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1. GM will test self-driving cars in New York City (GM)17:38[−]

GM Cruise Automation Chevy Bolt

GM and Cruise Automation, the self-driving startup the carmaker acquired in 2016, have been testing self-driving cars in the San Francisco Bay Area, where Cruise is headquartered.

Autonomous Chevy Bolts running Cruise technology will soon arrive in Manhattan, however. New Yorkers could see them in early 2018.

"GM and Cruise are applying to begin testing in Manhattan, where mapping has begun in a geofenced area," the office of New York State Governor Andrew M. Cuomo said in a statement.

"All testing will include an engineer in the driver's seat to monitor and evaluate performance, and a second person in the passenger seat. In support of this work, Cruise is expanding its presence in New York and will begin building a team of employees in New York City."

GM's driverless cars utilize Level 4 autonomy, in which a human occupant simply monitors systems while the vehicle navigates — in the case of the Cruise-equipped Bolts — a precisely mapped environment. This full autonomy is one step away from a Level 5 car that handles all driving duties no matter what the situation.

Cruise CEO Kyle Vogt has previously explained why GM decided to subject its driverless vehicles to testing in San Francisco, a challenging urban area (the company is also testing in Detroit and Phoenix, less difficult places).

Cruise Automation SFO testing

New York's decision is the result of legislation passed earlier this year authorizing autonomous-vehicle testing in the Empire State. Currently, 18 states have laws on the books that allow for testing, with most of the action taking happening in California.

"Autonomous vehicles have the potential to save time and save lives, and we are proud to be working with GM and Cruise on the future of this exciting new technology," the governor said.

"The spirit of innovation is what defines New York, and we are positioned on the forefront of this emerging industry that has the potential to be the next great technological advance that moves our economy and moves us forward."

In the same statement, Vogt added that "[t]esting in New York will accelerate the timeline to deploying self-driving cars at scale."

"New York City is one of the most densely populated places in the world and provides new opportunities to expose our software to unusual situations, which means we can improve our software at a much faster rate," he said.

SEE ALSO: GM is testing its autonomous cars in one of the most challenging cities for driving

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2. Netflix hits record high as subscriber growth blows past targets (NFLX)17:16[−]

reed hastings netflix

Shares of Netflix hit a record high of $204.38 early Tuesday after the company reported subscriber growth that blew past estimates. Shares have since pared their gains, and are currently up 0.51% at $203.72.

The company reported a total net add of 5.3 million subscribers in the third quarter, which was above estimates of 4.5 million. It missed slightly on earnings per share, coming in at $0.29 versus the Wall Street consensus of $0.32. Revenue beat, coming in at $2.99 billion versus the $2.97 billion expected.

Following the results, a number of analysts upgraded their price targets for Netflix, which Goldman Sachs said could happen if the company had a good earnings report. The consensus price target among analysts rose 8.4% to $217.74 from $200.85 from before the report, according to data from Bloomberg.

Goldman, which was previously the most bullish firm on Netflix, raised its price target from $235 to $250 after the report and remains the most bullish. Oppenheimer raised its price target t0 $245 from $215.

"Everything moving in right direction now, but investor anxiety over 2018 cash burn and content competition looms if sub growth slows," Jason Helfstein, an analyst at Oppenheimer wrote.

Helfstein is referring to the $7 billion to $8 billion that Netflix has said it wants to spend on original content in 2018. The company raised its prices for US customers by an average of $1 recently, which should help with the growing content budgets, though Netflix said the timing of the price increase is not linked with the plan to grow its library.

"Many investors have sort of criticized us in the past for being under-priced, and I think for us, we want to make sure that we do this commensurate with value," David Wells, CFO of Netflix, said on the company's earnings call. "And as we take up the content library value as we're doing more global originals that people have exclusively and only on Netflix, there's a great association of that value, and we think that we can grow that value and that price slowly and steadily over time."

Netflix said it hopes to add another 5.05 million subscribers in the fourth quarter, due, in part, to several popular show releases set for the fourth quarter.

Netflix is up 56.87% this year.

Read more about the results from Netflix's third-quarter earnings, click here.

netflix stock price

SEE ALSO: Netflix blows past subscriber growth targets, and hits an all-time high

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3. McDonald's 'mirror of Starbucks' is creating a nightmare for franchisees (MCD)17:11[−]

McCafe

McDonald's new McCafe beverages are a "mirror of Starbucks," according to franchisees — and that's causing some problems.

In September, McDonald's announced it had added a new set of espresso-based drinks to the menu: the caramel macchiato, vanilla cappuccino, and americano.

In a survey of 27 McDonald's franchisees released by Nomura analyst Mark Kalinowski on Tuesday, only two franchisees said that the new beverages are beating sales expectations.

Meanwhile, seven said that the beverages are underselling, and 18 said that the drinks are selling in line with expectations.

Further, the new beverages were creating a long list of challenges, according to franchisees. Here are a few complaints:

  • "Very time consuming, and competitors have a higher-quality product."
  • "Forced equipment purchases, awful sales."
  • "Getting them correct. There are too many ways to mess them up."
  • "Slow ordering time, slow make time, and therefore slow service time. Very labor intensive."
  • "Time-consuming products like this do not belong on McDonald's menu."

Starbucks cup barista

Three franchisees said that one positive aspect of the beverages is their similarity to Starbucks, with one franchisee calling them a "mirror" of the coffee giant's own drinks.

However, copying Starbucks creates a new set of issues.

Starbucks has been plagued with slower service times as it attempts to increase traffic while implementing new mobile ordering technology. People are willing to forgive some of Starbucks' fundamental flaws — like expensive drinks and slower service — because the chain has always marketed itself as being elevated above the average fast-food chain.

McDonald's, meanwhile, is the most iconic fast-food chain in the business. While it has attempted to boost its reputation over the last two years with various menu innovations, it doesn't have the same leeway that Starbucks has.

If McCafe drinks slow down service or force customers to pay more, customers are going to shop elsewhere — especially if McDonald's can't compete with Starbucks when it comes to quality or consistency.

SEE ALSO: McDonald's newest menu items should terrify Starbucks

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4. The president of Goldman Sachs says the perfect r?sum? won't get you the job — here's what will (GS)17:09[−]

David Solomon

A perfect resume isn't enough to find career success, according to one of the most powerful men on Wall Street.

David Solomon, the president and co-COO of Goldman Sachs, recently shared his best career advice on the firm's podcast, " Exchanges at Goldman Sachs."

He told host Jake Siewert that the resume is not the be-all and end-all.

"I see some incredible resumes that over the years come across my desk," he said. "But when you start to sit down and talk with them, they can't really communicate or articulate in a way that backs up just the raw academic performance."

People with poor communication skills, he says, are not doomed for failure. But they could face more barriers.

"Take public speaking," he said. "Take some writing classes. Think about how you can develop communication skills, because it will help you in anything you do."

Solomon also shared the career advice his father gave him when he was younger. It's a tidbit Solomon passed on to his daughters, although he says they didn't heed it.

"Everyone should take a semester of accounting," Solomon said. "Just understanding basic accounting really helps you understand how a lot of the world works from an economic perspective."

Accounting, according to Solomon, can help people understand how to run everything from a home to a giant company. That said, however, he think it's important students get their full degree in a subject matter in which they can find a true interest.

"And when you dig into things that you have some passion about or some interest in, you go a little deeper, you work a little bit harder," he said.

Solomon joined Goldman in 1999, according to his company profile. Prior to his role as co-COO and president, which he took on at the beginning of the year, he was cohead of investment banking from July 2006 to the end of 2016.

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5. LARRY SUMMERS: The new argument for Trump's tax plan is 'dishonest, incompetent and absurd'16:30[−]

donald trump

Larry Summers, the former Treasury Secretary and director of the National Economic Council, took aim Tuesday at the Trump administration's tax plan.

The target of Summers' ire was a new paper from the White House's Council of Economic Advisers, chaired by Kevin Hassett. The CEA released an analysis Monday that explored potential positive wage benefits of the tax-reform outline.

The paper said reducing the corporate tax rate to 20%, as the Trump proposal would, from the current 35% would increase the average American worker's wages by $4,000.

Summers said he disagreed.

"Kevin Hassett accuses me of an ad-hominem attack against his economic analysis of the Trump Administration’s tax plan," Summers wrote on his personal blog. "I am proudly guilty of asserting that it is some combination of dishonest, incompetent, and absurd."

Hassett has been vocal in recent days, attacking critics of the tax plan, including Summers and unfavorable analyses such as the one conducted by the Urban-Brookings Tax Policy Center. Summers did not take kindly to Hassett's attacks on other economists, saying the attacks were part of the reason he was "speaking so strongly."

As for the finding that the corporate tax cut would amount to a $4,000 annual raise for workers, Summers charged it would be impossible due to the simple math of the cut. From the post (emphasis added):

"The cut in corporate tax rates from 35 to 20 percent will cost slightly less than $200 billion a year. There is a legitimate debate among economists about how much the cut will benefit capital and how much it will benefit labor. Kevin's 'conservative' claim that the cut will raise wages by $4000 in an economy with 150 million workers is a claim that workers will benefit by $600 billion or 300 percent of the tax cut! To my knowledge, such a claim is unprecedented in analyses of tax incidence. Kevin though doubles down by holding out the further possibility that wages might rise by $9000."

Another key question is the degree to which a corporate tax cut would benefit labor or capital. A paper from economists at the Treasury Department, which was controversially buried by the department, found that workers bear the burden of 18% of the corporate tax rate, so they would receive roughly the same percentage of the benefit from a cut.

The Joint Committee on Taxation, a nonpartisan federal office, found that workers bore around 25% of the corporate tax rate.

The CEA paper, on the other hand, assumes that workers bear an average burden of 57% of the corporate tax.

While Summers said the issue is the source of "legitimate debate among economists," he still said the paper overreaches.

Summers also pointed to issues with Hassett's assumptions that the tax cut would lead to a substantial economic boost. The former Treasury Secretary noted the US is near full employment and the possible interest rate hike offset from the Federal Reserve as two reasons the tax cuts may not be a huge boon to the economy.

"Considering all this, if a Ph.D student submitted the CEA analysis as a term paper in public finance, I would be hard pressed to give it a passing grade," Summers said in conclusion. "I predict that as debates on tax policy unfold there will be many serious Republican economists who endorse parts of the Trump plan. I doubt that any will associate themselves with the CEA analysis."

SEE ALSO: Trump wants the tax plan passed by the end of the year, but that's a 'farcical fantasy'

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6. The dollar is ticking higher16:30[−]

dollar

The dollar is ticking up on a relatively quiet day for US economic data.

The US dollar index was up by 0.4% at 93.60 at 9:09 a.m. ET.

The dollar slid last week after inflation data came in below expectations and the September FOMC minutes showed that many Fed officials are concerned that inflation will remain lower for longer.

The index is up by about 9% since US President Donald Trump's inauguration.

As for the rest of the world, here was the scoreboard at 9:15 a.m. ET:

  • The Mexican peso was up by 0.3% at 18.9791 per dollar, reversing some of its losses. The currency was getting slammed earlier this week as the US came out swinging in the fourth round of NAFTA re-negotiations. "There are two ways to read the US demands," Marc Chandler, global head of currency strategy at Brown Brothers Harriman, said in commentary. "The first is from the perspective of "The Art of the Deal" where strong demands are made to forces a favorable compromise. The second is that making unreasonably onerous demands may force a collapse of the agreement that the US President has called among the worst in history."
  • The euro was down by 0.4% at 1.1753 against the dollar. Earlier, German ZEW economic sentiment came in at 17.6 for October, below expectations of 20.0. Meanwhile, Spain cut its economic forecast for 2018, citing the impact of the political situation in Catalonia.
  • The British pound was down by 0.5% at 1.3184 against the dollar. Earlier, data showed that the UK's CPI rose 3.0% year-over-year in September, in line with expectations, and above the prior month's reading of 2.9%.
  • The Russian ruble was little changed at 57.3996 per dollar, while Brent crude oil, the international benchmark, was up by 0.3% at $57.99 per barrel.
  • The Indian rupee was down by 0.5% at 65.027 per dollar.
  • The Japanese yen was down by 0.2% at 112.37 per dollar.

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7. Bank stocks mixed despite Goldman Sachs and Morgan Stanley earnings beats (MS, GS, JPM, C, WFC, BAC)16:22[−]

Lloyd Blankfein

Trading on major bank stocks were mixed after two of the big banks reported earnings early Tuesday.

Goldman Sachs and Morgan Stanley beat estimates for the third-quarter to mixed fanfare. Goldman stock was down 1.82% while Morgan Stanley shares were up 1.61%.

Goldman posted earnings per share of $5.02, ahead of the $4.19 expected by analysts. This was largely credited to a surge in investing and lending revenue.

Meanwhile, Morgan Stanley reported earnings per share of $0.93, ahead of estimates of $0.81 per share. The bank saw strong performance from its dealmakers and wealth management unit.

Tuesday's results followed the strong performances by JPMorgan, Citibank, Bank of America and Wells Fargo, which all posted earnings beats last week.

The S&P 500 Financials Index, which is comprised of banks and financial institutions, was down 0.25% after Tuesday's opening bell, but up 12.87% for the year. Here's a look at how the major banks are trading on Tuesday:

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8. Here's a super-quick guide to what traders are talking about right now (NFLX, MS, GS)15:57[−]

Traders work on the floor of the New York Stock Exchange (NYSE)  February 8, 2016. REUTERS/Brendan McDermid

Dave Lutz, head of ETFs at JonesTrading, has an overview of today's markets.

Here's Lutz:

Good Morning! US Futures are drifting around unchanged, with some big tech rallying behind NFLX up 2.5%. Slightly Green in Europe, with the DAX up 10bp in very light volumes. Staples acting good behind Danone #s and Banks rallying as activists target Credit Suisse. IBEX continues to underperform into Thursday’s Catalonia presser, and Italian Banks are under some pressure early. In London, FTSE up small in heavy turnover - Sharp weakness in Merlin offset by Pearson’s leap higher, and weakness in Miners offset by a rally in FTSE banks. In Asia, TOPIX up 20bp - Hang Seng Unch and Shanghai off small in terrible liquidity - KOSPI up20bp, but Tech-Heavy KOSDAQ up 1.7%, and Aussie popped 70bp as Miners shares rallied behind RIO shipment #s.

The US 10YY is unch after being rejected from the 200d earlier – but Fed Funds at 87% for December and the 2YY at 9year highs and the DXY continues to rally as Taylor’s chances increase in Washington. Broad based rally in the Dollar, as UK Inflation posts inline at 5Y+ highs and Euro weaker as Germany’s ZEW comes in light. Ore retreated 2% overnight, and we have some profit-taking in Copper, off 1% early. Gold Continues to retreat from $1300 and the 200dma as the stronger $ outweighs North Korea angst. WTI adding to yesterday’s gains as Iraqi and Kurdish forces continue to clash, and Natty Gas rebounding, up nearly 2% as Traders on the East Coast awaken to a chilly morning.

SEE ALSO: 10 things you need to know before the opening bell

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9. Trump wants the tax plan passed by the end of the year, but that's a 'farcical fantasy'15:55[−]

donald trump

  • President Donald Trump and Republicans want to get their tax plan passed by the end of the year.
  • The window is closing quickly, with under 30 days left in the legislative calendar.
  • Many analysts think such a feat is nearly impossible.

Gary Cohn, the director of the National Economic Council and President Donald Trump's top economic adviser, wants tax reform done this year.

"It's really ambitious, and I think it's really possible, and I think it's really essential," Cohn said at an American Bankers Association meeting Monday. "I think we have a unique window in time right now, but unfortunately, we keep losing days to this window."

He added: "The opportunity is now."

While pressure is mounting on Congress to pass a tax package, the calendar shows dwindling opportunity before the calendar flips to 2018 — with the House out for the week, 28 days remain on the 2017 legislative calendar in which both chambers are scheduled to be in Washington at the same time.

Analysts say, however, that getting a plan to overhaul the US tax code through Congress this year simply isn't going to happen.

"The idea of getting tax reform done this year is a farcical fantasy," Isaac Boltansky, an analyst at the research firm Compass Point, told Business Insider. "Lawmakers have neither the time nor the capacity to formulate and clear a tax reform package in 2017."

The so-called Big Six tax negotiators and Trump unveiled a nine-page unified framework late last month, though they still must agree on finalized tax legislation, take that through committees in both the House and the Senate, pass bills through both chambers, and settle any differences between the two bills.

Already some substantial policy cracks are opening up within the Republican Party on the push — including on the possible elimination of the state and local tax deduction and on the amount the plan would add to the federal deficit.

Gary CohnAnd since the party plans to use budget reconciliation to preempt a filibuster from Democrats in the Senate, the chamber first needs to pass a budget resolution and either get that through the House as is or work with the House to reconcile the differences between their separate budgets.

Greg Valliere, the chief global strategist at Horizon Investments, said Republicans could spin passing a budget as progress toward tax reform. But he said that getting everything finished this year was unlikely.

"They first have to agree on a budget — House-Senate conference committee may not iron that out till early November," Valliere said in an email. "Obviously not enough time to enact a tax bill, but the spin will be that there's progress — true — and a bill can pass by the end of the winter — probably true."

Brian Gardner, the director of Washington research at Keefe, Bruyette & Woods, said the timeline for the House might be shorter — and that since it already passed its budget resolution has a larger margin for error with votes, it could make the deadline.

"Assuming the budget resolution is finished by late October/early November, we expect the House will pass a tax bill by year-end 2017," Gardner said in a note to clients. "We expect the Senate will move slower and may not vote on a tax bill until early 2018. Under what we consider a best-case scenario, tax legislation could be finished in the first half (probably the second quarter) of 2018."

But Congress is also running up against a slew of other deadlines that could complicate progress on tax reform. For one, it must address the expiration of federal funding in December to avoid a government shutdown.

"At this point, the real conversation should focus on whether there can be sufficient progress this year to set the stage for action next year," Boltansky said. "A tax package in this Congress is still possible, but with each passing day — and each new distraction — it becomes less probable."

SEE ALSO: Trump is considering overhauling a key part of his tax plan after Republican blowback

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10. There's an under-the-radar business at Goldman Sachs that has been quietly crushing it (GS)15:45[−]

Lloyd Blankfein

Goldman Sachs reported third-quarter earnings on Tuesday, crushing Wall Street estimates.

The earnings beat was driven by a huge quarter for the investing and lending business, which posted a 35% increase in revenues. And the fixed income, currencies and commodities business, which has been struggling, jumped 25% from a terrible second quarter.

But while Goldman Sachs' bond trading woes have garnered plenty of column inches, Goldman's gains in arranging bonds, otherwise known as debt capital markets work, have attracted less attention.

In the earnings release Tuesday, Goldman Sachs noted:

  • Debt underwriting produced year-to-date net revenues of $2.03 billion, the highest for the first nine months of the year, reflecting a leading position for the firm’s leveraged finance franchise.

To put that in to perspective, here are the nine months revenue figures for Goldman Sachs' debt underwriting business for the past few years:

  • September 30 2017 - $2.03 billion
  • September 30 2016 - $1.885 billion
  • September 30 2015 - $1.57 billion
  • September 30 2014 - $1.83 billion
  • September 30 2013 - $1. 856 billion
  • September 30 2012 - $1.37 billion
  • September 30 2011 - $1.09 billion
  • September 30 2010 - $962 million

In other words, Goldman Sachs' debt underwriting revenue has doubled since 2010.

According to Dealogic, Goldman Sachs ranked fourth for US marketed debt capital markets work for the first nine months of the year, behind powerhouse commercial banks Citigroup, Bank of America Merrill Lynch and JPMorgan, but ahead of traditional debt players like Wells Fargo, Barclays and Deutsche Bank. The bank ranked sixth over the same period a year earlier.

And Goldman Sachs has made up ground in just about every segment of the debt market. It's a top five player in: investment grade debt; financial institution group debt; US marketed loans; yankee debt; high yield and leveraged loans.

The benefit for Goldman Sachs here is twofold. First, the gains in debt capital markets have helped soften the blow of reduced trading revenues. Second, those gains could also help boost the trading business.

A recurring talking point in discussions around Goldman Sachs' FICC position is its position (or lack thereof) with corporates. While universal banks can count on recurring revenue from multinational corporate accounts, Goldman Sachs has been more heavily exposed to the fortunes of hedge funds.

President and COO Harvey Schwartz said in September that Goldman Sachs is hoping to grow the corporate franchise within FICC, which currently makes up 16% of the business, and boost revenues by $250 million.

"We have the leading investment banking franchise," Schwartz said. "We also have a significant global financing franchise. However, our corporate client base is underweight versus peers and we are committed to expanding it."

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11. Morgan Stanley crushes earnings (MS)14:36[−]

James Gorman

Morgan Stanley crushed Wall Street expectations for third-quarter results Tuesday, thanks to strong performance from its dealmakers and its wealth-management unit.

The investment bank reported earnings of $0.93 a share, while analysts were expecting earnings of $0.81 a share.

"Our third quarter results reflected the stability our Wealth Management, Investment Banking and Investment Management businesses bring when our Sales and Trading business faces a subdued environment," Morgan Stanley CEO James Gorman said. "Our balanced business model and the consistent performance of our franchise enabled us to deliver solid returns for our shareholders."

Here are the other key figures:

  • Revenue: $9.2 billion, beating expectations of $9.04 billion and up from $8.9 billion in the third quarter of 2016.
  • Net income: $1.8 billion, beating estimates of $1.5 billion and up from $1.6 billion in the third quarter of 2016.
  • Wealth management: $4.2 billion in revenue, up from $3.9 billion a year ago. Fee-based assets under management hit a record of $1 trillion.
  • Investment-banking revenue: $1.3 billion, up from $1.1 billion a year ago.
  • Trading revenue: $2.9 billion, missing estimates of $3.01 billion and down from $3.2 billion a year ago.
  • FICC: $1.2 billion, down from $1.5 billion a year ago.

Morgan Stanley produced strong results despite the heavy, but not unexpected, hit to its trading business. While fixed income, currencies, and commodities trading declined 20%, equities trading was relatively even compared with last year, with revenue coming in at $1.9 billion.

Through the first nine months, though, trading at the firm is up to $8.9 billion compared with $7.4 billion last year, despite a steep reduction in FICC headcount.

FICC trading revenue has particularly suffered at the big banks, with Bank of America reporting a 22% drop, Citi reporting a 16% drop, and JPMorgan reporting a 27% drop.

Nonetheless, each of the three competing banks beat earnings estimates handily last week and produced otherwise positive results.

Morgan Stanley was buoyed by strong wealth management and investment-banking performances.

Wealth-management revenue was up nearly 9% to $4.22 billion, with revenue per adviser growing to $1.1 million.

Investment banking climbed 15% to $1.3 billion in revenue, thanks primarily to strong performance in underwriting, which increased third-quarter revenue to $715 million from $600 million last year.

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12. New York City yellow cabs have taken a back seat to Uber14:05[−]

uber

The growth in popularity of ride-hailing apps like Uber has affected ridership numbers for New York City's yellow cab industry over the past several years.

But the once David and Goliath relationship between competitors now looks much more even.

For the first time ever, more people took Uber than yellow cabs, according to some number-crunching from the New York Times. The Times reported that in July, Uber had an average of 289,000 rides per day while yellow cabs came in second with 277,000.

The report credits Uber's growth mainly to its availability in the outer boroughs where yellow cabs have become an increasingly rare sight. Half of Uber's rides in New York City now start in an outer borough. That is up from 25% two years ago.

This will add pressure to an already stressed yellow cab industry. Taxi medallion prices have fallen from a high of over $1 million in 2013 to less than $200,000 currently. In response to the drastic fall in medallion values, the New York City Council's Committee on Transportation recently approved a task force to study the medallion market.

But following Uber's banishment from London, these numbers must be a welcome sight for the Silicon Valley unicorn.

SEE ALSO: A Greenwich hedge fund is behind the mysterious buyer of the NYC 'Taxi King's' medallions

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13. Goldman Sachs smashes earnings estimates (GS)14:05[−]

lloyd blankfein

Goldman Sachs reported third-quarter earnings results Tuesday, posting earnings per share of $5.02, way ahead of the $4.19 number expected by analysts.

“Our overall performance this year has been solid and provides a good foundation on which to execute and deliver our growth initiatives,” said Lloyd Blankfein, chairman and chief executive officer.

The biggest driver of the beat was a surge in investing and lending revenue.

"I&L was far and away the biggest driver of the quarter's revenue upside," Credit Suisse analysts said in a note after the results.

Here are the key figures:

  • Revenues: $8.3 billion, above the $7.5 billion expected.
  • Net income: $2.1 billion, higher than the $1.7 billion expected.
  • Investing and lending had its best performance in three years, with $1.9 billion in revenues, up 35% year-on-year. That was driven by gains from investments in private equities, which Goldman said were "positively impacted by corporate performance and company-specific events."
  • Investment banking revenues were $1.8 billion, up quarter-on-quarter and year-on-year.
  • Institutional client services, which can be thought of as the sales and trading business, had $3.1 billion in revenues, up quarter-on-quarter, but still down year-on-year.

Goldman Sachs took a hit to its trading business, as expected. The bank saw a 26% year-on-year decline in fixed income, currency and commodity revenues, to $1.45 billion. That was comparable with the drop at the likes of Bank of America (-22%) and JPMorgan (-27%).

"Although market-making conditions improved in most businesses compared with the second quarter of 2017, Fixed Income, Currency and Commodities Client Execution continued to operate in a challenging environment characterized by low levels of volatility and low client activity," the bank said in a statement.

Still, third quarter FICC revenues were an improvement on the terrible second quarter.

Here's a breakdown of Goldman's FICC revenue in recent quarters:

  • Q3 2017 - $1.45 billion
  • Q2 2017 — $1.16 billion
  • Q1 2017 — $1.685 billion
  • Q4 2016 — $2 billion
  • Q3 2016 — $1.96 billion
  • Q2 2016 — $1.93 billion
  • Q1 2016 — $1.66 billion
  • Q4 2015 — $1.12 billion

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14. 10 things you need to know today (SPY, SPX, QQQ, DIA, JWN, RT, CS, NFLX, MSFT)13:42[−]

Make America Great Again

Here is what you need to know.

Netflix blows past subscriber targets, hits all-time high. The streaming giant beat on both US and international subscriber growth, propelling shares to a record high in after-hours trading on Monday.

Nordstrom postpones its effort to go private. Shares of the department-store chain fell by as much as 7% on Monday after the Nordstrom family postponed its attempt to take the company private, struggling to raise enough debt to finance the deal.

A private-equity firm is buying Ruby Tuesday. The casual dining chain was purchased for a total enterprise value of $335 million, or $2.40 a share in cash, by the private-equity firm NRD Capital.

An activist hedge fund wants to break up Credit Suisse. The Swiss hedge fund RBR Capital Advisors, which is spearheaded by Gaël de Boissard, a former cohead of investment banking at Credit Suisse, wants to split up the bank after its stock has fallen by 20% since Tidjane Thiam took over as CEO in 2015, the Financial Times says.

Microsoft's CEO earns a big payday. Microsoft CEO Satya Nadella earned more than $20 million in cash and stock over the company's most recent fiscal year, according to a company Securities and Exchange Commission filing on Monday.


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Japan's Kobe Steel has been falsifying data for more than 10 years. Cheating at the firm went on for decades and with the knowledge of plant and quality-control managers, Reuters reports, citing an unsourced Nikkei report.

UK inflation hits 3%. UK inflation ticked up to 3% in September, its highest level in five years, data released Monday by the Office for National Statistics showed.

Stock markets around the world are higher. Japan's Nikkei (+0.38%) paced the advance in Asia, and Germany's DAX (+0.02%) clings to a small gain in Europe. The S&P 500 is set to open little changed near 2,557.

Earnings reporting picks up. Goldman Sachs, Harley-Davidson, and Morgan Stanley are among the names reporting ahead of the opening bell, while IBM releases its quarterly results after markets close.

US economic data flows. Industrial production and capacity utilization will be released at 9:15 a.m., and the NAHB Housing Market Index is announced at 10 a.m. ET.

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15. MORGAN STANLEY: A stock market correction is 'looking more likely'13:03[−]

red light

Earnings season can be a euphoric time for stocks.

It's a time when companies have the opportunity to show off growth that matches their valuations, and it can encourage investment by traders looking to put money to work.

But that may not be the case this time around, Morgan Stanley warns.

A big part of that has to do with how investors approach earnings season. When investors anticipate strong results, stocks tend to rally heading into the season only to fade as results are actually reported, the firm says.

This scenario has played out in a relatively benign way twice already this year, with the maximum loss reaching just 3%. But it's different this time around, with the benchmark S&P 500 holding roughly just half of its previous upside, according to Morgan Stanley forecasts.

"If stocks follow the pattern they have been all year, actual earnings season will be a sell the news event and we could have a decent pull back or consolidation," a group of equity strategists led by Michael J. Wilson wrote in a client note. "Near term, a correction is looking more likely."

So what could cause this decline, which the firm says could stretch further than 5%? Wilson & Co. lay out five possible negative catalysts:

  • The unwinding of the Federal Reserve's massive balance sheet
  • Tax-cut legislation proves to be more difficult than simply making promises
  • The announcement of a new Fed chief could "disrupt financial conditions"
  • The US dollar, fresh off multiyear lows, looks to be reversing to the upside
  • Leading economic indicators are hitting extremes, suggesting peaks are "more likely than not"

With all that said, Morgan Stanley is far from calling the end of the 8-1/2-year bull market. The firm is simply warning about the possibility of a relatively mild pullback from what have been record-high valuations.

In fact, the firm is the most bullish on Wall Street, with a 2,700 target on the S&P 500 by the end of first quarter 2018. That's 5.6% above the index's closing price on Monday.

As such, Wilson recommends that investors use whatever weakness results from a potential correction as an opportunity to load back up on equity exposure. In other words, buy the dip — the unofficial slogan of the unstoppable bull market.

Screen Shot 2017 10 16 at 4.51.30 PM

SEE ALSO: Bets on a 'dangerous' trade that reminds experts of the 1987 market crash just broke a record

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NOW WATCH: RAY DALIO: You have to bet against the consensus and be right to be successful in the markets

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16. The new titans of Wall Street are crushing it this year (KKR)07:20[−]

Steven Schwarzman

Equity markets have been red hot, but one area of Wall Street has been even hotter.

Shares of alternative investment managers — those which deal with assets outside of traditional equities, like private equity, distressed debt and real estate — are up roughly 40% so far this year, over double the S&P 500's benchmark 13% return in the same period, according to data from Goldman Sachs.

"Our bottom-up free cash flow analysis shows the stocks’ earnings power is ~30% greater today than it was in 2014/15 (prior share peaks), while the downside risks have been significantly reduced," analyst Alexander Blostein said in a note Monday. "With macro conditions still benign, we see more room to run and raise our coverage view to Attractive with an average total return of 18%."

KKR will join Blackstone Group, a $371 billion firm led by CEO and former Trump advisor Stephen Schwarzman, and Apollo Global Management, which manages $231.8 billion, on Goldman’s list of alternative managers that could outperform in the near future thanks to higher fee-related earnings, healthier balance sheets, and many fewer downside risks.

Private equity firms on the whole have been crushing it in recent years. A recent study by CEM Benchmarking looked at the fund performance of defined benefit pension funds from 1998 to 2014, and found that private equity ranked second to listed-equity real estate investment returns for average annual net returns.

"Private equity had the highest average gross return, estimated as 13.5%, but had the second highest average net return of 11.4% because the impact of expenses," the report said.

Apollo in July raised the largest ever private equity fund, amassing $24.6 billion to be invested in North America and Western Europe, according to Reuters. Blackstone has also made headlines recently for launching a $40 billion infrastructure fund with the help of Saudi Arabia’s Public Investment Fund.

"We believe downside risks to stocks today are nearly ~3X lower than they were vs. last time these stocks peaked, largely due to earnings mix changes," Blostein said. “Given this dynamic, we shift our coverage view on Alternative Managers to Attractive from Neutral."

Specifically, Goldman raised its target price for shares of KKR, a $148.5 billion fund manager, to $23 — 13% above were the stock was trading Monday morning.

KKR is up 48.42% so far over the past year, while Blackstone and Apollo are up 40.27% and 79.53%, respectively.

Note: This post has been updated from its original version to reflect Apollo Global Management's total assets under management.

KKR stock price alternative investment managers

SEE ALSO: A Wall Street giant has raised $40 billion with the help of Saudi Arabia - and it could 'benefit significantly' from Trump's policies (BX)

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NOW WATCH: The head of a $55 billion fund at First Eagle points out the risks everyone else on Wall Street is missing

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17. A huge chunk of men who rule corporate America would prefer if everyone focused less on diversity07:01[−]

Mad Men

Corporate America is still run by mostly white, old men. According to a new survey, they're not too bothered about the lack of diversity.

Nearly a third of the men surveyed recently by PwC would prefer if less attention was paid to diversity. Thirty-one percent of men said there is too much focus on it, compared to 4% of women.

The survey interviewed 866 US public company board members, of which 14% were women – a representative cross section, according to PwC.

Among other findings:

  • When asked whether gender diversity was "very important," only 35% of men said so versus 68% of women.
  • When asked whether racial diversity was "very important," only 20% of men said so, compared to 42% of women.
  • Eighty percent of women said that increasing diversity was happening too slowly, compared to 33% of men.

On every question asked about the importance of diversity, women were far more likely to say that different types of diversity (by age, socioeconomic class, race, etc.) are important. For instance, when it comes to racial diversity on boards, 74% of women but only 26% of men say it's "very important." The chart below goes into the details.

Screen Shot 2017 10 13 at 10.22.18 AM

A big reason for the disparity is that most of the people running these boards are older men who grew up in a different social climate, said Paula Loop, leader of the Governance Insights Center at PwC.

Only 4% of directors at S&P 500 boards are under age 50, and they're overwhelmingly men, per the report.

"You're seeing a lag in the environment these people worked in," Loop told Business Insider. "They're continuing to feel that it’s not missing from their board groups."

One bright spot, according to Loop: men seem to have slightly improved their views on gender diversity since the survey last year. That might be due to pressure from institutional investors who have made gender diversity a hot topic, she said.

SEE ALSO: A star stock picker at Fidelity was reportedly fired after an allegation of sexual harassment

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NOW WATCH: This is what separates the Excel masters from the wannabes

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18. SoftBank's giant investment in Uber will be finalized 'very likely in the next week'06:20[−]

Arianna Huffington

LAGUNA BEACH, CA — SoftBank's multi-billion-dollar investment in Uber will be finalized "very likely in the next week," Uber board member Arianna Huffington said at the WSJD conference Monday.

Uber's board voted earlier this month to approve the Japanese tech conglomerate's investment, which would add six more board seats, include a commitment to go public by 2019, and annul super-voting shares held by ousted ex-CEO Travis Kalanick and other longtime insiders.

Through its $93 billion Vision Fund, SoftBank plans to acquire a 14% to 20% stake in the world's most valuable privately-held tech startup, Huffington said Monday. The deal would include a direct investment in the company as well as a secondary buyout of existing shareholders, she said.

Uber's lofty valuation, which has been pegged at around $69 billion pre-money, appears to be the final detail holding back the cash infusion.

“We are waiting at the moment on what is going to transpire with the price," Huffington said Monday. "It’s all about the price."

She implied that receiving an investment from specifically SoftBank, the "hundred-billion-dollar gorilla in the ride-hailing industry," was a strategic move to assure Uber's long-term success.

“Expect to see some consolidation" in the global ride-hailing industry, she said.

SEE ALSO: Uber will IPO by 2019 and let Softbank buy a huge stake, following a big board meeting

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NOW WATCH: SCOTT GALLOWAY: Bad behavior cost Uber $20-30 billion

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19. Netflix's top execs all wore ugly 'Stranger Things' sweaters on the Q3 earnings call, and the stunt highlights an important new business (NFLX, TGT)02:55[−]

Reed Hastings

Netflix CEO Reed Hastings understands the value of video — and now he's using it to do some serious product placement.

Every quarter, Hastings and other company executives discuss Netflix's latest financial results in a recorded video interview with a financial analyst. During Monday's video interview to discuss the company's third-quarter earnings, the CEO and his lieutenants interrupted questions on financial metrics and the regulatory environment to don garish sweaters with blinking lights sewn in.

Although the woolly abominations might not win many style points among fashionistas, the sweaters were instantly recognizable to fans of Netflix's hit series, "Stranger Things." (The string of Christmas tree lights with letters under each bulb were an important part of the plot in the show's first season.)

The stunt was a promotion for the second season of the show, which Netflix will release on October 28. And it also hints at what could turn out to be an important new business for the company — selling merchandise, such as lunchboxes, backpacks, and action figures, that capitalizes on the popularity of its shows.

Stranger Things"We’re celebrating both the amazing content that’s coming in ten days or so and also Target's great promotion strategy," Hastings announced on the video after his wardrobe change.

"We’re learning how to do merchandising," he continued. "We’ve got some amazing displays and amazing materials out at Target."

Whether the next season of Stranger Things proves as popular as the first remains to be seen. But Hastings proved he's a master promoter by getting the most of his video airtime.

And if really you like his sweater, you can buy it for $32.99 at Target.

SEE ALSO: Netflix blows past subscriber growth targets, and hits an all-time high

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NOW WATCH: This 'crazy, irrational decision' Apple made 20 years ago turned out to be the key to its outrageous success over Samsung

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20. Trump took credit for stock-market records once again — so we graded his claims02:32[−]

Trump NYSE

All you need is a working Twitter account to know that President Donald Trump tries to take credit every time the stock market hits a record high.

It's a routine that has played out in 2017 as the S&P 500 has stretched well into the ninth year of a bull market that has brought it back to unprecedented highs.

And Trump was back at it again Wednesday morning, with a series of tweets playing up his role in the stock market's latest ascent to record levels:

So is Trump right?

Not most of the time. While there have been times this year when the so-called Trump trade — or the promise of business-friendly policies — has undoubtedly been responsible for the gains, there have also been long stretches when other factors were driving returns.

To best assess Trump's fluctuating influence on stocks, we've looked at the S&P 500 on a periodic basis and zeroed in on which bullish element was actually most responsible for strength. When tied together, they provide a pretty good idea of how the benchmark has gone from one high to the next over time — and it hasn't always involved the president.

Methodology

At the beginning of each section is a chart showing the performance of an index of stocks tracking highly taxed companies, relative to the S&P 500. The measure is intended to serve as a proxy for the effect of Trump's proposed policies on the benchmark, with the thinking being that a lowering of the corporate tax rate has long been seen as the campaign promise most likely to be passed.

If the high-tax index is outperforming, that implies a high degree of overall confidence in the Trump trade and therefore outsize influence being exerted on the S&P 500. If the gauge is underperforming (in negative territory), that implied a low degree of confidence and minimal influence.

And bear in mind that if the line veers into negative territory (which — spoiler alert — it does), that isn't reflective of the broader stock market — it's just the most actionable part of the Trump trade. The S&P 500 as a standalone entity has repeatedly hit record highs this year.

In the end, hopefully, we'll have given you enough information to conclude for yourself whether Trump has, in fact, been as indispensable to the stock rally as he claims to be.

November 2016 to February 2017: The best days of the Trump trade.

Remember the first few months after last year's election? It seems like ages ago, and what a simpler time it was. The stock market ripped higher, off to its best start to a new year, largely on the strength of the so-called Trump trade.

And we're not talking about the current iteration of the Trump trade. We mean the one taking place when all the promise of a newly-elected-but-still-out-of-office president's pro-business measures were still on the table, including lower corporate taxes, a repatriation tax holiday, massive infrastructure spending, financial deregulation, and a border adjustment tax.

The initial effect of that version of the Trump trade was undeniable. Every day it proved its mettle, as segments of the stock market ebbed and flowed with the latest headlines associated with each potential change.

Sure, earnings reports for the fourth quarter — mostly released in January — saw corporate profits expand. But it was at just half the rate we'd end up seeing later in 2017, rendering its ultimate effect relatively muted.

But you'll note that the Trump trade faded near the end of this period, providing an ominous sign.

Trump tweet of the period:


Number of stock-market closing records:
20

Was Trump responsible? Yes, definitely, though little did we know that the tax plan rollout he alluded to in the above tweet was still months away (more on that below).



March 2017 to August 2017: The Trump trade dies.

Look no further than the chart above to get an idea of when investors lost faith in Trump's proposed policies. Returns for the most highly taxed companies, infrastructure stocks, and financial firms either leveled off or dropped sharply, hurt by a lack of progress and worries stemming from a healthcare-bill defeat.

Yet the S&P 500 rally raged on, undeterred by the policy failings in Washington. A big part of this can be attributed to the FANG group, made up of Facebook, Amazon, Netflix, and Google. If you expanded that to include other tech stocks like Apple and Microsoft, which were similarly unstoppable during the period, the collection represented the mega-cap backbone that allowed the market to continue its historic climb.

Also helping push stock indexes into the rarefied air was profit expansion. Mentioned in the section above as a minor positive catalyst, earnings growth exploded for the first- and second-quarter reporting periods, which largely occurred in April and July. The S&P 500 saw profit growth of 14% during the first three months of the year and 11% for the second quarter, its best stretch since 2011.

Long story short, the market had a lot going for it during the period — and none of it was built on Trump policy.

Trump tweet of the period:


(Note: None of his tweets included the phrase "stock market" in the four-month period between March 2 and July 2.)

Number of stock market closing records: 18

Was Trump responsible? Not a chance.



August 2017 to present: The Trump trade is ... back?

The period since mid-August has been a mixed bag for the Trump trade. As you can see above, our indicator rallied sharply at the beginning of the period, largely on the back of the long-awaited Republican tax plan. The proposed measures focused on a corporate tax cut as well as a one-time repatriation tax holiday. And since many of the companies that pay high taxes and stash the most cash overseas are the mega-cap tech stocks that wield huge influence over stock indexes, things started to look up.

Since late September, however, the Trump trade has started to flag once again as — let me know if you've heard this before — the S&P 500 broke a series of records. This time around, the benchmark index was pushed to records by laggard sectors like energy and telecom, while tech faltered. The so-called market rotation that occurred showed once again that the S&P 500 had more tricks up its sleeve as it forged ahead into the ninth year of its bull market.

At present time, the jury is still out on the Trump trade's ongoing influence — or lack thereof. After all, investors are starting to grapple with the prospect of a massive federal balance-sheet unwind as well as another set of quarterly corporate earnings.

Trump tweet of the period:


Number of stock market closing records:
13

Is Trump responsible? To be determined.



See the rest of the story at Business Insider

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