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Weak U.S. consumer prices, retail sales put spotlight on Fed

A shopper passes a window display at the Beverly Center mall in Los Angeles, California November 8, 2013. REUTERS/David McNew

Weak U.S. consumer prices, retail sales put spotlight on Fed

By Lucia Mutikani| WASHINGTON

U.S. consumer prices unexpectedly fell in May and retail sales recorded their biggest drop in 16 months, suggesting a softening in domestic demand that could limit the Federal Reserve’s ability to continue raising interest rates this year.

The Fed is expected to increase borrowing costs later on Wednesday, but the signs of retreating inflation pressures and moderate consumer spending could worry policymakers who have previously viewed the softness as transitory.

“For the Fed, today’s reports are a twin disappointment,” said Michael Hanson, chief economist at TD Securities in New York. “Continued softness in the economic data could call into question the Fed’s conviction, but that is unlikely to be a main theme at today’s meeting, in our view.”

The Labor Department said its Consumer Price Index dipped 0.1 percent last month, weighed down by declining prices for gasoline, apparel, airline fares, motor vehicles, communication and medical care services, among others.

The second drop in the CPI in three months followed a 0.2 percent rise in April. In the 12 months through May, the CPI rose 1.9 percent, the smallest increase since last November, after advancing 2.2 percent in April.

The year-on-year gain in the CPI in May was still larger than the 1.6 percent average annual increase over the past 10 years. Economists had forecast the CPI unchanged last month and advancing 2.0 percent from a year ago.

The so-called core CPI, which strips out food and energy costs, rose 0.1 percent in May after a similar gain in April as rents continued to increase moderately. The core CPI increased 1.7 percent year-on-year, the smallest rise since May 2015, after advancing 1.9 percent in April.

The Fed has a 2 percent inflation target and tracks an inflation measure which is currently at 1.5 percent.

While the U.S. central bank is expected to raise interest rates by 25 basis points on Wednesday, its second hike this year, the weakness in inflation and retail sales, if sustained, could put further monetary tightening in jeopardy.

INCOMING DATA CRUCIAL

“Clearly officials will be mindful of incoming inflation trends in the coming months before greater confidence can be made with second half of the year policy normalization plans,” said Sam Bullard, a senior economist at Wells Fargo Securities in Charlotte, North Carolina.

The dollar fell to a seven-month low against a basket of currencies on the data, while prices for U.S. Treasuries rallied. U.S. stocks were little changed ahead of the Fed’s interest rate decision.

In a separate report, the Commerce Department said retail sales fell 0.3 percent last month amid declining purchases of motor vehicles and discretionary spending after a 0.4 percent increase in April. May’s drop was the largest since January 2016 and confounded economists’ expectations for a 0.1 percent gain.

Retail sales rose 3.8 percent in May on a year-on-year basis. While some of the drop in monthly retail sales reflected lower gasoline prices, which weighed on receipts at service stations, sales at electronics and appliance stores recorded their biggest decline since March 2010.

Excluding automobiles, gasoline, building materials and foodservices, retail sales were unchanged last month after an upwardly revised 0.6 percent rise in April. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product and were previously reported to have increased 0.2 percent in April.

Consumer spending accounts for more than two-thirds of the U.S. economy. Despite last month’s weak core retail sales reading, low inflation could translate into higher consumer spending in the calculation of GDP.

The economy grew at a 1.2 percent annualized rate in the first quarter, held back by a near stall in consumer spending and a slower pace of inventory investment.

Output increased at a 2.1 percent pace in the October-December period. The Atlanta Fed is forecasting GDP rising at a 3.2 percent annualized rate in the second quarter.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Meredith Mazzilli)

Published at Wed, 14 Jun 2017 17:18:26 +0000

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Goldman Sachs CEO falls for prankster

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Top CEOs to Trump: You're wrong on climate change
Top CEOs to Trump: You’re wrong on climate change

Lloyd Blankfein may think twice before accepting praise for his next witty tweet.

The Goldman Sachs(GS) CEO and Twitter newbie posted a message on Friday poking fun at President Trump’s attempt to divert attention from recent scandals. “Just landed from China. Trying to catch up…How did “infrastructure week” go?” Blankfein wrote on Twitter.

Blankfein’s tweet was showered with Twitter love, receiving 5,000 retweets and 20,000 likes.

It was followed up by an email over the weekend claiming to be from Harvey Schwartz, the chief operating officer of Goldman.

“Tweet won some online award for most humorous tweet — Trump will be so pissed ;)” the email read.

Blankfein took the bait, replying: “Seemed like a good way to bookend my trip.”

In reality, the Goldman CEO had just fallen for a prank by an online mischief-maker, who likes to embarrass banking executives.

“Absolute genius Lloyd. You’ve never thought of heading for Vegas with a standup act?” the prankster emailed Blankfein, adding that “all the girls and gambling” could cause a man to “get easily corrupted.”

“I’d settle for getting away with it,” Blankfein responded, according to screenshots of the emails posted online.

Goldman Sachs confirmed the authenticity of the email exchange, but declined to comment further.

Related: Goldman Sachs CEO tweets, slams Trump

Blankfein had only just begun his Twitter career, sending out his first-ever tweet on June 1 to slam President Trump’s decision to leave the Paris climate accord.

But the Goldman CEO shouldn’t feel too bad though. The troublemaker, who calls himself “Email Prankster” on Twitter, later duped top execs at Citigroup.

The prankster, pretending to be Citigroup Chairman Michael O’Neill, sent an email containing a link to a news story about Blankfein getting pranked. Citi CEO Michael Corbat said, “Can’t open it..”

Stephen Bird, Citi’s consumer-banking chief, sent a lengthy reply. “At least Lloyd was responsive…in the new economy that’s something,” Bird said. “Some of his peers are still getting their messages printed out.”

Citi declined to comment, though the bank didn’t dispute the email exchange happened.

In both cases, bank execs were fortunate that they weren’t duped into divulging any sensitive information.

The email prankster previously duped Barclays boss Jes Staley and Mark Carney, the head of the Bank of England.

Embattled Barclays CEO Jes Staley was tricked into thanking someone he thought was the chairman of his bank John McFarlane for his support at the annual shareholder meeting. And Carney was fooled into discussing his predecessor’s drinking habits.

Published at Tue, 13 Jun 2017 20:58:29 +0000

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PayPal Holdings Inc.: Payment Tech’s Growth Opportunity

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PayPal Holdings Inc.: Payment Tech’s Growth Opportunity

Lucas Downey June 12, 2017

Published at Mon, 12 Jun 2017 19:40:00 +0000

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Banks Rally After D.C. Theatrics

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Banks Rally After D.C. Theatrics

By Alan Farley | June 9, 2017 — 10:46 AM EDT

The banking sector took off in a strong rally during the June 8 Senate hearing, posting the biggest one-day gain since March 1. The buying surge signals broad relief that D.C. disclosures are unlikely to derail President Trump’s tax cut agenda and its expected impact on U.S. growth and the yield curve. While it seems premature, market players have an excellent track record recognizing subtle shifts missed by pundits, politicians and the financial media.

Also, the rally was perfectly placed at 3-month support, predicting it will gain traction in coming days. This marks a significant turnaround because the financial sector has lagged badly so far in the second quarter, due to weaker than expected GDP and the slow pace of Federal Reserve rate hikes. It’s now possible that commercial and regional banks will lead a summer rally to new highs.

The SPDR S&P Bank ETF (KBE) sold off from $60 to $9 during last decade’s bear market and bounced to $29 in 2010. It took three years to mount that resistance level, ahead of a second period of lagging performance that lasted into the November 2016 election. It took off in the strongest rally since 2009 after Donald Trump’s triumph, driven higher by promises of deregulation and corporate tax cuts that would generate higher underwriting and lending activity.

The uptick stalled in early March held down by weak first-quarter growth and D.C. drama that continues to threaten the president’s agenda. The decline dumped the fund through support at the December high and then broke range support centered near $43. It settled at a 4-month low near $40 at the end of March and spent the last two-and-a-half months testing that level while failing to mount new resistance at the 50-day EMA.

The fund bounced at support for the fifth time earlier this week after tagging the 200-day EMA and turned higher into the Comey hearings, gathering strength as it became clear the president would survive the latest political assault. It ended the session above the 50-day EMA for the first time since early May, pointing to rising strength that could signal the start of the next leg of the November breakout.

The long-term chart highlights the potential of significant upside in coming months. The 2016 breakout also mounted the .618 Fibonacci bear market retracement level, a significant barrier to higher prices. This week’s bounce started right on top of new support, indicating the fund could now rally up to the 50% retracement level near $50. That price zone marks the final barrier ahead of a 100% round trip into the high posted before the 2008 economic collapse.

Which commercial banks will lead this advance if it unfolds as predicted? The top pick is a no-brainer because Dow component JP Morgan Chase and Co. (JPM) has outperformed its peers in the last decade, after surviving the crash with the industry’s strongest balance sheet. CEO Jamie Dimon has maneuvered skillfully through a minefield of legal and political issues since that time while the stock has lifted into a series of all-time highs.

This is an important technical consideration for prospective investors and market timers because it tells us Morgan has no overhead supply of unhappy shareholders to absorb, unlike rivals Bank of America, Corp. (BAC), Citigroup, Inc. (C) or Wells-Fargo and, Co. (WFC). While the next rally leg is likely to float all boats, market history predicts that smart money will head straight for the sector’s leadership, which is undisputed at this time.

The Bottom Line

Banks turned sharply higher during this week’s Senate hearing, with market players deciding the disclosures won’t derail President Trump’s tax cut agenda. This bullish turnaround could signal a corrective low, ahead of a strong recovery that lifts the sector to 2017 and multi-year sector highs

Published at Fri, 09 Jun 2017 14:46:00 +0000

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GE wants to unload its iconic light bulb business

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GE factory jobs move from Wisconsin to Canada

GE factory jobs move from Wisconsin to Canada

GE wants to unload its iconic light bulb business

  @mattmegan5

Thomas Edison may not think this is a bright idea: General Electric is trying to rid itself of the light bulb business that has symbolized the company for 125 years.

GE, a conglomerate cofounded by Edison, told employees on Thursday it has put the iconic lighting business up for sale.

The storied company cited a desire to “focus on its core digital industrial assets” and streamline a portfolio that today is centered on things like jet engines and health care equipment.

GE(GE) said talks with potential suitors have only just begun so it’s not clear how much the lighting division will fetch. The Wall Street Journal reported in April that a sale could be valued at $500 million.

The proposed sale of GE Lighting will not include GE’s professional lighting or Current, a division that sells LED lighting to businesses.

Getting rid of GE’s light bulb business is the most striking example of how the conglomerate continues to remake itself to keep pace with the modern economy.

GE’s origins stretch back to the beginning of light bulbs and the days of Edison’s inventions. GE was formed in 1892 through the merger of Edison Electric Light, Edison Lamp, Edison Machine Works and Bergmann & Co.

In 1935, GE lamps were used to light the first ever Major League Baseball night game, played in Cincinnati. GE would later invent the fluorescent lamp in 1938 and halogen lamp in 1959.

GE was long known for these light bulbs as well as appliances like refrigerators and microwaves. It later delved into media and even finance with NBC Universal and GE Capital. But GE has since sold off NBC and most of its finance arm.

Today’s version of GE has promised to lead the “digital industrial era.” CEO Jeff Immelt has refocused attention on areas the company feels it can lead, including healthcare, trains, wind turbines, jet engines and ways to make manufacturers more productive.

For instance, GE is investing heavily in the industrial Internet of Things by trying to digitize factories.

Published at Fri, 09 Jun 2017 16:20:12 +0000

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Will I pay taxes on my Social Security payouts?

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Will I pay taxes on my Social Security payouts?

By Jean Folger | Updated June 9, 2017 — 5:30 PM EDT

A:

Some people have to pay federal income taxes on the Social Security benefit they receive. Typically, this occurs only when individuals receive benefits and have other substantial sources of income from wages, self-employment, interest, dividends and/or other taxable income that must be reported on your tax return.

In accordance with Internal Revenue Service (IRS) rules, you won’t pay federal income tax on more than 85% of your Social Security benefits. The percentage of benefits for which you will owe income tax is dependent upon your filing status and combined income. If you:

  • File a federal tax return as an “individual” and your combined income is
    • Between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits
    • More than $34,000, up to 85% of your benefits may be taxable.
  • File a joint return, and you and your spouse have a combined income that is
    • Between $32,000 and $44,000, you may have to pay income tax on up to 50% of your benefits
    • More than $44,000, up to 85% of your benefits may be taxable.
  • Are married and file a separate tax return, you will probably owe taxes on your benefits.

Note: the IRS defines combined income as your adjusted gross income, plus tax-exempt interest, plus half of your Social Security benefits. You will receive a Social Security Benefit Statement (From SSA-1099) each January detailing the amount of benefits you received during the previous tax year. You can use this when you complete your federal income tax return to determine if you owe income tax on your benefits. If you do owe taxes on your Social Security benefits, you can make quarterly estimated tax payments to the IRS or choose to have federal taxes withheld from your benefits.

Published at Fri, 09 Jun 2017 21:30:00 +0000

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Fed gives extension on complying with part of Volcker rule to three banks

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Fed gives extension on complying with part of Volcker rule to three banks

The U.S. Federal Reserve on Wednesday gave extensions of up to five years to Deutsche Bank, SVB Financial Group, and UBS Group on complying with part of the Volcker Rule that deals with illiquid funds.

 

The central bank said the three need more time to divest legacy illiquid funds in order to comply with the rule’s limits on their stakes in private equity and hedge funds.

 

The rule, part of the 2010 Dodd-Frank Wall Street reform law, limits the types of trading banks can conduct with their own money, as a way to curb speculation in financial institutions. But the financial services industry has said regulators have carried out the rule in a confusing and often convoluted way and are pressing the administration of President Donald Trump to make compliance easier and clearer.

 

(Reporting by Lisa Lambert; editing by Diane Craft)

Published at Wed, 07 Jun 2017 19:55:13 +0000

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Ready, set, go: Retirement advice protections are here

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Ready, set, go: Retirement advice protections are here

By Mark Miller| CHICAGO

Friday is the day, folks.

Starting on June 9, all financial advisers providing guidance on retirement accounts must adhere to the new U.S. Department of Labor rule requiring that they act in your best interest rather than their own.

The controversial rule survived a bruising seven-year battle against entrenched interests in the financial services industry, which were seeking to protect excess fees that cost retirement savers $17 billion a year – a full percentage point in annual returns, according to U.S. government estimates during the Obama administration.

Most recently, the rule survived a 60-day delay by the new administration under President Donald Trump, which has considered repealing or revising it.

The Trump administration may yet try to weaken or undo parts of the so-called fiduciary standard, and several important parts of the rule are due for completion in January. These include details on adviser exemptions and disclosures that must be made to consumers.

For now, the rule has teeth. It permits consumers to sue advisers if they do not think they have met their fiduciary obligations.

What will the rule mean for retirement savers, and how can you take advantage of its protections? The following are some key issues to consider:

 

WHAT HAS CHANGED?

The fiduciary rule imposes requirements on advisers who were previously not required to act in clients’ best interest.

If you are surprised to learn that all advisers were not already required to do this, you are not alone. A survey released in April by Financial Engines, which advises workplace savers, found that 53 percent of Americans mistakenly thought that all financial advisers already adhered to a best interest standard.

Registered Investment Advisers (RIAs) are already fiduciaries; now broker-dealers and insurance company representatives will have to act in your best interest whenever tax-advantaged retirement accounts are involved. Previously, they were governed by a far weaker “suitability” standard that allowed them to sell higher-cost products that might otherwise fit your investment goals.

 

DO A CHECK-UP

If you already work with an adviser, expect to receive a contract spelling out that the relationship is now governed by the new rule and specifying that advice will be in your best interest, costs will be no more than reasonable and that no misleading statements are permitted.

The rule is limited to tax-advantaged retirement accounts – such as IRAs and 401(k) accounts – including rollovers from workplace plans to IRAs.

But do not stop there. Insist that any adviser you work with accepts fiduciary responsibility.

An easy way to separate wheat from chaff is by asking an adviser to sign the Committee’s fiduciary oath, a legally enforceable contract that commits advisers to put your interests first. (To download the fiduciary oath, click: here)

Scott Puritz, managing director of Rebalance IRA, a low-fee fiduciary advisory firm that manages retirement investments, recommends requiring any prospective adviser to provide a detailed accounting of all expenses applied to your retirement accounts, including adviser, fund, marketing and distribution and transaction costs.

Also request a detailed accounting of any one-time expenses, such as front-end loads on mutual funds plus exit or surrender penalties. You also want full disclosure of any conflicts of interest that an adviser may have that could impact her advice to you.

 

BE INFORMED

Finally, ask for a copy of the firm’s U.S. Securities and Exchange Commission Form ADV Part 2, which requires brokers to disclose the types of services provided, fee schedules, disciplinary information and any conflicts of interest.

It is also important to conduct a thorough background check on anyone you intend to hire, advises Kate McBride, former chair of The Committee for the Fiduciary Standard, a group of industry practitioners and experts.

Do a search of FINRA’s Brokercheck database (brokercheck.finra.org/), and a Google search for news on the adviser’s firm.

“Be on the lookout for firms that have paid big fines in the past five years for wrongdoing or over-charging,” McBride says. “If there are more than a handful of cases, think carefully about whether you want to use that firm.”

The Pittsburgh-based Centre for Fiduciary Excellence maintains a database of roughly 200 vetted fiduciary advisory firms around the United States that have subjected themselves to extensive audits of their investment practices and client files. (To access the free database, click here: here)

“People will spend more time looking for a contractor to fix their sinks than they do hiring an adviser,” McBride adds. “You have to do your homework.”

(The opinions expressed here are those of the author, a columnist for Reuters.)

(Editing by Lauren Young and G Crosse)

 
Published at Thu, 08 Jun 2017 12:08:40 +0000

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Is It Time to Buy U.S. Steel?

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Is It Time to Buy U.S. Steel?

By Alan Farley | June 8, 2017 — 11:55 AM EDT

United States Steel Corp. (X) shell-shocked shareholders after posting a 2-year high at $41.83 in February, cut in half in an industry-wide rout triggered by lower than expected Chinese growth and repeated delays in Trump administration infrastructure initiatives. The stock has settled near $20 in recent weeks and is working through a rounded basing pattern that could yield a tradable low

Wall Street upgrades in the last two weeks suggest the stock is back on their radar, with Credit Suisse and Standpoint Research analysts looking for higher prices in the short-term. Even so, it faces stiff resistance between $24 and $28 due to a high volume gap posted on April 26 after the company missed first-quarter profit and revenue estimates while lowering fiscal year 2018 guidance.

A pullback trade here isn’t for everyone because quick upside is unlikely, given significant overhead supply, but long-term and swing traders could benefit by entering tiered positions as short-term buy signals go off. Tight stop losses will be needed with both strategies because long-term relative strength readings still expose the stock to a trip into the mid to upper-teens.

X Long-Term Chart (1991–2017)

This old school industrial giant began trading in its current form in 1991, settling into a long-term trading range, stuck between support at $20 and resistance in the mid-40s. It broke down when the tech bubble in 2000, with the decline settling at an all-time low near $9.50 in 2003. A mid-decade uptrend posted the strongest gains in its public history, reaching an all-time high at $196 in June 2008.

The bottom dropped out during the economic collapse, dumping the stock more than 170-points in just five months. It bounced at $20.71 in November and stalled in the 40s a month later, ahead of an even lower low at $16.66 in March 2009. The subsequent recovery wave failed to alter the bleak technical landscape, reaching the upper-60s in 2010, with that level unchallenged in the last seven years.

The stock tested the 2010 high in 2011 and sold off, bouncing at the bear market low in 2013 while a lower high into 2014 got also sold, triggering a 2015 breakdown that hit an all-time low in January 2016. Price action since that time carved a multi-wave bounce that stalled near $40 in December, followed by a test that yielded a failed breakout and steep decline in May 2017.

X Short-Term Chart (2016–2017)

The rally into 2017 failed to end the 9-year string of lower highs, keeping the long-term downtrend fully intact, but the decline has now reached 6-year support that was broken in September 2015 and remounted in May 2016. It’s also flashing extremely oversold readings in several time frames, raising odds for a bounce that could generate profits for aggressively managed positions.

Price action since mid-May has congested into a symmetrical triangle centered at $20.50, with a breakout targeting the 50-day EMA, which is declining into the bottom of the May gap. That level is hiding a large supply of trapped shareholders, raising odds for violent whipsaws in or around that price zone. As a result, short-term traders should take opportune profits on a rally into that level and get out of the way. That may not be an option for long-term positions, highlighting the urgency of low average entry prices that can withstand high volatility.

The Bottom Line

U.S. Steel has reached deep support near $20 that could support a sizable bounce in coming weeks. Multiple resistance levels predict high volatility and two-sided price action once that uptick is underway, favoring quick exits for the fast-fingered crowd and a ton of patience for long term players.
Published at Thu, 08 Jun 2017 15:55:00 +0000

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Macy’s Warning Sends Department Store Stocks Sinking

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American department store chain Macy’s Inc. (M) continues to see its shares fall Wednesday after dipping more than 8% on its reduced outlook for the current quarter.

Chief Financial Officer (CFO) Karen Hoguet told analysts Tuesday that the department store’s gross margins may come in below forecasts offered in February. (See also: Macy’s and the Day Retail Died.)

Investors Fear Pressure Will Continue into Q2

With gross margins now expected to be 60 to 80 basis points below last year, Cincinnati-based Macy’s says it plans to offset the burden with increased cost savings.

In general, investors are receiving the warning as a sign that the intense pressure on American retailers in the recent period hasn’t eased up in Q2. Macy’s industry peers such as J.C. Penney Co. Inc. (JCP) and Kohl’s Corp. (KSS) saw their stocks close down about 4% and 6% respectively following the announcement on Tuesday.

New CEO Lays Out ‘North Star Strategy’

Hoguet joined Macy’s newly instated Chief Executive Officer (CEO) Jeff Gennette in the department store chain’s first meeting with analysts in four years, just 10 weeks into Gennette’s tenure.

After working at Macy’s for 34 years, the new CEO says he has “tremendous faith” in the brand’s ability to strengthen its bond with customers, although admitting that it must “work hard” to “figure out all the answers.” Gennette further detailed a new “North Star Strategy” that outlines how the firm will evolve its marketing, merchandise, experience, interplay between stores and online, and innovation front deemed “what’s new, what’s next.” The North Star Strategy will reportedly involve a new loyalty program to roll out later in the year, a simplification of pricing and a reduction in duplicate items while the firm focuses on more trendy fashion over basic clothing.

As luxury retailers benefit from an increase in demand for premium products driven by Millennial trends and a solid stock market, Macy’s hopes to leverage its high-end brands such as Tommy Hilfiger and DKNY, along with private-label brands including I.N.C., Hotel Collection and Martha Stewart. In a move that will also boost margins, Gennette seeks to grow exclusive and private label brands to make up 40% of total revenue by 2020 compared to the current 29%. (See also: 2017: The Year of Retail Bankruptcies.)
Published at Wed, 07 Jun 2017 19:53:00 +0000

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Goldman Sachs boost rates for savers in bid to attract deposits

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U.S. savers who routinely scour personal finance sites for the best deposit rates are soon going to see an unusual bank at the top of the list: Goldman Sachs Group Inc.

The Wall Street bank’s consumer arm, Goldman Sachs Bank USA, plans on Wednesday to raise the rate it offers customers on deposits to 1.2 percent, slightly higher than rivals Synchrony Bank, CIT Bank and New York Community Bank’s My Banking Direct.

Goldman had previously offered savers 1.05 percent. The average national rate for savings accounts is currently 0.06 percent, according to the U.S. Federal Deposit Insurance Corporation.

The move makes Goldman the highest interest paying bank, according to personal finance website Bankrate.com. The firm is aggressively trying to boost its deposit base and attract Main Street clients.

Goldman’s online deposits from individuals total $12 billion, a small but growing fraction of the $128 billion in overall deposits on the firm’s overall balance sheet. Still, that is far less than large commercial banks like JPMorgan Chase & Co with $1.4 trillion in deposits.

Goldman hopes increasing its deposit base will help it boost profits if it can find ways to lend them profitably. The bank is looking to make further inroads into lending broadly across wealth management and investment banking, as businesses like trading struggle to generate the type of returns they once did.

Deposits also represent a more stable type of funding and are less likely to disappear during times of stress than other funding sources. Regulators may have been pushing banks to rely more on deposits since the 2008 financial crisis.

Last year, the bank launched Marcus, its first major foray into consumer lending. It also acquired Honest Dollar, an online retirement savings platform for small businesses and startups.

(Reporting by Olivia Oran in New York; Editing by Bernard Orr)
Published at Wed, 07 Jun 2017 09:47:15 +0000

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Jean Case’s journey from needing charity to giving it

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Jean Case’s journey from needing charity to giving it

By Chris Taylor| NEW YORK

There are some prominent power couples in the world of philanthropy, but Steve and Jean Case might be among the most influential of all.

Steve, the famed founder of AOL, and Jean, CEO of the Case Foundation and Chair of the National Geographic Society, have been transforming the twin worlds of technology and giving for decades.

For the latest in Reuters’ “Life Lessons” series, Jean Case spoke with Reuters on the 20th anniversary of her foundation’s inception to discuss what life’s thrill ride has taught her so far, and what challenges still lie ahead.

 

Q: Just how extraordinarily normal were your beginnings?

A: It was so normal that I actually grew up in a place called Normal, Illinois.

I was raised by a single mom, and was pretty close to my German immigrant grandparents, so they instilled a strong work ethic in me. I also had someone who took me under his wing, (former Florida Congressman) Clay Shaw, whose law office I worked in. So I like to think I had a series of guardian angels looking after me.

 

Q: Your mom had the very tough job of waitress, so how did that environment shape your understanding of money?

A: You have to take care of the basics first, if you can’t count on financial security. So pay essentials like the electric bill before you think about buying anything else.

She tried really hard, but as a waitress raising four kids, the bottom line is that it was never enough. She had to deny herself a whole lot just in order to pay the bills.

 

Q: Eventually you achieved success by joining AOL, where you met your husband Steve. Was it strange to go from a world of need to a world of wealth?

A: I went from being a recipient of philanthropy to being able to practice philanthropy. There are definitely big pendulum swings in life. But I have stayed close to the communities where I grew up, where people still struggle, and those folks have never allowed me to get enclosed in a bubble.

 

Q: What role models have guided you along the way?

A: I am a student of history, so many of them come from the past. Madam C.J. Walker, for instance, was one of the first self-made millionaires in the U.S. as a black female from the South. You look at someone like that, and you say ‘Wow, if she can do that, then I can do anything.’

 

Q: When you and Steve formed your foundation, how did you hash out how to allocate resources?

A: We started 20 years ago, and a common theme in a lot of what we have done is to take initiatives and really scale them in a powerful way, by partnering with government and the private sector. For instance, along with the Obama administration, we helped lead Startup America, helping and championing startups across the country after the financial crisis.

 

Q: You two have signed on to the Giving Pledge to donate at least half your wealth to charity. Was that decision easy or difficult?

A: It was easy in the sense that we had already made the commitment personally, but the hard part was doing something so public and visible. We had to get comfortable with that. Our kids were very young when we signed on, and they are all in their 20s now, and so they have always known that we wanted to give away most of our wealth.

 

Q: What money mistakes in your career stick out in your mind?

A: A litany of them. One was pretty visible, though: We had a clean-water initiative that we put millions of dollars into, before we realized that the ship just couldn’t be righted. I even wrote something about it, and called it ‘The Painful Acknowledgement of Coming Up Short.’

 

Q: Will your children take over the reins of the foundation someday?

A: They are not involved and it was never our intent to get them involved. Think of the really wonderful moments in life: Earning your own paycheck, buying your first car. We wanted all five of them to have those experiences on their own, so they have all started on their personal life tracks. In fact, the last two graduated from college just last week.

 

(Editing by G Crosse)
Published at Tue, 06 Jun 2017 14:38:26 +0000

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Exclusive: Trump administration concerned about U.S. firms giving financial ‘lifeline’ to Venezuela

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Exclusive: Trump administration concerned about U.S. firms giving financial ‘lifeline’ to Venezuela

By Matt Spetalnick and Girish Gupta| WASHINGTON

 

The Trump administration is concerned about any action by U.S. companies that provides a financial lifeline to Venezuela’s government, senior White House officials told Reuters, after Goldman Sachs Group Inc came under fire for purchasing $2.8 billion of state oil company bonds at a steep discount.

 

Venezuela’s political opposition and some U.S. lawmakers have condemned the purchase of so-called “hunger bonds” as a way to prop up President Nicolas Maduro’s cash-strapped government, accused of being behind food shortages affecting millions of Venezuelans in a worsening crisis.

 

The New York-based investment bank said last week that it never transacted directly with Venezuelan authorities when it bought the bonds of oil firm PDVSA for pennies on the dollar.

 

“We’re concerned by anything that provides a lifeline for the status quo,” one U.S. official, speaking on condition of anonymity, told Reuters. “I would prefer them not to.”

 

A second administration official said U.S. companies making Venezuela investments should “think morally about what they’re doing.”

 

The officials said they did not know whether the Trump administration had made its case directly to Goldman Sachs.

 

Goldman Sachs did not respond to a request for comment.

 

Julio Borges, head of Venezuela’s opposition-led Congress, accused Goldman Sachs on Monday of “aiding and abetting the country’s dictatorial regime.”

 

In a letter to Goldman Sachs President Lloyd Blankfein, Borges said Congress would open an investigation into the transaction and he would recommend “to any future democratic government of Venezuela not to recognize or pay these bonds.”

 

Eliot Engel, the senior Democrat on the House of Representatives Foreign Affairs Committee, urged President Donald Trump on Friday to condemn Goldman Sachs for the bond purchase.

 

The Trump administration, which has several former Goldman Sachs executives in senior roles, has yet to officially comment on the issue.

 

Engel said the bond purchase allowed Maduro and his associates to “regularly abuse the human rights of Venezuelan citizens while at the same time blocking their access to much-needed food and medicine.”

 

Venezuela’s opposition won control of the legislature in a 2015 election, but the pro-government Supreme Court has annulled all its measures and essentially stripped its powers. The country has been engulfed in two months of anti-government unrest, which has left more than 60 people dead on both sides.

 

Maduro’s government says the United States and Venezuela’s opposition are seeking to oust him from power.

 

With Venezuela’s inefficient state-led economic model struggling under lower oil prices, Maduro’s unpopular government has become ever more dependent on financial deals or asset sales to bring in coveted foreign exchange. Venezuela’s international reserves rose by $749 million on Thursday and Friday, reaching around $10.86 billion, according to the central bank.

 

(Reporting by Matt Spetalnick and Girish Gupta; Editing by Yara Bayoumy and Mary Milliken)

Published at Sun, 04 Jun 2017 05:13:30 +0000

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Watch out OPEC, U.S. could break oil production record of 1970

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US is the world's second largest emitter of CO2
US is the world’s second largest emitter of CO2

Watch out OPEC, U.S. could break oil production record of 1970

  @mattmegan5

The U.S. shale oil boom is recovering from the crash faster than almost anyone imagined, OPEC included.

OPEC’s decision in late 2014 to pump oil at high levels launched a devastating price war. It sent oil prices to 13-year lows, dealing a big blow to the shale revolution. Dozens of American producers fell into bankruptcy and countless oil workers lost jobs.

But more recently, OPEC has retreated by putting a lid to its production. Crude prices have stabilized, and shale is coming back stronger than before. Oil companies are discovering that they can pump oil profitably from shale hotbeds, especially the Permian Basin of West Texas, profitably at even today’s prices of $50 a barrel.

Now, some believe that the U.S. could soon be pumping more oil than ever, potentially deepening the oil glut that OPEC has so far failed to fix.

Rystad Energy is predicting that before the end of this year, monthly U.S. oil production will top the record of 10 million barrels per day that was set in November 1970.

“We call U.S. production the anti-fragile: Something that once shocked comes back stronger and more efficient than ever,” said Michael Tran, director of energy strategy at RBC Capital Markets.

“OPEC grossly underestimated the ability of U.S. production,” he said.

The shale revolution has reshaped the global energy landscape, vaulting the U.S. to the upper echelon of oil producers behind only Russia and Saudi Arabia.

U.S. oil output shot up from just 4.7 million barrels per day in October 2008 to a peak of 9.6 million in April 2015. All of that U.S. crude caused a global glut. OPEC responded in late 2014 by launching a price war aimed at regaining market share by drowning high-cost producers like shale in cheap oil.

us oil boom

But America’s oil boom didn’t slow nearly as much as feared. Domestic production dipped to a low of 8.6 million barrels in July 2016, down 10% from the peak. Since then it’s stabilized, and rebounded to 9.1 million barrels a day in March, the most recent month stats are available for.

“Based on proprietary and detailed well level data, Rystad Energy sees current U.S. production bouncing back twice as fast as it dropped,” the firm wrote in a report this week.

U.S. shale ‘dominating’

Goldman Sachs agrees that the U.S. oil boom looks to be back on track.

“The pendulum between shale and OPEC has shifted wildly over the past five years…In 2017, shale is dominating growth again,” Goldman Sachs analysts wrote in a report this week.

So how high will U.S. production go? The EIA is calling for the U.S. to pump 9.74 million barrels per day in December. That would top the recent high but be just shy of the record.

Rystad Energy believes that U.S. shale will once again exceed expectations and output will reach the all-time high of 10 million barrels.

If that happened, the U.S. could surpass Saudi Arabia as the world’s No. 2 oil producer. OPEC estimates the Saudis pumped 9.95 million barrels of oil a day in April, while Russia produced 11.2 million.

‘Drill, baby, drill’

One of the keys behind the revival of U.S. shale is how much more efficient producers have become, thanks to innovation and discounts on service contracts.

Nowhere is that more true than the Permian Basin, where Goldman Sachs estimates that wells have become 50% more productive over the past two years.

Another important factor is that U.S. shale companies have locked in higher oil prices when they occur by turning to hedging contracts. More and more oil companies are using hedges to give them certainty.

“That means regardless of where prices go, it’s still drill, baby, drill,” said RBC’s Tran.

It’s possible that Rystad’s call for record U.S. oil production is too optimistic. Domestic output could be slowed by a new oil price slump. There are also infrastructure challenges in terms of transporting shale oil to refiners, some of which don’t process that type of crude.

Of course, a more moderate pace of U.S. oil output might not be the worst thing for the industry. Too much pumping could deepen the oil glut OPEC and Russia are struggling to fix by extending their production cuts until March 2018.

Published at Thu, 01 Jun 2017 16:22:23 +0000

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Exxon loses key climate change battle

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Rex Tillerson's complicated relationship with climate change
Rex Tillerson’s complicated relationship with climate change

Exxon loses key climate change battle

  @mattmegan5

ExxonMobil just lost a critical climate change battle even as the fate of the Paris accord remains in serious doubt.

In a rare defeat for a major company, over 63% of Exxon shareholders voted in favor of a proposal on Wednesday calling on the world’s biggest public oil company to do more to disclose the risk it faces from the global crackdown on carbon emissions.

The proposal asks Exxon(XOM) to stress test its assets for climate risks each year. The test would include scenarios such as declining demand for oil as a result of emerging technologies like electric cars and regulations, stemming from the Paris climate accord. The vote occurred just hours after CNN and other news outlets reported that President Trump is expected to withdraw from the Paris climate agreement.

It’s very uncommon forthese kinds of campaigns to get such a high percentage of votes, especially in the face of the kinds of intense lobbying efforts Exxon launched against this resolution. Last year, a similar proposal was backed by 38% of shareholders.

“This is an unprecedented victory for investors in the fight to ensure a smooth transition to a low carbon economy,” New York State Comptroller Thomas DiNapoli, who spearheaded the proposal, said in a statement.

The Exxon proposal is nonbinding, meaning the company is not required to follow it. But given the strong support, it will be difficult for Exxon to ignore it will likely force the company to make significant changes.

“The burden is now on ExxonMobil to respond swiftly and demonstrate that it takes shareholder concerns about climate risk seriously,” DiNapoli said.

The resolution calls on Exxon to ensure it “fully evaluates and discloses to investors risks to the viability of its assets as a result of the transition to a low carbon economy.”

After the vote, Exxon CEO Darren Woods said shareholder resolutions that received a majority of support “will be reconsidered by the board.”

Climate activists quickly seized on the Exxon vote as a sign that Big Oil is being forced to change its ways.

“Exxon’s shareholders are finally acknowledging what the company still refuses to — that the age of oil is nearly over,” Greenpeace wrote in a statement. Greenpeace launched a campaign this week attacking Exxon in Dallas ahead of its annual shareholder meeting with billboards, bumper stickers and even a blimp hovering above the city.

While Exxon rejected the need to stress test its climate risk, the oil giant did not back away from its support for the Paris deal despite reports Trump may be about to dump the climate accord.

“I stand by our position,” Woods said in response to a question from a shareholder about the White House’s deliberations.

“We think the advantage of the Paris framework is it engages and involves countries from all around the world, irrespective of their economic development,” Woods said.

The Exxon boss added that it’s a “global challenge which requires global participation.”

Published at Wed, 31 May 2017 17:46:19 +0000

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VMware to Rally 20% on Amazon Partnership: Baird

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VMware to Rally 20% on Amazon Partnership: Baird

By Shoshanna Delventhal | May 31, 2017 — 1:24 PM EDT

Network virtualization and cloud infrastructure leader VMware Inc. (VMW) got a boost from the Street this Wednesday as analysts at R.W. Baird issued a bullish note on the hybrid IT company.

Baird’s Jayson Nolan upped his rating on the cloud play to buy from neutral, highlighting growth potential from VMware’s recent cloud deals. Nolan also raised his price target on VMW to $115 from $90, reflecting a near 20% upside from Tuesday’s close.

Positive on Tech Leader’s Strategic Shift

Analysts suggest that the Palo Alto, Calif.-based company, once threatened by the swift adoption of public cloud computing and container software, has held its own and is now “thriving” in cloud deals, in which public cloud computing operators run its virtual machines in their facilities. Nolan indicated that VMware is also benefiting from a “more engaged” parent company, Dell Technologies, which bought out EMC last year in the largest tech deal to date: $67 billion.

“We are positive on VMware’s strategic shift to partner, not compete with the public cloud,” wrote the Baird analyst. “VMware is better strategically positioned now than in years, in our opinion.” In particular, Baird indicates its channel work shows “great positivity and excitement” surrounding the recent VMware and Amazon.com Inc. (AMZN) Amazon Web Services partnership.

“Naturally, a co-development between the respective leaders in private and public clouds should offer an unparalleled level of seamlessness in hybrid cloud mobility, which to date remains one of the largest challenges to enterprise cloud deployment,” wrote the analyst. (See also: VMware CEO ‘Really Excited’ About AWS Partnership.)

Analyst Highlights VMware’s Dominance

Nolan applauded the cloud infrastructure provider’s success in maintaining its “pioneering dominance over the server virtualization market,” despite “a myriad of low-cost, alternative hypervisors” introduced with the goal of “dethroning vSphere from its market leadership.” While looking forward, the analyst says Microsoft Corp.’s (MSFT) Hyper-V cannot be discounted and that Nutanix Inc.’s (NTNX) Acropolis solution is beginning to see early success, the impact will remain limited to smaller environments and VMware will continue its market leading position through at least 2020.

The upgrade comes before VMware is slated to report its most recent fiscal first-quarter report after the closing bell on Thursday. (See also: VMware Bids Farewell to vCloud Air Business.)
Published at Wed, 31 May 2017 17:24:00 +0000

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Did Apple Poach a Qualcomm Engineer to Develop Chips In-House?

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Did Apple Poach a Qualcomm Engineer to Develop Chips In-House?

By Daniel Liberto | May 31, 2017 — 6:55 AM EDT

Apple (AAPL) has poached a leading communication chip engineer from Qualcomm (QCOM), the company it is currently in a legal battle with over wireless modem royalties, prompting speculation that the iPhone-maker is keen to start developing its own in-house solutions.

Esin Terzioglu, who played an important role in helping Qualcomm become an industry leader in cellular modem chip technology, announced the move, which was first highlighted by analyst Neil Shah of Counterpoint Research, on his LinkedIn page.

“It has been my honor and privilege to have worked with so many talented and dedicated individuals at Qualcomm where we accomplished great feats as a team (10nm bring up was a doozy and the team did an amazing job bringing the first product to market!!!),” Terzioglu wrote in his post on the social networking website. “I feel privileged for the opportunity to continue my career at Apple. Stay in touch.”

What Is Apple Playing at?

Apple’s decision to hire one of Qualcomm’s leading engineers has fueled speculation that it is keen to develop wireless modem chips in-house. Qualcomm was the sole provider of cellular modems used in iPhones and iPads, until Apple fired a lawsuit against the company in January, alleging that the chip maker was charging excessive royalties for its patented products. (See also: Qualcomm Countersues Apple.)

Since then Apple has opted to use Intel’s (INTC) rival technology in some versions of the new iPhone, even though the Santa Clara-based company’s products are believed to be inferior to Qualcomm’s offerings. At the same time, Apple has reportedly been working on developing its own cellular chip, a challenging feat given the expensive and complicated nature of the technology. (See also: Qualcomm Vs. Intel In Server Chip Market.)

However, with Terzioglu now on board, Apple’s bid to stop outsourcing could now become more achievable. Raymond James (RJF) analyst Tavis McCourt believes this to be the case. In a note reported on by Barrons he said, “The data point is the latest in a list of instances suggesting that Apple has plans to develop full SoCs (system-on-a-chip) in-house for future mobile devices.” He added, “The current A series processors lack a baseband modem and Terzioglu’s move seems to suggest that Apple is acquiring the necessary expertise to develop such technology.”
Published at Wed, 31 May 2017 10:55:00 +0000

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Consumer spending jumps; monthly inflation rebounds

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Consumer spending jumps; monthly inflation rebounds

By Lucia Mutikani| WASHINGTON

U.S. consumer spending recorded its biggest increase in four months in April and monthly inflation rebounded, pointing to firming domestic demand that could allow the Federal Reserve to raise interest rates next month.

The Commerce Department said on Tuesday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.4 percent last month after an upwardly revised 0.3 percent gain in March. Households spent more on both goods and services last month.

April’s increase was the biggest since December and could ease concerns about second-quarter economic growth after weak reports on core capital goods orders, the goods trade deficit and inventory investment in April. Consumer spending was previously reported to have been unchanged in March.

U.S. stock index futures pared losses after the data while the dollar edged up against the yen. Prices of U.S. Treasuries were trading slightly higher.

Consumer spending grew at its slowest pace in more than seven years in the first quarter, helping to restrict gross domestic product growth to a 1.2 percent annual rate in the first three months of the year. GDP growth estimates for the second quarter range between a rate of 2 percent and 3 percent.

Minutes of the Fed’s May 2-3 policy meeting, which were published last week, showed that while policymakers agreed they should hold off hiking rates until there was evidence the growth slowdown was transitory, “most participants” believed “it would soon be appropriate” to raise borrowing costs.

The U.S. central bank hiked rates by 25 basis points in March. Expectations of further policy tightening next month are also supported by steadily rising inflation.

The personal consumption expenditures (PCE) price index rebounded 0.2 percent in April, reversing March’s 0.2 percent drop. In the 12 months through April, the PCE price index increased 1.7 percent after rising 1.9 percent in March.

Excluding food and energy, the so-called core PCE price index also bounced back 0.2 percent after dipping 0.1 percent in March. In the 12 months through April, the core PCE price index increased 1.5 percent after rising 1.6 percent in March.

The core PCE is the Fed’s preferred inflation measure. The central bank has a 2 percent target for core PCE.

But rising inflation is cutting into both consumer spending and income growth. When adjusted for inflation, so-called real consumer spending rose 0.2 percent last month after advancing 0.5 percent in March.

While personal income rose 0.4 percent last month, as wages jumped 0.7 percent, income at the disposal of households after accounting for inflation advanced 0.2 percent. Real disposable income increased 0.4 percent in March.

Savings were little changed at $759.1 billion last month.

(Reporting by Lucia Mutikani; Editing by Paul Simao.
Published at Tue, 30 May 2017 12:53:31 +0000

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Jobs report; ExxonMobil’s big meeting; Earnings season winds down

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Unemployment rate at lowest in 10 years
Unemployment rate at lowest in 10 years

Jobs report; ExxonMobil’s big meeting; Earnings season winds down

  @shannonfgupta

1. Jobs report: On Friday, the Labor Department will reveal how many jobs were added in May.

A strong report could bolster the case for another interest rate hike. The Federal Reserve has already said it will likely raise rates in June — a sign it’s confident in the economy’s health. The Fed last triggered a hike in March.

Unemployment dropped to 4.4% in April, it’s lowest level since 2007. Economists believe the U.S. economy is now at or near full employment.

2. ExxonMobil’s big meeting: Exxon will be holding its annual shareholders meeting on Wednesday.

Stock holders will likely bring up climate concerns. Exxon has called on President Trump to remain in the Paris climate deal, saying the global agreement provides an “effective framework for addressing the risks of climate change.”

The meeting comes two weeks after Exxon announced plans to open its first Mobil gas station in Mexico. The company also promised to invest $300 million in operations and marketing over the next decade.

3. Earnings season winds down: We’re almost done with first-quarter earnings, and investors hopeLululemon(LULU) will go out with a bang (or at least a sparkle).

The fitness retailer’s stock slid in March after its CEO admitted that its clothing was just, well, boring. Vera Bradley, Michael Kors and Express are also on the earnings docket.

4. Big tech conference: Media and tech leaders will descend on Recode’s annual Code Conference next week.

Hillary Clinton, Venture capitalist Marc Andreesen, Google CFO Ruth Porat and Netflix CEO Reed Hastings are among the scheduled speakers.

The conference in Los Angeles will focus on a variety of topics, including the future of digital tech and product development.

5. Coming this week:

Monday – Markets closed for Memorial Day

Tuesday – “House of Cards” season 5 premiers on Netflix(NFLX, Tech30)

Wednesday – ExxonMobil(XOM) shareholders meeting; Michael Kors(KORS), Vera Bradley(VRA) and Hewlett Packard(HPE, Tech30) earnings

Thursday – Lululemon(LULU) and Express(EXPR) earnings

Friday – Jobs report
Published at Sun, 28 May 2017 12:06:28 +0000

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Wells Fargo ups recruitment bonuses to grow brokerage ranks

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Wells Fargo ups recruitment bonuses to grow brokerage ranks

By Elizabeth Dilts

Wells Fargo & Co will offer more money in recruitment bonuses to financial advisers after competitors announced plans to pull back from recruiting, two people familiar with the matter said on Thursday.

The bank’s wealth management unit, known as Wells Fargo Advisors, will increase recruiting offers by as much as 50 percent, according to two people briefed on the changes who asked not to be named because they were not authorized to discuss them publicly.

The extra money will show up in the upfront bonus checks brokers receive when they join Wells Fargo, as well as in their deferred compensation, which is paid out after several years. The increase was first reported by The Wall Street Journal.

“Attracting the industry’s top talent will always be a priority for Wells Fargo Advisors,” said spokeswoman Emily Acquisto in a statement. “We’ve been disciplined in recruiting and it has worked for us. Adding great advisers and new clients has helped us grow in key markets.”

Wells Fargo’s move comes after three primary rivals, Morgan Stanley, Bank of America Corp and UBS AG announced they were cutting recruiting budgets.

While some of those firms, known in industry parlance as the “wirehouses,” have said they will continue selective recruiting, it has left an opening that Wells appears to be stepping into, the sources said. Wells has traditionally offered less compensation than the other three big Wall Street brokerages, so the increase puts it at or near what its competitors had offered until recently.

(Reporting by Elizabeth Dilts and Dan Freed in New York; writing by Dan Freed; Editing by Lauren Tara LaCapra and Cynthia Osterman)
Published at Thu, 25 May 2017 22:02:11 +0000

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