Wednesday February 15

Stocks rose again today driven by financials. The S&P 500 and the Dow Jones rose 0.5% to 2,349 and 20,611 respectively. The KBW Bank index rose 1% and utilities fell 0.5%. Economic data today showed that CPI rose by more than estimated. Over the month headline CPI rose 0.6% compared to estimates of 0.3%. That brought yearly changes to 2.5%. Core numbers similarly were strong. Retail sales also rose 0.4% on the month compared to the consensus 0.1% estimate. Eric Rosengren of the Boston Fed said the Fed could raise interest rates three times this year which is interpreted as hawkish. Janet Yellen spoke to Congress and talked about central bank independence and defended the Fed’s track record on supporting the economy. She pointed a lower unemployment rate as a positive and suggested that there is room for improvement in growth. The two year Treasury yield rose 3bp to 1.26%. The ten year Treasury rose 3bp to 2.50%. Accordingly 2yr vs 10yr remained at 1.24%. The dollar was mixed on the day against peers. USD fell 0.3% against EUR to $1.0604. USD fell 0.1% against JPY to Y114.11. USD rose less than 0.1% to $1.2458. Oil prices slid back after crude oil inventories rose by 9.5 million barrels last week which is a pretty elevated total. WTI fell 0.3% to $53.03. Brent fell 0.5% to $55.70.

SoftBank is going to buy Fortress for a total of $3.3bn. This comes after the Japanese technology company raised a $100bn venture capital fund to buy technology and artificial investment companies. Additionally the CEO of SoftBank has said in the past that he wants to be one of the largest asset managers as well which explains the Fortress acquisition. Technology and investment play together since it will give SoftBank a large network of investors and an investing platform that will be able to be able to make investments across different sectors. Fortress shareholders will receive $8.08 per share which is a 39% premium to where they closed yesterday. Fortress manages $70bn in AUM in alternative investments such as real estate, credit, and private equity. Fortress will operate independently out of its headquarters in New York. It is also advantageous to Fortress because they now have access to investors and sovereign wealth funds who put money into SoftBank’s $100bn fund. Accordingly SoftBank aims to double AUM in the next few years. A boutique in London called FAB Partners helped arrange the deal.

American companies that do business in China are worried that regulators in China may make it more difficult for them to business there if protectionist policies manifest under Trump. They are worried about reciprocity that could come up if trade wars are initiated. America companies doing business in China have suggested they feel less welcome and the number of companies ranking China as an attractive investment destination has fallen every year since 2012. That suggests that companies are taking the same confrontational approach as the presidential administration. These companies have suggested that policies in China favor domestic firms as opposed to multinational firms. One example of Chinese firms benefitting from the regulatory environment is Alibaba which is allowed to run data centers in Silicon Valley. However in China Amazon is only allowed to do business with local partners.

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Wednesday February 15

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