Harbingers

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DOW – 6 = 20,661
SPX + 4 = 2348
NAS + 27 = 5821
RUT – 0.95 = 1345
10 Y – .04 = 2.39%
OIL – .09 = 48.15
GOLD + 4.00 = 1249.20

London was shaken yesterday by the first major terrorist attack since the 2005 subway bombings. Witnesses told of hearing multiple gunshots after a policeman was attacked outside Parliament. On Westminster Bridge, a car mowed down pedestrians. Two pedestrians and a police officer were killed, and at least 20 people injured, some very seriously.

A vehicle ran over pedestrians before crashing into a fence outside Parliament. A man wielding a knife then ran into the grounds and stabbed a police officer before being shot. Police believe the man, who died from his injuries, was the only attacker and are treating the attack as terrorism.

Global stocks were in retreat mode, but losses were relatively minor. Investors were taking some money out of equities and they’re putting their cash into government bonds. European markets declined with many indexes down by about 1%. Asian markets ended the day with losses.

Japan’s Nikkei notched the biggest drop of 2.1%. The moves follow a sizable drop for US stocks yesterday. The Dow Industrials fell 1.1%, the S&P 500 dropped 1.2% and the Nasdaq was down 1.8%.

It was the worst day for stocks since October, but it was the first day in which the S&P 500 index traded in a 1 percent range since Dec. 14. In that time, the market did see one other one-day move of 1 percent or greater, when the S&P rose nearly 1.4 percent on March 1 — but since stocks opened sharply higher that day, the S&P did not manage a 1 percent intraday move.

Consequently, the index went 64 days without such a move, which is easily the longest-ever streak according to data that dates back to 1962. The second-place streak, of 34 days in 1995. In the past, after periods of calm, the market tends to continue moving in the direction of the trend – which is up, but calm is not the normal state for the market, so we can expect a period of increased volatility.

So, watch out for some big dips ahead.

That’s the historical tendency, however we also need to watch out for other markets – notably bonds, as we discussed on Tuesday; where we see a flattening yield curve, and it flattened even more today. A flattening curve means the economic outlook is dampening. When it grows steeper, like it did after the election, the economic outlook is brightening. But a flattening yield curve also influences the stock market negatively.

And if you are waiting for more volatility, you might not have to wait long. Healthcare legislation is schedule for a vote in the House of Representatives today. This is the first big piece of legislation for the Trump administration, and could serve as a harbinger.

After the health care legislation, Trump’s budget proposal will take front and center and he may face resistance from members of his own party for cuts to environmental programs. That’s due to an Obama administration practice that spread billions of dollars in contracts to Republican as well as Democratic congressional districts. Members of Congress typically resist efforts to cut spending that brings projects and jobs to their district.

A Bloomberg analysis of federal contract data shows that spending related to the environment reached 423 congressional districts in fiscal year 2016 and totaled $5.9 billion. Almost half that spending—47 percent—went to districts represented by Republicans.

Federal contract spending isn’t just spread across congressional districts. It’s also spread across contractors: Last year, 4,462 vendors got contracts categorized as related to the environment, climate, sustainability or similar fields.

Twenty-five publicly traded companies earned more than $10 million each from those contracts. Distributing federal largesse has been standard practice for the Department of Defense for many years, a lesson not lost on the Department of Energy.

President Trump’s second choice to lead the Labor Department is about to get a hearing. Alexander Acosta, a Florida law school dean, testified today. He follows Andrew Puzder, who withdrew his candidacy in February.

The National Association of Realtors says existing home sales declined 3.7% to a seasonally adjusted annual rate of 5.48 million units last month. The NAR says a persistent shortage of houses on the market is pushing up prices and sidelining potential buyers.

Housing inventory has dropped for 21 straight months on a year-on-year basis. With supply remaining tight, the median house price surged 7.7% from a year ago, to $228,400 in February. That marked the 60th consecutive month of year-on-year price gains.

The Mortgage Bankers Association reports mortgage application activity fell from a nearly four-month peak as borrowing costs on 30-year home loans held at their highest level almost three years. Mortgage apps fell 2.7% for the week ended March 18. Average interest rates on 30-year, fixed-rate conforming mortgages, the most widely held type of U.S. home loan, held for a second week at 4.46%, a level last seen in April 2014.

According to a new study from Spectrem Group, the number of millionaire households in America increased by 400,000 in 2016, reaching a new record of 10.8 million. Since the 2008 financial crisis, the number of millionaire households has grown every year, adding a total of 4 million millionaire households.

The number of multimillionaire households has also grown. There are now 1.4 million households worth $5 million or more and 156,000 households worth $25 million or more.

Nike (NKE) reported earnings that beat estimates but total revenue was up just 5% in the last quarter. The company’s outlook wasn’t that great either. Nike said it expects sales growth to slow a bit this quarter. And future orders, a measure investors look at as a proxy for sales during the next few quarters, were down 4%. Nike is still growing rapidly in emerging markets as well as Asia. Nike was the worst performing stock in the Dow last year, falling nearly 20%.

FedEx (FDX) said some of its largest retail customers shipped fewer packages during the holiday season than forecast, after the delivery giant had ramped up spending and staffing in anticipation of a crush of deliveries. The outcome hurt FedEx’s bottom line during the fiscal third quarter ended Feb 28. While revenue surged 18%, helped by higher rates and more packages shipped, overall margins fell because of a 30% rise in fuel costs and investments to keep up with e-commerce growth.

Fiat Chrysler (FCAU) is the latest automaker to be named in a growing French investigation into diesel emissions cheating. The Paris prosecutor has opened an investigation into potential aggravated fraud at Fiat Chrysler.

Fiat Chrysler acknowledged it was under investigation for “alleged consumer protection violations” but denied wrongdoing. French prosecutors were already investigating Renault and might open an investigation into PSA Group. This follows the $19 billion settlement between US regulators and Volkswagen (VLKAF). Last week, German prosecutors raided VW headquarters as part of an ongoing investigation.

ING has confirmed a Dutch criminal investigation, but wouldn’t comment beyond the information presented in the bank’s annual report. The investigation relates to the “on-boarding of clients, money laundering, and corrupt practices,” per the 10-K filing, and can result in “significant” penalties.

Just days after finance chiefs of the world’s top 20 economies dropped their pledge for open trade, the European Central Bank has published a study claiming protectionist trade policies may increase, rather than reduce, a country’s trade deficit.

 Separately, Italy is calling for unambiguous support for an open global economy at a G7 finance ministers summit in May, saying they hope the upcoming G7 meeting yield a strong and clear message… against any temptation of protectionist closure.

T+ 3 is history. The SEC voted unanimously on rules to shorten the amount of time it takes for a securities trade to settle from three to two business days. Wall Street and consumer groups are largely supportive of the effort, as it reduces credit and market risk exposure.

Modern technology lets investors make trades in a matter of milliseconds. But since 1993, the SEC’s rules have required brokers to wait for three business days between the time an investor’s order is executed, to when the cash and ownership of the security are exchanged.

Dutch paints and coatings maker Akzo Nobel rejected a second takeover proposal from US rival PPG Industries, saying an improved $24.1 billion offer was still too low and too risky.

AT&T, Verizon, Enterprise Holdings, GSK and other major US advertisers are pulling hundreds of millions of dollars in business from Google (GOOGL) and YouTube, following similar moves by advertisers in the UK. The problem is offensive and extremist content. For example, an ad on YouTube for the new Mercedes E-Class ran next to an ISIL video praising jihad that has been viewed more than 115,000 times.

Google pledged this week to keep offensive and extremist content away from ads, but the cleanup can’t happen fast enough. AT&T (T) said that it is halting all ad spending on Google except for search ads. That means AT&T ads will not run on Google’s video service YouTube and on a couple million websites that take part in Google’s ad network.

AT&T emailed a statement saying: “We are deeply concerned that our ads may have appeared alongside YouTube content promoting terrorism and hate. Until Google can ensure this won’t happen again, we are removing our ads from Google’s non-search platforms.”