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Sunday Night Futures

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https://pixabay.com/en/users/geralt-9301/By geralt from Pixabay

Sunday Night Futures

by Bill McBride on 10/23/2016 08:24:00 PM

Weekend:
Schedule for Week of Oct 23, 2016

Monday:
• At 8:30 AM ET, the Chicago Fed National Activity Index for September. This is a composite index of other data.

From CNBC: Pre-Market Data and Bloomberg futures: S&P futures and DOW futures are up slightly (fair value).

Oil prices were mixed over the last week with WTI futures at $50.67 per barrel and Brent at $51.61 per barrel.  A year ago, WTI was at $44, and Brent was at $47 – so oil prices are UP about 10% to 15% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.21 per gallon (close to unchanged from a year ago).  Gasoline prices will be up year-over-year soon.

Read more at http://www.calculatedriskblog.com/2016/10/sunday-night-futures_23.html#SZq8TjCryTEUsEli.99

by Bill McBride on 10/23/2016 08:24:00 PM

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Published at Mon, 24 Oct 2016 00:24:00 +0000

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REFILE-UPDATE 2-UK Stocks-Factors to watch on Oct 24

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By pixel2013 from Pixabay

Oct 24 Britain’s FTSE 100 index is seen opening up 20 points, or 0.3 percent, on Monday, according to financial bookmakers, with futures up 0.5 percent ahead of the cash market open.

* The UK blue chip index closed down 0.09 percent at 7,020.47 points on Friday after hitting a one-week high, with stronger miners following a rally in metals prices offsetting weaker companies such as British American Tobacco .

* GSK: GlaxoSmithKline said on Monday it had filed its shingles vaccine, Shingrix, for U.S. regulatory approval, bringing the potential blockbuster a step closer to market.

* COBHAM: British aerospace and defence company Cobham downgraded its profit forecast for the second time this year after a continued weak performance in its communications unit.

* MICROSOFT UK PRICES: Microsoft Corp said it will be increasing pricing for its enterprise software and cloud services in the UK in the wake of the sterling’s plunge since Britons voted to leave the EU.

* VODAFONE: India’s telecoms regulator on Friday recommended the top three network operators be fined a combined 30.5 billion rupees ($455 million), saying they were denying new entrant Reliance Jio sufficient interconnection points. One of the top operators is Vodafone Plc’s India subsidiary.

* FRENCH CONNECTION: French Connection Group Plc, the fashion retailer that recently reported its fifth consecutive year of losses, is being circled by overseas retail investors and private equity firms, with interested buyers thought to include U.S. firm Neuberger Berman and Rutland Partners, the Telegraph reported on Sunday. French Connection declined to comment when contacted by Reuters. bit.ly/2dAzTzy

* PETRA DIAMONDS: Diamond miner Petra Diamonds Ltd reported a 30 percent rise in first-quarter production, boosted by strong output at its Cullinan mine in South Africa.

* BRITISH BANKS: Britain’s major banks are set to report stronger-than-expected results this week, confounding expectations that political and economic upheaval caused by the vote to quit the European Union would immediately squeeze profits.

* BRITISH EQUITIES: JP Morgan Cazenove has downgraded its position on British stocks while upgrading euro zone equities, citing negative pressures on British equities from rising gilt yields as one of its main reasons.

* UK TAX: Britain could slash corporation tax to 10 percent if the European Union refuses to agree a post-Brexit free trade deal or blocks UK-based banks from accessing its market, the Sunday Times reported, citing an unidentified source.

* BREXIT: Big international banks are preparing to move some of their operations out of Britain in early 2017 due to the uncertainty over the country’s future relationship with the European Union, a top banking official said..

(Reporting by Esha Vaish in Bengaluru; Editing by Sunil Nair)

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Published at Mon, 24 Oct 2016 06:30:37 +0000

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Are You Operating in Peak Performance Mode?

Are You Operating in Peak Performance Mode?

How many of the following apply to you?  Please answer true or false to each item:

I’ve clearly and visually mapped out my trading process, from the ways I collect information and generate ideas to the ways in which I express those ideas as trades (and as constituents of a portfolio), enter and size positions, manage and adjust positions while they are open, and exit trades.     True     False

I’ve clearly and visually mapped out my personal process to maximize performance, from how I sleep, eat, exercise, socialize, and utilize my non-work time to sustain a peak state.     True     False

I explicitly keep score in written fashion, not just with my profits and losses, but with each component of my trading and personal processes to see what I’ve done well and what I can improve in process terms.     True     False

I use my trading and personal process scores to explicitly identify written goals for improvement and the concrete steps I will commit to in order to achieve these goals.     True     False

I keep a written scorecard of my performance vis a vis each of my goals to track my progress and, if necessary, make adjustments in how I pursue the goals.     True     False

I use my scorecard to make ongoing adjustments to my trading and personal processes, so as to turn initial improvements into ongoing habit patterns.     True     False

Every trader goes through losing trades and losing periods.  When we’re not in peak performance mode, losing money is a fail.  In peak mode, losses become First Attempts In Learning.  Peak performance mode is our way of committing ourselves to growth and improvement; it’s our way of becoming accountable to ourselves.  Merely writing in a journal does not ensure deliberate practice and ongoing improvement.  We become better by keeping score in process terms and continually refining our personal and professional processes.

Further Reading:  The One Trading Drill That Can Improve Performance

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Published at Sat, 22 Oct 2016 10:48:00 +0000

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The Final Bottom in Gold – WHEN

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https://pixabay.com/en/users/Stevebidmead-249424/By Stevebidmead from Pixabay

The Final Bottom in Gold – WHEN


The big decline in the precious metals appears to already be underway (even though we are in a short-term corrective upswing) and it seems that gold will move much lower in the coming months even though it’s likely to move higher in the coming days. The big decline remains to be the most important development for gold and silver investors. Why? Because this decline’s end is likely to present the ultimate buying opportunity for precious metals and for mining stocks.

Before elaborating on this all-important issue, let’s briefly discuss the current events. The USD Index rallied yesterday and it moved higher also today, reaching its March 2016 high. We previously wrote that it was possible that we would see something like that and we also wrote that it didn’t really matter, as metals and miners were not likely to respond to an additional rally at that time (before a corrective rally). That’s exactly what (hadn’t) happened – metals and miners moved only a little lower yesterday and they are almost no changes today. This means that the precious metals sector continues to show strength relative to the USD Index and thus a rally in the former is still likely and it seems that our profits on long positions will become bigger shortly.

Having said that, let’s move to the most important issue of today’s alert.

We discussed the final bottom target for gold in the previous Gold & Silver Trading Alerts and in today’s alert we focus on something even more important – we discuss WHEN gold is likely to bottom.

What may seem odd, today’s alert will not feature any gold, silver or mining stocks charts as the key detail is not visible on any of them, but on a quite different chart – the one featuring the past two decades of the USD Index. Why? Because, in a globalized economy and interconnected financial markets, no asset can move totally independently from other ones – and this is especially the case with gold and the USD Index during major moves. In most cases (we discuss the exception later in today’s alert), when the USD plunges a lot, gold is likely to rally a lot and when the USD soars, gold is likely to decline substantially. That’s likely to change in the final stage of the precious metals bull market, but it doesn’t seem we are at this point yet.

Therefore, the million-dollar question can be asked differently: when is the USD Index likely to form a very important top in the coming months?

In our opinion, it’s most likely to happen in January or February 2017, with the second half of January being the most probable target.

Why? Let’s take a look at the chart (charts courtesy of http://stockcharts.com).

 

US Dollar Weekly Chart
Larger Image

We’ve looked at the above chart and analyzed it hundreds (if not thousands) times, but it hadn’t been until this week that we noticed a major analogy that becomes apparent only after connecting a few dots that – individually – may not seem clear at all.

Let’s start with the discovery. What was the key thing that happened in the USD Index in the past few years? It rallied sharply (pushing RSI well above 80) and broke the all-important 100 level – or more precisely – it tried to break above it, but failed and declined substantially. There were other attempts and they failed as well and were followed by an even bigger decline.

Since history rhymes, the big question is: “When did we see something similar?” Almost 20 years ago – in 1997. That’s the only time in the past 20+ years, when the weekly RSI was well over 80 (besides late 2014 and early 2015). Paraphrasing Calvin Candie’s quote from a Tarantino movie: this fact alone is something that should get your curiosity, but the big number of other similarities and how precise the key one is, should get your attention.

After the USD Index initially moved above 100 in August 1997, it declined sharply and it took several months before the next rally begun. The rally started after the USD moved to the 50-week moving average. That’s exactly what we saw in the more recent past – in 2015. What happened next in 1998? The USD tried moving above 100 a few more times, but finally declined substantially and this time the decline took the USD to a new low. Again, the same thing happened in 2015 and 2016. The shape of the rallies and declines was not identical, but it’s nothing to call home about – after all, very different events accompanied both time frames.

Up to this moment, the above analogy can be viewed as interesting, but perhaps not particularly important. We saw the above previously and it was not shocking. What changes everything is an additional analogy – the size (in terms of both the price and time) and steepness of the 1997 – 1998 decline.

We marked the entire decline with a red line and we copied and pasted this line onto the 2015 – 2016 decline. That’s right – the red line that you can see from the 2015 top to the 2016 bottom is not drawn based on these extremes – it’s the exact copy of the 1997 – 1998 decline. However, we bet that you wouldn’t be able to guess that by looking at the chart as the moves are almost identical. The accuracy of the analogy is striking, especially since there are already quite a few similarities between the 2 situations.

Of course, the moves are not 100% identical, but are so close that we can view them as such. The previous decline unfolded over 436 days and the USD declined by 9.12 (8.999%) bottoming very close to the 92 level and the recent decline was 414 days long and the USD declined by 8.83 (8.768%) bottoming very close to the 92 level. Extremely similar.

In light of such significant similarity, we simply can’t ignore the likelihood that what followed the 1998 bottom is going to follow the 2016 bottom as well – especially that so far this similarity is playing out near-perfectly.

Plotting the 1998 – 1999 rally on the current situation provides us with approximately 104 as the next target, but let’s focus one something different. How is the USD Index moving after the bottom?

Back in late 1998, the USD Index moved sharply higher, above the red “target line” and topped close to 97. Then it declined below 94, but the key thing is that it declined below the target line by approximately as much as it had previously rallied above it (in other words, the “target line” rallied through the middle of the short-term decline). The bottom was formed more or less at the rising support line based on the previous important bottoms (rising red dashed line).

What happened earlier this year? Pretty much the same thing – the USD Index moved sharply above the rising red “target line” (the exact copy of the “target line” from 1998 – 1999), then it declined below it by as approximately as much as it had rallied above it previously, and bottomed. The bottom was formed more or less at the rising support line based on the previous important bottoms (rising red, dashed line).

The similarities are indeed extraordinary and the implications are very important. As far as the shape of the upcoming rally (the way the USD gets to its target) is concerned, we don’t have to see identical performance, just as the way in which the USD tried to move above 100 in 1998 wasn’t very similar to the way it tried to move above the same level in late 2015 and early 2016.

Still, the rally is very likely to end in a similar way to what we saw back in 1999 in terms of length and the size of the rally. So, when and how high is the USD Index likely to move?

At the first sight we see that the target is at approximately the 104 level. More detailed calculations:

USD rallied by 12.28 (13.32%) from the 1998 bottom to the 1999 high (104.5). If it rallies by the same amount from the 2016 bottom, we get 104.16 as the target and if it rallies by the same amount percentage-wise, we get 104.11 as the target. However, since the recent decline was not as big as the previous one (it was 96.8% of the 1997 – 1998 decline), we might expect the following rally to be smaller as well. Applying the above percentage to the above methodology provides us with 103.77 and 103.73 as targets.

Overall, we end up with what we see on the chart – the USD Index is likely to for a major top close to the 104 level.

As far as time and the WHEN question are concerned, we saw the bottom on May 3, 2016 and adding 436 days to this date (that’s how long the USD declined from the 1997 top to the 1998 bottom) gives us the time target of January 27, 2017. However, since the recent decline took a bit less time than the previous one (95% of the previous decline’s time), we might expect the following rally to take less time as well. Applying the above percentage to the above methodology provides us with January 13, 2017 as the target date.

Moving back to the issue of the 104 level as the target – there is also another very important technique that points to it. It’s the target based on the big reverse head-and-shoulders formation that started to form in late 2015 and was completed just a few weeks ago. The declining black line is the neck level of the formation and the breakout above it is now clear even from the very long-term perspective. The move back to it is still quite possible, but the implications are bullish for the following months nonetheless.

The size of the “head” in the head-and-shoulders and reverse-head-and-shoulders patterns is the size of the rally that’s likely to follow. We already saw the breakout (at about 96) so we can use this technique. We marked the size of the “head” and the target based on it with vertical, black, dashed lines. As discussed earlier, this technique points to 104 as the next major target.

Given the likelihood that we’ll see a big rally in the USD Index in the coming months, there is a very good possibility that we’ll see gold at new lows. It seems that we still have time to prepare for the ultimate buying opportunity in gold, silver and mining stocks, but this time is slowly running out.

So, will gold continue to plunge if the USD continues to rally, like it did in 1999 – 2001? Not necessarily. If could very well be the case that prolonged strength in the USD Index will not really be due to the inherent strength of the USD (or the U.S. economy), but due to weakness in the euro (if the latter continues to exist, that is) and in other major currencies. If this is the case, gold is likely to rally due to the demand from these other countries. Besides, the self-similar patterns are generally most useful for near-term price movements (it’s relative what is near term – in case of a multi-year analogy, several months are indeed near term) and not so much for price moves that extend far into the future. Consequently, the discussed analogy has important implications for the next several months, but not necessarily for the next few years. The USD Index could continue to rally, but not necessarily due to the self-similar pattern and not necessarily in tune with it (beyond the next several months).

Summing up, while the short-term indications for the precious metals sector remain bullish, the medium-term trend remains bearish and it seems that the final bottom will be formed in the first months of 2017, with the second half of January 2017 being the most probable time frame.

Meanwhile, it seems that the profits on our long positions will increase further before the trade is over and the downtrend resumes.

Thank you.


The above estimations are based on the information that we have available today (Oct. 21, 2016). We will be monitoring the market for opportunities and report to our subscribers accordingly. If you’d like to join them, we invite you to subscribe to our Gold & Silver Trading Alerts today. If you’re not ready to subscribe today, we invite you to sign up to our free gold mailing list – you’ll receive our Gold & Silver Trading Alerts for the first 7 days as a starting bonus.


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Przemyslaw Radomski

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Gold & Silver Investment & Trading Website – SunshineProfits.com

Przemyslaw Radomski

Przemyslaw Radomski, CFA (PR) is a precious metals investor and analyst who takes advantage of the emotionality on the markets, and invites you to do the same.

His company, Sunshine Profits, publishes analytical software that anyone can use in order to get an accurate and unbiased view on the current situation.

Recognizing that predicting market behavior with 100% accuracy is a problem that may never be solved, PR has changed the world of trading and investing by enabling individuals to get easy access to the level of analysis that was once available only to institutions.

High quality and profitability of analytical tools available at www.SunshineProfits.com are results of time, thorough research and testing on PR’s own capital.

PR believes that the greatest potential is currently in the precious metals sector. For that reason it is his main point of interest to help you make the most of that potential.

As a CFA charterholder, Przemyslaw Radomski shares the highest standards for professional excellence and ethics for the ultimate benefit of society.

Sunshine Profits enables anyone to forecast market changes with a level of accuracy that was once only available to closed-door institutions. It provides free trial access to its best investment tools (including lists of best gold stocks and best silver stocks), proprietary gold & silver indicators, buy & sell signals, weekly newsletter, and more. Seeing is believing.

Disclaimer: All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Copyright © 2009-2016 Przemyslaw Radomski, CFA

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Published at Fri, 21 Oct 2016 23:35:00 +0000

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New Jersey, Alaska deals will lead big week in muni supply

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https://pixabay.com/en/users/bykst-86169/By bykst from Pixabay

New Jersey, Alaska deals will lead big week in muni supply

 

By Nick Brown

U.S. municipal market supply will likely be among the highest in a decade when an estimated $16.7 billion of bonds and notes goes up for sale next week, lead by deals from New Jersey and Alaska.

 

With $16.5 billion in expected bond sales and $213 million in notes, according to Thomson Reuters estimates on Friday, the week would be one of the 10 biggest for supply in the last 10 years. Looking at just bonds, it would be the biggest since December 2006.

New Jersey will sell $2.76 billion of highway reimbursement notes through Bank of America Merrill Lynch, and Alaska plans to offer $2.35 billion of taxable pension obligation bonds via Citigroup, with both deals set to price on Wednesday.

 

Muni supply is surging lately. This week, an estimated $15.9 billion of bonds and notes hit the market.

“We expect the issuance pipeline to remain robust over the next few weeks as some issuers look to place deals prior to the November general election and a potential (Federal Reserve) rate hike in December,” Barclays analysts said in a Friday report.

 

Barclays said the weakness in the muni market “is technical in nature, and as soon as supply subsides, the market should regain its footing.”

As this week’s big supply hits, U.S. municipal bond funds’ net flows turned negative for the first time since the end of September 2015, according to Lipper, a unit of Thomson Reuters Corp. Funds reported nearly $136 million of net outflows in the week ended Oct. 19.

 

Next week’s biggest competitive offering comes from Maryland, whose department of transportation will sell more than $690 million of new and refunded bonds in a two-part deal on Wednesday.

(Reporting by Nick Brown and Karen Pierog; Editing by Lisa Shumaker)

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Published at Fri, 21 Oct 2016 19:20:42 +0000

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Wall Street ends little changed; Microsoft hits record

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https://pixabay.com/en/users/efes-18331/
By efes from Pixabay

Wall Street ends little changed; Microsoft hits record

By Chuck Mikolajczak

| NEW YORK

The S&P 500 and the Dow were little changed and the Nasdaq advanced on Friday as a record day for Microsoft and earnings from McDonald’s helped offset a fall in energy and healthcare shares.

General Electric (GE.N), often seen as an economic bellwether, weighed on the market as the industrial conglomerate’s posted results that topped expectations but cut its full-year revenue target to send shares down 0.9 percent after it touched an 8-month low of $28.33.

A stronger dollar .DXY, which touched its highest level since early February, also pulled on sentiment as it could dent the earnings of large multinationals.

“The dollar is getting stronger, that is going to have a negative impact energy prices, that is going to have a negative impact on corporate earnings, at least potentially,” said Phil Orlando, chief equity market strategist at Federated Investors, in New York.

The energy index .SPNY was off 0.7 percent, while health .SPXHC declined 0.9 percent. Johnson & Johnson <JNJ.N and Merck (MRK.N), were both down 1.2 percent, and among the biggest drags on the healthcare sector. Schlumberger (SLB.N), the world’s No. 1 oilfield services provider, weighed on the energy index as it lost 3 percent after its quarterly results.

But gains in Microsoft (MSFT.O) and McDonald’s (MCD.N) on the back of their strong quarterly reports helped keep losses in check.

“Earnings, frankly have started out little better than I thought they would, and a little better than the consensus thought they would. You had a couple of good companies like Microsoft, which is skewing things positively,” said Orlando.

Microsoft was up 4.3 percent at a record closing high of $59.69, while McDonald’s was up 3 percent at $113.93.

With 23 percent of S&P 500 companies posting results, earnings are now expected to show growth of 1.1 percent for the third quarter, up from the 0.5 percent decline expected at the start of the month, according to Thomson Reuters data.

The Dow Jones industrial average .DJI fell 16.64 points, or 0.09 percent, to 18,145.71, the S&P 500 .SPX lost 0.18 points, or 0.01 percent, to 2,141.16 and the Nasdaq Composite .IXIC added 15.57 points, or 0.3 percent, to 5,257.40.

For the week, the Dow edged up 0.04, the S&P rose 0.4 percent and the Nasdaq climbed 0.8 percent.

Telecoms .SPLRCL, down 2.3 percent, were lower for a second straight session. AT&T (T.N) lost 3 percent on news the wireless carrier was in advanced talks to buy Time Warner (TWX.N), whose stock surged 7.8 percent.

In other deal news, Reynolds American (RAI.N) jumped 14 percent after British American Tobacco (BATS.L)(BTI.A) offered to buy the 58 percent of the tobacco company it does not already own in a $47 billion takeover.

Advancing issues outnumbered declining ones on the NYSE by a 1.04-to-1 ratio; on Nasdaq, a 1.20-to-1 ratio favored decliners.

The S&P 500 posted 8 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 52 new highs and 38 new lows.

About 5.97 billion shares changed hands in U.S. exchanges, below the 6.4 billion daily average over the last 20 sessions.

(Reporting by Chuck Mikolajczak; Editing by Dan Grebler and Nick Zieminski)

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Published at Fri, 21 Oct 2016 21:49:10 +0000

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UPDATE 1-GE profit up but revenue forecast trimmed amid sluggish economy

 

The ticker and logo for General Electric Co. is displayed on a screen at the post where it’s traded on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., June 30, 2016.REUTERS/Brendan McDermid
By Alwyn Scott | NEW YORK

General Electric Co (GE.N) beat analyst profit forecasts in the third quarter, but revenue growth remained sluggish, prompting the company to scale back expectations for full-year revenue and profit on Friday, sending shares sharply lower.

The industrial giant’s adjusted profit jumped 10 percent to 32 cents a share, exceeding the 30 cents that analysts had estimated on average, according to Thomson Reuters I/B/E/S.

GE raised its full-year target for cash returned to shareholders to $30 billion from $26 billion and noted it had returned $25 billion in the first three quarters.

But slow economic growth, particularly in the oil and gas business, weighed on revenue. Organic revenue, which excludes growth from acquisitions, grew 1 percent in the quarter.

The company’s shares were the biggest decliner on the Dow Jones Industrial Average index, falling 2 percent to $28.48 in early trading on the New York Stock Exchange.

Analysts had been looking for GE to report stronger revenue growth after a weak first half, but that was stymied by a 25-percent slump in oil and gas revenue in the quarter.

Investors were skeptical that GE’s organic revenue growth could hit 5 percent in the fourth quarter, Sanford C Bernstein analyst Steven Winoker wrote in a note.

Anemic third-quarter growth “again calls into question the company’s ability to hit the 5 percent” target, he said.

Company officials were more sanguine. Cost cutting in oil and gas and other businesses and a diminishing drag from foreign exchange translation should allow GE to deliver $2 a share in adjusted earnings in 2018, Chief Executive Officer Jeff Immelt said on a conference call.

FORECASTS ADJUSTED

While analysts expect second-half growth of about 15 percent in the power business, GE’s largest division, power revenue grew just 7 percent in the third quarter.

GE trimmed its full-year revenue forecast to flat to 2 percent growth, down from 2 percent to 4 percent growth.

It narrowed its adjusted profit forecast to between $1.48 and $1.52 a share, compared with the $1.45 to $1.55 a share forecast at the end of the second quarter.

The company lifted its cash flow outlook, which it said allowed the boost in share buyback plans by an additional $4 billion. It now expects free cash flow and dispositions to total at least $32 billion, up from a range of $29 billion to $32 billion it forecast at the end of the second quarter.

GE’s net income from continuing operations rose to $2.10 billion in the third quarter ended Sept. 30 from $1.97 billion a year earlier. Earnings per share from continuing operations rose to 23 cents from 19 cents.

Total revenue rose 4.4 percent to $29.27 billion.

(Additional reporting by Rachit Vats in Bengaluru; Editing by Bernadette Baum)

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Published at Fri, 21 Oct 2016 11:07:33 +0000

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Federal Reserve Admits it Never Knew What it was Doing

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By AhmadArdity from Pixabay

Federal Reserve Admits it Never Knew What it was Doing

Janet Yellen

The Federal Reserve is, at last, acknowledging at top levels that its economists are completely baffled, its recovery is failing, that the Fed cannot raise interest and may even have to heat up its stimulants … or we may end up with a permanently scarred and stagnant economy.

Federal Reserve bank president expresses deep reservations about Fed’s recovery

Last week, Boston Federal Reserve President Eric Rosengren opened a meeting with Fed Chair Janet Yellen with the following statements:

He said the “nonconformist” behavior of the economy remains a challenge for policymakers trying to determine whether low growth and low inflation are now a permanent state of affairs…. It could mean the country’s economic performance has changed for good. Policymakers are trying to determine “whether firms and households have changed behavior in ways that are likely to be more permanent than transitory, whether slow growth in productivity is transitory or permanent, and whether recent trends in personal saving behavior are likely to persist well into the future,” Rosengren said. The answers will shape whether officials at the Fed and other central banks … will have to keep nontraditional tools in hand and be prepared “to address any emerging risks to the current recovery.” The fact that 10 year Treasury yields remain near or below zero on an inflation-adjusted basis, Rosengren said, “suggests a lack of confidence in U.S. and global growth prospects, and in the ability of policy authorities to offset weak growth.” ~ Newsmax

Really? You figured that out all by yourselves? Good job, guys. Yes, there is a great lack of confidence in your ability to do just about anything. Yes, your plan has created an economy that is destined to remain stagnant until it dies. Yes, the economy is “non-conformist” to regular economic principles because you have engineered a recovery that is entirely based on irregular ways of thinking and have all but eliminated free markets in anything that trades in this world with your infinite ability to create meaningless money to pump into those markets. Therefore, the market of everything follows the Fed, rather than conforming to normal economically based decisions, because the Fed IS the economy now.

And all of this is a “challenge” for you because you haven’t got a clue as to what genie it is you let out of the bottle. And, yes, it does mean the country’s economic performance has changed for good or, at least, until your experiment in alchemy blows up so we can get back to real economics. Until then, the economy is destined to endless life support in order to remain comatose on the operating table.

We’re all glad you’re finally starting to see the shape of things to come. You are worse than the old-world alchemists who tried to make gold out of baser metals. You try to make money out of nothing and then pretend it has value, even as you create near-infinite amounts (trillions of dollars) of it. And, then, you believe the nothing you have puffed up with your hot air can create enduring productivity and wealth throughout the nation.

Clearly, your centrally planned economy is not running quite well as you would like or as you puppets of mastermind Ben Break-the-Banky thought it would, or you wouldn’t be talking about how it is not conforming to the ways you thought it would go after all of your quantitative wheezing and free loans. Once you finish figuring out why your plans aren’t working, if you need any arsenic for yourselves, I’m sure you can find plenty of people who will help you get ahold of some.

Yellen not yellin’ “recovery” any more

Next, the comments of Fed Chair Janet Yellen proved equally enlightening as to how economically unenlightened the Fed actually is:

Federal Reserve Chair Janet Yellen said Friday that the slow recovery from the Great Recession has surprised economists, confounding long-held beliefs about growth and inflation. Her remarks could help explain why the Fed has been reluctant to raise U.S. interest rates. ~ Newsmax

How odd that you would be surprised by this, Janet, given that I started writing this blog years ago because I was certain your recovery would fail and that any real recovery from the disaster that was created by the Federal Reserve, which we call the Great Recession, would take more than a decade to succeed.

You are surprised because your religious beliefs about growth and inflation are completely oblivious to how free-market economies actually function. Because of this false belief system, the Fed and its modern economists completely failed to see the great abyss that was coming in 2007 and 2008. To this day, you completely fail to see that we are still standing in that same abyss. It was your mentor who sat in your chair, Ms. Yellen, who infamously said he didn’t see a recession in sight during the summer of 2008 when he was standing nose-deep in the middle of one.

So, are we surprised your surprised? No. Readers of blogs like this expect you to be surprised. Being surprised by real-world economic reality seems to be the one thing you do well. I’m sure you thought you could nudge interest rates off the bottom in December, 2015, without destroying the stock market that you court and the economy as a whole and were surprised when the market immediately plunged into its worst January in market history. I’m sure you were surprised that things looked so bad by February, 2016, that you had to hold two closed-door emergency meetings with your board of governors right after one of your regular meetings and then follow that with an emergency meeting with the president and vice president, also behind closed doors, in order to try to fix the problems that were suddenly showing up quite starkly.

I suspect you were surprised when you found you could not raise interest rates four times this year as you telegraphed you might do … and then couldn’t raise them three times … and then couldn’t even raise them twice in one year … and now appear to be preparing the way in your comments below for the possibility that you won’t be able to raise them even once this year.

Yellen said sluggish worldwide growth will likely keep global interest rates low, making it harder for central banks to combat the next recession with rate cuts.

Umm. Yeah. There was no surprise in that here. I predicted a year ago that you would raise interest rates in December of 2015 for the first time in years because you were feeling great pressure to prove you could do it that year in order to show your recovery would hold. At the same time, I predicted that it wouldn’t hold and that you would become paralyzed and unable to raise interest rates again after that.

I said that things would start to fall apart so badly in 2016 that even you would be able to figure out that raising rates a second time would certainly finish off your fantasy recovery. (It only exists on the high fumes of low interest that you keep breathing into its lungs in the form of nearly free loans.) Clearly, you don’t call as many top-level, back-to-back emergency meetings as you did in the first part of this year unless something has gone seriously awry.

So, I venture to say that things looked quite dire and that you found a secret way in your closed-door, emergency summits to patch the economy along through the election cycle; but your comments below indicate you don’t think the fix will hold much longer. Your own comments make it clear enough that things have turned out so badly you are now forced by circumstances to prepare the general public and the business world for the possibility that the economy may have to run on near-zero interest for a very long time to come.

As with the aftermath of the Great Recession, Yellen noted that economists have at times been baffled by the economy’s refusal to comply with their expectations.

There it is again. This time from the big horse’s mouth. Admission that the economy is completely refusing to act as you think it should — that it is not responding to your life support. And you are baffled as to why that is. You don’t have a clue, or you’d give the answer to that question at the meeting where you were speaking; but you didn’t.

Unfortunately, you were given the world as your play pen in which to experiment with your shiny new alchemy kit as you try to figure out how the world works. The rest of us are just here to enjoy the explosions and clean up afterwards.

Thus, you were baffled before the Great Recession, and you’ve been baffled ever since. You are as baffled now as Alan Greenspan was baffled when the housing market proved that it actually can slow down and even go in reverse, in spite of ever-greater Fed stimulus to that market, in spite of a nearly religious belief (at the time) that real estate never crashes. Greenspan was an economist who was baffled that diminishing returns exist as an economic law. He tried to fly into the sun, and his wings melted off. Apparently he thought the Fed had overcome gravity.

Readers of blogs like this are not baffled, however, because they understand such basic economic realities as … you cannot fix an economy that is dying under the weight of its own monumental debt by piling up more debt. Seems simple to us, but somehow it is beyond your capacity to fathom such a concept. I’d say the Federal Reserve has peas for brains; but, really, peas can have worms in them, and worms have real brains, regardless of how small, and that’s more than can be said about the creatures that inhabit your little pod of experts. You are a strange anomaly: you are experts who are dumber than the average person in the area of your own expertise. Thus, you have to admit …

The aftermath of the 2007-2009 crisis has “revealed limits in economists’ understanding of the economy,” the Fed chair suggested.

Indeed it has! It has revealed that you do not even understand the very most basic economic principles, such as the law of diminishing returns, the fact that debt is not wealth, the basic premise that you cannot create demand just by expanding supply, or the idea that, if you make it easy for investors to make easy money, they will take the easy path and do no real work.

The Great Recession has revealed that the limits in economists’ understanding are apparently greater than any of us imagined prior to the Great Recession. That event was a real coming out party for you and your buddies. Many of us have no delusions that you understand anything anymore. We’re seriously wondering if you’re capable of tying your own shoes without tying them together and falling on your faces.

Telling us what you learned from the Great Recession gives us some insight into how blind you are:

Tumbling home prices reduced consumers’ willingness to spend more than economists had envisioned.

That was kind of a weird thing for you guys, too, wasn’t it? To find out that, when home prices fall and people are deeply underwater in debt, you can’t entice them to goose the economy with more consumption by offering them additional debt at a lower cost? I guess that was a revelation for you — that you cannot endlessly expand debt in order to keep expanding an economy that is entirely based on debt. Turns out, we’ve hit maximum debt where the average person doesn’t want any more of it at any price, so you’re forced to keep the price of new money down at near-zero.

And a steady decline in the unemployment rate has failed to lift wages and inflation as much as economic models would indicate.

You say your economic models are failing? Who would have seen that coming? You give all the new funny money to banks by the trillions for free to spend as they wish in the marketplace, and they find it is easier to make money by pricing stocks up in endless rounds of speculation just as houses got priced upward in the run-up to the Great Recession. Then it turns out the money continually gets reinvested in stocks and bonds and never on building factories and hiring more workers at higher rates to get better workers because … who needs to work for their money when when it is being created and given away for free by the trillions and when it can be multiplied time and again by just bidding up stocks? Why build factories and hire more skilled workers when money comes that easily and that risk free?

(There were no risks because you telegraphed quite openly under the Bernanke Doctrine of New Fedspeak that you would keep creating the money and giving it away to invest in bonds and stocks for years. That’s why the market went into convulsions whenever you hinted at quitting the money printing in months ahead or raising the cost of new money. But you weren’t even smart enough to realize those convulsions happened because the patient was so entirely dependent on your medicine that mere talk of taking the Meds. away threw the patient into paroxysms of fear.)

So, what we are really in is a money bubble. The money bubble inflates a stock bubble and a bond bubble at the same time. You created a Fed Fantasyland, a Wonderland where stocks went up when business news was bad because bad news meant you’d keep creating and giving out your magic elixir. You created a realm in which bonds and stocks went up and down together, whereas in the real world they used to run opposite of each other, because their rise and fall had nothing to do with the economy and everything to do with the incoming supply of new Fed money. You see, in Fed Fantasia, diminishing corporate earnings were of no concern when evaluating stock prices because no one was betting on the performance of a business but just on the performance of the Fed and on whether companies would use your magic money bubble to buy back shares and drive their own stock prices up. You created a realm of complete economic fantasy, and then you are flabbergasted that things don’t respond as they used to. You are amazing … just not in the ways you think you are.

The rest of us are more like flummoxed that you can’t figure out why things aren’t working, and we’re frustrated because we cannot figure out how to explain these basic concepts down to your level.

Ah, but the days of bubble money are nearing their end because December is almost here when you will have to either prove you were completely unable to raise interest rates by the tiniest fraction for an entire year — after the minuscule fraction that you raised them last December — or go ahead and raise them again to prove you can and, thus, kick over your own rickety recovery.

Have fun with that.

Yellen prepares public for no future interest-rate increases

And that’s why you are now preparing the entire world for the possibility that you may be keeping rates low for a very long time:

.

Yellen said the sluggish recovery suggests that “it is even more important for policymakers to act quickly and aggressively in response to a recession” and that policymakers might need to provide more stimulus “during recoveries than would be called for under the traditional view.

In December, the Fed raised short short-term U.S. rates from near zero, where it had kept them for seven years. Fed policymakers had been widely expected to raise rates several times this year, but they have not, citing persistent uncertainty about the economic outlook.

Given that the Fed traditionally speaks in minimalist language of hints and whispers, these words are rather bold in their implication that your surprised economists see that the economy’s failure to respond means you will have to mainline your stimulus even beyond the historically extraordinary levels of economic cocaine you have been doling out for free in recent years. The shot of epinephrine didn’t start the patient’s endlessly resuscitated heart this time around, so maybe if you just drop the patient in a vat of the stuff, that will stir some action.

Given your assessment of things to come, I don’t suppose you’ll be raising interest rates in December. Pour the epinephrine-cocaine Kool-Aid down his throat and into his nose and through his veins all you want, but he’s not going to move. (Actually this realization on your part doesn’t completely convince me you won’t be dumb enough to try another interest increase just to prove you really are doctors … because desperate people are unpredictable in their final moments.)

Thus, you and your cronies at the Bank of England have stated that you will likely let inflation grow beyond your 2% target before raising interest to curb inflation so as not to damage the economy:

In a further indication that the Federal Reserve will be inclined to let inflation run hot for a while, Chair Janet Yellen on Friday said it’s useful to consider the benefits of a “high-pressure economy.” Yellen said the post-financial crisis period has pushed policymakers into reconsidering the dynamics of inflation. ~ CNBC

Ah, yes. You’re caught in a bind because you’ve been saying for years that you’d back off on the administration of stimulants once you got the patients heart rate up to a level of 2% inflation and once you got to full employment. Now, you see you are almost at that level and, yet, nowhere near being able to end your stimulus; so you are preparing the world for the idea that maybe we are in exceptional times where 3% inflation for a limited time would be a good idea just to jumpstart things. If that doesn’t work, try 4?

The Federal Reserve sees no recovery in sight

Let me pre-empt you in sharing your next comment, Janet, by stating outright that you are blaming the need to go past 2% inflation by staying at near-zero interest on the past crisis, rather than admitting you’ve been administering all the wrong medicine: (Italics mine.)

(Reuters) – The Federal Reserve may need to run a “high-pressure economy” to reverse damage from the 2008-2009 crisis that depressed output, sidelined workers, and risks becoming a permanent scar, Fed Chair Janet Yellen said on Friday in a broad review of where the recovery may still fall short.

Though not addressing interest rates or immediate policy concerns directly, Yellen laid out the deepening concern at the Fed that U.S. economic potential is slipping and aggressive steps may be needed to rebuild it.

Yellen, in a lunch address to a conference of policymakers and top academics in Boston, said the question was whether that damage can be undone “by temporarily running a ‘high-pressure economy,’ with robust aggregate demand and a tight labor market.”

“One can certainly identify plausible ways in which this might occur,” she said. Looking for policies that would lower unemployment further and boost consumption, even at the risk of higher inflation, could convince businesses to invest, improve confidence, and bring even more workers into the economy.

Sounds to me like you’re preparing everyone for the possibility that the Fed won’t be raising interest anytime in the foreseeable future. You know that inflation and employment have met the Fed’s targets, so you will be out of excuses by December for not raising rates. You fear the Fed’s “recovery” cannot handle even the smallest raise so you are running this idea of a supercharged economy (one where higher inflation than the target is allowed) up the flag pole ahead of your next too meetings to see how it is accepted. If it’s accepted, there will be no rate increase.

You’re hoping the world will pretend the you and your hooded colleagues have discovered wisdom in raising your inflation target now that the Federal Reserve has met its original target since real recovery is crumbling all around you. Things may be giving way slower than I said they would this year, but your comments show desperation, revision of tired doctrines and realization that the landscape is falling apart everywhere.

Let me just offer you and your colleagues in merry old England a piece of advise: the further down Recovery Row you go, the less bang you get for the buck or less pop for the pound. You have not overcome gravity; you have not overcome the Law of Diminishing Returns. So, even drowning the patient in epinephrine is not going to restart his placid heart. At best, you’ll get one dying reflex kick. And the further you go with this, the worse real recovery will have to be when we try to get off the drugs.

So, just stop.

Just stop already.


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David Haggith

David Haggith
The Great Recession Blog

David Haggith

My path to writing this blog began as a personal journey. Prior to the start of this so-called “Great Recession,” my ex-wife had a family home that was an inheritance from her mother. I worked as a property manger at the time, and near the end of 2007, I could tell from rumblings in the industry that the U.S. housing market was on the verge of catastrophic collapse. I urged her to press her brothers to sell the family home before prices dropped. The house went on the market and sold right away — and just three months before Bear-Stearns and others crashed, taking the U.S. housing market down for the tumble. Her family sold at the peak of the market.

Copyright © 2015-2016 David Haggith

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Published at Thu, 20 Oct 2016 15:11:54 +0000

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Dollar hits seven-month high, global stocks set for weekly rise

Traders react while working on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 15, 2016.  REUTERS/Brendan McDermidTraders react while working on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., September 15, 2016.  REUTERS/Brendan McDermid

Dollar hits eight-month high, stocks set for weekly rise

 

By Dion Rabouin | NEW YORK

The dollar rose to its highest since February against a basket of currencies on Friday as investors weighed the likelihood of higher U.S. interest rates, while a measure of world stocks dipped but looked set for its first weekly gain in four weeks.

The euro hit a seven-month low against the dollar after the European Central Bank left its ultra-loose policy unchanged on Thursday but kept the door open to more stimulus in December.

The dollar also was bolstered by comments from New York Federal Reserve President William Dudley earlier this week that the Fed was prepared to raise U.S. overnight interest rates, and by decreasing likelihood of Donald Trump winning the U.S. presidency.

“There have been some Fed comments where they sound like they are ready to move in December, but also partly related is the market view that a hike in December is much more likely if Clinton wins than if Trump wins,” said Steven Englander, global head of foreign exchange strategy at Citigroup in New York.

A Trump victory is seen as more likely to create uncertainty and market volatility, which could delay an interest rate increase.

Traders are now pricing in a 74-percent chance the Fed will raise rates in December, up from 64 percent two weeks ago, according to CME Group’s FedWatch Tool.

China’s offshore yuan fell to its lowest against the dollar in six years, pressuring the currencies and equity shares of emerging market countries that rely on exporting to the world’s second largest economy.

Wall Street moved lower despite Microsoft surging to an all-time high. GE’s shares were off 2.3 percent, weighing the most on the S&P 500, after the conglomerate lowered its full-year revenue growth target and narrowed its profit forecast.

“Although earnings have been coming in mixed, GE’s comments of a sluggish economy is causing investors to take a step back,” said Andre Bakhos, managing director at Janlyn Capital in Bernardsville, New Jersey.

The Dow Jones industrial average fell 108.37 points, or 0.6 percent, to 18,053.98, the S&P 500 lost 7.43 points, or 0.35 percent, to 2,133.91 and the Nasdaq Composite dropped 2.81 points, or 0.05 percent, to 5,239.02.

World stocks slipped with MSCI’s broadest index of Asia-Pacific shares outside Japan down 0.4 percent and the pan-European STOXX 600 index edging 0.14 percent lower. World stocks, as measured by MSCI’s world index, were still on track for their first week of gains since September.

Longer-dated U.S. Treasury yields fell in step with their European counterparts, pushing both yield curves to their flattest level in a week, in the wake of Draghi’s comments about bond purchases.

“Draghi basically told people they could play in the long end,” said Tom di Galoma, managing director at Seaport Global Holdings in New York.

Oil prices rose modestly but were set for their first weekly loss since mid-September. Brent crude futures rose 0.6 percent while U.S. WTI crude futures added 0.2 percent.

(Reporting by Dion Rabouin; Additional reporting by Richard Leong and Karen Brettell in New York and Alistair Smout in London; Editing by Nick Zieminski)

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Published at Fri, 21 Oct 2016 10:51:14 +0000

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Some hedge funds post mega-gains, brighten industry gloom

https://pixabay.com/en/users/Pixaline-1569622/By Pixaline from Pixabay

Some hedge funds post mega-gains, brighten industry gloom

 

By Svea Herbst-Bayliss and Lawrence Delevingne
| BOSTON/NEW YORK

Hedge funds have suffered a steady drumbeat of bad news this year: poor performance, withdrawals, prominent closures, bribery and insider trading charges, and accusations from a state regulator that the whole sector is a “rip-off.”

 

Yet amid the gloom there are still a few managers posting the double-digit percentage gains that turned hedge funds into an elite asset class more than a decade ago, according to performance data provided by fund investors.

For instance, Eric Knight’s activist-oriented Knight Vinke Institutional Partners is up nearly 50 percent before fees this year, while the Russian Prosperity Fund, which picks stocks in the former Soviet Union and is led by Alexander Branis, has climbed 43 percent.

Then there are Jason Mudrick’s Mudrick Distressed Opportunity Fund and Phoenix Investment Adviser’s JLP Credit Opportunity Fund, which are both up 38 percent. Energy-oriented Zimmer Partners’ ZP Energy Fund is up 27 percent, while Gates Capital Management’s ECF Value Fund has risen 26 percent and Michael Hintze’s CQS Directional Opportunities Fund has climbed 20 percent.

By contrast, the average hedge fund returned a little more than 4 percent over the first nine months of the year, according to data from Hedge Fund Research. That is about half of what the S&P 500 Index has returned over the same period, including dividends, and compares to a 7 percent increase for the Barclays Capital U.S. Government/Credit Bond Index, a common measure of the credit markets.

“In general there is no doubt this has been a tough year in terms of performance, but there are still winners out there,” said Mark Doherty, a managing principal at PivotalPath, an investment consultant.

LITTLE-KNOWN VICTORS

The winners are harder to find. They tend not to be multi-billion-dollar household names whose managers appear on television and at industry conferences, attracting money to invest from the largest pension funds.

Although they pursue a variety of strategies, they are united in their relatively small size, investors said.

Gates Capital manages $1.8 billion, while Mudrick Capital oversees $1.5 billion and Phoenix’s JLP Credit Opportunity and Zimmer Partner’s ZP Energy Fund are smaller, with about $1 billion in assets, investors in the funds said. Representatives for the firms declined to comment.

There are a number of even smaller firms delivering blockbuster returns. Former Paulson & Co partner Dan Kamensky’s $125 million Marble Ridge, which started trading in January, is up 23 percent. Svetlana Lee’s Varna Capital, which invests less than $100 million, is up 20 percent. Halcyon Capital’s $200 million Halcyon Solutions Fund, managed by Jason Dillow, is up 22 percent.

“These funds may be able to capitalize on smaller and more inefficient securities that are too small for the larger funds,” said Michael Weinberg, chief investment strategist at New York-based Protégé Partners, which invests in smaller funds.

 

VARIED BETS

 

Knight Vinke’s gains were largely driven by the merger of French electronics company Fnac with electrical retailer Darty, which the hedge fund pushed for, its most recent letter said.

Bets on steelmaker Evraz, Russian airline Aeroflot and Federal Grid Company, which manages Russia’s unified electricity transmission grid system, helped the Russian Prosperity fund, its investment chief Branis said.

 

Some of the winners, including Dallas-based Brenham Capital, which manages $1.3 billion and is up 19 percent this year, also scored big by betting on the beaten-down energy sector as it recovers. Mudrick Capital won with bets on Alpha Natural Resources as the coal miner exits bankruptcy and closely held driller Fieldwood Energy, a fund investor said.

To be sure, this year’s strong returns were preceded by big losses in 2015 and early in 2016 at some firms. Mudrick Capital, which made early bets on distressed energy and commodity companies, lost 26 percent last year, and Gates’ ECF Value Fund lost 19 percent.

Some clients have not had the patience to stick around. Last month Rhode Island’s pension fund voted to cut its hedge fund allocation in half following in the footsteps of New Jersey, which voted for a similar reduction in August. This week New York’s financial regulator called hedge funds a “rip-off” in a report that said the state pension fund lost $3.8 billion on them in the last eight years.

Investors pulled an estimated $23.3 billion from hedge funds over the first half of the year, according to Hedge Fund Research, less than 1 percent of the industry’s $2.9 trillion overall assets.

(Story corrects to show Gates Capital Management’s ECF Value Fund lost 19 percent last year, not 26 percent.)

(Reporting by Svea Herbst-Bayliss and Lawrence Delevingne; Editing by Bill Rigby)

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Published at Thu, 20 Oct 2016 01:44:43 +0000

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Morgan Stanley profit jumps on bond-trading comeback

 

The logo of Morgan Stanley is seen at an office building in Zurich, Switzerland September 22, 2016.REUTERS/Arnd Wiegmann/File Photo

Morgan Stanley profit jumps on bond-trading comeback

By Olivia Oran and Sweta Singh

Morgan Stanley reported a better-than-expected profit on Wednesday, boosted by a surge in bond trading that helped all Wall Street banks last quarter.

Morgan Stanley’s gains were especially notable. Its adjusted bond-trading revenue more than doubled, hitting Chief Executive James Gorman’s revenue target for that business for the second quarter in a row.

The bank had struggled for years to improve in bond trading, which has volatile revenue and tough capital requirements to meet. Earlier this year, Morgan Stanley restructured the unit, cutting 25 percent of staff and appointing new leadership.

In an interview, Chief Financial Officer Jonathan Pruzan said the bank was on the right track, though it might be too soon to claim victory.

“The success we’ve had in the last quarter or two has boosted morale and confidence of the team,” he said. “But these things take time and until we can do it for years as opposed to quarters, we’re not going to declare success.”

Though it is still early in the fourth quarter, Pruzan said the trading environment has so far been similar to the end of September.

Overall, Morgan Stanley’s earnings applicable to common shareholders rose 62 percent to $1.5 billion, from $939 million in the same quarter a year earlier. Earnings per share rose to 81 cents from 48 cents, helped by stock buybacks.

Analysts had estimated earnings of 63 cents per share, according to Thomson Reuters I/B/E/S.

Revenue rose 15 percent to $8.9 billion. Analysts had expected revenue of $8.2 billion. Non-interest expenses rose just 4 percent, reflecting a cost-cutting program that Morgan Stanley hopes will shave $1 billion from annual expenses by next year.

That program, called Project Streamline, is on track despite costs associated with the bank’s stress test resubmission as well as Brexit, Pruzan said.

Morgan Stanley’s shares rose 0.8 percent to $32.57 at midday.

STRONG QUARTER Morgan Stanley wrapped up a surprisingly strong quarter for big U.S. banks. Goldman Sachs Group Inc, Morgan Stanley’s closest rival, reported a better-than-expected 58 percent rise in third-quarter profit on Tuesday.

Bond trading was strong across Wall Street, driven by Britain’s surprise vote to leave the European Union and bouts of anxiety about monetary policy around the world.

Morgan Stanley’s bond-trading revenue rose to $1.5 billion in the third quarter from $583 million in the year-ago period, when stripping out accounting gains and losses related to the value of its own bonds.

“We obviously did much better than probably anybody felt this quarter …,” Gorman said during a call with analysts. “… But we did not and are not going to run any victory lap around fixed income.”

Despite that rebound, Morgan Stanley posted an 8.7 percent return on equity, which is less than Gorman’s stated target of 9 percent to 11 percent by the end of 2017.

Pruzan said he continued to believe that the bank’s target ROE was achievable.

 

Equities sales and trading revenue, a traditional bright spot for the bank, edged up just 1 percent to $1.9 billion.

Revenue from investment banking fell about 7 percent to $1.23 billion, due to weaker M&A fees and capital markets activity.

Morgan Stanley ranked third to Goldman Sachs and JPMorgan Chase & Co in M&A fees collected during the quarter and fourth behind JPMorgan, Bank of America Corp and Goldman in fees from investment banking, which includes equity and debt underwriting, according to Thomson Reuters data.

Revenue from wealth management, which Morgan Stanley has been building for several years, rose 7 percent to $3.9 billion. The business hit a 23 percent pretax margin, in line with Gorman’s target for year-end.

Gorman said to expect an announcement from the firm’s wealth management executives in the coming weeks regarding how the bank will comply with the Department of Labor fiduciary rule. The rule, announced in April, sets a standard for brokers who sell retirement products and requires them to put clients’ best interests ahead of their own bottom line.

Gorman hinted that providing choice to clients about different investing products remains a priority for the firm.

(Reporting by Sweta Singh and Sudarshan Varadhan in Bengaluru and Olivia Oran in New York; Editing by Lauren Tara LaCapra and Nick Zieminski)

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Published at Wed, 19 Oct 2016 16:33:46 +0000

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Wall St. up on oil, upbeat earnings; Intel limits gains

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., October 19, 2016.  REUTERS/Lucas JacksonTraders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., October 19, 2016.REUTERS/Lucas Jackson

Wall St. up on oil, upbeat earnings; Intel limits gains

 

By Yashaswini Swamynathan

Wall Street was on track for its second straight day of gains on Wednesday as oil prices boosted energy stocks and financials got a lift after Morgan Stanley rounded off a strong quarter for big U.S. banks.

 

However, gains, especially on the Nasdaq, were limited by Intel (INTC.O). The chipmaker tumbled 6 percent, weighing the most on major indexes, after its disappointing revenue forecast. The chip index .SOX dipped 0.54 percent.

U.S. crude prices surged 3 percent to a 15-month high after a report showed an unexpected drop in U.S. crude stockpiles. [O/R]

The energy sector .SPNY jumped 1.74 percent, the most in three weeks, also boosted by a 4.8 percent rise in Halliburton (HAL.N) following its surprise quarterly profit.

Morgan Stanley (MS.N) inched up 0.8 percent after its results. The financial sector .SPSY has gained 1.8 percent in the past four trading days as the banks reported, while the KBW bank index .BKX is up nearly 3 percent.

Now, about 80 percent of the 70 S&P 500 companies that have reported so far have beaten earnings’ expectations, increasing the likelihood of snapping a four-quarter earnings recession.

 

Analysts now estimate earnings increased 0.5 percent in the third quarter, according to Thomson Reuters I/B/E/S.

“We would see the third quarter as the bottoming out of the earnings recession that we have been experiencing for the last year or so,” said Tracy Maeter, global investment specialist, J.P. Morgan Private Bank in Philadelphia.

At 12:27 p.m. ET (1627 GMT), the Dow Jones Industrial Average .DJI was up 74.79 points, or 0.41 percent, at 18,236.73.

 

The S&P 500 .SPX was up 6.16 points, or 0.29 percent, at 2,145.76 and the Nasdaq Composite .IXIC was up 2.25 points, or 0.04 percent, at 5,246.08.

Eight of the 11 major S&P sectors were higher. The consumer staples’ .SPLRCS 0.7 percent drop was the steepest.

The Federal Reserve is due to release its Beige Book at about 2:00 p.m. ET, giving anecdotal commentary on the health of the U.S. economy.

 

The third and final U.S. presidential debate between Donald Trump and Hillary Clinton starts later in the day. The stock market had gained on both days after the previous two debates, which were perceived to be won by Clinton.

“The noise in the marketplace around politics can drive stocks in the short term, but in terms of the underlying influence … that’s going to be driven more by the economy and the profitability of companies,” Maeter said.

Advancing issues outnumbered decliners on the NYSE by 2,178 to 721. On the Nasdaq, 1,637 issues rose and 1,008 fell.

The S&P 500 index showed eight new 52-week highs and two new lows, while the Nasdaq recorded 45 new highs and 44 new lows.

(Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D’Souza)

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Published at Wed, 19 Oct 2016 17:04:25 +0000

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Morgan Stanley to detail plan for fiduciary rule compliance soon: CEO

 

Morgan Stanley Chairman and Chief Executive James Gorman speaks during the Institute of International Finance Annual Meeting in Washington October 10, 2014.REUTERS/Joshua Roberts

 Morgan Stanley to detail plan for fiduciary rule compliance soon: CEO

By Olivia Oran

Morgan Stanley plans to announce in the coming weeks how its wealth-management business will comply with a new U.S. rule intended to protect retirement savers, Chief Executive James Gorman said on Wednesday.

Gorman declined to give details, but hinted that providing wealth clients with choice about account options and how they pay the firm is a priority.

“Giving (clients) a choice of how they deal with the firm, services they access, how they pay for those services, is critical to how we operate as a firm,” Gorman said during a call with analysts to discuss earnings. “Choice has been a fundamental guiding light for the firm and that is unlikely to change.”

Known as the fiduciary rule, the new regulation was announced in April by the Department of Labor. It sets a standard for brokers who sell retirement products and requires them to put clients’ best interests ahead of their own bottom line. It starts to take effect in 2018, giving brokerages time to comply.

Gorman’s guidance comes in contrast to rival Bank of America’s, which said its wealth business would eliminate individual retirement accounts that charge investors for each transaction.

Investors who want a retirement account will instead need to pay a fee that is a percentage of their assets. The move is intended to reduce conflicts that might arise if brokers push clients to more expensive investment products.

Giving wealth clients a choice won’t present compliance problems to Morgan Stanley, Gorman said.

“I don’t think that giving clients choice heightens one’s legal exposure and, in fact, that just seems a little counterintuitive,” he said.

(Reporting by Olivia Oran in New York; Editing by Nick Zieminski)

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Published at Wed, 19 Oct 2016 15:30:59 +0000

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US STOCKS-Wall St set to open slightly higher

 

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., October 17, 2016.REUTERS/Lucas Jackson

(Adds details, comments, updates prices)

* Oil prices rise 1.4 pct

* Morgan Stanley up on profit, revenue beat

* Intel drops on disappointing forecast

* Futures up: Dow 41 pts, S&P 4.25 pts, Nasdaq 4.75 pts

By Yashaswini Swamynathan

Oct 19 Wall Street looked set to inch higher at the open on Wednesday, a day after the S&P 500 rallied to its best day of the month amid upbeat quarterly earnings.

While investors assess another flood of corporate earnings reports, they also await the Federal Reserve’s Beige Book at noon, which contains commentary on the health of the U.S. economy, and the third U.S. presidential debate at night.

Oil prices rose 1.4 percent as the dollar eased and data showed Chinese output dropped while U.S. inventories shrunk.

“This morning does seem quiet, but oil prices could be one theme that could drive markets,” said Aaron Clark, portfolio manager at GW&K Investment Management in Boston Massachusetts.

“There are also not a lot of bellwether companies reporting today that would change the narrative that much.”

Strong earnings from marquee companies such as UnitedHealth and Goldman Sachs led Wall Street to rally on Tuesday.

Dow e-minis were up 41 points, or 0.23 percent, with 20,215 contracts changing hands.

S&P 500 e-minis were up 4.25 points, or 0.2 percent, with 132,273 contracts traded.

Nasdaq 100 e-minis were up 4.75 points, or 0.1 percent, on volume of 23,087 contracts.

The Nasdaq could come under pressure from Intel, whose shares dropped 5 percent in premarket trading after the chipmaker gave a disappointing current-quarter revenue forecast.

Morgan Stanley rose 1.4 percent after its quarterly profit and revenue beat consensus estimates, rounding off a strong quarter for big U.S. banks.

Yahoo rose 1.03 percent after reporting overnight that its third quarter profit beat estimates.

Through Tuesday, earnings from S&P 500 companies had largely beaten market expectations, putting them on track to post profit growth for the first time in five quarters. Analysts now expect earnings increased 0.2 percent in the third quarter, according to Thomson Reuters I/B/E/S.

Pipeline operator Kinder Morgan and payments processor American Express will issue results after the close.

The Fed’s Beige Book, due at 2:00 p.m. ET (1800 GMT), will lay out commentary on the health of the economy, and could offer more insight into the path of future interest rate hikes.

Donald Trump and Hillary Clinton face off in the third and final presidential debate. A Clinton presidency would be more positive for the markets because her positions are more well known than those of Trump, according to a Reuters poll. (Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Savio D’Souza)

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Published at Wed, 19 Oct 2016 12:55:14 +0000

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Asian shares edge up on China growth relief, oil higher

 

Share price of Japan’s Nintendo Co. (R) is displayed at a stock quotation board outside a brokerage in Tokyo, Japan July 11, 2016.REUTERS/Issei Kato

Asian shares edge up on China growth relief, oil higher

By John Geddie | LONDON

The U.S. dollar fell from a seven-month peak on Wednesday, combining with signs of an easing supply glut to help lift oil prices back towards a one-year high.

A weaker dollar boosts oil, which gained around 1 percent on Wednesday, since it makes fuel cheaper for countries using other currencies.

The bounce in commodity prices has helped bolster inflation expectations in the euro zone, nudging the bloc’s bond yields further away from the record lows struck after Britain voted to leave the European Union in June.

But neither the rise in oil prices nor a barrage of data confirming China’s economy, the world’s second, was stabilizing could prevent a dip in euro zone stocks after a series of poor earnings results.

“Oil is a good indicator of expectations for growth next year,” said Frederik Ducrozet, a senior European economist at Swiss wealth manager Pictet. “It is comforting for markets that oil is above $50 a barrel and looking stable at those levels.”

Against a basket of major currencies .DXY, the U.S. dollar stood at 97.824, off Monday’s seven-month high of 98.169, after consumer price data showed underlying inflation had moderated. That prompted markets to trim bets on a Federal Reserve rate hike later this year.

Traders said that had helped lift oil, which was also supported by a report of a drop in U.S. inventories and declining production in China. An upbeat OPEC statement on its planned output cut also supported the market.

International Brent crude futures LCOc1 were at $52.45 a barrel at 0840GMT, up 76 cents, or 1.45 percent, and heading back towards a one-year high of $53.73 seen earlier this month.

U.S. West Texas Intermediate (WTI) crude oil futures CLc1 were trading at $51.02 per barrel, also up nearly 1.5 percent, having been below $40 a barrel at the start of August.

DISAPPOINTING EARNINGS

European shares fell early on Wednesday after a slew of weak updates weighed on British companies Travis Perkins (TPK.L) and Reckitt Benckiser (RB.L). Akzo Nobel’s (AKZO.AS) results were hit by a weak pound.

The pan-European STOXX 600 index fell 0.4 percent, following a 1.5 percent rise in the previous session.

Asian shares were struggling to hold earlier gains seen after data showing Chinese gross domestic product expanded 6.7 percent in the year to September, exactly as forecast.

Other data showed retail sales rising 10.7 percent and urban investment 8.2 percent. Industrial output disappointed by growing only 6.1 percent.

“The upshot from today’s data is that economic activity seems to be holding up reasonably well, with few signs that a renewed slowdown is just around the corner,” said Julian Evans-Pritchard, China economist at Capital Economics.

“Nonetheless, the recent recovery is ultimately on borrowed time given that it has been driven in large part by faster credit growth and a property market boom, both of which policymakers are now working to rein in.”

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS initially added 0.4 percent on top of Tuesday’s 1.4 percent jump, but by 0800GMT was only up 0.1 percent on the day.

The recent bounce in oil prices has helped lift a key market gauge of long-term euro zone inflation – the five-year, five-year forward rate – above 1.43 percent EUIL5YF5Y=R, its highest level since June 8.

That remains well below the European Central Bank’s inflation target of just below 2 percent, but it has taken the heat off the bloc’s policymakers – who meet on Thursday – to introduce more easing measures.

Worries that they may eventually scale back their stimulus has seen German 30-year bond yields DE30YT=TWEB climb more than 20 basis points in the last fortnight, already on track for their biggest monthly rise in fourteen months.

DOLLAR RETREAT

The retreat in the dollar came after a report on U.S. consumer prices showed underlying inflation – stripping out food and energy – moderated slightly in September to 2.2 percent, leading the market to slightly pare back bets on a December rate hike.

Fed fund futures <0#FF:> imply around a 65 percent probability of a move, down from 70 percent.

Federal Reserve Chair Janet Yellen said last week the U.S. central bank could allow inflation to run above its target.

The euro was slightly higher against the weakening dollar at $1.0985 EUR=. Sterling slipped back after its strongest one-day gains in over three months on a trade-weighted basis after a UK government lawyer said parliament would have to ratify any deal to take Britain out of the EU.

The Bank of England’s trade-weighted sterling index jumped 1.4 percent on Tuesday =GBP. The pound had fallen to a record low last week on worries that Britain would undergo a “hard” exit from the EU, in which access to the single market was sacrificed for the sake of tighter controls on immigration.

(Additional reporting by Wayne Cole in Sydney)

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Published at Wed, 19 Oct 2016 05:40:08 +0000

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Nikkei inches up on Wall Street rise, takes China data in stride

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nave-1139195_1280By MemoryCatcher from Pixabay

Nikkei inches up on Wall Street rise, takes China data in stride

 

By Shinichi Saoshiro
| TOKYO

Oct 19 Japan’s Nikkei share average
inched up on Wednesday, taking cues from a bounce by Wall Street
shares, with the market taking China’s growth data in stride
since they were roughly in line with expectations.

 

The Nikkei was up 0.3 percent at 17,007.24 points,
ensconced in a tight range through the session.

“All three Wall Street indexes rebounded overnight and crude
oil prices are rising, and these are supportive factors for the
market,” said Masahiro Ichikawa, senior strategist at Sumitomo
Mitsui Asset Management.

Wall Street advanced on Tuesday to give the S&P 500 its best
day this month on the heels of solid earnings reports from names
such as UnitedHealth and Netflix.

 

“On the other hand, steady selling pressure around the
17,000 threshold is preventing a further advance and keeping the
Nikkei in range,” Ichikawa said.

China’s economy grew 6.7 percent in the third quarter from a
year earlier, steady from the previous quarter and in line with
market expectations, as increased government spending and a
property boom offset stubbornly weak exports.

 

Shares of Sharp Corp rose 9.2 percent following a
report that the company expects to post an operating profit of
about 40 billion yen this fiscal year helped by cost cuts and a
withdrawal from its loss-making North American TV business.

Other big gainers included food processor Maruha Nichiro
Corp which rose as much as 6.7 percent after the Nikkei
said its April-September operating profit likely doubled from a
year earlier, helped as a stronger yen reduced import costs.

 

Terumo Corp was up 2 percent after two U.S.
companies said they will sell some of their medical devices to
the medical equipment maker.

Abbott Laboratories, which is in the process of
buying St. Jude Medical Inc for $25 billion, said the
companies would sell some of their medical devices to Terumo
Corp for about $1.12 billion.

The broader Topix gained 0.15 percent to 1,358.58
and the JPX-Nikkei Index 400 added 0.15 percent to
12,155.36.

(Reporting by Shinichi Saoshiro; Editing by Kim Coghill)

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Published at Wed, 19 Oct 2016 02:22:04 +0000

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Short Rally

Photo
tags
By genesis_3g from Pixabay

Short Rally


We have been waiting for a bounce into the high forecast by the Hybrid Lindsay model and it looks to have come on Tuesday. Cycles warned that the high might come on the late side of the margin of error but internals now appear set-up to give us that rally early this week. Bears don’t have much to worry about, however, as the high is expected no later than Wednesday.

The VXV is a CBOE index similar to the VIX that projects volatility out three months instead of the VIX’s one month time frame. A simple ratio of the two indices produce excellent buy and sell signals (as seen below).

S&P500 and Ratio VXV/VIX
Larger Image


Get your copy of the October Lindsay Report at Seattle Technical Advisors.com


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Ed Carlson

Ed Carlson
Seattle Technical Advisors.com

Ed Carlson

Ed Carlson, author of George Lindsay and the Art of Technical Analysis, and his new book, George Lindsay’s An Aid to Timing is an independent trader, consultant, and Chartered Market Technician (CMT) based in Seattle. Carlson manages the website Seattle Technical Advisors.com, where he publishes daily and weekly commentary. He spent twenty years as a stockbroker and holds an M.B.A. from Wichita State University.

Copyright © 2012-2016 Ed Carlson

All Images, XHTML Renderings, and Source Code Copyright © Safehaven.com

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Published at Tue, 18 Oct 2016 14:13:06 +0000

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MarketWatch.com – Stocks to Watch

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tags
By the3cats from Pixabay

MarketWatch.com – Stocks to Watch

  • Stocks to Watch: DuPont, Nike, KB Home are stocks to watch

    SAN FRANCISCO (MarketWatch) — Among the companies whose shares are expected to see active trade in Friday’s session are DuPont, Nike Inc., and KB Home.

    DuPont DD, +1.22% : The chemical company late Thursday cut its second-quarter and full year profit outlook due to worse-than-expected performance of its agriculture unit. Shares fell 1.9% in extended trading.

    Getty Images

    Nike NKE, +0.37% : The footwear company reported better-than-expected fourth-quarter earnings. Shares rose 2.9% in after hours.

    Manitowoc Co. MTW, +2.20% : Shares surged 12% in after-hours trade on a New York Times report that an activist investment firm is seeking to break the company in two.

    KB Home KBH, -0.06%  is forecast to report second-quarter earnings of 21 cents a share, according to a consensus survey by FactSet.

    Finish Line Inc. FINL, -2.01%  is expected to post first-quarter earnings of 21 cents a share.

  • Stocks to Watch: Bed Bath & Beyond, GoPro, Nike are stocks to watch

    SAN FRANCISCO (MarketWatch) — Among the companies whose shares are expected to see active trade in Thursday’s session are Bed Bath & Beyond Inc., GoPro Inc., and Nike Inc.

    After Wednesday’s closing bell, Bed Bath & Beyond BBBY, -0.45%  reported quarterly earnings that fell short of analysts’ estimate. Shares fell 5.7% in after hours.

    GoPro

    GoPro GPRO, +2.42% a video camera maker, is expected to make its market debut after pricing its initial public offering late Wednesday. Channel checks by IPO Boutique indicate that the IPO is many times oversubscribed.

    Nike NKE, +0.37%  is projected to post fourth-quarter earnings of 75 cents a share, according to a consensus survey by FactSet.

    ConAgra Foods Inc. CAG, +1.85% is likely report earnings of 57 cents a share in the fourth quarter.

    Accenture PLC ACN, +0.58%  is forecast to report third-quarter earnings of $1.21 a share.

    Lennar Corp. LEN, +0.72%  is likely to post second-quarter earnings of 51 cents a share.

    McCormick & Co. MKC, +0.55%  is expected to post earnings of 62 cents a share in the second quarter.

MarketWatch.com – Stocks to WatchMarketWatch.com – Stocks to WatchStocks to Watch: DuPont, Nike, KB Home are stocks to watchStocks to Watch: Bed Bath & Beyond, GoPro, Nike are stocks to watchStocks to Watch: Google, Barnes & Noble are stocks to watch Wednesday

 

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GLOBAL MARKETS-Asian stocks extend rise in light volume; Aussie shines

 

A man stands next to an electronic board showing stock prices in Tokyo, Japan, August 18, 2016.REUTERS/Kim Kyung-Hoon

GLOBAL MARKETS-Asian stocks extend rise in light volume; Aussie shines

By Saikat Chatterjee | HONG KONG

Asian shares extended gains on Tuesday, pulled higher by financials and a rebound in oil prices, while the Australian dollar hit a two-week high as investors trimmed expectations for a central bank rate cut this year.

Despite the bounce in risk-sensitive assets in Asia, volumes were light with markets hugging well-worn trading ranges. Investors are now awaiting China data due this week, including the September quarter gross domestic product on Wednesday, after last week’s trade figures raised concerns about the health of the world’s second-biggest economy.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS gained 0.8 percent, extending earlier gains. Australia’s benchmark index was up 0.4 percent while Japanese stocks.N225 edged higher on a softer yen. European shares are expected to open higher, tracking the Asian moves.

“Investors are slightly risk averse while their attention has been on the dollar-yen levels,” said Kazuhiro Takahashi, an equity strategist at Daiwa Securities. “They are waiting for a turning point, and until then, they will likely stay on the sidelines.

China’s B share market .SSEB bounced 1.5 percent after tumbling more than 6 percent on Monday on concerns of extended yuan weakness while Hong Kong shares rose, led higher by financials and utilities.

“The Hong Kong markets should find some support around current levels though the weak outlook from the telecom and the property sector and continued concerns of yuan weakness will prevent any sharp gains,” said Alex Wong, a portfolio manager at Ample Capital, which has $100 million in assets under management.

As campaigning for the U.S. presidential elections enters its home stretch and concerns about the Chinese economy deepen after last week’s weak trade data, risk aversion is broadly on the rise – forcing investors to cut positions after a strong rally in risky assets in the third quarter of 2016.

Daily portfolio flows to emerging markets declined sharply last week with the seven-day moving average falling to its lowest level since a surprise Chinese currency devaluation in August 2015, according to data from Institute of International Finance.

“It’s been an incredibly quiet start to the week as most currencies remain rangebound but don’t let this sense of calm fool you as markets may be poised to explode,” said Stephen Innes, a senior trader at FX broker OANDA, referring to a multitude of macro-economic risks on the horizon.

Adding to the headwinds for emerging markets is the growing likelihood of a U.S. rate increase in December which has lifted 10-year U.S. Treasury yields by 25 basis points so far this month and boosted the dollar.

Wall Street ended down as lower oil prices weighed on energy shares.[.N] Stock futures SPc1 were flat in Asian trade.

Major currencies were confined in broad trading ranges on the back of soggy U.S. data and the absence of fresh triggers.

“Rangebound trading continues, with the 104 level heavy for the dollar-yen,” said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo. “It’s just short-term guys, playing in the market.”

The dollar index, which tracks the greenback against six major rivals, was flat at 97.74 .DXY, after rising as high as 98.169 in the previous session, its highest level since March 10.

Still, some risk indicators in the market were flickering green such as the Australian dollar AUD=, which was up around 0.6 percent at $0.7669. This came after comments from Reserve Bank of Australia Governor Philip Lowe, which suggested the bar for further rate cuts this year is higher than what markets currently expect.

Meanwhile, oil prices rose on hopes the market may not be as oversupplied as some analysts believe.

International benchmark Brent crude LCOc1 was up 0.5 percent while U.S. West Texas Intermediate (WTI) CLc1 edged 0.6 percent higher.

Safe-haven gold XAU= was firm around the $1250 per ounce level as growing risk aversion encouraged buyers, halting a 6 percent fall over the last few weeks.

(Additional reporting by Lisa Twaronite and Ayai Tomisawa in Tokyo; Editing by Eric Meijer and Sam Holmes)

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Published at Tue, 18 Oct 2016 05:18:31 +0000

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Netflix subscriptions boom around world, shares jump 20 percent

 

The Netflix sign on is shown on an iPad in Encinitas, California, April 19, 2013.REUTERS/Mike Blake/File Photo

Netflix subscriptions boom around world, shares jump 20 percent

By Lisa Richwine and Rishika Sadam

(This version of the October 17 story corrects reference to past quarters in second paragraph)

By Lisa Richwine and Rishika Sadam

Netflix Inc added over 50 percent more subscribers than expected in the third quarter as original shows such as “Stranger Things” drew new international viewers and kept U.S. customers despite a price hike, sending its shares soaring 20 percent in late trade.

The company’s performance represented a turnaround from the previous quarter of disappointing subscription growth. Netflix, which has spent heavily to expand outside its home market, also said that it was on track to start harvesting “material global profits” next year, even as it raised spending on original programming.

Shares of Netflix rose to $119.82 in extended trade from a close of $99.80.

Netflix added about 3.20 million subscribers internationally in the third quarter, higher than the 2.01 million average analyst estimate. (bit.ly/2e2gsRD)

In the United States, Netflix added 370,000 subscriptions, compared with analysts’ estimate of 309,000, according to research firm FactSet StreetAccount.

“Investors appear laser focused on subscriber growth, and so long as Netflix delivers on that metric, investors will bid its shares up,” said Wedbush Securities analyst Michael Pachter. However, Pachter said he thought the continuing cost of developing new shows would undermine plans to deliver material profits in 2017.

Netflix has expanded into more than 130 markets worldwide, including most major countries, except China. It said on Monday it was dropping plans to launch a service in China in the near term, opting instead to license its shows for “modest” revenue.

The company said it still hopes to launch service in China “eventually.”

In the meantime, Netflix plans to keep pouring money into building its stable of original and licensed TV shows and movies. Content spending will rise to $6 billion next year, a $1 billion increase from 2016, the company said.”We will keep investing in growing the content spend, even domestically, for quite a long time,” Chief Executive Reed Hastings said on webcast.

Netflix has been facing a slowdown in subscription growth in the United States as the market matures and a planned U.S. price hike raised concerns it would not hit its targets. It also faces competition from the likes of Hulu and Amazon.com Inc.

But the company, whose other popular original shows include “Orange is the New Black” and “House of Cards”, said it expects to add 1.45 million subscribers in the United States in the current quarter.

Analysts on average were expecting 1.27 million additions, according to research firm FactSet StreetAccount.

“Netflix has successfully navigated the challenges of a price increase,” retail research group Conlumino said in a note, adding that it had been “somewhat less successful” in maintaining subscriber growth.

In its international markets, it expects subscriber additions of 3.75 million, compared with the average analyst estimate of 3.32 million.

Third-quarter revenue rose 31.7 percent to $2.29 billion.

Netflix’s shares have surged in the past few years, driven by rapid growth as the company redefined television and fueled “binge watching”.

The stock, however, was down 12.7 percent this year as investors fretted about slowing growth in its domestic market and increasing competition.

(Reporting by Rishika Sadam in Bengaluru and Lisa Richwine in Los Angeles; Additional writing by Peter Henderson; Editing by Don Sebastian, Bernard Orr)

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Published at Mon, 17 Oct 2016 22:32:57 +0000

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