Friday March 3 Daily Market Primer

•         Stocks drop, except for SNAP
•      Fed speak week
•          UK slowing down
•         Political noise continues

Happy Friday.  US stocks took a breather yesterday, as the S&P dropped .6%.  Asian European stocks mostly followed the US lower, and the US 10 year is bumping up against 2.5%, and the dollar weakened for the first time in six days with all the tightening talk this week.  The Fed parade continues today, with public appearances by both Janet Yellen in Chicago and Stan Fischer in New York.  US futures are pointing down this Friday morning.

	LAST	CHANGE	% CHANGE
DJIA	21,002.97	-112.58	-0.53%
Nasdaq	5,861.22	-42.81	-0.73%
S&P 500	2,381.92	-14.04	-0.59%
Russell 2000	1,395.67	-17.97	-1.27%
Global Dow	2,683.21	2.45	0.09%
Stoxx Europe 600	374.64	-0.96	-0.26%
Nikkei 225	19,469.17	-95.63	-0.49%
UK: FTSE 100	7,366.62	-15.73	-0.21%
CBOE Volatility	11.80	-0.01	-0.08%
Australia: S&P/ASX 200	5,729.60	-47.00	-0.81%
China: Shanghai Composite	3,218.31	-11.72	-0.36%
Hong Kong: Hang Seng	23,552.72	-175.35	-0.74%
Europe Dow	1,620.55	8.70	0.51%
India: S&P BSE Sensex	28,832.45	-7.34	0.54%
France: CAC 40	4,987.98	24.18	0.49%
Germany: DAX	12,021.38	-38.19	-0.32%
Italy: FTSE MIB	19,637.48	196.86	1.01%
Spain: IBEX 35	9,765.20	49.20	0.51%
U.S. 3 Month	0.66	-0/32
U.S. 2 Year	1.325	-1/32
U.S. 5 Year	2.037	-3/32
U.S. 10 Year	2.491	-4/32
U.S. 30 Year	3.078	-0/32
Germany 2 Year	-0.836	0/32
Germany 10 Year	0.354	-11/32
Crude Oil	52.83	0.22	0.42%
Brent Crude	55.34	0.26	0.47%
Natural Gas	2.812	0.008	0.29%
S&P GSCI	397.26	1.15	0.29%
E-mini S&P 500	2379	-3	-0.13%

SNAP jumped up about 44% to $24.48 after the IPO at $17, causing no end of jokes in the financial press about disappearing IPO money, market cap, and users and more than a few comparisons to 1999.  UK economic data since Brexit has been mixed, and UK stocks have been on a tear along with developed stock market around the world, but there may be signs of slowing, as several recent data points, including the Markit survey of economic growth point to weakness in the economy.  Bitcoin continues to rise and is now priced higher than gold, which means….I have no idea what it means but it is interesting and is getting quite a bit of attention in the press.   As we head into the weekend, the Trump administration is under fire for Russia connections, but so far at least it seems like a continuation of the political noise we have seen since the inauguration and not a market driver.

Here’s the news:

Federal Reserve

Janet Yellen and Stanley Fischer top off a week in Fed-speak — or Fed-cacophony — by delivering speeches in Chicago and New York later today. With expectations of a March interest-rate increase now overwhelming, Treasury futures markets were subdued and the dollar held steady. Fed Vice Chair Fischer will speak at 12:30 Eastern Time, with his boss due half an hour later.

Stocks swoon

Snap Inc. up, everything else down. That was the flavor of Thursday's equity markets, and today most gauges worldwide are following the U.S. in paring this week's strong gains. South Korea's Kospi fell the most since November, on reports of an impending drought of Chinese tourists, while the Stoxx Europe 600 Index had dropped 0.5 percent by 5:05 a.m. in New York. S&P 500 futures were down 0.3 percent.

Inflation beats

The Bank of Japan’s preferred measure of consumer prices has risen for the first time since December 2015 — albeit ever so slightly. Whether that print budges policy will become clearer after the bank's March 16 meeting. This morning's data also show inflation picking up where it's not welcome: Turkey's CPI gauge rose at its fastest pace in nearly five years, sending yields spiking higher.

U.K. misses

Manufacturing and services-sector data that fell short of analysts' expectations may be pointing to the long-awaited, much-contested Brexit slowdown. As Chancellor of the Exchequer Philip Hammond readies his budget, Markit’s combined surveys imply economic growth of 0.4 percent this quarter. That would be the slowest pace in a year, and is helping to extend the pound's losing streak into a sixth day. Across the channel, the resignation of a campaign aide is deepening French Presidential candidate Francois Fillon's woes.

Coming up....

Chinese Premier Li Keqiang will present next year's economic targets at the opening of the National People’s Congress on Sunday. Also on Sunday, the International Society of Transport Aircraft Trading hosts its annual conference for airline manufacturers, lessors, and airlines.

Pimco’s new bond chief is red hot and luring in billions. Janet Yellen speaks. Federal Reserve Chair Janet Yellen is set to give her economic outlook at the Executives Club of Chicago at 1 p.m. ET. Traders will be listening for clues as to whether the Fed will hike interest rates at the conclusion of its March 14-15 meeting. World Interest Rate Probability data provided by Bloomberg says there's an 88% chance the Fed hikes by 25 basis points at the meeting. Europe is growing at its fastest pace since 2011. Markit's final February composite reading for the eurozone came in at 56, well ahead of the 54.4 print from January. "Growth of eurozone economic output accelerated to a near six-year record in February," IHS Markit said in a release. Global manufacturing is making a comeback. Global manufacturers posted their best month in almost six years in February as the JPMorgan-IHS Markit Global Manufacturing Purchasing Managers Index rose by 0.2 points to 52.9, making for the best reading in 69 months. The dominant part of the UK economy is slowing down. UK services PMI slowed to 53.3 in February, missing the 54.2 that economists were expecting. "The slowdown mainly reflected a softer pace of new business growth, which some respondents linked to more cautious spending among consumers," a release from Markit that accompanied the report said. Bitcoin is extending its lead over gold. On Thursday, bitcoin climbed above gold for the first time. On Friday, the cryptocurrency trades up 2% at $1,281 a coin while the precious metal is down 0.5% at $1,228 an ounce. Snap Inc. had a monster debut. Shares of the social-media company shot up 44% in their market debut to close at $24.48 a share, giving Snapchat's parent company a market cap of more than $33 billion. Snap is now bigger than Macy's ($10 billion), Twitter ($11.3 billion), American Airlines ($23.6 billion), and Target ($32.9 billion). Costco same-store sales miss. The warehouse club retailer reported that same-store sales rose by 3% in its second quarter, missing the 3.2% gain that analysts were forecasting. The company also announced that it planned to raise membership fees as of June 1. Stock markets around the world are mostly lower. Hong Kong's Hang Seng (-0.7%) trailed in Asia, and Germany's DAX (-0.2%) lags in Europe. The S&P 500 is set to open down 0.1% near 2,380. Earnings reporting slows. Big Lots and Revlon will release their quarterly results ahead of the opening bell. US economic data is light. Markit services PMI and ISM Non-Manufacturing will be released at 9:45 a.m. and 10 a.m. ET. The US 10-year yield is higher by 2 basis points at 2.50%. Sessions Steps Aside Attorney General Jeff Sessions said Thursday he will remove himself from involvement in any investigation related to the 2016 presidential race, following the disclosure that he had conversations with a Russian official while advising the Trump campaign. Lawmakers from both parties had called on Mr. Sessions to recuse himself after reports that he met with the Russian ambassador to the U.S. last year, even though he had testified in Senate confirmation hearings that he had no contact with Russian officials during the campaign. Mr. Sessions announced his recusal just hours after President Trump expressed full confidence in Mr. Sessions and that he didn’t think the attorney general should recuse himself. In a brief press conference, Mr. Sessions denied he had misled lawmakers during his confirmation hearing, saying he had been asked only if he engaged in a continuing exchange of information with Russian officials. Snapped Up Snap shares soared on the first day of trading Thursday in an initial public offering that will likely hand the disappearing-message app’s founders, investors and underwriters big profits and provide a boost for the sluggish new-issue market. The newly public shares surged 44% above their offering price to close at $24.48. That made for the biggest one-day pop for a U.S.-listed IPO raising at least $1 billion in more than two years. Trading on Thursday was brisk at 216 million shares. The five-year-old Snapchat’s parent is now worth more than $34 billion using a fully diluted share count, on par with seasoned companies such as Marriott and Target. The successful offering cements the billionaire status of the company’s founders, at least on paper, and benefits early investors and the banks that helped underwrite the offering. Complex Legacy A year after oil magnate Aubrey McClendon died in an auto crash, lawyers in Oklahoma City are sifting through the tangle of obligations and assets he left behind, trying to determine if he died a wealthy man—or swamped by debt. As one of the biggest probate cases in history enters its second year, at stake is the resolution of more than $600 million of claims against Mr. McClendon’s estate that remain outstanding, out of a total exceeding $1.1 billion that were filed. Banks and other creditors are preparing for a long fight. Because Mr. McClendon’s businesses are complex and many of his investments are illiquid, it could be years before the estate is fully unwound. The prospects for creditors have brightened recently thanks to a big rally in oil prices, which raised valuations of many of Mr. McClendon’s holdings.

How China's rebuilding investor confidence.

Has Trump already sidelined his Secretary of State?

How to use Trump's border ban at business school.

European earnings outshine the U.S.

Video: Is the IPO market back?

Sessions wins political respite. Who’s Right: Warren Buffett or Larry Fink? Goldman’s $3 Billion Drop in the ETF Bucket Self-Driving-Truck Startups Race to Take On Uber Islamic State Hid Training Camp in Rail Tunnel Near Mosul

Let me state at the outset that I don't hate gold. I'm not even anti-gold. (I used to hate it, but I changed my mind.) That being said, there's an aspect of the way people talk about and trade gold that doesn't make sense. Bullion is frequently seen as a hedge against political volatility. People buy it when they are nervous about stuff — like, say, the euro area collapsing. Ok, fine. But what role does it really play in a portfolio? Going back to 1980, the single best year for gold was 2007, when it rose a bit over 30 percent. So let's say you had 10 percent of your portfolio in gold (which would be a gigantic, outsized position) and the metal has its best year ever. It would add 3 percent to your portfolio? Big whoop. Cullen Roche over at Pragmatic Capitalism found that going to back to at least 1970, a portfolio of 33 percent stocks, 33 percent bonds, and 33 percent gold offers virtually nothing in terms of growth or stability, relative to one that's split 50-50 between stocks and bonds. Now, if you really think that the world is going to fall apart, you could probably make a case for having a big slug of physical gold in a safe somewhere. But from a standard portfolio diversification standpoint or as a hedge against some particular risk in any given year, it's hard to see what more gold exposure really adds.

Source: Bloomberg, BI, WSJ, CFAI Fin. Newsbrief