A Few Stories From The Week It was a wild week for the equities markets that included the much anticipated Fed meeting, the Slack initial public listing (IPL), the release of a white paper from Facebook on its new cryptocurrency (Libra) and a near attack by the U.S. on Iranian targets.
Despite all the lingering tensions and questions around what the Fed would do, the Dow was +2.4% for the week, the S&P +2.2% and the Nasdaq rallied 3%. This brings the yearly gains to 14.5%, 17.7% and 21.0% respectively and stocks are on pace for their best June since 1955.
Also, the yield on the 10yr Treasury dropped below 2% for the first time since November 2016 (after the Fed’s statement), before closing at 2.06%.
FOMC As expected, the Federal Reserve kept interest rates on hold on Wednesday, but signaled that rate cuts could be coming down the road. It removed the key word "patient" from its policy statement, while noting that "uncertainties" about its previously rosy economic outlook have increased.
However, the decision was not unanimous. For the first time in Jay Powell’s tenure, there was a dissent. St. Louis Fed president James Bullard said the Fed should have cut rates by 25 basis points. Also, Minneapolis Fed president Neel Kashkari was even more dovish. Although he doesn’t get a vote until 2020, he made public his position that he advocated for a 50 basis point rate cut and a commitment not to raise rates again until core inflation reaches the Fed’s 2% target on a sustained basis.
Econ Calendar for Next Week Next week's economic calendar is jam packed and should give the Fed a lot to data to mull over. We have new home sales and consumer confidence on Tuesday, trade numbers and durables goods orders on Wednesday and Q1 GDP on Thursday. Economists think GDP could be revised slightly higher to 3.2% in the final release from the previous estimate of 3.1%.
Something To Think About... Finally, I'll leave you with one stat that I found very intriguing, yet scary at the same time. The world has $13 trillion of debt below zero yields (investors are paying the governments to hold their cash). So although many investors complain about U.S. interest rates being low, they are a lot higher than in most of the developed world. The benchmark 10 year yields are negative in Germany, the Netherlands, Switzerland and Japan and very close to going negative in France. Macro News:- Tehran said it would exceed the nuclear deal’s cap on its enriched-uranium stockpiles before the end of June, jeopardizing European efforts to save the accord after President Trump pulled the U.S. out of it last year. The threat came days after the U.S. accused Iran of orchestrating a second set of attacks on tankers near a vital global shipping route. Meanwhile, U.S. military officials said an additional 1,000 troops would help provide security and intelligence in the region. The U.S. already has more than 20,000 troops in Afghanistan, Iraq and Syria.
- The U.S. came very close to carrying out strikes on Iranian targets on Friday, with 45 having given his approval. Planes were in the air and ships in position, and 45 reportedly even went so far as to warn Iran (via Oman) of the imminent strikes—but then he changed his mind at the last minute.
- White House plans new Iran sanctions. 45 tweeted that he plans to impose new sanctions on Iran on Monday, and national security adviser John Bolton warned against calling the U.S. weak after 45 called off retaliatory strikes against Tehran.
- The U.S. trade representative’s office started seven days of hearings on Monday on proposed additional tariffs targeting Chinese goods. Consumer items, largely spared by existing tariffs, would face 25% levies under the 45 administration’s plan targeting $300 billion of Chinese imports that haven’t yet been taxed.
- President Xi Jinping concluded a two-day state visit to North Korea on Saturday – the first state visit from a Chinese leader in 14 years. Analysts didn’t expect Xi to visit North Korea until later this year, if at all, so the timing of Xi’s surprise sojourn, a week before the Chinese president holds an “extended meeting” with 45 at the G20 summit in Osaka, is likely no coincidence. Xi wants to remind the U.S. that China is vital for applying pressure on Kim Jong-un’s wayward regime.
- ECB President Mario Draghi on Tuesday said he was ready to launch another round of stimulus, saying the central bank could cut interest rates again or provide further asset purchases if inflation doesn't reach its target.
- Sen. Elizabeth Warren made waves in Silicon Valley when she announced a plan to create a $7billion fund to offer startup capital to entrepreneurs of color. The federal fund would be run by states and municipalities, and the grants would go to entrepreneurs who are eligible for the Small Business Administration’s existing 8(a) program and who have less than $100,000 in household wealth.
- Artificial intelligence experts briefed members of the House Intelligence Committee about the dangers of deepfake videos that look real but are heavily altered by computers to show people saying things they never said.
- Brent oil rallied above $65 per barrel on Friday and was on track for a 5% gain this week on fears of a U.S. military attack on Iran that would disrupt flows from the Middle East.
- 45 plans to issue an executive order Monday to compel the disclosure of prices in health care, according to people familiar with the matter. The order will direct federal agencies to initiate regulations and guidance that could require insurers, doctors, hospitals and others in the industry to provide information about the negotiated and often discounted cost of care.
Micro News:- Goldman Sachs Strategy Shake up: Goldman Sachs is upping its private equity ante by building a mini-Blackstone Group internally, according to The WSJ. The firm is reportedly pulling together four separate units that invest in private companies, creating new unit and planning a fundraising blitz.
- Sotheby's auction house is being taken private for $57 per share in a cash deal valued at $3.7 billion. The buyer is BidFair USA, an entity wholly owned by media and telecom entrepreneur as well as art collector, Patrick Drahi.
- Bitcoin leapt across the $10,000 mark for the first time since May 2018, boosted by the release of Facebook's white paper on a new cryptocurrency (Libra) this week. Experts say the involvement of large companies in the crypto space is boosting sentiment as it gives a degree of legitimacy to an industry long plagued by talk of illegal activity, speculative trading and regulatory scrutiny.
- The annual sustainability report from UPS, one of the biggest enablers of the e-commerce boom, says it emitted 13.8 million metric tons of CO2 while delivering 5.1 billion packages in 2017, by ground and air. Emissions from FedEx, the other major shipper, were 15.1 million metric tons. The Postal Service emitted about 4.3 million metric tons of CO2.
- Alphabet subsidiary Waymo has struck its first deal to supply self-driving car technology to automakers that are building their own autonomous vehicles and services. The deal is with Renault and Nissan, for their cars and trucks in France and Japan, and maybe other other Asian countries including China.
- Apparently there’s an entire black market of vintage Kool-Aid packet collectors, where a sealed packet of Pink Swimmingo can go for as much as $400. I know where this market is... So much money you don't know what to do with it Landia...
- Preparing for a future without single-use plastics. Coca-Cola and PepsiCo are rolling out more high-tech water fountains that can add bubbles and flavors on demand. But the customers have to supply the bottles. Hmmm... yeah, that'll work.
- The power of a strong brand will be on display when Yum Brands' The Bell: A Taco Bell Hotel and Resort starts taking reservations on June 27 for the taco-inspired destination in Palm Springs, California. Really?
- Wynn Resorts is scheduled to officially open the doors to the long-awaited Encore Boston Harbor property today. The casino operator is expecting a crowd of as many as 50K to take in the opening festivities for the $2.6B project.
Capital Markets:- Ripple, the startup behind the XRP cryptocurrency, has agreed to invest up to $50 million in MoneyGram, the giant money-transfer service. Ripple agreed to buy $30 million worth of shares and warrants to buy stock at $4.10 a share (for a 10% stake in the company), and additional warrants for up to $20 million worth of newly issued stock, also at $4.10 a share, over the next two years at MoneyGram’s discretion.
- Slack, the quirky workplace chat app, had a smooth opening day on the market. First day of trading was steady. The stock opened at $38.50, hit its highest price at $42 and lowest at $38.25, and closed at $38.62 (a mere 0.3% increase), at a market cap of just under $20 billion.
- Dish Network Corp. is in talks to acquire wireless assets from T-Mobile and Sprint, including wireless spectrum and the latter’s Boost Mobile brand, for up to $6 billion, according to Bloomberg. The deal could be announced as soon as this week, though it could still fall through.
- CBS is preparing to make an offer for Viacom in coming weeks, following a meeting of CBS directors last week in which a potential deal was discussed.
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