October 13, 2016

Stocks sank at the open (Dow -155 pts; SPX -.8%) with tech, energy, financials and materials down more than 1% in early trading. Utilities and real estate are the only sectors in the green at the moment. After treading water for about 5 weeks, the SPX is selling off a bit. The VIX Index climbed over 17 this morning. European markets are poised to close down by about 1% and most of Asia was down overnight. The dollar is a bit weaker and commodities are slightly higher. WTI crude is flat around $50/barrel. Bonds are mixed, with junk yields a bit higher and Treasury yields lower. The 10-year Treasury yield is currently at 1.74%. 

US import prices fell 1.1% y/y in September vs. economists’ consensus forecast for a 1.0% dip. Import price declines (i.e. deflation) have been with us for over two years, driven by plunging oil prices in 2014 & 2015. In fact, for most of 2015 prices were down over 10% y/y, but have since rebounded. This is good news because the volatility in oil and the dollar we saw last year has been replaced by stability this year. But there is still not enough inflationary pressure to force the Fed into interest rate hikes.    

China’s trade data came in significantly worse than expected. In dollar terms, exports fell 10% y/y, reversing a six-month trend of improving exports. Imports edged down 1.9%. This is not good news for global trade and economic growth. The Chinese currency fell as the news was released.

Wells Fargo (WFC) CEO John Stumpf has resigned, ceding to overwhelming pressure from within and without. Mr. Stumpf will not receive severance pay. He was replaced with an executive who was not involved in the retail side of the bank. Wall Street analysts were generally in favor of the move. Famed bank analyst Mike Mayo over at CLSA says “this is the beginning of the end of the cross-selling crisis.” CNBC Contributor Jim Cramer says Fed rate hike expectations are “far more important” to Wells’ stock price than this cross-selling crisis. 

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