Mar 16-20: Fedspeak reigns

DJIA 18051 // S&P 2097 // NASDAQ 5004 // 10-YR TRE 1.887% //

EURO 1.092 // OIL 47.69 // GOLD 1191 // BIT 246

Fed chair Janet Yellen spoke last week, removing the "patience" wording from FOMC minutes, but remaining cagey about specifics of when the Fed might raise the target rate. Markets interpreted the report bullishly, sending stocks skyrocketing.

5132.52

Highest-ever level of the Nasdaq, set on March 10, 2000 during the "Tech Bubble." The tech-heavy index has seen a tremendous run-up recently to within several percent of its all-time high, attributed to lower borrowing rates and the renaissance of the technology sector in the US.

Some incredible facts about the Nasdaq's latest run, Yahoo Finance

Despite having a down day on Wednesday, the Nasdaq Composite is still thisclose to breaking 5,000 and ever nearer to breaking its Tech Bubble record

Dollar bulls take it on the chin as Yellen says Fed won't rush to raise rates, Forbes

If there's been one bet on Wall Street that seems common of late, its putting money on continued strength of the US dollar. That presumption got turned upside down last Wednesday, when the Fed issued its latest policy statement and tempered expectations about US growth.

Starbuck's CEO Howard Schultz says Race Together "the right thing to do", CNN Money
Starbuck's CEO is not one to back down about an issue he cares about and last Wednesday he staunchly defended the company's much lampooned effort to improve race relations.

Problem: the bond "conundrum" is back, CNN Money
The 10-year Treasury started last week at 2.11% and tumbled to 1.94% during Janet Yellen's comments, as bond prices (inversely related to yields) we pushed up. But as the Fed move towards raising rates, bond yields should be moving up. What gives?

Vocabulary & People:

• derivatives
• greenback
• Janet Yellen
• Jan Hatzuis
• Jeffrey Gundlach
• CPI

Calendar: 

• M 3/23: Chicago Fed, Existing home sales
• T 3/24: CPI, PMI Manufacturing, New home sales, Richmond Fed
• W 3/25: Durable goods orders, EIA petroleum status
• T 3/26: Jobless claims, PMI services, Kansas City Fed
• F 3/27: GDP, Consumer sentiment

Predictions from last week: 2/3 All-Time: 17/30

• "Patient" removed: CORRECT
• Euro slide against dollar: WRONG
• Oil back above $45: CORRECT

Weekly Predictions:

1. Lululemon misses earnings
2. Another US presidential candidate declares
3. Consumer sentiment positive

Mar 9-13: Happy St. Patrick's Day

DJIA 17977 // S&P 2081 // NASDAQ 4929 // 10-YR TRE 2.098% //

EURO 1.057 // OIL 43.68 // GOLD 1154 // BIT 292

Calendar: 

• Mo Mar 16: Industrial production, Housing market index
• Tu Mar 17: FOMC meeting begins, Housing starts
• We Mar 18: FOMC meeting announcement, forecasts, chair conference
• Th Mar 19: Jobless claims, Leading indicators
• Fr Mar 20: Atlanta Fed business inflation

Predictions from last week: 0/3 All-Time: 15/27

• Stock market drops: WRONG
• AAPL shares up: WRONG
• Dollar General beats: WRONG

Weekly Predictions: gathered at conclusion of weekly meeting

1. Yellen removes "patient" wording from Fed report
2. Euro continues slide against dollar
3. Oil moves back above $45

Mar 2-6: Bulls and bonds

DJIA 17875 // S&P 2073 // NASDAQ 4412 // 10-YR TRE 2.20% //

EURO 1.086 // OIL 49.53 // GOLD 1173 // BIT 280

The Federal Reserve (whose headquarters, called the Eccles Building in Washington DC, is pictured here) just finished its annual stress tests designed to assess the strength of the US banking system. The Fed was founded in 1913 after the Panic of 1907 demonstrated a need for a government financial entity to preserve market liquidity. The Fed has 3 primary goals: maximize employment, stabilize prices, and and moderate long-term interest rates.

676

The value of the S&P 500 index exactly 6 years ago--the lowest level that it hit during the bear market associated with the financial crisis. The index has rebounded by several hundred percent since then, hitting record highs over the past several trading sessions.

The bull market is 6 years old, now what? CNN Money

After hitting a bottom of 676 exactly 6 years ago this Monday, the S&P has returned more than 200% amid the 4th-longest bull market in history. Two market analysts made names for themselves by "calling the bottom," citing that the market losses in 2009 exceeded even the market turmoil from the 1929 market crash. Soon afterwards, the central government and Federal Reserve took emphatic steps to reassure investors, triggering the beginning of the bull market.

Fed stress tests find banks adequately capitalized, WSJ

The Fed's annual stress test of financial health confirmed that all 31 banks tested had resources available to continue lending in the midst of economic shock. This is the first time all 31 banks passed, although it noted Goldman Sachs and Zions Bancorp had certain capital ratios that approached minimum required levels. Banks who pass the test are now permitted to return value to shareholders in the form of dividends and share buybacks.

Faith falters in S&P 500 as $17 billion outflow precedes selloff, Bloomberg
Despite hitting 50 record highs in the past year, investors in 2015 have pulled $17 billion from the S&P index and devoted that money to investments in fixed income and bonds. That change in investment represents the biggest quarterly divergence since 2000. The movement of funds is being attributed to talks that, following continued strong employment numbers, the Federal Reserve will begin raising rates later this summer.



European stimulus sparks bond blitz, WSJ
With rates in Europe being kept low and even negative as the economy continues to recover, some European firms are taking advantage by issuing bonds paying zero interest. The purchase of zero interest bonds indicates that investors believe capital gains--an appreciation in the price of the bond itself--will provide gains. American companies such as Berkshire Hathaway and Coca Cola have issued $26 billion of euro bonds so far this year.

Foreign takeovers see US losing tax revenue, WSJ
Recent government outrage pushed regulators to limit "tax inversions," when US companies purchased companies abroad in order to capture reduced tax in foreign countries. But the law doesn't regulate the opposite: foreign countries purchasing US companies. For example, instead of acting as a predator, Salix Pharmaceuticals has chosen to be the prey in a recent deal to be acquired by Valeant, a competing pharmaceutical firm.

Vocabulary:

• market bottom
• tax inversion
• stress test
• zero coupon bonds
• JOLTS
• bear market

Calendar Mar 9-13

• Mn Mar 9: Labor market conditions; URBN
• Tu Mar 10: NFIB small business index, JOLTS; BKS, HABT
• We Mar 11: EIA petroleum status, Treasury budget; BOX, KKD, SHAK
• Th Mar 12: Retail sales, Import prices, Inventories; DG, TKMR, MTN
• Fr Mar 13: PPI, Consumer sentiment

Predictions from last week: 2/3 All-Time: 15/24

• Costco beats estimates: CORRECT
• Trade gap widens: WRONG
• Caesars Entertainment misses: CORRECT

Weekly Predictions:

1. Stock market drops as Fed signals summertime rate hike
2. Apple shares spike on enthusiasm for Apple Watch
3. Dollar General (DG) beats earnings forecast

Feb 23-27: Riding the bull

DJIA 18130 // S&P 2102 // NASDAQ 4448 // 10-YR TRE 2.002% //

EURO 1.1224 // OIL 48.87 // GOLD 1216 // BIT 261

After flip flopping for months on  whether or not additional internet regulation will hamper or speed innovation, regulators last week decided to manage "equal access" to the internet, acknowledging the importance of a platform previously thought of as a frontier territory but which has now become part of the fabric of the modern US economy.

34%

Netflix's share of overall internet downloads during peak evening times in May 2014, up 32% from 2013.

Top News (click on article titles for links; if paywalled, copy article title into Google)

FCC adopts net neutrality rules to ban internet discrimination, Yahoo Finance

After months of debate, on Thursday the FCC moved forward with plans to regulate the internet as a utility much in the same way other telecommunications networks are now controlled. That means Netflix and Google won't have to pay extra fees to assure streaming video quality, but it also means they may be susceptible to connection speed slowdowns as more space is reserved for competitors.

Stock markets all around the world break records, CNN Money
Investors, made giddy by central banks' easing of lending rates, have driven stock market indices worldwide to some of their highest levels since the recession, with some indices hitting all-time highs. The Dow Jones average broke 18,200 for the first time. However, Nobel Prize winner Robert Schiller warns that price/earnings multiples are now around the same level they were before the bubble burst in 2008.

Janet Yellen puts Fed on path to lift rates, WSJ
Citing rates of employment, production, and spending improving at a "solid rate," the Fed plans "at some point" to consider raising the federal funds rate. The cost of credit is considered extremely important to the economy because it determines the cost of home and auto loans for consumers (who constitute around 70% of US GDP) as well as corporate debt for companies, and also plays an important role in valuation.

JP Morgan to start charging big clients fees on some deposits, WSJ
New regulations and low interest rates are pushing bigger banks toward considering charges for larger corporate clients including financial service providers such as hedge funds and PE firms. Retail customers should not be affected by the fees. Traditionally one of banks' most attractive and stable forms of funding, it has become increasingly expensive to maintain profits on deposits amidst newly mandated capital and liquidity requirements.

RadioShack to sell name with $20 million opening bid, CNN Money
Radioshack's largest shareholder agreed to bid $20 million for the consumer electronics brand name in court last Wednesday. After being in business for 94 years, the chain is now liquidating its brand and store leases through bankruptcy proceedings. Despite a financial downtown, RadioShack's name recognition could help save another company a tremendous amount of cost in new branding.

Vocabulary (click to open link)

• FCC
• P/E 10 (Schiller P/E) ratio
• Federal funds rate
• Liquidity
• Private equity

Calendar:

• Mon Mar 2: Personal income and outlays, PMI Mftg, ISM Mftg; CZR, NTRI, PANW, STNG
• Tue Mar 3: Motor vehicle sales, Janet Yellen speaks; AMBA, AZO, BCS, BBY, JD, KATE, TIVO
• Wed Mar 4: ADP employment, ISM Non-mftg, EIA petrol; ANF, AEO, BREW, PETM, TST
• Thu Mar 5: Jobless claims, Productivity, Factory orders; CSIQ, COST, DMND, KR
• Fri Mar 6: Employment situation, International trade; SPLS

Predictions from last week: 1 / 3 All-Time: 13 / 21

• Yellen keeps "patience" wording: CORRECT
• CPI comes in at 0.0%: WRONG
• GDP annualized rate of 3.5%: WRONG

Weekly Predictions:

1. Costco beats estimates after rejecting AmEx's bid
2. Trade gap continues to widen in face of strengthening dollar
3. Caesars misses estimates amidst weakness in China