a year ago, but both the top and bottom line were slightly better than estimates.

UBS is going to trial over $2.1 billion in losses that investors incurred on mortgage-backed securities, the latest in a series of lawsuits over the shoddy financial products at the heart of the financial crisis. The non-jury trial in Manhattan stems from a lawsuit being pursued by U.S. Bancorp on behalf of three trusts, who claim UBS refused to buy back the MBSs when pervasive defects emerged.

Federal prosecutors from the U.S. Attorney’s office and the SEC are investigating Theranos over whether it misled investors. Walgreens Boots Alliance and the NY State Department of Health have received subpoenas in recent weeks seeking documents and testimony about representations made to them by the blood-testing startup.

The National Oceanic and Atmospheric Administration has released data showing the first three months of this year, so far, the hottest year ever. March was also the 11th consecutive month to see a new record for temperatures since agencies started tracking them in the 1800s. The new data confirms similar but separate reports from NASA and the Japan Meteorological Association.

Both 2014 and 2015 were record setting years as well.  The Arctic is seeing some of the most abnormal weather on earth, with temperatures about 6 degrees warmer than average overall. These highs could lead to record melting of Arctic sea ice this summer, where the ice cover is already at its lowest since measurements began in the late 1970s.

After a relaxing four-day weekend, you might find that you’re more productive at work than usual. And now there is research to prove it. According to a new study by researchers at the University of Melbourne, for employees over the age of 40, the sweet spot for the best productivity is around three days of work per week. That’s when workers showed the highest level of brain functioning.

Their brain functions were scored based on the results of three tests: a memory test; a reading test; and an attention, visual comprehension, and motor skills test. In all three tests, participants who worked part-time, around 25 to 30 hours a week, showed the sharpest cognitive skills.

Cognitive abilities were lowest among those who worked 50 to 60 hours per work and in those didn’t work at all. The findings suggest that some work is good for your brain, but too much can be damaging, at least for older and middle-aged workers.

Financial Review

Nice Little Planet

Sinclair Noe — November 18, 2015

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

Subscribe: iTunes | Android | RSS

DOW + 247 = 17,737
SPX + 33 = 2083
NAS + 89 = 5075
10 YR YLD + .01 = 2.27%
OIL + .03 = 40.70
GOLD + .20 = 1071.00
SILV – .01 = 14.28

Stocks rallied the most in four weeks, while Treasuries pared losses. The dollar traded near a seven-month high against the euro. Oil was little changed near a two-month low after dropping below $40 a barrel in New York for the first time since August as producers’ output swelled global inventories to a record. U.S. supplies climbed to the highest for the season in more than 80 years.

A predawn police raid on an apartment building in a Paris suburb led to the deaths of two extremists, including the alleged ringleader of last weekend’s attacks – although there is no official confirmation; the raid also resulted in seven arrests. Police also found plans in the apartment for more attacks on Paris. French President Hollande renewed his case for an extension to a state of emergency decreed after the attacks and for changes to the constitution that he said would make France safer. Meanwhile, a French aircraft carrier headed to the eastern Mediterranean to intensify the bombardment of ISIS positions in Syria.

Hacking collective Anonymous accessed and took down more than 5,500 social media accounts associated with ISIS. As part of its efforts, Anonymous published a guide for supporters of how to identify and clean out ISIS-linked accounts.

While we have all been following the news about the attacks in Paris it is important to remember that ISIS is not going to win; they will not establish a caliphate in Paris, nor will they take over New York, or LA, or Kansas City. The point is not to minimize the horror. It is, instead, to emphasize that the biggest danger terrorism poses to our society comes not from the direct harm inflicted, but from the wrong-headed responses it can inspire. The goal of terrorists is to inspire terror, because that’s all they’re capable of. And the most important thing we can do in response is to refuse to give in to fear.

The Federal Reserve published the minutes of the last FOMC meeting and earlier today, 3 more Fed policymakers said they support a rate hike in December.  Atlanta Fed President Dennis Lockhart said Wednesday he is comfortable moving rates higher “soon”; Cleveland Fed President Loretta Mester repeated that she thinks the economy can handle a small rate hike; Richmond Fed President Jeffrey Lacker, remember he voted for raising rates in September and October, said he has his “fingers crossed” that conditions will finally be right for a rates liftoff in December.” And that is pretty much what the Fed minutes revealed – the Fed is ready to raise interest rates at the next FOMC meeting on December 16.

Sovereign debt spreads are widening as investors look to Fed tightening and ECB easing in December. The extra yield on two-year Treasury notes over their G7 peers has widened to 76 basis points, the most since 2007. In the euro-area, meanwhile, Germany this morning sold two-year notes at a record-low yield of minus 0.38 percent.

New home construction declined by 11% in October to an annual rate of 1.06 million, marking the lowest level since the early spring.  Housing starts in September were also revised down to a 1.19 million annual rate from 1.21 million. Permits for single-family homes, which account for about three-quarters of the housing market, rose 2.4% in October to an annual rate of 711,000. That’s the highest level since the end of 2007. The decrease in starts last month was primarily due to a 25.1 percent slump in work on multifamily homes.

BlackRock, the world’s largest asset manager, is winding down a global macro hedge fund after losses and investor redemptions eroded assets. BlackRock Global Ascent lost 9.4 percent this year, according to an October investor document, on track for its worst year since inception in 2003. The fund, which had $4.6 billion in assets just two years ago, has shrunk to less than $1 billion as of November 1.

Members of the Organization for Economic Cooperation and Development have agreed to scale back public financing for coal-fired power plants. The policy would cut off financing for 85 percent of coal projects going forward. The new policy, which will take effect in a year, would provide subsidies only for so-called “ultra-supercritical” coal-fired power plants — those built to the most stringent environmental standards.

Square is due to price its NYSE IPO later today in an offering that’s being closely watched for what it means for the potential listings of other “unicorn” tech companies – those worth over $1 billion – such as Airbnb and Dropbox. Amid a difficult market for tech IPOs, Square set its price range at $11-13 a share, valuing the company at up to $4.2 billion, or 30% below its worth in a private fundraising round a year ago. Trading in the firm’s stock is scheduled to start on Thursday.

Canadian Pacific has laid out its proposal to acquire Norfolk Southern. Norfolk Southern said will “carefully evaluate” Canadian Pacific Railway’s $28.4 billion acquisition offer, but has described the bid as “low-premium” and warned that it would face significant regulatory obstacles. Canadian Pacific is offering around $94.94 in cash and stock, or a 9% premium to Norfolk Southern’s closing price of $87 yesterday. The combined rail network would be worth about $47 billion.

Air Liquide has agreed to buy Airgas in the largest takeover in the industrial-gases sector in nine years. Air Liquide is offering $143 a share for an enterprise value of $13.4 billion. The deal will make Air Liquide the world’s biggest supplier of industrial gases and give it a dominant position in the U.S.

The Justice Department has unconditionally approved Schlumberger’s $12.7 billion proposed purchase of Cameron International, putting the companies on track to close the deal early next year.

Federal prosecutors are actively pursuing criminal cases against executives from Royal Bank of Scotland and JPMorgan Chase for allegedly selling flawed mortgage securities. The Wall Street Journal reports investigators are working to establish that the bankers ignored warnings from associates that they were packaging too many shaky mortgages into investment offerings and are weighing whether they can prove that constituted fraud.

At RBS, prosecutors are scrutinizing a $2.2 billion deal that repackaged home mortgages into bonds in 2007. In a 2013 civil settlement with RBS, the Securities and Exchange Commission described the lead banker on that deal, whom it didn’t name, as trying to push it through over concerns of the diligence department.

The JPMorgan probe has long been stalled because officials have been divided over whether they have sufficient evidence to charge anyone with a crime but it has recently picked up steam. While major banks have had to pay billions of dollars in settlements over the financial crisis, there has been a notable lack of criminal convictions.

So, after about 8 years, the Department of Justice isn’t actually announcing indictments, but they are picking up steam.

New York Attorney General Eric Schneiderman has subpoenaed Yahoo in his investigation into the multibillion-dollar daily fantasy sports industry. Yesterday, Schneiderman filed for a temporary injunction to shut down industry leaders DraftKings and FanDuel, arguing that they facilitate illegal gambling.

Target posted third-quarter results that matched analysts’ estimates and raised the low end of its annual profit forecast, citing strength in health products and children’s apparel.

Lowe’s, the second-largest home-improvement chain, reported a 5% rise in quarterly sales, thanks to a robust housing recovery. Net income climbed to $736 million, or 80 cents a share, from $585 million, or 59 cents a share.

Reuters has published an excellent examination of stock buybacks and the results are pretty incredible. In fiscal 2014, among the 3,297 US companies examined, spending on buybacks and dividends surpassed the companies’ combined net income. In the most recent reporting year, share purchases reached a record $520 billion. Throw in the most recent year’s $365 billion in dividends, and the total amount returned to shareholders reaches $885 billion, more than the companies’ combined net income of $847 billion.

The phenomenon is the result of several converging forces: pressure from activist shareholders; executive compensation programs that tie pay to per-share earnings and share prices that buybacks can boost; increased global competition; and fear of making long-term bets on products and services that may not pay off.

Because buybacks increase demand and reduce supply for a company’s shares, they tend to increase the share price, at least in the short-term. By decreasing the number of shares outstanding, they also increase earnings per share, even when total net income is flat. If those buybacks come at the expense of innovation, short-term gains in shareholder wealth could harm long-term competitiveness.

Share repurchases have helped the stock market climb to records from the depths of the financial crisis, but many argue that the records have come at the expense of workers by cutting into the capital spending that supports long-term growth – and jobs. Further, because most most U.S. stock is held by the wealthiest Americans, workers haven’t benefited equally from rising share prices. The U.S. economy is now twice as rich in real terms as it was 40 years ago, but most people feel poorer.

This has been by far the hottest year on record. Last month was the hottest October in 136 years of data, making it the eighth record-breaking month so far in this record-breaking year. This week the El Nino weather pattern started setting records of its own, with some of the warmest weekly temperatures ever seen across large parts of the equatorial Pacific.

Last month wasn’t just the hottest October on record, it was the biggest departure from normal for any month in the past 136 years, according to data from the National Oceanic and Atmospheric Administration. Nice little planet you have here. Shame if something happened to it.

No Harm In Waiting For A Fed Increase

Financial Review

First Do No Harm

Sinclair Noe — September 17, 2015

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

Subscribe: iTunes | Android | RSS

DOW – 65 = 16,674
SPX – 5 = 1990
NAS + 4 = 4893
10 YR YLD – .08 = 2.22%
OIL – .25 = 46.90
GOLD + 11.80 = 1132.00
SILV + .21 = 15.24

The Fed will raise rates someday, just not today. The FOMC issued their statement today, and they left interest rates unchanged, again. The biggest change in the wording dealt with international markets, saying: “Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term.”

The statement also included this new line: “The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced, but is monitoring developments abroad.” You may recall that China was also frequently referenced in the Beige Book published a couple of weeks ago in preparation for this FOMC meeting.

The Fed also released their economic projections and they seem to be forecasting more of the same: GDP just over 2% for 2015, the unemployment rate finishing the year at 5%, inflation still significantly short of their target, and the outlook for a rate hike before the end of the year. But don’t bet on it; this Fed might never get off the Schneid. There will be growing pressure for a rate hike, if only to avoid the perception that the Fed is weak, or the idea of a Yellen put, or the view that market volatility is enough to stay the Fed’s decision again.

And the Fed’s decision to wait raises concerns about global economic weakness. Slowing growth in China has rippled across the world, hitting commodity-producing countries hard. The MSCI Emerging Markets Index, which captures stock markets in nations such as Brazil, Chile, Egypt and China, is down 14 percent this year. Just how bad is the situation in the emerging markets? And is it about to get worse?

The statement from the Fed also featured the first dissenter, Richmond Fed President Jeffrey Lacker was gung ho for a 25 basis point increase. And in the economic projections, known as the “dot plot”, which include forecasts of where each policymaker thinks the Fed should have its policy rate at the end of a given period, there’s one remarkable outlier in the projections.

For the first time ever, one monetary policymaker thinks the U.S. needs to move to negative interest rates until at least the end of 2016 to achieve full employment and get inflation back to 2 percent. That was probably the parting shot of outgoing Minneapolis Federal Reserve Bank President Narayana Kocherlakota. Beyond that one vote for negative rates, most of the dots point to higher rates by the end of the year. And there is a good chance that might happen, if only to prove they can.

The decision to leave rates unchanged doesn’t mean much; remember we’re talking about one-quarter of one percent. The Fed hasn’t chosen to resolve the doubts about whether its monetary tools can raise rates without causing upheaval in the banking system. But it has also chosen not to create new uncertainty over whether a rate hike is a one-off or a signal of more to come. Even so, forecasts show policymakers predicted that the Fed’s benchmark rate would rise gradually, reaching 2.6 percent by the end of 2017. In June, they predicted that the rate would reach 2.9 percent by then.

Futures traders are pricing in a 21 percent probability the central bank increases it target range in October, a 49 percent chance by the December meeting and a 56 percent likelihood by January. Treasuries rallied, pushing yields lower; while the dollar tumbled to a three-week low; stocks wobbled then slipped – there is bound to be some concern that slowing global growth could hamper the domestic economy.

There was some speculation that if the Fed didn’t raise rates today, they would at least come out with a hawkish statement, reaffirming their intent to raise rates soon – but that didn’t happen. And so this is being interpreted as a very dovish statement from the Fed. It might also be giving us some insight into the Yellen-led Fed. Greenspan or Bernanke probably would have hiked rates, right or wrong. And I thought Yellen would be a bit more hawkish, just to be assertive. That was not the case. Yellen appears more cautious, but that doesn’t mean she made a mistake.

There is more danger in hiking rates prematurely than in waiting. The Fed may think inflation is transitory but for now, it certainly isn’t a problem – no harm in waiting. The Labor market has been improving but there is still plenty of slack; a stronger labor market might attract some discouraged workers to try again; a stronger labor market might result in push on stagnant wages – no harm in waiting.

If the Fed raises rates, no borrower will feel the pain more acutely than the federal government, the nation’s largest borrower; and fiscal policy has been irresponsible at best; the Fed couldn’t feel confident raising rates with the prospect of a federal government shutdown in less than 2 weeks – no harm in waiting.

The housing market has finally shown signs of life, but many markets, like Phoenix, still haven’t fully recovered; a Fed rate hike would almost certainly result in higher mortgage rates – no harm in waiting. A Fed increase might have prompted investors to pull money out of emerging, damaging their economies, and hurting their abilities to buy goods from developed countries – no harm in waiting.

The problem for the Fed is that any action they take will take time to work; steering the economy one way or the other is like trying to steer a huge ship, not a small sports car; there is lag time before the effects of policy are felt. And there might never be a perfect time to change policy. If they don’t get to it by the December, next year we move into an election year, which means there will be political implications thrown into the mix.

There was other economic news today. The number of Americans getting laid off from their jobs remains near the lowest level in decades. New applications for U.S. unemployment benefits fell by 11,000 to 264,000 in the seven days ended Sept. 12. This is the lowest level of claims since mid-July, when claims fell to 255,000, the lowest level since September 1974.

Construction of new homes slowed down over the past two months. Housing starts fell 3% to an annual rate of 1.13 million units in August. Starts in July were revised down sharply to a decline of 4.1% to an annual rate of 1.16 million units from the prior estimate of a 0.2% gain to 1.21 million.

The U.S. current account deficit narrowed to a preliminary $109 billion in the second quarter, or 2.5% of gross domestic product, from a revised $118 billion.

The Philadelphia Fed manufacturing index took a surprise turn into negative territory in September, falling to negative 6 from positive 8.3 in August.

Copper prices rose to two-month highs in early Asian trading on worries about supply disruptions due to a powerful earthquake off the coast of Chile – the world’s largest copper producer. The magnitude 8.3 quake shook buildings in the capital Santiago and generated tsunami warnings from New Zealand to California. Five people are now known to have died, and one million residents have been evacuated from Chilean coastal areas.

French media giant Altice has confirmed it will buy Cablevision for an enterprise value of $17.7B, or $34.90/share in cash (a 22% premium to Wednesday’s closing price). Together both operators represent the fourth-largest cable operation in the U.S. market.

General Motors has agreed to pay $900 million and sign a deferred-prosecution agreement to end a U.S. government investigation into its handling of an ignition-switch defect linked to 124 deaths. The deal means GM will be charged criminally with hiding the defect from regulators and defrauding consumers, however, the charges will be put on hold while the automaker fulfills the terms of its settlement. Individuals are also not expected to be charged in the criminal suit.

Australia’s antitrust regulator has deferred a decision again on Royal Dutch Shell’s proposed $70 billion takeover of BG Group, this time until Nov. 12, warning the deal could raise prices and cut the supply of natural gas to consumers on the east coast of Australia. The takeover has already been cleared by the European Commission, U.S. and Brazilian antitrust authorities, but still needs approvals from Australia’s Foreign Investment Review Board and China to go ahead.

Saying the deal was unlikely to hurt competition, the Justice Department has granted antitrust clearance to Expedia’s $1.3 billion takeover of rival Orbitz Worldwide. The department had investigated how the merger might affect the commissions Expedia and Orbitz negotiate with airlines, car rental companies and hotels and explored new charges to consumers.

Northrop Grumman  announced a new $4 billion share repurchase program. The defense contractor had previously approved a $3 billion program last December.

Sony said China censorship rules are hurting sales of its PlayStation 4 video game console, even though a ban on foreign-made gaming consoles was lifted last year.

KKR‘s Samson Resources filed for Chapter 11 bankruptcy protection, as the oil and gas producer hands control over to its lenders. Samson was bought four years ago by a group led by KKR for $7.2 billion.

Back from the dead? Google seems to have resurrected its troubled Glass connected eyewear project, now called Project Aura, by hiring engineers and software developers from Amazon. Aura will remain within Google rather than Alphabet to collaborate more closely with advanced technology efforts and develop other wearables. Google stopped selling the initial $1,500 version of Glass to consumers in January following waning interest, criticism over its price and privacy concerns.