March 13, 2017

Stocks opened lower this morning (Dow -48 pts; SPX -.13%). Gold miners and semiconductors are in the green in early trading, but just about everything else is flat-to-down. Interestingly, Europe is poised to close higher and Asia was up overnight. In fact, year-to-date, most of the world’s equity markets have enjoyed a synchronized rally. WTI crude oil is down slightly to trade around $48.30/barrel. Oil is sitting at 3-month lows due to higher US drilling activity and inventories. Oilfield services provider Baker Hughes (BHI) says the number of active drilling rigs has risen for 8 straight weeks. Bonds are mostly unchanged this morning. The 5-year Treasury yield is hovering around 2.11% and the 10-year Treasury is trading at 2.59%. 

Intel (INTC) announced a deal to buy Mobileye (MBLY) for about $15.3bil in order to get into self-driving car automation. Mobileye makes collision-avoidance systems and until now has relied on ST Micro to manufacture its products. Presumably, Intel will take over that job. Mobileye will be a very small part of Intel, but is expected to grow very quickly. Intel stock is down 2% this morning.

The Federal Reserve’s key policy committee (FOMC) will meet later this week to consider an interest rate hike. Bond traders are assigning a roughly 90% chance that the committee will act. Bloomberg’s survey of economists finds that most respondents expect three rate hikes this year. Many Wall Street strategists are saying that the stock market will fall if the Fed doesn’t follow through with a hike. That is, a move to normalize interest rates will communicate confidence in the economic recovery. 

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