“Letting losses run is the most serious mistake made by most investors.” – William O’Neil

1. U.S. Weighs Broad Sanctions on North Korea — the Trump administration is considering imposing sanctions aimed at cutting North Korea off from the global financial system as a response to its nuclear threats and missile tests. The penalties would be part of a multi-pronged approach of increased economic and diplomatic pressure, especially on Chinese banks and firms that do the most business with Pyongyang.
2. Target’s Store Makeover Plan — Target’s first fully redesigned shop in Houston will include two separate entrances: one for time-crunched grocery shoppers, and another for those who want to browse fashion or beauty. The company will use the design, which also includes order pickup parking spots, as a starting point for the 500 stores it plans to make over in 2018 and 2019. It’s part of the $7B investment Target (NYSE:TGT) disclosed last month.
3. Gain in the S&P500 YTD Made up of MegaCap Stocks –the S&P 500 is up over 6% already in 2017, but thus far it has only been large-cap stocks. Courtesy of BIG, In the chart below, decile 1 (labeled “Largest”) contains the largest 10% of stocks in the index at the start of the year. Decile 2 contains the next largest 10%, and so on and so forth until you get to the last decile (labeled “Smallest”), which contains the smallest 10% of stocks in the index.

4. Apple Is Closer to Manufacturing Phones in India — WSJ reported that Taiwanese contract manufacturer Winstron Corp. could start making the iPhone 6 and 6S models at its plant in Bangalore as soon as April, and add the assembly of Apple’s cheaper SE model in three months. India has one of the fastest-growing smartphone markets, and Apple currently only has about a 4 percent share of it. As the Indian population of 1.2 billion people continues to grow, the move presents an opportunity for the company to boost sales.
5. Oil Dropped for the Third Week Ahead of Kuwait meeting — oil is set for its third weekly drop ahead of this weekend’s meeting in Kuwait, at which OPEC and its production-cutting allies will assess the effectiveness of their actions to date. Talks will also be overshadowed by the question of whether the persisting glut requires curbs to be extended beyond the summer.

The week ahead — Economic data from Econoday.com:

“The trick is not to be the hottest stock-picker, the winningest forecaster, or the developer of the neatest model; such victories are transient. The trick is to survive! Performing that trick requires a strong stomach for being wrong because we are all going to be wrong more often then we expect. “ — Peter Bernstein

1. Intel To Buy Mobileye for $14B-$15B — Intel (NASDAQ:INTC) agreed to buy Mobileye (NYSE:MBLY), a leading manufacturer of software for autonomous vehicles, for $14B-$15B. There are no industry standards for relatively nascent driverless-car technology, and being in the lead now could set Intel up for long-term dominance. The move, if approved, would leapfrog Intel ahead of Qualcomm and Nvidia, said Rolland. That’s even as Qualcomm’s pending $39 billion acquisition of NXP Semiconductors NXPI, -0.22% gives it a suite of automotive chips and Nvidia’s partnership with Bosch and Audi puts it on track to get Level 4 driverless cars—almost fully autonomous—on the road by 2020.
2. Pershing’s Ackman Exits Valeant(VRX) — Long-time Valeant Pharmaceuticals bull Bill Ackman has apparently waved the white flag. CNBC reports that he sold 27.2M shares for around $11 each, taking a loss of more than $3B after trying to rescue the struggling drug company for some 18 months.
3. International Energy Agency (IEA) Noted Oil demand to ease in 2017 — in its latest monthly report, the IEA cautioned that the market was still dealing with a vast amount of past supply, but added the compliance rate from OPEC’s production cuts averaged 98% during the first two months of the deal. While oil demand is expected to drop from 1.6M bpd last year to 1.4M bpd in 2017.
4. The U.S. Federal Reserve Raised Interest Rates For The Second Time In Three Months — the decision by the FOMC to lift the target overnight interest rate by 25 basis points to a range of 0.75 percent to 1.00 percent marked a convincing step in the Fed’s effort to return monetary policy to a more normal footing. The Fed also stuck to its outlook for two additional rate increases this year and three more in 2018. The central bank lifted rates once in 2016. However, they did not flag any plan to accelerate the pace of monetary tightening, with the policy-setting committee reiterating and Yellen emphasizing that future rate increases would be “gradual.” At the current pace, rates would not return to a neutral level until the end of 2019.

The week ahead — Economic data from Econoday.com:

“Only when the tide goes out do you discover who’s been swimming naked” – Warren Buffett

1. Trump Endorses GOP Healthcare Plan to Replace Obamacare — President Trump is “proud to endorse” a plan to replace Obamacare backed by Republican leaders in Congress, and called for its quick passage even as opposition to the American Health Care Act hardened among conservatives. Alongside the end of health insurance mandates, the proposal would create a new tax credit tied to a person’s age and income for those who cannot get insurance through their employer, and would restructure the country’s Medicaid program. Trump also tweeted plans to lower drug prices. “I am working on a new system where there will be competition in the Drug Industry. Pricing for the American people will come way down!”.
2. Soda Industry Prepares for Tax Hit — Philadelphia’s new soda tax has high stakes for the beverage industry, with PepsiCo (NYSE:PEP) recording a 40% drop in sales and Coca-Cola (NYSE:KO) seeing volumes slump 30%-50%. A much bigger market, Chicago’s Cook County, has passed a similar tax that goes into effect July. Boulder, San Francisco and others also voted on related measures, while Santa Fe has a hearing on the issue this week.
3. Oil Drops Below $50 for First Time Since December on Supply Glut — Oil dropped below $50 in New York for the first time since December as concerns that OPEC’s output cuts are failing to restrain record U.S. stockpiles triggered the biggest slump in more than a year. Oil had fluctuated above $50 a barrel since the Organization of Petroleum Exporting Countries and other nations started trimming supply for six months starting Jan. 1 to reduce a global glut. The market swoon stoked the second-highest WTI options trading volume ever and sent volatility surging.
4. President Trump Pushes for $1 Trillion Infrastructure spending — President Trump is pushing his White House team to craft a $1T infrastructure spending plan that would pressure states to streamline local permitting, WSJ reported. He suggested a 90-day deadline to start projects and said they would be financed through public and private capital.
5. Bullish Sentiment Figures At Dangerous Levels — chart below show the S&P500 weekly index Investor’s Sentiment spikes above “Dangerous Level”. In the three times the reading has been that high since 2011 it has led to declines of 7% (2/11), 8% (5/13), and 3% (11/13). Also of note is that late last week the number of stocks making new 52-week highs on the NYSE collapsed by some 80%.

Aso shows the Composite Index from 1929 to present.

The week ahead — Economic data from Econoday.com:

“Financial markets will find & exploit hidden flaws, particularly in untested new innovation — and do so at a time that will inflict the most damage to the most people” — Raymond F. DeVoe

1. Trump Budget to Hike Military Spending — President Donald Trump’s first budget proposal will seek a nearly 10% boost in military spending, with offsetting cuts from nondefense agencies, financed partly by cuts to the State Department, EPA and other non-defense programs. In a speech to supporters, he pledged “one of the greatest military buildups in American history.”
2. France’s Q4 GDP Growth Doubles — driven by consumption and investment, France’s economy expanded at a faster pace in Q4, with GDP rising 1.2% year-on-year. The consumer price index in February also revealed a 1.2% rise on the year, but missed forecasts, while spending figures showed a 1.4% increase. GDP revisions will also be released in the U.S. A second estimate is expected to come in at an annualized 2.1% for Q4.
3. Fidelity Cuts Trading Commissions to $4.95 from $7.95 and TD Ameritrade Cuts Commissions to $6.95 — Fidelity blew up the online brokerage sector after cutting stock and ETF trading commissions to $4.95 from $7.95, following Schwab (NYSE:SCHW), which slashed its commissions to $6.95 from $8.95 in early February. Hit hardest was TD Ameritrade (NASDAQ:AMTD), which tumbled 10.5%, and immediately announced a cut in its commissions to $6.95 from $9.99.
4. Venezuela Running Out of Cash to Pay Debt — Venezuela only has $10.5B in foreign reserves left, according to its most recent central bank data, and still needs to make $7.2B in debt payments for the rest of 2017. The thinning reserves paint a dire financial picture as the country faces a humanitarian crisis sparked by an economic meltdown. Inflation is expected to rise 1,660% this year and 2,880% in 2018.
5. Snap IPO Brings Big Fees for WallStreet — shares of Snapchat (SNAP) popped in the company’s IPO on the New York Stock Exchange, finishing the day 44% higher at $24.48 per share. One big winner of the offering is Morgan Stanley (NYSE:MS), the lead underwriter in SNAP’s public debut (it’s set to bring in almost $26M in fees). Goldman Sachs (NYSE:GS), another key underwriter, could make as much as $21M from the listing.

The week ahead — Economic data from Econoday.com: