“The rarest thing on Wall Street is patience!” — unknown

1. Doha Disappoints as Saudi Arabia’s Refusal to Participate In The Deal Without Iran Agreement — the world’s largest oil exporters failed to reach an agreement in Doha to freeze output at January levels. The major sticking point during the meeting was the heightened tension between Saudi Arabia, the de facto OPEC leader, and Iran, which made a last-minute decision not to attend the gathering. Although no one expected Tehran to freeze production after its international sanctions were lifted, it wasn’t clear if the Saudis would demand that Iran immediately join the pact.
2. Mitsubishi Admits To Cheating In Fuel Economy Tests — Mitsubishi Motors Corp. reported late last week there were improprieties in its tests related to fuel-economy performance, affecting about 625,000 vehicles. The improper testing was conducted on four minicar models sold in Japan, Mitsubishi said. Two of the four models are manufactured by Mitsubishi and supplied to Nissan Motor Co. 7201, -0.97% NSANY, -1.27%.
3. SunEdison Files for Bankruptcy After Buying Spree Sours — SunEdison Inc. filed for bankruptcy protection after a two-year, $3.1 billion acquisition binge that drove its debt to unmanageable levels. SunEdison is one of the largest non-financial companies to do so in the past 10 years. Once the fastest-growing U.S. renewable energy developer, SunEdison embarked on an aggressive acquisition strategy that left it struggling with $12 billion in debt.
4. Volkswagen Posts Deep Loss After Taking $18.28 Billion Hit on Emissions Scandal — Volkswagen AG took a €16.2 billion ($18.28 billion) charge related to the emissions-cheating scandal, forcing it to slash its 2015 dividends and post a deep loss. The car maker took a major step toward resolving the scandal, agreeing to offer U.S. owners of nearly 500,000 vehicles a blend of car buybacks, repairs and compensation.
5. Bullish Sentiment Rebounds But Still Below 40% — courtesy of BIG, according to AAII, bullish sentiment increased from 27.9% up to 33.4%. After a huge rally off the February lows that has taken the S&P 500 back within a couple of percentage points from its all-time high. The subdued level of enthusiasm on the part of investors is a trend that has been in place for well over a year now, and one we have thoroughly documented. In fact, this week’s 33.4% reading in bullish sentiment represents the 25th straight week where bullish sentiment was below 40%, and outside of one week in late October, bullish sentiment has been below 40% for 59 of the last 60 weeks.

The week ahead — Economic data from Econoday.com:

“Investing has always been a game of alternatives. What do we do with our money? Cash is not a reasonable answer because it is depreciating all the time. Bonds are not the answer either – with a 1.8% yield, a 10-year U.S. government bond trades at roughly the equivalent of a stock selling at more than 80x after-tax earnings. In comparison, the S&P 500 trades at approximately 18x expected earnings with a current dividend yield of 2.2%. It is worth noting that the bond’s interest payments are fixed, while S&P 500 earnings and dividends are likely to increase over time. The nature of real estate has changed – a new world is unfolding with people shopping online and working from home – and you still have limited liquidity. Sometimes the obvious answer is also the correct answer. The stock market is the obvious answer. It has generated superior returns over time. But the volatility scares most investors. Ultimately we believe that a broad spectrum of investors will reach the same conclusion that we reached long ago. After seven years of generally rising stock prices, we still have not seen the broad, enthusiastic participation that generally indicates market tops. For investors of most stripes, the stock market remains the only viable game in town – a game which many natural participants may have forgotten, but we trust will remember soon enough. And while stocks may not be cheap relative to where they trade at stock market bottoms, they remain very cheap relative to the other outlets for our hard-earned cash.” — Frederick Rowe

1. Japan Might Intervene in the Yen Currency — according to Japanese Chief Cabinet Secretary Yoshihide Suga, the recent G20 agreement to avoid competitive currency devaluation does not mean Japan can’t intervene in response to the one-sided moves of the yen. The dollar hit a fresh 17-month low versus the yen last week on expectations that the U.S. Federal Reserve would raise interest rates very slowly.
2. CP Rail Ditched Norfolk bid and Consider Buyback or Dividend — Canadian Pacific (NYSE:CP) has abandoned efforts to combine with its American railroad counterpart Norfolk Southern (NYSE:NSC). “With no clear path to a friendly merger at this time, we will turn all of our focus and energy to serving our customers and creating long term value for CP shareholders,” CEO Hunter Harrison declared. Canadian Pacific’s (CP) board will meet next week to consider using the cash lying around for a possible buyback or dividend instead.
3. US Retail Sales Down 0.3% in March vs. 0.1% Increase Expected — the Commerce Department reported that retail sales declined 0.3 percent last month after being unchanged in February. Retail sales excluding automobiles, gasoline, building materials and food services ticked up 0.1 percent last month after an upwardly revised 0.1 percent gain in February.
4. IEA Sees Oil Oversupply Almost Gone in Second Half on Shale Drop — Bloomberg, global oil markets will “move close to balance” in the second half of the year as lower prices take their toll on production outside OPEC, the International Energy Agency said. OPEC and Russia are currently working on a plan to limit their crude production. The glut is also being tempered as Iran restores exports only gradually with financial barriers to sales persisting even after the lifting of international sanctions.
5. First-Quarter Growth Slows a Bit in China –the world’s second-largest economy grew 6.7% in Q1, the slowest pace of expansion since the financial crisis, according to official data released in Beijing. That was the slowest quarterly rate since the depths of the financial crisis in 2009, but it was also exactly what economists had forecast and it was in line with the government’s target this year for growth of 6.5 to 7 percent. Economists doubt the official figures as they are uncannily stable when compared with those of most other countries. The G.D.P. data is also increasingly out of step with other indicators that suggest an even sharper growth slowdown, economists say.
6. S&P 500 Setup for Respective All-Time High of 2130.82 — courtesy of SentimenTrader
stocks enjoyed a rare kind of breakout this week. As volatility compressed over the past month, the S&P 500’s Bollinger Bands started squeezing together, and this week the index broke out above its upper Band. That was the first time in nearly 400 days it was able to do so, the 2nd-longest streak in its history. Generally, stocks did well after triggering a breakout like this after having gone a long time without one. The small-cap Russell 2000 is nearly above its 200-day average. The last of the four major stock indexes to climb above its long-term average, when the Russell ended a streak of at least six months below its average, it tended to continue to rally going forward. A new high in the Advance/Decline Line tends to lead to gains. In response to some questions regarding Thursday’s Report on the A/D Line, when it moves to a multi-year high, the S&P 500’s maximum loss at its worst point over the next year has averaged -3.9%.

The week ahead — Economic data from Econoday.com:

“After talking to a guru or anyone with the holy grail, I always take a hot shower, burn the clothes I was wearing, and drink them out of my mind.” — unknown

1. Inversion Move Hits Allergan (AGN) — the Treasury moved to curb tax inversion deals, raising fears that it could thwart the planned merger of Ireland-based Allergan (AGN) and US based Pfizer (PFE). Allergan plummeted based on the news. Treasury is imposing limits on earnings stripping and “serial inverters”.
2. US Justice Dept Files Suit to Block Merger of Halliburton and Baker Hughes — the Dept Of Justice (DOJ) has sued to stop Halliburton Co. (HAL) from acquiring oilfield services rival Baker Hughes (BHI). The deal would combine two of the world’s three leading providers of those services to oil and gas companies. It would create a bigger rival to the industry leader, Schlumberger. DOJ officials say in their lawsuit that the Halliburton-Baker Hughes deal threatens to raise prices and eliminate competition.
3. Most Volatile S&P 500 Stocks on Earnings — chart below courtesy of BIG shows the most volatile stocks on earnings in the S&P 500. Each stock listed below typically moves up or down at least 6.2% on its earnings reaction day.

4. Japan Finance Minister “Jaw-Boning” Japanese Currency — Japan’s Finance Minister has described the dollar’s recent falls vs. the yen as “one-sided movements” and vowed to intervene if necessary to continue the country’s fight against deflation. “We are watching moves with a sense of tension,” Taro Aso told a press conference after the greenback sank to a 17-month low of 107.67 yen late last week. “We will take necessary steps in accordance with circumstances.” The dollar has tumbled nearly 10% against the Japanese currency this year, with the past week accounting for roughly 3% of the move.
5. More Fallout From the “Panama Papers” — the “Panama Papers” scandal has claimed its first banking chief executive with the resignation of Michael Grahammer, CEO of Austrian lender Hypo Landesbank Vorarlberg. So far, the Prime Minister of Iceland resigned. With additional details of offshore accounts surfacing, more high profile and political figures are looking to come clean. U.K. Prime Minister David Cameron has admitted to benefiting from a fund of his late father, but said that it was not set up to avoid taxes, and he himself paid state dues on the shares he sold.

The week ahead — Economic data from Econoday.com:

“Novice Traders trade 5 to 10 times too big. They are taking 5 to 10% risks on a trade they should be taking 1 to 2 percent risks.” – Bruce Kovner.

1. Warren Buffett’s Stake in Wells Fargo (NYSE:WFC) Increased to 9.9% as of Dec. 31 2015 — Warren Buffett’s stake in Wells Fargo (NYSE:WFC) hit 9.9% as of Dec. 31,most of which is held by Berkshire Hathaway (BRK.A, BRK.B). At 10%, Buffett would have to pass a review by the Federal Reserve in order to keep accumulating shares. While the central bank typically tries to limit the ties between non-financial companies and lenders, it has at times accepted a pledge by investors that they don’t plan to influence a bank; this happened in the ’90s when Buffett’s stake in AmEx (NYSE:AXP) rose above 10%.
2. Wages Fall and Spending Slow — the core PCE deflator, the Fed’s favorite inflation gauge, rose 1.7% vs. last year, matching Jan’s recent high but below views and policymakers 2% target. Actual wages and salaries fell 0.1%. Consumer spending rose 0.1% with Jan’s big initial gain revised down to 0.1%.
3. Google Announces Fiber Phone Service Starting At $10 A Month — Google ‘s product Manager John Shriver-Blake announced that Google (NASDAQ:GOOG)(NASDAQ:GOOGL) is introducing Fiber Phone, confirming rumors that it would be offering a home phone service in addition to its existing Fiber high-speed internet and cable TV offerings (and potentially a triple play package). The service is set to provide unlimited local and nationwide calls for $10 per month, while adopting the same international calls rates as Google Voice (GOOG, GOOGL). According to the company, a user’s Fiber number “lives in the cloud,” allowing them to use it on any phone, tablet, or laptop.
4. Fed Chair Woman Backs Dovish Stance — the Fed chair said global uncertainty has left policymakers making a coutious approach to rate hikes, adding that the US economy has been mixed. Manufacturers and exporters have suffered, but the job market is robust with housing and consumption adding a lift.
5. China Rating Outlook Cut to Negative From Stable by S&P — Standard & Poor’s has cut the outlook for China’s credit rating to negative from stable, saying the nation’s economic rebalancing is likely to proceed more slowly than the ratings firm had expected. The nation’s credit rating is AA- with a negative outlook, S&P said in a statement, which also affirmed the long-term and A-1+ short-term sovereign credit ratings. “We revised the outlook to reflect our expectation that the economic and financial risks to the Chinese government’s creditworthiness are gradually increasing,” S&P said.
6. Key ETFs Asset Class Performance Matrix — Q1 2016 — courtesy of BIG, below is the asset class performance matrix for Q1 2016 using key ETFs traded on U.S. exchanges. A strong March propelled US stocks just barely into the green for the quarter. As shown, the S&P 500 SPY ETF finished Q1 up 0.81% year-to-date. The Dow 30 (DIA) more than doubled that at +1.96%, while the Tech and Biotech heavy Nasdaq 100 (QQQ) finished down 2.4%. Eight of ten sectors were up in Q1, led by Consumer Staples (XLP), Utilities (XLU), Telecom (IYZ), and Industrials (XLI). The two sectors in the red for the quarter were Financials (XLF) and Health Care (XLV) — both falling nearly 6%.

The week ahead — Economic data from Econoday.com: