Morning News: April 13, 2018
Posted by Eddy Elfenbein on April 13th, 2018 at 7:05 am

S&P Raises Japan’s Outlook to Positive on Stronger Growth

Trade Tensions Have Hit Stocks Hard—Why Is the Rest of the Market So Calm?

Trump Wants Back Into the TPP. Not So Fast, Say Members.

JPMorgan Says Stocks Are About to Shatter a Post-Crisis Record – And Most of Wall Street Could Be Caught Off Guard

Facebook’s Zukerberg Quietly Drops Another Privacy Bomb – Facial Recognition

Trump, Having Denounced Amazon’s Shipping Service, Orders Review of the Postal Service

The Aramco Accounts: Inside the World’s Most Profitable Company

VW Chief Pledges Faster Streamlining to Speed Decisions

Tesla May Be the Most Hated (and Loved) Stock in America

General Electric: The Recent Report (Rumor) Was Music To My Ears

Zillow Intends to Buy and Flip Homes

Airbus Set to Win China Approval for Delayed A320 Neo Deliveries

Joshua Brown: The Forward P/E Ratio Has Collapsed

Michael Batnick: Here We Go Again?

Blue Harbinger: How Do You Allocate Your Trade Risk Budget?

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Morning News: April 12, 2018
Posted by Eddy Elfenbein on April 12th, 2018 at 7:05 am

A Massive, ‘Semi-Infinite’ Trove of Rare-Earth Metals Has Been Found in Japan

Zuckerberg Faces Hostile Congress as Calls for Regulation Mount

WeWork Is Diving Headfirst Into China With a Big New Buy

Disney Forced Into Takeover Offer for Sky by U.K. Authority

Walmart Close to Buying Majority of India’s Flipkart

Toys ‘R’ Us Receives Bids of Over $1 Billion for Asian Business

Takeda Sounds Out Banks for Loans as it Moves Towards Shire Bid

Airlines Know You Hate the Airport, and Are Trying to Do Something About It

Airbus to Place Beds in Cargo Holds for Passengers on Long Flights

British Airways Owner IAG Weighs Takeover Bid for Norwegian Air

JPMorgan Sued Over Cash Advance Fees for Cryptocurrency Purchases

Breaking Into the Boom In Escape Rooms: What Entrepreneurs Need to Know

Cullen Roche: Why Does the Rebalancing Bonus Work?

Ben Carlson: The False Breakdown

Howard Lindzon: Gold and Dapps

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Fed’s Minutes
Posted by Eddy Elfenbein on April 11th, 2018 at 3:33 pm

The Fed released the minutes from their March 20-21 meeting. Here are some key bits.

The information reviewed for the March 20-21 meeting indicated that labor market conditions continued to strengthen through February and suggested that real gross domestic product (GDP) was rising at a moderate pace in the first quarter. Consumer price inflation, as measured by the 12‑month percentage change in the price index for personal consumption expenditures (PCE), remained below 2 percent in January. Survey‑based measures of longer-run inflation expectations were little changed on balance.

Gains in total nonfarm payroll employment were strong over the two months ending in February. The labor force participation rate held steady in January and then stepped up markedly in February, with the participation rates for prime-age (defined as ages 25 to 54) women and men moving up on net. The national unemployment rate remained at 4.1 percent. Similarly, the unemployment rates for African Americans, Asians, and Hispanics were roughly flat, on balance, in recent months. The share of workers employed part time for economic reasons edged up but remained close to its pre-recession levels. The rates of private-sector job openings and quits increased slightly, on net, over the two months ending in January, and the four-week moving average of initial claims for unemployment insurance benefits continued to be low in early March. Recent readings showed that increases in labor compensation remained modest. Compensation per hour in the nonfarm business sector advanced 2-3/4 percent over the four quarters of last year, and average hourly earnings for all employees rose 2-1/2 percent over the 12 months ending in February.

Total industrial production expanded, on net, in January and February, with gains in both manufacturing and mining. Automakers’ schedules indicated that assemblies of light motor vehicles would likely edge down in coming months. However, broader indicators of manufacturing production, such as the new orders indexes from national and regional manufacturing surveys, pointed to further solid increases in factory output in the near term.

Consumer expenditures appeared likely to rise at a modest pace in the first quarter following a strong gain in the preceding quarter. Real PCE edged down in January, and the components of the nominal retail sales data used by the Bureau of Economic Analysis to construct its estimate of PCE rose somewhat in February while the pace of light motor vehicle sales declined slightly. However, household spending was probably held back somewhat in February because of a delay in many federal tax refunds, and the subsequent delivery of those refunds would likely contribute to an increase in consumer spending in March. Moreover, the lower tax withholding resulting from the tax cuts enacted late last year, which was beginning to show through in consumers’ paychecks, would likely provide some impetus to spending in coming months. More broadly, recent readings on key factors that influence consumer spending–including gains in employment and real disposable personal income, along with households’ elevated net worth–continued to be supportive of solid real PCE growth in the near term. In addition, consumer sentiment in early March, as measured by the University of Michigan Surveys of Consumers, was at its highest level since 2004.

Real residential investment looked to be slowing in the first quarter after rising briskly in the fourth quarter. Starts of new single-family homes increased in January and February, al­though building permit issuance moved down somewhat. Starts of multifamily units jumped in January but fell back in February. Sales of both new and existing homes declined in January.

Growth in real private expenditures for business equipment and intellectual property appeared to be moderating in the first quarter after increasing at a solid pace in the preceding quarter. Nominal shipments of nondefense capital goods excluding aircraft edged down in January. However, recent forward-looking indicators of business equipment spending–such as the backlog of unfilled capital goods orders, along with upbeat readings on business sentiment from national and regional surveys–pointed to further solid gains in equipment spending in the near term. Firms’ nominal spending for nonresidential structures outside of the drilling and mining sector declined in January. In contrast, the number of crude oil and natural gas rigs in operation–an indicator of business spending for structures in the drilling and mining sector–continued to move up through mid-March.

Total real government purchases seemed to be flattening out, on balance, in the first quarter after rising solidly in the fourth quarter. Nominal defense spending in January and February was consistent with a decline in real federal purchases. In contrast, real purchases by state and local governments looked to be rising, as the payrolls of these governments increased in January and February and nominal state and local construction spending advanced somewhat in January.

The change in net exports was a significant drag on real GDP growth in the fourth quarter of 2017, as imports grew rapidly. The nominal U.S. international trade deficit widened in January; exports declined, led by lower exports of capital goods and industrial supplies, while imports were about flat. The slowing of real import growth following the rapid increase in the fourth quarter suggested that the drag on real GDP growth from net exports would lessen in the first quarter.

Total U.S. consumer prices, as measured by the PCE price index, increased 1-3/4 percent over the 12 months ending in January. Core PCE price inflation, which excludes changes in consumer food and energy prices, was 1-1/2 percent over that same period. The consumer price index (CPI) rose 2-1/4 percent over the 12 months ending in February, while core CPI inflation was 1-3/4 percent. Recent readings on survey-based measures of longer-run inflation expectations–including those from the Michigan survey, the Survey of Professional Forecasters, and the Desk’s Survey of Primary Dealers and Survey of Market Participants–were little changed on balance.

Foreign economic activity expanded at a moderate pace in the fourth quarter. Real GDP growth picked up in Mexico but slowed a bit in some advanced foreign economies (AFEs) and in emerging Asia. Recent indicators pointed to solid economic growth abroad in the first quarter of this year. Inflation abroad continued to be boosted by the pass-through to consumer prices of past increases in oil prices. However, excluding food and energy prices, inflation remained subdued in many foreign economies, including the euro area and Japan.

CPI Fell 0.1% in March
Posted by Eddy Elfenbein on April 11th, 2018 at 11:34 am

For the first time in 10 months, consumer prices fell in March. The CPI showed a drop of 0.1%, but that was driven by lower gas prices.

That core rate, which excludes food and energy, rose 0.2% which is basically inline with the previous trend.

Here’s the headline rate:

In the last 12 months, headline inflation is up 2.36%.

Here’s a look at the core rate:

Core inflation over the last year was 2.11%.

Morning News: April 11, 2018
Posted by Eddy Elfenbein on April 11th, 2018 at 7:02 am

Trade Threats Cloud Bright World Growth Outlook, Lagarde Says

China Will Do What’s Best for China: Not Shooting Markets

Upcoming Earnings Could Pour ‘Fuel on Fire’ for Stocks

Six Takeaways From Zuckerberg’s Time in the Senate Spotlight

Day 2 of Mark Zuckerberg’s Testimony: What to Watch For

FTC Confirms What We Suspected All Along: Those ‘Warranty Void If Removed’ Stickers Are No Good

Farmers Hit the Road to Reach Shoppers Before Amazon Does

Bank of America to Stop Financing Makers of Military-Style Guns

Boeing Reels in a Huge Order From American Airlines Group, Inc.

It Built an Empire of GIFs, Buzzy News and Jokes. China Isn’t Amused.

Theranos Lays Off Most of Its Remaining Workforce

No One Likes Necco Wafers, but People Are Hoarding Them Anyway

Lawrence Hamtil: Equal-Weighting the S&P 500 vs the S&P 400

Roger Nusbaum: Tariffs Throw A Cat Amongst The Pigeons

Joshua Brown: Managing Risk is Not the Same as Taking Less Risk

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Morning News: April 10, 2018
Posted by Eddy Elfenbein on April 10th, 2018 at 7:07 am

Russian Markets Reel After U.S. Imposes New Sanctions

‘No Direct Confrontation’: Investors Voice Relief at Xi’s Speech

U.S.-China Talks Broke Down Over Trump’s Demands on High-Tech Industries

Payday Lenders Sue CFPB as Hopes for Quick Regulatory Fix Fade

The $66 Billion Bayer-Monsanto Merger Just Got a Major Green Light — But Farmers are Terrified

Mark Zuckerberg Meets With Top Lawmakers Before Hearings

Uber Acquires Bike Share Startup JUMP

Uber Loses EU Court Case in Fight Against French Criminal Charges

Alexa P2P Could Be Amazon’s Gateway to Payments

You Won’t Have to Sign for Credit Card Purchases Much Longer

Novartis Wager on AveXis Shows Rare Diseases Command Mega Prices

Ant Financial Plans $9 Billion Round of Fresh Financing

Nick Maggiulli: The Echo Chamber

Michael Batnick: The Risk

Cullen Roche: Why Bitcoin Will Never Be the Dominant Form of Money

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The Rise in Volatility
Posted by Eddy Elfenbein on April 9th, 2018 at 7:25 pm

It’s hard to convey the dramatic rise in the stock market’s volatility in a graph. I think this one does a good job. It’s the daily changes of the S&P 500 from mid-September until today.

In the first two-thirds of the graph, the stock market rarely went down, and rarely rose by more than 1%. Since then, it’s gotten much more interesting. We’ve already had six 2% down days this year.

In today’s session, the Dow rose as much as 440 points. I was skeptical. I didn’t see the need for a big rise after an ugly day on Friday. At 12:27, I tweeted:

Today's rally is a lot weaker than it appears.

— Eddy Elfenbein (@EddyElfenbein) April 9, 2018

As it turns out, I got close to the top. The markets soon reversed course.

The S&P 500 closed higher by 0.33% today. While that’s not a big change for the day, we saw a lot of intraday movement. This is a very different market than the one we saw late last year.

Russian Stocks Plunge
Posted by Eddy Elfenbein on April 9th, 2018 at 10:25 am

The Russian stock market is plunging as the Trump administration announced new sanctions. Check out the price action in the Russian ETF (RSX).

From Bloomberg:

Russian stocks had their biggest drop in four years and the ruble slumped the most in the world after the U.S. slapped new sanctions on Kremlin-connected billionaires and tensions with the U.S. spiraled following the latest chemical attack in Syria.

The benchmark MOEX Russia Index sank 8.7 percent on Monday, the steepest slide since March 2014, when Moscow’s annexation of the Crimean peninsula triggered international penalties. The ruble and local bonds had their biggest drop since 2016 and the cost of insuring sovereign notes against default was set for the sharpest increase since December 2014.

Investors pulled out after the U.S. on Friday escalated penalties against Russia for meddling in the 2016 election by sanctioning dozens of Russian tycoons, companies and key allies of President Vladimir Putin. On top of that, U.S. President Donald Trump warned of a “big price to pay” in response to reports of a chemical attack outside Syria’s capital, saying President Vladimir Putin and Iran “are responsible for backing Animal Assad.”

“We haven’t seen such a united, mass retreat from Russian assets for a long time,” Kirill Tremasov, director of the analysis department at Loko-Invest said by phone. “The situation is ever more reminiscent of 2014.”

Morning News: April 9, 2018
Posted by Eddy Elfenbein on April 9th, 2018 at 7:05 am

Europe Caught in the Middle as Trump Threatens China

Russian Stocks Take Worst Hit Since Crimea on Sanctions, Syria

Oil Edges Up But U.S.-China Trade Tensions Curb Gains

Rusal Sanctions Offer Light Comfort for Aluminum Prices

Expansion of Canada’s Trans Mountain Pipeline in Doubt

Novartis Bets Big on Gene Therapy With $8.7 Billion AveXis Deal

Alibaba Invests in Chinese Facial-Recognition Startup

Deutsche Bank Solves One Crisis With New CEO. Now Onto the Next

Tesla Gives Panasonic an Electric Shock

7 Ideas To Pave The Way For Autonomous Vehicles

Car Dealerships Face Conundrum: Get Big or Get Out

Spotify’s $26 Billion Value Is Hard to Put Your Finger On

Ben Carlson: Price Discovery in Bitcoin & Is College Worth the Cost?

Jeff Carter: Plenty of Non-Believers

Howard Lindzon: Apple is Dead, The New Stocktwits iOS App, and Security is Perking…

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March NFP +103K, Unemployment 4.1%
Posted by Eddy Elfenbein on April 6th, 2018 at 8:35 am

The March jobs report is out. The government says the U.S. economy created 103,000 net new jobs last month. That’s below expectations of 178,000. For the sixth month in a row, the unemployment rate held at 4.1%.

Average hourly earnings rose 0.3%. In the last year, AHE is up 2.7%.

There were big revisions to the data for January and February. The revisions totaled -50,000.

The Labor Force Participation Rate was 62.9%. The broader U-6 rate was 8.0%.

Here’s the unemployment rate:

Here’s the U-6 rate:

Labor Force Participation Rate: