<div class="image-container float_right"><div class="image"><img src="http://static2.businessinsider.com/image/50fec73decad04673f00001b-590-443/robin-hood-1.jpg?maxX=480" border="0" alt="Robin hood" width="480" /><a href="http://www.imdb.com/media/rm1932046336/tt0102798">Warner Brothers/Imdb</a></div></div>Wall Street's top stock market strategists have become <a href="http://www.businessinsider.com/citi-2014-sp-500-target-2013-9">increasingly bullish in recent weeks</a>. And last week's decision by the Federal Reserve has only emboldened many of these experts.
Deutsche Bank's <keyword id="1744308" type="PERSON" weightage="60" keywordseo="David-Bianco">David Bianco</keyword> is among the strategists to have <a href="http://www.businessinsider.com/deutsche-bank-raises-sp-500-target-2013-9">cranked up his S&amp;P 500 target</a> this month.
But in a note to clients titled "Straight Shot To 1800," Bianco argues that the rally will be a smooth ride for stock market investors.
"We expect the S&amp;P to reach 1800 without a 5%+ dip," he wrote in a 52-page note on Thursday. Here's more color:
S&amp;P 500 targets for 2013, 2014 and 2015 yearends: 1750, 1850 and 2000. We expect the S&amp;P to reach 1800 without a 5%+ dip Since May, we advised watching for signs of a return to healthy S&amp;P sales and EPS growth, after four shy quarters, in order to get more <keyword id="69301" type="UNKNOWN" weightage="60" keywordseo="bullish">bullish</keyword>. We argued that restoring healthy S&amp;P sales and EPS growth required oil price resilience and stronger manufacturing, investment spending and exports. Oil and the euro have been very resilient, despite higher yields and dollar gains upon normalizing monetary policy. Moreover, macro reports for 3Q to date have consistently indicated a definitive acceleration in capex and trade vs. last 4 qts. For these reasons, we raised our S&amp;P EPS estimates and yearend target on Sept. 3rd. to 1750 from 1675. Confirmation of these trends and ultimately stronger sales and EPS growth in 3Q and 4Q reports should push the S&amp;P to 1800 by early next year.
Healthy mid single-digit sales growth and upper single-digit EPS growth is now imminent. S&amp;P EPS: 2013E $111, 2014E $119 We are now confident that US investment and exports will accelerate to 5% or higher in 2H13 and 2014 on: 1) resilient oil prices, which will keep energy capex rising, 2) a well managed China slowdown, that is curbing construction but supporting investment in capital goods used for transportation or that lift urban living standards or that boost labor productivity, and 3) an overdue upgrade cycle in US manufacturing, enterprise technology and infrastructure. These factors should make for decent industrial capital goods demand despite US defense spending pressures and the global mining capex crunch. But in order for overall US capex and exports to return to the normal ~10% growth rate of the past 20 years outside of recessions Tech spending must be reinvigorated. Fortunately, some of the latest indicators and management commentary suggest that corporate tech spending is starting to stir.
A return to normal EPS growth supports a return to a normal PE. Target PE: ~16x trailing and ~15x forward S&amp;P EPS Our 2014E EPS of $119, up over 7%, assumes ~4.5% sales growth, ~1.5% of mostly pension related margin expansion and a ~1% share count decline. We forecast nearly 8% EPS growth at non-financials after two years of no sequential quarterly growth. Our outlook represents a broad return to healthy growth, across sectors, not dependent on Financials. We also expect 2014 to be another year of ~15% DPS growth. With a return to nominal and especially real EPS growth that is in line with history, we consider the historically normal PE of 16x trailing and 15x forward S&amp;P EPS fair. This PE aligns with the average since 1960 and implies that 6% is a fair real return on long-term S&amp;P 500 ownership. Further PE expansion in 2014 or 2015 would be justified if long-term real interest rates stay below historical norms when the Fed stops asset purchases or if real EPS growth plus the dividend yield outlook can exceed historical averages. Mid-term elections and the implications for corporate taxes will also influence the 2014 end PE.
The S&amp;P 500 closed at 1,709 on Friday.

DAVID BIANCO: The S&P 500 Will Make A 'Straigtht Shot' To 1,800

UPS <a href="http://www.sec.gov/Archives/edgar/data/1090727/000109072715000003/exhibit991-pressreleaseq42.htm">disclosed on Friday morning</a> that it expects its fourth quarter earnings will widely miss expectations.
In pre-market trade on Friday, UPS shares were down as much as 8%. 
UPS said it expects adjusted earnings per share to total $1.25 in the fourth quarter, missing Wall Street's current expectations for earnings of $1.47, with UPS attributing this earnings to "underperformance" from its US domestic segment. 
"While package volume and revenue results were in line with expectations, operating profit was negatively impacted by higher than expected peak-related expenses," the company said. 
UPS added:
<div style="padding-left: 60px;">Peak plans were designed to provide high quality service for volume surges. The extra capacity was necessary to process the extreme spike in package volume on Cyber Monday and peak day, December 22. However, demand was less than expected on other days. This resulted in a sub-optimized network during peak season. A decline in productivity, increased contract carrier rates, as well as costs associated with overtime and training hours contributed to the excess cost. In addition, the network was somewhat disrupted by volume fluctuations caused by the West Coast port dispute.</div>
<div style="padding-left: 60px;"> </div>
<div>In its release, UPS CEO David Abney said, "Clearly, our financial performance during the quarter was disappointing."</div>
<div> </div>
<div>The company added that an added pension expense of $180 million and currency headwinds - i.e. a strong US dollar - will negatively impact results in 2015, and the company now expects its 2015 EPS will come in below its target of 9%-13% growth. </div>
<div> </div>
<div><a href="http://www.sec.gov/Archives/edgar/data/1090727/000109072715000003/exhibit991-pressreleaseq42.htm">Read UPS' full release here »</a></div>

UPS Shares Are Getting Crushed After The Company Warns That Its 4th-Quarter Results Will Be Terrible 

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/56b221d8dd0895bc798b47d1-1661-1246/rtx231o6.jpg" alt="Uber CEO Travis Kalanick speaks to students during an interaction at the Indian Institute of Technology (IIT) campus in Mumbai, India, January 19, 2016." data-mce-source="REUTERS/Danish Siddiqui" data-mce-caption="Uber CEO Travis Kalanick speaks to students during an interaction at the Indian Institute of Technology (IIT) campus in Mumbai, India, January 19, 2016." data-link="http://pictures.reuters.com/C.aspx?VP3=SearchResult&amp;VBID=2C0BXZKO7PR1I&amp;SMLS=1&amp;RW=1483&amp;RH=895#/SearchResult&amp;VBID=2C0BXZKO7PR1I&amp;SMLS=1&amp;RW=1483&amp;RH=895&amp;PN=2&amp;POPUPPN=61&amp;POPUPIID=2C0BF1FIORWKP" /><a href="http://pictures.reuters.com/C.aspx?VP3=SearchResult&amp;VBID=2C0BXZKO7PR1I&amp;SMLS=1&amp;RW=1483&amp;RH=895#/SearchResult&amp;VBID=2C0BXZKO7PR1I&amp;SMLS=1&amp;RW=1483&amp;RH=895&amp;PN=2&amp;POPUPPN=61&amp;POPUPIID=2C0BF1FIORWKP">REUTERS/Danish Siddiqui</a>Uber CEO Travis Kalanick.</div></div></div>Good morning! Here's the technology news you need to know this Thursday.1. <a href="http://uk.businessinsider.com/gopro-earnings-q4-2015-2016-2" target="_blank">GoPro posted an unexpected earnings loss as its growth slowed and new products failed to catch on with consumers</a>. The digital camera maker reported an adjusted earnings-per-share (EPS) loss of $0.08 (£0.05) and sales of $436.6 million (£299.6 million) for the holiday quarter.2. <a href="http://uk.businessinsider.com/uber-tax-europe-dutch-zero-employees-2016-2" target="_blank">A European member of parliament has accused Uber's European business of being "specifically designed, from the start, to reduce its tax liabilities</a>." Labour's Anneliese Dodds made the comment to Business Insider after we pointed out that two Dutch companies closely involved in running Uber's <keyword id="6354868" type="COUNTRY" weightage="60" keywordseo="UK">UK</keyword> business had no employees for up to a year after it launched here.3. <a href="http://uk.businessinsider.com/john-giannandrea-new-google-search-chief-2016-2" target="_blank">Google just appointed artificial-intelligence exec John Giannandre as its new head of search</a>. Giannandrea will take over from long-time Googler Amit Singhal, <a href="http://www.businessinsider.com/googles-search-chief-is-retiring-2016-2">who has announced his retirement</a>. The move highlights Google's growing emphasis on AI. 4. <a href="http://www.bloomberg.com/news/articles/2016-02-03/index-ventures-amasses-1-25-billion-to-back-tech-startups" target="_blank">Index Ventures</a> <a href="http://www.bloomberg.com/news/articles/2016-02-03/index-ventures-amasses-1-25-billion-to-back-tech-startups" target="_blank">has raised a fresh $550 million (£377 million) fund and expects to accelerate its deal making in 2016.</a> The venture firm is now armed with as much as $1.25 billion (£858 million) after having spent little of the $700 million (£480 million) it raised last April.5. <a href="http://uk.businessinsider.com/cisco-buys-jasper-for-14-billion-2016-2" target="_blank">Cisco is buying a Californian startup called Jasper Technologies for $1.4 billion (£960 million)</a>. Jasper has a cloud-based network service for internet of things (IoT) devices. It has raised $205.3 million (£141 million) in venture funds. 6. <a href="http://uk.businessinsider.com/department-of-work-and-pensions-appointing-amazon-exec-douglas-gurr-to-board-report-2016-2" target="_blank">The UK Department of Work and Pension is appointing an Amazon executive to its board, Sky News reports</a>. Douglas Gurr, who heads up Amazon's China operations, is apparently joining as a non-executive director.7. <a href="http://uk.businessinsider.com/elon-musk-personally-cancels-blogger-tesla-order-2016-2" target="_blank">Tesla CEO Elon Musk personally cancelled a venture capitalist's Tesla order after a "rude" post</a>. Californian investor Stewart Alsop wrote <a href="https://medium.com/@salsop/dear-elonmusk-you-should-be-ashamed-of-yourself-ca3d266882a4#.1jpmd9f8f">an open letter to Musk</a> about the badly run launch event for the Tesla Motors Model X.8. <a href="http://uk.businessinsider.com/apple-market-cap-passes-alphabet-google-2016-2" target="_blank">Apple became the most valuable company in the world again for a brief spell on Wednesday.</a> The iPhone maker lost the title to Alphabet <a href="http://www.businessinsider.com/google-passes-apple-to-become-most-valuable-company-in-world-2016-2">earlier this week</a> after Google's parent company posted better-than-expected earnings on Monday.9. <a href="http://uk.businessinsider.com/microsoft-recalls-2-million-surface-chargers-2016-2" target="_blank">Microsoft is recalling two million laptop chargers because 56 caught fire</a>. Users who own a Surface Pro, Pro 2, or Pro 3 are advised to check their chargers. The newer Surface Pro 4 and Book are not affected.10. <a href="http://www.theguardian.com/media/2016/feb/04/julian-assange-wikileaks-arrest-friday-un-investigation" target="_blank">WikiLeaks founder Julian Assange says he will agree to be arrested by British police on Friday if a UN investigation does not rule that he is being illegally detained at the Ecuadorian embassy in central London</a>. Assange first entered the embassy in June 2012 and has not been outside since. <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/hidden-facebook-tricks-you-need-2016-1">Hidden Facebook tricks you need to know</a></h3> <div> <div> <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script> <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="ZqMGlkMDE6kTToJhnpQU_qxqcD8vfEyM" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div> <script> if (typeof RunFunctions === 'undefined') { var RunFunctions = []; } RunFunctions.push(function() { var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'ZqMGlkMDE6kTToJhnpQU_qxqcD8vfEyM',{ autoplay: 'false' }); }); </script> <noscript><div>Please enable Javascript to watch this video</div></noscript></div> </div> <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script> </div>

10 things in tech you need to know today

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/54d91f5decad04df41e404d4-1200-924/greece-71.jpg" border="0" alt="Greece">Geert Vanden Wijngaert/APEuropean Parliament President Martin Schulz, right, and Greece's Prime Minister Alexis Tsipras address the media at the European Parliament in Brussels on Wednesday, Feb. 4, 2015.</img></div></div></div>Stocks lost ground to start the week as the blue chip Dow index suffered the biggest losses, falling more than 0.6% as markets were still taking stock of headlines out of Greece over the weekend and suggested little progress had been made between Greece and its EU creditors.
First, the scoreboard:
<ul>
<li>Dow: 17,734.4, -90, (-0.5%)</li>
<li>S&amp;P 500: 2,047.6, -7.8, (-0.4%)</li>
<li>Nasdaq: 4,729.6, -14.8, (-0.3%)</li>
</ul>
And now, the top stories on Monday:
1. It's been a volatile year for stocks. Year-to-date, each of the major stock averages are slightly in the red, but the real story has been how rocky of a road it's been to this point. In an email, the NYSE's Rich Barry wrote that Monday marked the 26th trading day of the year, and almost served as the 18th time that the Dow moved up or down 100 points or more. Talk about ups and downs.
2. We're still in the heart of fourth quarter earnings season, and while earnings per share have come in a <a href="http://www.businessinsider.com/monday-scouting-report-feb-9-2015-2015-2">bit better than expected</a>, revenue expectations for the S&amp;P 500 in 2015 are now flat compared to the prior year. In a note to clients, <a href="http://www.businessinsider.com/markets-chart-of-the-day-february-9-2015-2">Goldman Sachs' David Kostin wrote</a> that, "Consensus now forecasts 0% S&amp;P 500 sales growth in 2015 following a 5% cut in revenue forecasts since October. Low oil prices along with FX headwinds and pension charges have weighed on 4Q EPS results and expectations for 2015."
3. We're still digesting the fallout from the RadioShack <a href="http://www.businessinsider.com/radioshack-files-for-bankrtupcy-2015-2">bankruptcy filing</a> last week. Over the weekend, we highlighted the <a href="http://www.businessinsider.com/radioshack-store-closure-list-2015-2">complete list of RadioShack stores</a> set to close by the end of March. And Business Insider's <a href="http://www.businessinsider.com/how-the-american-work-week-hurt-radioshack-2015-2">Ashley Lutz noted on a Monday</a>, a report in The Wall Street Journal suggested that the decline in RadioShack could, as much as anything, be tied to the decline in leisure time for the American worker.
4. Oil is still at the top of the market's mind, and in a note to clients on Monday, <a href="http://www.businessinsider.com/oil-could-fall-to-20-a-barrel-2015-2">Citi's Ed Morse said</a> that West Texas Intermediate crude oil prices could fall as low as $20 as the oil market still looks to balance supply and demand. "It's impossible to call a bottom point," Morse wrote. On Monday, WTI continued its recent upswing, adding another 2% to move back towards $53 a barrel. 
5. Companies in the oil and gas space continue to deliver bad news to the market, with oil company SandRidge reportedly set to announce a 75% reduction in its oil rigs, <a href="http://www.businessinsider.com/r-exclusive-sandridge-cutting-rig-count-by-75-percent--document-2015-2">according to a report from Reuters</a>. Reuters reported that SandRidge will implement these cuts through early April, and comes after the company's stock has fallen by about 70% over the last year. 
Don't Miss: <a href="http://www.businessinsider.com/r-germany-rejects-greek-claim-for-world-war-two-reparations-2015-2">Germany tells Greece there is 'zero' chance it is going to pay World War II reparations »</a>

STOCKS FALL: Here's what you need to know

<div class="image-container float_right" style="width:400px"><div class="image"><img src="http://static4.businessinsider.com/image/510b6b1769bedd883f000016-835-626/ford-atlas-truck-concept-detroit-auto-show-naias-2013.jpg?maxX=400" border="0" alt="ford atlas truck concept detroit auto show naias 2013" width="400" /></div>Alex Davies / Business Insider</div><keyword id="6355174" type="CITY" weightage="60" keywordseo="Ford">Ford</keyword>'s Q1 earnings results are out.
The company reported earnings of $0.41 per share, beating consensus estimates for $0.38 EPS.
Revenues came in at $35.8 billion, also ahead of expectations.
The stock is currently up 2.3% in pre-market trading.
Below is a summary of the data <a href="http://finance.yahoo.com/news/ford-posts-first-quarter-pre-110000538.html">from the release</a>:
DEARBORN, Mich., April 24, 2013 /PRNewswire/ --
<ul style="padding-left: 30px;" type="disc">
<li style="padding-left: 30px;">Strong total company pre-tax profit was $2.1 billion, or 41 cents per share, a decrease of $147 million from a year ago; 15thconsecutive quarter of profitability </li>
<li style="padding-left: 30px;">Net income was $1.6 billion, or 40 cents per share, an increase of $215 million compared with a year ago </li>
<li style="padding-left: 30px;">Positive Automotive operating-related cash flow was $700 million for the quarter — the 12th consecutive quarter of positive cash flow — with strong liquidity of $34.5 billion, unchanged from year-end 2012 </li>
<li style="padding-left: 30px;">Wholesale volume and total company revenue each grew about 10 percent compared with a year ago, including market share gains in North America and Asia Pacific Africa </li>
<li style="padding-left: 30px;">North America pre-tax profit was a record $2.4 billion — the highest quarterly profit since at least 2000, when the company began reflecting the region as a separate business unit — with an operating margin of 11 percent. Ford also reported a small pre-tax profit for Asia Pacific Africa, and losses in Europe and South America </li>
<li style="padding-left: 30px;">Ford Credit continued its solid performance with a first quarter pre-tax profit of $507 million </li>
<li style="padding-left: 30px;">For full year 2013, the company's guidance remains unchanged — Ford expects another strong year, with total company pre-tax profit about equal to 2012, operating margin about equal to or lower than 2012, and Automotive operating-related cash flow higher than 2012</li>
</ul>
<div style="padding-left: 30px;">
Ford Motor Company [NYSE: F] today reported first quarter 2013 pre-tax profit of $2.1 billion, driven by record results from North America and continued solid performance from Ford Credit.
Total company first quarter pre-tax profit of $2.1 billion, or 41 cents per share, was $147 million lower than a year ago, more than explained by Europe and South America. Net income for the first quarter of $1.6 billion, or 40 cents per share, was $215 million higher than a year ago. 
Ford generated positive Automotive operating-related cash flow of $700 million in the first quarter — the 12th consecutive quarter of positive performance — with strong liquidity of $34.5 billion unchanged from year-end 2012.
As part of Ford's previously announced strategy to de-risk its pension obligations, the company made $1.8 billion in cash contributions to its worldwide funded plans during the quarter. This included $1.2 billion of discretionary contributions, in line with Ford's long-term pension de-risking strategy. 
Dividends paid in the quarter totaled about $400 million.
"Our strong first quarter results provide further proof that our One Ford plan continues to deliver," said Alan Mulally, Ford president and CEO. "Our plan remains centered on serving customers in all markets around the world with a full family of vehicles — small, medium and large; cars, utilities and trucks — each with the very best quality, fuel efficiency, safety, smart design and value."
</div>
<a href="http://finance.yahoo.com/news/ford-posts-first-quarter-pre-110000538.html">Click here for the full release &gt;</a>

Ford Beats Estimates On Earnings And Revenue

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/56b48f6f2e526575008b50fc-1873-1405/rtx25ff9.jpg" alt="greece protest" data-mce-source="Reuters/Alkis Konstantinidis" data-mce-caption="Riot police react to petrol bombs thrown by masked youths in Syntagma Square during a 24-hour general strike against planned pension reforms in Athens, Greece." data-link="http://pictures.reuters.com/C.aspx?VP3=SearchResult&amp;ALID=2C0BF1FVD7RKO#/SearchResult&amp;ALID=2C0BF1FVD7RKO&amp;VBID=2C0BX4V5XEFU&amp;POPUPPN=1&amp;POPUPIID=2C0BF1FV97979" /><a href="http://pictures.reuters.com/C.aspx?VP3=SearchResult&amp;ALID=2C0BF1FVD7RKO#/SearchResult&amp;ALID=2C0BF1FVD7RKO&amp;VBID=2C0BX4V5XEFU&amp;POPUPPN=1&amp;POPUPIID=2C0BF1FV97979">Reuters/Alkis Konstantinidis</a>Riot police react to petrol bombs thrown by masked youths in Syntagma Square during a 24-hour general strike against planned pension reforms in Athens, Greece.</div></div></div>Here is what you need to know ahead of the jobs report. <a href="http://www.businessinsider.com/us-jobs-report-preview-january-2016-2">Friday is jobs day</a>. The US economy is expected to have created 190,000 jobs during the month of January as the unemployment rate held at 5.0%, according to Bloomberg. In addition, average hourly earnings are anticipated to have climbed 0.3% month-over-month and 2.2% year-over-year while the average workweek held at 34.5 hours. The data will cross the wires at 8:30 a.m. ET.<a href="http://www.businessinsider.com.au/everything-you-need-to-know-about-celebrating-chinese-new-year-2016-2">The Chinese New Year is coming</a>. The Chinese New Year begins on Monday, February 8. The week-long holiday will keep markets across Asia shuttered for at least a couple of days. Mainland China and Taiwan will see their markets closed for the entire week as they bring in the Year of the Monkey. China's Shanghai Composite (-0.6%) fell on its last trading day during the Year of the Goat.<a href="http://www.businessinsider.com/obama-to-propose-provocative-new-tax-on-oil-2016-2">President Barack Obama wants a $10 per barrel tax on oil</a>. Obama is set to release his new budget plan next week, and it will contain a $10 per barrel tax on each barrel of oil sold to promote investment in clean transportation projects. The proposal is expected to be met with strong objections in the Republican-controlled US Congress.<a href="http://www.businessinsider.com/eu-referendum-yougov-poll-brexit-versus-stay-feb-3-4-2016-2?r=UK&amp;IR=T">Support for a Brexit is gaining momentum</a>. The latest YouGov poll showed 45% are in favor of a Brexit while only 36% are opposed. The case for leaving the EU has gained support following UK Prime Minister David Cameron releasing his draft EU deal earlier this week. Specifically, people are pointing to the sections related to immigration for the shift in support.<a href="http://www.telegraph.co.uk/finance/currency/12140736/Pound-could-crash-by-20pc-if-UK-votes-for-Brexit-warns-Goldman-Sachs.html">Goldman Sachs warns the British pound could plunge on a Brexit</a>. The Telegraph reports, Goldman Sachs thinks the British pound could lose 20% of its value if the UK votes to leave the European Union. The investment bank pointed to the UK's large current account deficit as a "source of vulnerability." According to Goldman a drop to 1.15 or 1.20 cannot be ruled out. Currently the British pound is down 0.4% at 1.4527.<a href="http://www.businessinsider.com/linkedin-earnings-q4-2016-2">LinkedIn is getting crushed after giving brutal guidance</a>. The professional networking site said it expects first-quarter adjusted earnings per share (EPS) of $0.55, which is well shy of the $0.75 expected by the Bloomberg consensus. Revenue guidance was also light, coming out at between $3.6 billion and $3.65 billion, compared Wall Street expectations of $3.9 billion. As for the fourth quarter, LinkedIn announced adjusted earnings of $0.94 per share, easily beating the $0.78 that was anticipated. Revenue surged 34% to $861.9 million, which exceeded the expected $857.4 million. The stock is down 30% in pre-market trade.<a href="http://www.businessinsider.com/r-news-corps-revenue-fall-for-fourth-quarter-in-a-row-2016-2?IR=T">News Corp disappointed</a>. The media giant earned an adjusted $0.20 per share, missing the Bloomberg consensus by a penny. Revenue fell 4.3% to $2.16 billion, but that was good enough to beat the $2.13 billion Wall Street was expecting. Reuters says News Corp's core media business, including Dow Jones and the Wall Street Journal, contributed to the slump.<a href="http://www.businessinsider.com/profit-fell-more-than-50-at-bnp-paribas-frances-biggest-bank-2016-2?r=UK&amp;IR=T">France's biggest bank saw a huge drop in profit</a>. BNP Paribas' fourth quarter profit plunged 52%. Income at the French investment bank €665 million from more than €1 billion a year earlier. The disappointing results come as the bank was forced to write-down the value of its assets at its BNL, its Italian unit. BNP has announced it's restructuring its investment bank division and increasing focus on wealth management.Stock markets around the world are mixed. Japan's Nikkei (-1.3%) lagged in Asia as Hong Kong's Hang Seng (+0.6%) outperformed. In Europe, Spain's IBEX (+0.8%) leads and Germany's DAX (-0.2%) underperforms. S&amp;P 500 futures are higher by 1.75 points at 1909.50.US economic data is heavy. In addition to the jobs report and everything that comes along with it, the trade balance will also be released at 8:30 a.m. ET. Consumer credit ends this week's data with its 3 p.m. ET release. The US 10-year yield is up 1 basis point at 1.85%. <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/walmart-closing-stores-worldwide-retail-supercenter-express-neighborhood-texas-2016-1">Find out if you live near one of the 153 US Walmart stores that are closing this month</a></h3> <div> <div> <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script> <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="d0bW83MDE6hsoCBXLICH4MLVrvyUNweQ" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div> <script> if (typeof RunFunctions === 'undefined') { var RunFunctions = []; } RunFunctions.push(function() { var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'd0bW83MDE6hsoCBXLICH4MLVrvyUNweQ',{ autoplay: 'false' }); }); </script> <noscript><div>Please enable Javascript to watch this video</div></noscript></div> </div> <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script> </div>

10 things you need to know before the opening bell

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/56a8b3bcc08a8036008bccae-1892-1419/rtx241e0.jpg" alt="motorcycle stunt busting through" data-mce-source="Reuters/Mukesh Gupta" data-mce-caption="An Indian policeman performs a stunt on his motorcycle during the Republic Day parade in Jammu, India." data-link="http://pictures.reuters.com/Package/2C0BF1F2YLK16#/SearchResult&amp;ALID=2C0BF1F2YLK16&amp;VBID=2C0BX45HPAX6&amp;POPUPPN=16&amp;POPUPIID=2C0BF1F2IM1V7" /><a href="http://pictures.reuters.com/Package/2C0BF1F2YLK16#/SearchResult&amp;ALID=2C0BF1F2YLK16&amp;VBID=2C0BX45HPAX6&amp;POPUPPN=16&amp;POPUPIID=2C0BF1F2IM1V7">Reuters/Mukesh Gupta</a>An Indian policeman performs a stunt on his motorcycle during the Republic Day parade in Jammu, India.</div></div></div>With the Fed's latest rate announce expected this afternoon, here's what you need to know before the opening bell. <a href="http://www.businessinsider.com/what-to-expect-from-wednesdays-fed-meeting-2016-1">Wednesday is a Fed day</a>. The Federal Reserve will complete its two-day meeting, and announce its latest policy decision at 2 p.m. ET. Currently the market sees no chance of a rate hike and just a 2% chance of a rate cut. Traders will be parsing the statement for clues as to how the recent turmoil in markets may impact the path of presumed Fed rate hikes. Since this is an "off-cycle" meeting there won't be an accompanying press conference nor an update of economic projections.<a href="http://www.businessinsider.com/china-stocks-falling-off-cliff-2016-1?r=UK&amp;IR=T">A late-day rally trimmed the losses in China</a>. China's Shanghai Composite fell to a loss of more than 4% at the midpoint of Wednesday's session, touching its lowest level since November 2014. However, a sudden and dramatic rebound, paced by large cap stocks, lifted the index to a loss of just 0.5% by the close. According to BI Australia, the late-day bid had the hallmarks of buying by China's "National Team."<a href="http://www.businessinsider.com/ray-dalio-ft-opinion-long-term-debt-2016-1">Ray Dalio says the 75-year debt supercycle is ending</a>. Ray Dalio, the founder of Bridgewater Associates, says pretty soon central banks won't be able to stimulate growth using cheap debt. In an op-ed for Financial Times, Dalio said debt super cycles typically last 50 to 75 years, and that the end of the current cycle is near. Dalio pointed to 1935 as an example, saying this scenario was referred to as "pushing on a string."<a href="http://www.businessinsider.com/r-putins-top-security-adviser-says-us-is-after-russias-minerals-2016-1">Russia is worried the US is after its natural resources</a>. According to Nikolai Patrushev, head of Russia's Security Council, the US wants to weaken Russia to "open access to the richest resources for the United States, which believes that Russia possesses them undeservingly." BP data obtained by Reuters shows Russia has the world's sixth largest crude oil holdings and second largest natural gas reserves.<a href="http://www.businessinsider.com/apple-q1-earnings-2016-1">Apple's iPhone business may have finally peaked</a>. Apple earned $3.28 per share on revenue of $75.9 billion. While EPS beat the Bloomberg consensus estimate of $3.23, revenue was shy of the $76.6 billion that was expected. The company sold 74.8 million iPhones during the holiday quarter, which was a slight improvement from the 74.5 number from a year ago, but missed the 75 million that was anticipated. iPad sales tumbled 21% to 16.12 million while Mac sales slid 3%. Apple's revenue guidance for the first three months of 2016 was between $50 billion and $53 billion, which at the midpoint is an 11% year-over-year decline. Wall Street was looking for revenue guidance of $55.7 billion. Apple is down more than 4% in pre-market trade.<a href="http://www.businessinsider.com/rbs-2015-trading-update-analysis-privatisation-litigation-compensation-misselling-2016-1">RBS issued a warning</a>. The Royal Bank of Scotland warned it would take a $3.6 billion (£2.5 billion) hit as a result of legal bills, misselling, writedowns on its private bank and changes to its pension system. However, the warning didn't include anything related to a settlement with US authorities, so there might be another charge in the near future. "I am determined to put the issues of the past behind us, and make sure RBS is a stronger, safer bank," said CEO Ross McEwan on the call.<a href="http://www.ledger-enquirer.com/news/business/article56676838.html">TSYS is buying TransFirst.</a> The credit card and payments processor is buying privately owned TransFirst for $2.35 billion in cash. According to the Ledger-Enquirer, the takeover makes TSYS the sixth largest US merchant acquirer in the US based on net revenue. TSYS Chairman, President and CEO Troy Woods says the acquisition will "enhance its merchant business in order to remain competitive in the rapidly changing acquiring landscape."Stock markets around the globe are mixed. Japan's Nikkei (+2.7%) led a mixed session in Asia, and Germany's DAX (-0.8%) paces the declines in Europe. S&amp;P 500 futures are down 13.50 points at 1882.25.Earnings reporting picks up. Biogen, Boeing, EMC, Fiat Chrysler, Norfolk Southern and United Technologies are among the names reporting ahead of the opening bell. EBay, Facebook, Las Vegas Sands, Qualcomm and Texas Instruments highlight the names releasing their quarterly results after markets close.US economic data is light. New home sales will be released at 10 a.m. ET and crude oil inventories will cross the wires at 10:30 a.m. ET. The US 10-year yield is up 1 basis point at 2.00%. <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/reasons-men-cheat-research-adultery-gary-neuman-2016-1">Research reveals why men cheat - and it's not what you think</a></h3> <div> <div> <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script> <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="9vdnlycjo8Di2vj5XaYNQCb3Cc2NYbee" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div> <script> if (typeof RunFunctions === 'undefined') { var RunFunctions = []; } RunFunctions.push(function() { var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', '9vdnlycjo8Di2vj5XaYNQCb3Cc2NYbee',{ autoplay: 'false' }); }); </script> <noscript><div>Please enable Javascript to watch this video</div></noscript></div> </div> <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script> </div>

<div style="float: right; margin: 15px 0 20px 20px;"><table border="0" cellspacing="0" cellpadding="0"><tbody><tr><td colspan="2"><a href="http://static6.businessinsider.com/category/chart-of-the-day"> <img src="http://static3.businessinsider.com/image/2237544b39b8324a71969a00/button-more-charts.gif" border="0" alt="button more charts" /></a></td></tr><tr><td><a href="http://www.businessinsider.com/chart-of-the-day-military-spending-decline-2013-1"><img src="http://static1.businessinsider.com/image/2237544b42b8324a7a969a00/button-chart-prev.gif" border="0" alt="button chart prev" /></a></td><td><a href="http://www.businessinsider.com/chart-of-the-day-the-japanese-mothers-2013-1"><img src="http://static2.businessinsider.com/image/2237544b4db8324a85969a00/button-chart-next.gif" border="0" alt="button chart next" /></a></td></tr></tbody></table></div>Stocks have staged a remarkable rally with no major corrections.
In a new research note to clients, Citi global equity strategist Robert Buckland discusses what happens after 20 percent rallies in the stock markets. Specifically, he looks for what the key drivers were that extended previous 20% rallies.
"Our study of previous +20% rallies shows that for equities to fly there needs to be a combination of (1) lower than average starting valuations, (2) double digit EPS growth, (3) rising PMIs, (4) higher US government bond yields and, (5) sustained flows into equities," wrote Buckland.
Most of those points may seem pretty obvious. But the point about rising government bond yields isn't always intuitive.
Here's Buckland on bond yields (emphasis ours):
Bond market confirmation Rising profits and improving economic activity are often not enough for market momentum to be sustained. Often the improving environment for equities needs to be mirrored by a deterioration for fixed income investors. We find the first 20% gain in markets is often accompanied with stable bond yields (we use US treasuries). But for markets to make double digit gains from here we usually need to see core government bonds yields rise by 50 basis points or more. They tend to decline by 80 basis points when markets fall from here (Figure 8).
We believe rising bond yields help equity markets in two ways. First, higher yields drive a steeper yield curve which has previously been a robust forward indicator of future economic and profits growth. While QE has weakened the signaling effect of the yield curve, there are still many who take their guide for economic activity and equities from the bond market. Second, falling bond prices encourage a shift of money back into equities, as investors chase returns. In the case of pension funds, higher yields, in theory, should reduce the present value of future liabilities and free up more cash to allocate to riskier assets. This leads us to the next element investors should consider at this stage of a bull market.
<div class="image-container click-to-enlarge" style="width:618px"><div class="image"><a title_source="" title_caption="" class="zoomin" href="http://static2.businessinsider.com/image/510830baeab8eaf66e000013-960/moneygame-cotd-012913.jpg"><img src="http://static2.businessinsider.com/image/510830baeab8eaf66e000013-940-705/moneygame-cotd-012913.jpg?maxX=618" border="0" alt="chart of the day shows the US 10-year bond market change, january 2013" width="618" /></a></div></div>

CHART OF THE DAY: If We Want Stocks To Keep Surging, Government Bond Yields Need To Rise

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/56df4d4f91058422008b5051-2400/rtr393u1.jpg" alt="Larry Fink" data-mce-source="REUTERS/Toru Hanai" data-link="http://pictures.reuters.com/C.aspx?VP3=SearchResult&amp;VBID=2C0FCIXMPPRR5&amp;SMLS=1&amp;RW=1577&amp;RH=958#/SearchResult&amp;VBID=2C0FCIXMPPRR5&amp;SMLS=1&amp;RW=1577&amp;RH=958&amp;POPUPPN=26&amp;POPUPIID=2C0408TKT0910" /><a href="http://pictures.reuters.com/C.aspx?VP3=SearchResult&amp;VBID=2C0FCIXMPPRR5&amp;SMLS=1&amp;RW=1577&amp;RH=958#/SearchResult&amp;VBID=2C0FCIXMPPRR5&amp;SMLS=1&amp;RW=1577&amp;RH=958&amp;POPUPPN=26&amp;POPUPIID=2C0408TKT0910">REUTERS/Toru Hanai</a></div></div></div>This week, Business Insider published the inaugural edition of <a href="http://www.businessinsider.com/bi-100-the-creators-business-visionaries-creating-value-for-the-world-2016-6">Business Insider 100: The Creators</a>, celebrating leaders who embody the notion that capitalism can and should be a force for good.You can check out the <a href="http://www.businessinsider.com/creators">whole Creators series</a> here.We have also launched a series in partnership with public radio's Marketplace, exploring everything from the history of shareholder value to <a href="http://www.businessinsider.com/ibm-corporate-america-history-2016-6">Wall Street's impact on companies like Sears and IBM</a>.We are not alone in being interested in these topics: many big investors and company chief executives have discussed these issues.In February this year, Larry Fink, the chief executive at BlackRock, the world's biggest investor with $4.6 trillion, sent a letter to chief executives at S&amp;P 500 companies and large European corporations. Fink, incidentally, appeared at 23 on the <a href="http://www.businessinsider.com/bi-100-the-creators-business-visionaries-creating-value-for-the-world-2016-6">Business Insider 100: The Creators</a> list.The letter focuses on short-termism both in corporate America and Europe, but also in politics, and asks CEOs to better articulate their plans for the future.Business Insider managed to get a hold of the letter and published it at the time. Given our ongoing work on this topic, we're publishing it in full again below (emphasis ours):Over the past several years, I have written to the CEOs of leading companies urging resistance to the powerful forces of short-termism afflicting corporate behavior. Reducing these pressures and working instead to invest in long-term growth remains an issue of paramount importance for BlackRock's clients, most of whom are saving for retirement and other long-term goals, as well as for the entire global economy.While we've heard strong support from corporate leaders for taking such a long-term view, many companies continue to engage in practices that may undermine their ability to invest for the future. Dividends paid out by S&amp;P 500 companies in 2015 amounted to the highest proportion of their earnings since 2009. As of the end of the third quarter of 2015, buybacks were up 27% over 12 months. We certainly support returning excess cash to shareholders, but not at the expense of value-creating investment. We continue to urge companies to adopt balanced capital plans, appropriate for their respective industries, that support strategies for long-term growth.We also believe that companies have an obligation to be open and transparent about their growth plans so that shareholders can evaluate them and companies' progress in executing on those plans. We are asking that every CEO lay out for shareholders each year a strategic framework for long-term value creation. Additionally, because boards have a critical role to play in strategic planning, we believe CEOs should explicitly affirm that their boards have reviewed those plans. BlackRock's corporate governance team, in their engagement with companies, will be looking for this framework and board review.Annual shareholder letters and other communications to shareholders are too often backwards-looking and don't do enough to articulate management's vision and plans for the future. This perspective on the future, however, is what investors and all stakeholders truly need, including, for example, how the company is navigating the competitive landscape, how it is innovating, how it is adapting to technological disruption or geopolitical events, where it is investing and how it is developing its talent. As part of this effort, companies should work to develop financial metrics, suitable for each company and industry, that support a framework for long-term growth. Components of long-term compensation should be linked to these metrics.We recognize that companies operate in fluid environments and face a challenging mix of external dynamics. Given the right context, long-term shareholders will understand, and even expect, that you will need to pivot in response to the changing environments you are navigating. But one reason for investors' short-term horizons is that companies have not sufficiently educated them about the ecosystems they are operating in, what their competitive threats are and how technology and other innovations are impacting their businesses.Without clearly articulated plans, companies risk losing the faith of long-term investors. Companies also expose themselves to the pressures of investors focused on maximizing near-term profit at the expense of long-term value. Indeed, some short-term investors (and analysts) offer more compelling visions for companies than the companies themselves, allowing these perspectives to fill the void and build support for potentially destabilizing actions.Those activists who focus on long-term value creation sometimes do offer better strategies than management. In those cases, BlackRock's corporate governance team will support activist plans. During the 2015 proxy season, in the 18 largest U.S. proxy contests (as measured by market cap), BlackRock voted with activists 39% of the time.Nonetheless, we believe that companies are usually better served when ideas for value creation are part of an overall framework developed and driven by the company, rather than forced upon them in a proxy fight. With a better understanding of your long-term strategy, the process by which it is determined, and the external factors affecting your business, shareholders can put your annual financial results in the proper context.Over time, as companies do a better job laying out their long-term growth frameworks, the need diminishes for quarterly EPS guidance, and we would urge companies to move away from providing it. Today's culture of quarterly earnings hysteria is totally contrary to the long-term approach we need. To be clear, we do believe companies should still report quarterly results - "long-termism" should not be a substitute for transparency - but CEOs should be more focused in these reports on demonstrating progress against their strategic plans than a one-penny deviation from their EPS targets or analyst consensus estimates.With clearly communicated and understood long-term plans in place, quarterly earnings reports would be transformed from an instrument of incessant short-termism into a building block of long-term behavior. They would serve as a useful "electrocardiogram" for companies, providing information on how companies are performing against the "baseline EKG" of their long-term plan for value creation.We also are proposing that companies explicitly affirm to shareholders that their boards have reviewed their strategic plans. This review should be a rigorous process that provides the board the necessary context and allows for a robust debate. Boards have an obligation to review, understand, discuss and challenge a company's strategy.Generating sustainable returns over time requires a sharper focus not only on governance, but also on environmental and social factors facing companies today. These issues offer both risks and opportunities, but for too long, companies have not considered them core to their business - even when the world's political leaders are increasingly focused on them, as demonstrated by the Paris Climate Accord. Over the long-term, environmental, social and governance (ESG) issues - ranging from climate change to diversity to board effectiveness - have real and quantifiable financial impacts.At companies where ESG issues are handled well, they are often a signal of operational excellence. BlackRock has been undertaking a multi-year effort to integrate ESG considerations into our investment processes, and we expect companies to have strategies to manage these issues. Recent action from the U.S. Department of Labor makes clear that pension fund fiduciaries can include ESG factors in their decision making as well. We recognize that the culture of short-term results is not something that can be solved by CEOs and their boards alone. Investors, the media and public officials all have a role to play. In Washington (and other capitals), long-term is often defined as simply the next election cycle, an attitude that is eroding the economic foundations of our country.Public officials must adopt policies that will support long-term value creation. Companies, for their part, must recognize that while advocating for more infrastructure or comprehensive tax reform may not bear fruit in the next quarter or two, the absence of effective long-term policies in these areas undermines the economic ecosystem in which companies function - and with it, their chances for long-term growth.We note two areas, in particular, where policymakers taking a longer-term perspective could help support the growth of companies and the entire economy:• First, tax policy too often lacks proper incentives for long-term behavior. With capital gains, for example, one year shouldn't qualify as a long-term holding period. As I wrote last year, we need a capital gains regime that rewards long-term investment - with long-term treatment only after three years, and a decreasing tax rate for each year of ownership beyond that (potentially dropping to zero after 10 years).• Second, chronic underinvestment in infrastructure in the U.S. - from roads to sewers to the power grid - will not only cost businesses and consumers $1.8 trillion over the next five years, but clearly represents a threat to the ability of companies to grow. At a time of massive global inequality, investment in infrastructure - and all its benefits, including job creation - is also critical for growth in most emerging markets around the world. Companies and investors must advocate for action to fill the gaping chasm between our massive infrastructure needs and squeezed government funding, including strategies for developing private-sector financing mechanisms.Over the past few years, we've seen more and more discussion around how to foster a long-term mindset. While these discussions are encouraging, we will only achieve our goal by changing practices and policies, and CEOs of America's leading companies have a vital role to play in that debate.Corporate leaders have historically been a source of optimism about the future of our economy. At a time when there is so much anxiety and uncertainty in the capital markets, in our political discourse and across our society more broadly, it is critical that investors in particular hear a forward-looking vision about your own company's prospects and the public policy you need to achieve consistent, sustainable growth. The solutions to these challenges are in our hands, and I ask that you join me in helping to answer them.Sincerely,Laurence D. Fink "The Price of Profits," our series with Marketplace, looks at what happens when profits become a company's product. For more, visit <a href="http://features.marketplace.org/priceofprofits/" target="_blank" data-referer-safe="1" data-referer-original-href="http://priceofprofits.org">priceofprofits.org</a>. <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/hugh-hefner-son-cooper-playboy-mansion-sale-2016-6">Hugh Hefner's son reacts to the sale of the Playboy Mansion</a></h3> <div> <div> <script src="http://player.ooyala.com/v3/6e12e8b3387a44daacfb73afba25a76e"></script> <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="A3aWwwNDE6JhQ99gtsV_5KWDFsTjBJld" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div> <script> if (typeof RunFunctions === 'undefined') { var RunFunctions = []; } RunFunctions.push(function() { var ooyalapopvideo = OO.Player.create('ooyalaplayer_popvideo', 'A3aWwwNDE6JhQ99gtsV_5KWDFsTjBJld',{ autoplay: 'false' }); }); </script> <noscript><div>Please enable Javascript to watch this video</div></noscript></div> </div> <script>(function() { function createPlayer() { OO.ready(function() { RunFunctions.forEach(function(ooyalaFunction) { ooyalaFunction(); }); RunFunctions = [];}); } createPlayer(); }()); </script> </div>

BlackRock's Larry Fink told CEOs that 'quarterly earnings hysteria' is bad for business - here's the letter he sent them

<div class="KonaFilter image-container float_right"><div class="image on-image"><img src="http://static4.businessinsider.com/image/53151d066da8117232311914-1184-888/brian-belski-7.png?maxX=482&amp;maxY=361" border="0" alt="brian belski" width="482" height="361" /><a href="http://www.bloomberg.com/video/bmo-s-belski-on-u-s-canadian-stocks-and-economies-l3aavgVNQc69gWNE9HzRcA.html">Screenshot via Bloomberg TV</a></div></div>FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
<a href="http://www.bmocm.com/research/">Investors Still Doubt The Rebound In Earnings Growth</a> (BMO Capital Markets) 
Investors distracted by all the noise are ignoring an important trend, writes Brian Belski. "Earnings growth has staged a nice rebound in recent quarters," he writes. "For instance, 4Q13 year-over-year quarterly growth is tracking at 21.3% (with 93% of S&amp;P 500 having reported), its highest level since 4Q10." 
"Nonetheless, many clients we speak with remain skeptical regarding earnings growth, owing to the perception that quarterly EPS estimates have been reduced significantly from the start-to-the-end of the past few reporting periods, which they believe implies a deteriorating earnings outlook. 
"…Truth be told, earnings revisions are an important part of our investment analysis process and we pay close attention to trends within the data. However, given the recent mood of the markets, we believe that some investors are misinterpreting the signals that earnings revisions are sending."
<a href="http://www.businessinsider.com/warren-buffett-recommends-sp-500-index-2014-3">Warren Buffett Has Some Incredibly Specific Advice For Where The Average Investor Should Invest</a> (Business Insider)<a href="http://www.businessinsider.com/warren-buffett-recommends-sp-500-index-2014-3"></a>
Warren Buffett's Berkshire Hathaway tries to beat the market. But this is not the path Buffett recommends for the average uninformed investor. From Buffett's Berkshire Hathaway letter to shareholders: "What I advise here is essentially identical to certain instructions I've laid out in my will. One bequest provides that cash will be delivered to a trustee for my wife's benefit. (I have to use cash for individual bequests, because all of my Berkshire shares will be fully distributed to certain philanthropic organizations over the ten years following the closing of my estate.) My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&amp;P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors - whether pension funds, institutions or individuals - who employ high-fee managers."
<a href="http://vanguardadvisorsblog.com/2014/03/03/creating-enduring-success-with-clients/">'Advisors Manage So Much More Than Money'</a> (Vanguard) 
Back in 2008-2009 when we saw a bear market in stocks, talk of the death of equities started making the rounds again. But the stellar run in 2013 has seen investors flood back into stocks. Now, we're seeing a lot more volatility in the stock market and that has investors worried again. "It's tempting to follow the crowd, but this is a period that reinforces the value of discipline," writes Martha King, managing director of Vanguard Financial Advisor Services. 
"With the Standard &amp; Poor's 500 Index up more than 30% last year, now may be the perfect time to review clients' asset allocations and remind them of the importance of sticking to their plans. Successful advisors manage so much more than money. You manage people and their expectations. When clients are scared about market drops or overly enthusiastic about market increases, you stop them from overreacting and potentially making poor choices."
<a href="http://www.fa-mag.com/news/brokers-want-to-thwart-finra-plan-to-collect-client-data-17126.html">Brokers Aren't Fans Of FINRA's Proposal To Gather Client Data</a> (Investment News)
A 2013 Financial Industry Regulatory Authority (FINRA) proposal called Comprehensive Automated Risk Data System (CARDS) has become a top industry concern, reports Dan Jamieson at FA Mag. This system would collect customer trade data "and analyze it to identify churning, pump-and-dump schemes, excessive markups and mutual fund switching. The data would also be used for exams of broker-dealers," reports Jamieson.
"The CARDS concept would result in lot of sensitive information about individual customer holdings and [transactions] being kept at one place -- Finra," Ira Hammerman, general counsel at the Securities Industry and Financial Markets Association told Jamieson. "That raises both privacy and data [security] concerns," Hammerman said. "These issues really are top of mind with our members' customers, the mom and pop investors."
<a href="http://wealthmanagement.com/research/advisor-confidence-drops">Advisor Confidence In The Economy And The Future Of The Stock Market Drops </a>(WealthManagement.com)
Advisors optimism on the U.S. economy and markets saw its biggest monthly drop since April 2013, according to Wealthmanagement.com's latest Advisor Confidence Index. The current state of the economy component of the index fell 4.8% this month, while that of markets in six months was down 2.5%. "The US Stock Market is an area of caution and concern for me. The last decline in the equity markets bottomed in 2009. Historically, US markets have experienced a major decline every 4 years. Cycle theory suggests that advances that extend beyond the norm are usually followed by more forceful declines," Kevin Stockton of Horter Investment Management told WealthManagement.com.

BELSKI: Investors Are Missing An Important Market Trend

<div class="image-container float_right" style="width:400px"><div class="image"><img src="http://static1.businessinsider.com/image/51090fda6bb3f76107000034-899/boeing-787-dreamliner-2.jpg?maxX=400" border="0" alt="boeing 787 dreamliner" width="400" /></div><a href="http://www.flickr.com/photos/ist4u/6809457674/sizes/l/in/photostream/">flickr / INABA Tomoaki</a></div><keyword id="6357957" type="CITY" weightage="60" keywordseo="Boeing">Boeing</keyword>'s Q4 2012 <keyword id="6357061" type="UNKNOWN" weightage="60" keywordseo="earnings">earnings</keyword> release is out.
A live blog of the earnings conference call at 10:30 AM is below.
The aircraft manufacturer reported earnings of $1.28 per share, better than analysts' estimates of $1.18.
Revenues came in at $22.30 billion, just a hair below the $22.33 expected.
The company sees 2013 earnings in the range of $5.00-5.20 per share versus analysts' estimates of $5.16.
Boeing expects 2013 revenues in the range of $82-85 billion versus estimates of $87.90.
Shares are up slightly in pre-market trading.
The company touched briefly on the Dreamliner crisis in the release:
On January 16, 2013, the Federal Aviation Administration (FAA) issued an airworthiness directive that resulted in all in-service 787s temporarily ceasing operations. The company is committed to working with the FAA and other applicable regulatory authorities to return aircraft to service with the full confidence of customers and the traveling public. While production continues on the 787, the company is suspending deliveries until clearance is granted by the FAA.
Boeing says it expects to deliver more than 60 787s in 2013.
In the release, Boeing CEO Jim McNerney said, “Our first order of business for 2013 is to resolve the battery issue on the 787 and return the airplanes safely to service with our customers. At the same time, we remain focused on our ongoing priorities of profitable ramp up in commercial airplane production, successful execution of our development programs, and continued growth in core, adjacent and international defense and space markets.”
<a href="http://www.boeing.com/news/releases/2013/q1/130130_nr.pdf">Click here for the full release &gt;</a>
See below for a summary of Boeing management's comments from the earnings call.
CONFERENCE CALL
[<a href="http://edge.media-server.com/m/p/9mi3j5r7/lan/en">click here for the webcast</a>]
10:30 AM ET - Call begins. CEO Jim McNerney and CFO Greg Smith are on the line.
10:32 - Jim: The business outlook is good, and Boeing expects economic conditions to stabilize this year. Boeing led the industry in new orders for aircraft in 2012.
10:34 - Jim: Nearly two-thirds of Boeing's order book is outside the U.S. and Europe. With volatility in fuel prices, customers continue to see accelerated deliveries, while cancellations remain at low levels.
10:35 - Jim: Boeing continues to see strong demand particularly in the Middle East, Brazil, and Asia Pacific.
10:36 - Jim: Although the threat of sequestration looms, Boeing is still seeing solid demand for unmanned systems and cyber-security.
10:39 - Jim: In 2012, Boeing successfully completed five rate increases on its commercial airplane programs.
10:40 - Jim: Boeing is currently producing 5 787s per month. It expects to be able to crank out 7 787s per month by mid-2013 and 10 per month by the end of the year.
10:41 - Jim: Boeing rigorously supports the investigation into Dreamliner malfunctions and is working around the clock to identify the problem. Progress is being made. "We deeply regret the impact this is having on our customers."
10:42 - Jim: Final stage assembly of the new 787-9 is expected in mid-2013. The first customer delivery remains on track for early 2014.
10:46 - Greg: Unprecedented low interest rates have caused a significant increase in non-cash pension management costs. New non-GAAP measures – referred to as "core operating earnings" and "core earnings per share" – will strip those out.
10:49 - Greg: [Greg is running through the financial results, which can be found in <a href="http://www.boeing.com/news/releases/2013/q1/130130_nr.pdf">Boeing's Q4 earnings release</a>]
10:55 - Greg: Guidance assumes no financial impact from the FAA directive on the Dreamliner investigation. Boeing will inform investors if that changes.
10:58 - Jim: For 2013, our first order of business is obviously getting 787s flying again.
11:00: Q&amp;A begins.
11:00: First question is from Sanford Bernstein. If we were to see an extended delay in 787 deliveries, what would make Boeing consider reducing production rates, and how might this affect the availability of engineering resources for other programs?
11:01 - Jim: That is a highly hypothetical situation. I can't predict an outcome.
11:02 - Sanford Bernstein: Is the problem impacting other development efforts in other product lines?
11:02 - Jim: No, this issue is highly compartmentalized and is not drawing on any critical resources from other growth programs.
11:03: A question from Credit Suisse. What are the parallel paths Boeing is pursuing here; e.g., a software solution versus a more complex electrical change? Also, how much would those paths cost?
11:04 - Jim: The drain on resources from the 787 investigation is not significant. I can't talk about the investigation, but I can assure you there is an ongoing analysis of the root cause, which I'm confident will be identified. "Confidence in the process, confidence in the right resources, and confidence that it's not distracting the balance of Boeing."
11:07: A question from JPMorgan. Cash flow was very strong in Q4 relative to guidance and expectations. What caused that and how does that impact 2013?
11:07 - Greg: There is some pull forward from 2013, and we've been actively managing cash. Also, higher deliveries in Q4. That should continue in 2013 as Boeing ramps up production of commercial aircraft.
11:09: A question from Coen and Co. Is there any reason to think the FAA's approach will change on the 787 from previous investigations?
11:10 - Jim: I don't want to pre-judge what is going to happen.
11:12: A question from BofA Merrill Lynch. How is it going with the 737 MAX, and what should we think about when 787-10 will happen, and what is the timing on the 777X? Also, how do you incrementally evolve a 20-year-old airplane?
11:13 - Jim: MAX development is going very well. We are hitting all of our benchmarks slightly ahead of schedule, and our confidence is growing every day that we will deliver that airplane on time. On the 787-10, we've been conditionally offering the airplane in the marketplace, and the response has been very strong. Very good progress toward that. On the 777X, we are focused on a technical solution that offers significant performance advantages. I think it's been widely discussed that the most likely design is some increased capacity and a composite wing with new engines. "That airplane has eye-watering sorts of performance associated with it." We're getting close to the point where we conditionally offer it to customers.
11:16 - BofA: A composite wing on the 777X is a significant development. There is nothing easy about that, right?
11:17 - Jim: You are correct, it will be a significant amount of work. It's not without challenges, but we are confident.
11:18: A question from Barclays. What will the cadence of 787 deliveries be like throughout the year? Also, for Greg, on the "core EPS" – how are you addressing the sizable liabilities that you are stripping out over the long term?
11:19 - Greg: The 787 deliveries are spread throughout the year. With regard to pension liabilities, it continues to be a primary focus. We've taken action in a number of areas, including our investment strategy. We are continuing to make progress in that area, and the change to "core EPS" does not reduce the significance of that liability.
11:25: Questions from the media. One from the AP: how many batteries have been replaced?
11:26 - Jim: We don't have an exact number. Batteries are replaced on our planes every day. We are unaware of any incidence of battery replacement due to safety concerns – only for routine maintenance. Replacements have been slightly higher than we predicted.
11:27: A question from Reuters. How would a strike by engineers, which seems possible next month, impact the FAA investigation?
11:28 - Jim: That's another hypothetical that is very hard to predict. We're hopeful discussions with the engineers don't come to that. That question hasn't presented itself as a real issue.
11:29: A question from the WSJ. Are supply chains for the 787 too rigid to implement any changes that may arise from the FAA investigation without affecting the rate of production?
11:30 - Jim: We have a bit of a buffer there in our planning.
11:31: A question from CNBC. Is there any consideration of ditching the lithium-ion batteries in the Dreamliner?
11:31 - Jim: Nothing indicates that we made the wrong choice of the battery at this stage.
11:38: Call ends.
<a href="http://www.businessinsider.com/boeing-q4-2012-earnings-2013-1">Click here to refresh the page for LIVE updates &gt;</a>

Boeing Beats Earnings Estimates, Briefs Investors On 787 Dreamliner Fiasco

Alcoa Beats On Earnings, But Revenue Comes In Soft

<div class="KonaFilter image-container display-table"><div><div class="image on-image"><img src="https://static-ssl.businessinsider.com/image/5a299e6ca3b47410148b464a-1847/rieder smile.png" alt="rick rieder blackrock cio" data-mce-source="Bloomberg TV" data-link="https://www.bloomberg.com/news/videos/2017-11-03/blackrock-thinks-rates-can-move-moderately-higher-video" /><a href="https://www.bloomberg.com/news/videos/2017-11-03/blackrock-thinks-rates-can-move-moderately-higher-video">Bloomberg TV</a></div></div></div><ul><li>Rick Rieder, who oversees $1.7 trillion as the global chief investment officer of fixed income at BlackRock, says the growth of technology is the most important dynamic in markets.</li><li>In a wide-ranging discussion, Rieder also discussed the Federal Reserve's next steps, the GOP tax plan, the equity and bond markets, and the rise of exchange-traded funds.</li></ul><hr /> With even the most cursory look at the business landscape, it's clear that technology is pervading everything around us - the places we shop, the products and services we pay for, even the way we think about the world.Just look at <a href="http://markets.businessinsider.com/stock/AMZN-Quote" target="_blank" rel="noopener">Amazon</a>'s using its foundation as an e-commerce juggernaut to disrupt industries far and wide. <a href="http://markets.businessinsider.com/stock/TSLA-Quote" target="_blank" rel="noopener">Tesla</a>, with its $52 billion market cap, is more valuable than Ford in the eyes of investors. And <a href="http://markets.businessinsider.com/stock/AAPL-Quote" target="_blank" rel="noopener">Apple</a>'s iPhone has for years been the primary mode of communication for many of us.Rick Rieder, the global chief investment officer of fixed income at <a href="http://www.businessinsider.com/category/blackrock" target="_blank" rel="noopener">BlackRock</a>, is closely watching technology's effects on the economy and global marketplace. Responsible for overseeing $1.7 trillion, he's a keen observer of how trends like this are developing. To him, it's all part of the grand puzzle of how markets and the economy fit together - and understanding the big picture is crucial to his success as an investor.In an interview with Business Insider, Rieder broke down how technology is transforming the economy and explained how the market is underestimating its impact. He also shared his thoughts on the Federal Reserve's next steps, the GOP tax plan, the equity and bond markets, and the rise of exchange-traded funds.It was part of a wide-ranging discussion that also included a deep dive into Rieder's hectic daily schedule, <a href="http://www.businessinsider.com/blackrock-rick-rieder-chief-investment-officer-fixed-income-interview-2017-11">which you can read about here</a>.This interview has been edited for clarity and length.Joe Ciolli: You've <a href="https://www.blackrockblog.com/2017/09/14/technology-transforming-economic/" target="_blank" rel="noopener">written in the past</a> about the adoption of technology and how it's affecting the market. What's your view on the role of technology?Rick Rieder: By far the most important dynamic today across all markets is how quickly technology is changing the world we live in and invest in. I think people are underestimating how quickly technology is changing commerce in particular, and you're seeing extraordinary dispersion happening in credit as a result.Having said that, I'm convinced the economy is going to keep growing. But if you look at the components of inflation, services versus goods, there are tremendous differences. When the price of goods drops, consumption of those goods grows, particularly since lower- and middle-income consumers tend to consume more goods than services. So when prices come down, quantities grow as a result.When people say the system is stagnating because inflation isn't growing at 2%, that's not true. Prices are dropping so far and so fast for so many consumption items - like apparel, audio and video equipment, transportation services, and more - that the quantity of goods is actually growing precipitously, just at a lower price point than anyone's ever seen before.Ciolli: Are there any specific industries you'd like to highlight?Rieder: Look at motor vehicle sales, which have generally been pretty stable and pretty good. But then you get new ride-sharing technologies that come in which bring down the cost of transportation. Just look at rental-car companies' stock prices - they then sell their fleet, so CPI trends for new and used cars are affected. People don't consider the secondary or tertiary effects of technology. Or take Tesla, for example; they announce a car that's $27,500 after the tax subsidy and all of a sudden you have to deflate the whole automobile industry.And what's happened now with regard to food and restaurants, the whole dynamic is being changed. It used to be that you had a brand that sold through an outlet. If you walked into your local retailer, you knew they'd carry a well-known national brand. Now word of mouth is shifting the way commerce works, in that you don't need to have the brand anymore because it's evaluated online. The whole world of commerce is changing.Ciolli: You're a member of the Federal Reserve Bank of New York's investment advisory committee for financial markets. What's your outlook for what's next for the Fed?Rieder: We've been pretty adamant about the Fed raising rates in December and then three times next year. But the industry now thinks that the Fed is going to go four or five times next year, which is interesting because not too much happened in the past month, since the tax bill was already moving in a positive direction.This is the first time in three years where I'm more dovish than the market on how much the Fed will move in the next year, but I do think the markets, the economy, and inflation will all give them the avenue to move.Inflation is accelerating, and I think people are underestimating the nominal growth potential for 2018. It's possible that we could get 5% nominal GDP next year, allowing the Fed to move but not requiring a dramatic need to brake the economy or inflation.Ciolli: Many people have identified uncertainty around the Fed's balance-sheet unwind as a major source of risk. Do you agree with that?Rieder: The one thing a central bank is not supposed to be is the instigator of volatility, and they won't be. Central banks are maniacally focused on not being an instigant to disrupt markets.As for the changing leadership at the Fed, the Federal Reserve chair tends to act differently than an elected official. They tend to continue the path laid out by the predecessor, while an elected official oftentimes tries to shift gears.Also, when the Fed tightens it's different than easing, in the sense that it can be behind the curve. You want to make sure growth is still durable when you're tightening, which is very different than the easing process, where you want to be fast and ahead of the economy. I think they'll be deliberate in what they do from here.Ciolli: What are your thoughts on tax reform?Rieder: Before, it made a lot of sense for companies to just use excess cash flow to buy back stock. You weren't getting any benefit from capital expenditure, and your cost of debt was extremely low. But now you have a direct expense benefit in the tax bill potentially, and global growth is going to continue to be good, so it makes more sense to invest in capex. That's huge, and it's just not factored in today in terms of the potential impact.When you take your corporate tax rate to 20%, it will create a 20-25% EPS benefit for some companies or industries permanently. That has such huge ramifications for how companies look at their businesses going forward, and how they look at risk.I'm a big believer that when you create this velocity in the system, where companies are able to spend on capex and hiring, it will pull forward growth - meaning we potentially could be in a recession by late 2019 into 2020, but it's not a 2018 story. I wouldn't argue with that, particularly since some growth will get pulled forward.With all of these potential tail risks for doing capex today, I don't see how you can go to your board of directors and say you're just going to buy back your stock in 2018.Ciolli: There are bull markets currently raging for both stocks and bonds. As someone with a fixed-income focus, what do you think could derail the bond bull market?Rieder: I think both the equity and bond markets are right in what they are telling us about important fundamental and technical drivers.There's a demographic that we've never seen before: an aging population that's created this dynamic of needing more income, particularly for insurance companies and pension funds that are growing as a derivative of an aging population. There aren't enough assets or cash flow in the world relative to that demand. The long end of the bond market can stay very low for a very long time because of this extraordinary demand.I think rates are going to move higher, but it'll be a deliberate process. If you asked me where we'd be six months from now, I think the 10-year will be 2.75%, which is still pretty low in a historical context. Because there's not enough income in the bond market, money is going to keep flowing into the equity market, pushing it higher, because that is where you can access decent cash flows today.There just aren't enough assets relative to income requirements in the world today. By any measure we use, the 10-year Treasury yield is between 50 to 75 basis points too low, but it's because there's a shortage of assets. That demand is also much of why volatility is so low.Ciolli: We saw the high-yield-bond market hit a rough patch recently. What's your view on that?Rieder: This recent high-yield skirmish was a result of valuations being high, as with some other parts of the fixed-income market. I think the high-yield market got to a very aggressive valuation point in the US and Europe, and then you got some adverse news around some specific sectors. That was a pretty good wake-up call, and it showed that the markets still hold a good amount of risk.With all of that said, I'm not worried about a dangerous credit-cycle unwind at all.Yet we're going to have more volatility in 2018 no matter what. When central banks pull back on the "put" they've implicitly had in the market, markets will consequently move more on organic economic conditions, which is almost by definition more volatile.Ciolli: Do you think that these sorts of setbacks are ultimately positive for the market?Rieder: Artificially distorted markets are super dangerous. There's a real rhythm to markets, where historically every four years you'd get a market disruption - like in 1990, 1994, 1998, and 2002. And that creates a dynamic where markets reprice and then assets can do well for the next three years.We should've theoretically recalibrated in '06. The fact that we didn't meant that '08 was a bigger problem. Now we're in '17, and assets are being distorted longer. It's really dangerous. Markets have to recalibrate and reprice.A VIX at 9 is wrong. A VIX at 30 is wrong too. But we should really be operating between 13 and 22. And the longer you operate outside of that, the worse it ends up being. It's like going to the dentist - you've just got to do it, and the longer you don't, the worse it ends up being.I don't think equities are mispriced. As a matter of fact, I think they're going to keep going higher, but parts of the debt market are too high, which can be a leading indicator or ultimately the cause in a cause-and-effect world.Ciolli: Active managers often blame ETFs for sapping the market of volatility. What do you make of the role ETFs play?Rieder: Passive investing has definitely made some contribution to low volatility, full stop. I wouldn't argue with that at all.But quantitative easing has also reduced volatility in financial systems - that's the No. 1 influence that QE has on the economy and financial markets, I would argue. That's because of the assumption that central banks will keep going until they solve the problem. And when you come off of that persistent monetary stimulus, volatility grows.But I think there's something even more important than that, and it's the volatility of inflation.In the '70s and '80s, you had a baby boom and housing inflation, and you had some energy inflation. Then in the last 20 years, particularly in the last decade, you've had the price of oil bouncing around due to supply and demand shocks.Now oil doesn't move much at all, and, consequently, there's very little volatility in inflation. If the volatility of inflation stays low, then the volatility of markets must stay low. When you drop the risk premium on the inflation component down, then all of a sudden every financial asset can stay higher for a longer period of time.Ciolli: What's your biggest market fear?Rieder: Complacency.Some areas of the financing market are too high. Central banks flooded the system with liquidity, and now they should pull back. If you don't have that normal give and take that markets generally calibrate to, prices end up being too high for too long, or yields too low, and you get a complacency that's not good.That's my biggest fear going forward. The longer you don't recalibrate - and build up volatility in the markets - that can create a bad outcome with real reverberations. It could adversely affect the lending dynamics in the country and shut down companies from investing.I think what the Fed is doing now is the exact right thing, but I think the ECB and BOJ should start moving as well. Central banks need to pull back and reach some equilibrium.Geopolitical risk also keeps me up at night, but <a href="http://www.businessinsider.com/blackrock-rick-rieder-chief-investment-officer-fixed-income-interview-2017-11" target="_blank" rel="noopener">I don't sleep much anyway</a>, and that will always be there. <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/keurig-papa-johns-political-issues-market-discussion-2017-11">Should companies be tackling politics? Keurig and Papa John's provide cautionary tales</a></h3> <div> <iframe class="bijwplayerclass" data-player="jwplayer" src="https://content.jwplatform.com/players/FhEcPFRF-xjRU7l6Z.html" width="100%" height="100%" frameborder="0" scrolling="auto" style="margin:0px;" allowfullscreen=""></iframe><script>function receiveMessage(event){ console.log(event.data.fullscreen); Android.fullscreen(event.data.fullscreen); }window.addEventListener("message", receiveMessage, false);</script> </div> </div>

BlackRock's $1.7 trillion bond chief reveals the most important force driving markets

<div class="image-container float_right" style="width:400px"><div class="image"><img src="http://static6.businessinsider.com/image/50ec8425eab8ea447200000f-590/alcoa-aluminum-factory-machine.jpg?maxX=400" border="0" alt="Alcoa Aluminum Factory Machine" width="400" /></div>Sean Gallup/Getty Images</div><keyword id="165626" type="COMPANY" weightage="60" keywordseo="Alcoa">Alcoa</keyword>'s <keyword id="6357061" type="UNKNOWN" weightage="60" keywordseo="earnings">earnings</keyword> report is out, and earnings season has unofficially begun.
<a href="http://www.businessinsider.com/alcoa-2013-market-conditions-slides-2013-1">The State Of The Global Economy In Two Huge Slides From Alcoa's Earnings Report &gt;</a>
The company recorded $0.06 EPS in Q4 2012, as expected.
However, the global aluminum giant reported sales of $5.9 billion in Q4, above analysts' estimates of a drop to $5.6 billion.
The stock is moving a bit higher in post-market trading.
Alcoa says that China demand is "coming back," and that the North American building industry is showing potential, but demand from the trucking industry is sluggish.
The company also has an "optimistic" outlook for 2013, but that the debt ceiling debate may slow economic growth, per Bloomberg.
Below are details <a href="http://www.businesswire.com/news/home/20130108006984/en/Alcoa-Reports-Fourth-Quarter-Income-Continuing-Operations">from the press release:</a>
4Q 2012 Highlights
<ul>
<li>Income from continuing operations of $242 million, or $0.21 per share; excluding special items, income from continuing operations of $64 million, or $0.06 per share</li>
<li>Revenue of $5.9 billion, up 1 percent sequentially, down 2 percent from 4Q 2011</li>
<li>Cash from operations of $933 million, up $670 million from 3Q 2012</li>
<li>Free cash flow of $535 million</li>
<li>Strong liquidity with cash on hand of $1.9 billion</li>
<li>Record low 24 days working capital</li>
<li>Record results in Global Rolled Products, Engineered Products &amp; Solutions</li>
<li>Forecasting 7 percent growth in global aluminum demand in 2013</li>
</ul>
Full-Year 2012 Highlights
<ul>
<li>Income from continuing operations of $191 million, or $0.18 per share; excluding special items, income from continuing operations of $262 million, or $0.24 per share</li>
<li>Revenue of $23.7 billion, down 5 percent from 2011, on lower LME pricing</li>
<li>Cash from operations of $1.5 billion</li>
<li>Free cash flow of $236 million</li>
<li>Debt-to-capital ratio 35 percent; Net debt-to-capital ratio 30 percent</li>
<li>Debt of $8.8 billion; Net debt of $7 billion, lowest level since 2006</li>
<li>Record results in Global Rolled Products, Engineered Products &amp; Solutions</li>
<li>531,000 metric tons of smelting capacity taken offline to improve competitive position</li>
</ul>
NEW YORK--(BUSINESS WIRE)--Alcoa (NYSE:AA) today reported income from continuing operations of $242 million, or $0.21 per share, in fourth quarter 2012. Excluding the net positive impact of special items, income from continuing operations was $64 million, or $0.06 per share.
“We overcame volatile metal prices and global economic instability to deliver on our targets for the fourth year in a row. We enter 2013 in a strong position to maximize profitable growth.” Fourth quarter 2012 income compares to a loss from continuing operations of $143 million in third quarter 2012, and a loss of $193 million in fourth quarter 2011.
For the full-year 2012, Alcoa reported income from continuing operations of $191 million, or $0.18 per share, compared with $614 million, or $0.55 per share, in 2011. Year-on-year the realized aluminum price fell 12 percent, equating to roughly $1 billion in market impact.
Despite low aluminum prices, Alcoa generated full-year income and met all of its cash sustainability targets for the fourth consecutive year, ending 2012 in a strong cash position. The Company delivered $1.3 billion in productivity and overhead improvements, reduced days working capital by three days, and ended the year in a strong liquidity position with net debt at its lowest level since 2006 and $1.9 billion cash on hand.
“Alcoa hit record profitability in our mid and downstream businesses, and continued to drive efficiency in our upstream businesses in the fourth quarter, all while cutting debt and maintaining our cash position,” said Klaus Kleinfeld, Alcoa Chairman and Chief Executive Officer.
“We overcame volatile metal prices and global economic instability to deliver on our targets for the fourth year in a row. We enter 2013 in a strong position to maximize profitable growth.”
In 2013, Alcoa sees global aluminum demand growth of 7 percent, up from 6 percent in 2012 and ahead of the 6.5 percent rate required to meet the Company’s forecast of a doubling in global aluminum demand between 2010 and 2020. Aluminum demand grew 10 percent in 2011 on top of 13 percent growth in 2010.
In 2013, Alcoa projects global growth in the aerospace (9-10 percent), automotive (1-4 percent), commercial transportation (2-7 percent), packaging (2-3 percent), building and construction (4-5 percent), and industrial gas turbine (3-5 percent) markets.
Fourth Quarter 2012
Alcoa reported fourth quarter 2012 net income of $242 million, or $0.21 per share, compared to a net loss of $143 million, or $0.13 per share, in third quarter 2012 and $191 million, or $0.18 per share, in fourth quarter 2011. Adjusted EBITDA in fourth quarter 2012 was $597 million, an increase of $315 million over third quarter 2012 and an increase of $152 million over fourth quarter 2011.
Special items in fourth quarter 2012 delivered a net gain of $178 million, primarily associated with the closing of the Tapoco Hydroelectric Project asset sale, which resulted in a $161 million after-tax gain. Another $78 million in gains, including those associated with discrete income tax items and the positive impact of mark-to-market changes on certain energy contracts, were mostly offset by the negative impact of restructuring, primarily related to plant curtailments and asset impairments, and the Massena, New York site fire.
Revenue for fourth quarter 2012 was $5.9 billion, up 1 percent compared with third quarter 2012, but down 2 percent compared with fourth quarter 2011 revenue of $6 billion.
Sequentially, the higher fourth quarter revenues were primarily due to improved realized pricing for aluminum (up 5 percent).
Alcoa delivered outstanding results across all businesses in the fourth quarter. Alcoa’s Primary Metals business delivered After-Tax Operating Income (ATOI) of $316 million in the fourth quarter, up $348 million over fourth quarter 2011 despite a 2 percent drop in realized metal prices. Fourth quarter 2012 ATOI was favorably impacted by the closing of the Tapoco asset sale. At the end of fourth quarter 2012, Global Primary Products had moved down the smelting cost curve by 4 percentage points.
The Company’s midstream and downstream businesses continued to turn in record performance, hitting new profitability highs. Global Rolled Products achieved record fourth quarter ATOI of $69 million, up $43 million year-on-year, and record fourth quarter adjusted EBITDA per metric ton of $344. Engineered Products and Solutions delivered record fourth quarter ATOI of $137 million, up 12 percent year-on-year, and achieved record fourth quarter adjusted EBITDA margin of 17.7 percent, the fourth consecutive quarter a year-over-year record was established.
Alcoa ended the quarter with strong cash results. The Company generated $535 million in free cash flow in the quarter, with cash from operations of $933 million, up $670 million sequentially. Alcoa also maintained its strong liquidity position, ending the quarter with cash on hand of $1.9 billion.
Following the record low in days working capital achieved in each quarter throughout 2012, the Company also achieved an all-time low for the fourth quarter at 24 days, three days lower than the previous fourth quarter record set in 2011, and 19 days lower than fourth quarter 2008. This is the 13th successive quarter the Company has demonstrated year-over-year improvement.
In fourth quarter 2012, the debt-to-capital ratio stood at 34.8 percent, 130 basis points lower than the sequential quarter, while net debt-to-capital stood at 29.7 percent.
2012 Full-Year
For the year 2012, revenue was $23.7 billion, compared to $25 billion in 2011. Income from continuing operations was $191 million, or $0.18 per share, in 2012 compared with $614 million, or $0.55 per share, in 2011. Excluding the impact of special items, income from continuing operations was $262 million, or $0.24 per share, for 2012, compared to $812 million, or $0.72 per share, for 2011.
Full-year 2012 net income was $191 million, or $0.18 per share, compared to $611 million, or $0.55 per share, in 2011.
Alcoa’s midstream and downstream businesses achieved record performance in 2012 with ATOI of $358 million and $612 million, respectively. Adjusted EBITDA per metric ton for Global Rolled Products was a full-year record at $390, 66 percent higher than the 10-year average and 19 percent higher than 2011. Engineered Products and Solutions ended the year with a record annual adjusted EBITDA margin of 19.2 percent, more than double where it was 10 years ago.
Alcoa turned in strong performance against its financial targets in 2012, delivering strong cash results in a challenging market. Despite a drop in both realized alumina prices and realized aluminum prices year-on-year, and $561 million in cash contributions to the pension plan, the Company generated $1.5 billion in cash from operations and $236 million of free cash flow in 2012. At the same time, Alcoa reduced net debt by over $450 million to its lowest level since 2006 ($7 billion), while maintaining a strong cash position of $1.9 billion.
Alcoa ended 2012 with a debt-to-capital ratio of 34.8 percent, within its 30 to 35 percent target range.
Alcoa exceeded its productivity and overhead target for 2012, delivering $1.3 billion in productivity and overhead improvements, 52 percent more than target.
Capital spending for 2012 was $1.26 billion, $89 million below the annual target. For the year, capital expenditures and cash investment in the Saudi Arabia joint venture were approximately $1.4 billion, more than $270 million below the 2012 target.
Sustainable improvements in days working capital reached an all-time low of 24 days. This reflects a year-over-year improvement of 3 days, twice Alcoa’s target of 1.5 days.
Alcoa has taken significant action in the past four years to protect its investment grade rating and is in a stronger financial position today than 2008. Through a disciplined approach to capital spending and focus on liquidity in the past four years, the Company has generated $5 billion in productivity gains, reduced working capital by 19 days, contributed stock to the pension plan two of the last four years, and successfully monetized assets.
In addition, Alcoa has taken action to manage its debt maturity schedule. Excluding 2014 convertible debt, bond maturities have been minimized to $422 million over the next four years.
Alcoa has now completed its planned closure or curtailment of 531,000 metric tons, or 12 percent, of its highest-cost system smelting capacity, further improving the Company’s competitive position.
Segment Information
Alumina
ATOI in the fourth quarter was $41 million, up $50 million sequentially and down $84 million from fourth quarter 2011. The sequential increase was driven by continued productivity gains and positive London Metal Exchange (LME)-based pricing, somewhat offset by a slower rise in Alumina Price Index-pricing.
Primary Metals
ATOI in the fourth quarter was $316 million, up sequentially from negative $14 million, and up from negative $32 million in fourth quarter 2011. The $330 million sequential improvement was driven primarily by the closing of the Tapoco Hydroelectric Project asset sale, productivity gains within the segment, and positive LME-based pricing. Third-party realized price in the fourth quarter was $2,325 per metric ton, up 5 percent sequentially, but down 2 percent year-on-year.
Global Rolled Products
ATOI in the fourth quarter was $69 million, down from $98 million in the third quarter of 2012, but up from $26 million in fourth quarter 2011, a 165 percent year-on-year improvement. Sequentially, seasonal volume declines in packaging were somewhat offset by productivity improvements. The $43 million year-on-year improvement was driven by volume, productivity gains, and better price and mix, somewhat offset by cost increases. Global Rolled Products had record fourth quarter ATOI and adjusted EBITDA per metric ton. Days working capital was a record at 30 days, an improvement of 8 days compared with fourth quarter 2011.
Engineered Products and Solutions
ATOI in the fourth quarter was $137 million, down $23 million sequentially and up $15 million, or 12 percent, year-on-year. Sequentially, cost increases and unfavorable volume and price/mix were somewhat offset by continued productivity improvements. The year-on-year improvement was driven primarily by productivity gains, partially offset by cost increases.
Alba Update
Alcoa is actively negotiating with the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) to reach a resolution of their investigations of the Alba matter; however, we have not reached any agreement with either agency. Given the uncertainty regarding whether a settlement can be reached and, if reached, on what terms, we are not able to estimate a range of reasonably possible loss with regard to any such settlement. If a settlement of the government investigations is reached, we believe that the settlement amount would be material to Alcoa’s results of operations for the relevant fiscal period. If a settlement cannot be reached, Alcoa will proceed to trial with the DOJ and the SEC and under those circumstances is unable to predict an outcome or to estimate its reasonably possible loss. There can be no assurance that the final outcome of the government’s investigations will not have a material adverse effect on Alcoa.
Alcoa will hold its quarterly conference call at 5:00 PM Eastern Time on January 8, 2013 to present the quarter and full-year results. The meeting will be webcast via alcoa.com. Call information and related details are available at www.alcoa.com under “Invest.”
-----------------
ORIGINAL: Minutes away from Alcoa's earnings report after the closing bell, and hence, the unofficial kickoff of Q4 2012 earnings season.
Analysts expect Alcoa to report a profit of $0.06 per share, up from the $0.03 EPS recorded in Q3 2012.
Sales are expected to fall to $5.598 billion.
"With a global footprint and being the first cyclical name to report, investors will be keenly watching management’s guidance for forward aluminium demand as a gauge of global economic conditions," wrote Deutsche Bank Head of Fundamental Strategy Jim Reid in his daily client briefing this morning.
We will have the release LIVE after the closing bell. <a href="http://www.businessinsider.com/alcoa-q4-2012-earnings-2013-1">Click here for updates &gt;</a>

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