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DOW – 279 = 17,826
SPX – 23 = 2081
NAS – 75 = 4931
10 YR YLD – .03 = 1.85%
OIL – .52 = 56.19 Oil posted a 12% gain for the past week.
GOLD + 5.30 = 1,203.30
SILV – .06 – 16.23

The economy continues to expand and consumers are feeling better. The University of Michigan Consumer Sentiment Index rose to 95.9 in April, up from 93 in March. Separately, The Conference Board said leading indicators rose 0.2% in March; the leading economic index has been slowing over recent months but it still points to moderate expansion in economic activity.

Consumer prices rose 0.2% in March. Gasoline prices rose 3.9%, which was the biggest jump since February 2013; still, gas prices are about 33% below year-ago levels.  The core-CPI, which excludes energy and food prices, also rose 0.2% due to higher cost of housing and used cars. The cost of clothes, housing, cars, and medical care increased, while food and airfare decreased. Core prices have risen 1.8% in the past year. While the “all-items index” (which includes things like food and energy) declined 0.1% over the last 12 months. Higher inflation would indicate a stronger dollar because it could reinforce the view that the Fed might hike interest rates sooner rather than later.

The Labor Department reports real average hourly earnings for all employees increased 0.1 percent from February to March, seasonally adjusted. This result stems from a 0.3-percent increase in average hourly earnings being partially offset by a 0.2-percent increase in the Consumer Price Index. Real average hourly earnings increased by 2.2 percent, seasonally adjusted, over the past 12 months.

Another tidbit from the Labor Department shows that long-term, wages have not just been flat but slightly down over the past 40 years. Adjusted for inflation, average weekly earnings for production and non-supervisory employees, the bulk of the workforce, topped out in October 1972. In today’s dollars, the weekly paycheck in 1972 was the equivalent of $811, compared with current paychecks at $703 a week. A recent jump in real average earnings is largely due to low inflation, rather than surging paychecks. Cheaper gasoline and a strong dollar have pushed down overall prices, leaving many Americans with more money, even though they aren’t spending it.

After a string of soft U.S. economic data, the dollar hovered near a one-week low against a basket of major currencies on Friday and was on track for its biggest weekly drop in a month. The dollar index set a fresh one-week low this morning; but moved higher following the economic data on inflation.

An interesting article in the Murdoch Street Journal today argued the idea that the Fed has already tightened monetary policy just by talking about tightening monetary policy. The talk about hiking rates has made itself felt in stock, bond, and most important foreign exchange markets; a version of the taper tantrum, if you will. The dollar’s sharp rise in the last six months is due not just to the European Central Bank’s dramatic easing of monetary policy through quantitative easing (QE, the purchase of bonds with newly created money), but to the juxtaposition of the ECB’s action against anticipation that the Fed will soon tighten. Anticipation of tighter U.S. monetary policy also shows up in various measures of risk such as the spread between yields on corporate bonds and safe Treasuries, which have widened, or the stock market, which has stopped climbing.

This might explain why the economy didn’t seem to take off with the benefits of lower oil prices. It’s also a reminder of something investors and Fed officials routinely forget: Markets discount the Fed’s actions long before they actually occur, in ways that are not obvious at the time.

Bloomberg’s trading terminal experienced a global outage this morning, with traders complaining all over Twitter they had been hit by the issue. And yes, this does affect worldwide trading, especially in the bond markets. There are more than 300,000 subscribers to the Bloomberg terminals and they pay about $20,000 per year for the subscription, so it is for serious business. A lot of traders stepped out for coffee this morning. Service was restored after a couple of hours.

China’s securities regulator tightened rules on margin lending while the country’s two stock exchanges said they would make it easier to short stocks, or bet that stocks will fall in price in an effort to temper the country’s soaring stock markets. Asian markets were generally lower today.

German government bonds continued to break records this morning, lifted by the ECB’s commitment to stimulus, coupled with investors’ appetite for low-risk assets amid growing concerns over Greece. European stocks are down 2.1 percent this week, poised for the worst drop in four months and trimming 2015 gains to 18 percent. In early trade, the yield on Germany’s 10-year bond slipped to 0.049%, breaking through Thursday’s all-time low. The yield on the country’s 30-year debt was just below half a percentage point.

“Liquidity is drying up in Greece,” Greek Finance Minister Yanis Varoufakis said yesterday in Washington. Athens will continue to “compromise for a speedy agreement, but will not be compromised.” International Monetary Fund Managing Director Christine Lagarde warned that she wouldn’t let Greece miss a debt payment. Greece is struggling to win more aid to avoid a default, while resisting more austerity measures. And the Greeks seem to be dragging their feet when it comes to spelling out specific reforms; the reason is simple; the reforms the EU is requesting won’t work and would not be accepted by Greek voters. So, slowly the EU is starting to realize that a Greek exit from the Eurozone would be a big mistake; they don’t know how big a problem it would create but the thinking is that it would be major. Today, there appeared to be a shift in thinking.

In the event of a missed payment, there is no specific plan B to keep Greece in the monetary union. Which is a frightening proposition that now has the big banks scared of other countries exiting the euro, and even bigger concerns that it could breakdown into bank runs. So now, international creditors are starting to show more flexibility in negotiations over Greek finances to prevent a euro exit. The red-line is that the Syriza led government in Athens needs to commit to at least some economic reforms.

If you have been following the Greek situation, it sometimes sounds like it flips then flops between a possible resolution and what seems to be an inevitable train wreck; either Greece bows down to it paymasters or it defaults and exits the Euro Union. But the longer the Greeks delay, the more they are likely to see flexibility from creditors. A Greek exit would be.., well nobody knows but it would probably be bad. And yet, default seems inevitable because they are just too far in the hole. More and more it looks like a best case scenario is a partial default, a few concessions, Greece stays in the Eurozone. That doesn’t mean it will happen that way, but that looks like a possibility. And if, in this whole process, Greece can wean itself off of dependence from the banksters, they could even pull out of the economic depression they are in.

We have a few earnings reports to cover today:
American Express (AXP) reported quarterly revenue that fell short of analysts’ estimates, dropping 2.7% to $7.9 billion. AmEx was hurt by a stronger dollar and the loss of several co-branded tie-ups; AmEx recently ended its co-branded relationship with JetBlue, while its agreement with Costco is due to expire next March.

Schlumberger (SLB) shares rose slightly after the oil equipment provider topped first-quarter earnings projections, although revenue missed. Excluding charges, the company booked a per-share profit of $1.06, beating estimates of $0.91, but down from $1.21 a year earlier. Blaming a decline in drilling activity, Schlumberger said it now plans to cut 11,000 more jobs in addition to the 9,000 job cuts announced in January. You might think a big earnings miss would result in a nasty day of trading, but the Wall Street crowd like to see job cuts.

General Electric (GE) reports its revenue fell a worse-than-expected 12% in its first quarter. Overall for the quarter ended March 31, GE reported a loss of $13.5 billion, or $1.35 a share, compared with a profit of $3 billion, or 30 cents a share, a year earlier.

Honeywell (HON) reported a 5% drop in quarterly revenue, in part due to a stronger dollar, even as net income rose. Honeywell raised the lower end of its full-year profit forecast, even as they cut their full year revenue forecast.

Fifty years ago April 19th, Gordon Moore, he one-time CEO of Intel, predicted that the number of components on semiconductors or “chips” would continue to double every twelve to eighteen months even as the cost per chip would hold constant. The idea came to be known as Moore’s Law. And it really was a radical idea. Most commodities do not behave like that. Think about meat, grains, coffee, or oil, which get worse and more expensive over time. Computing power and related components of the digital revolution including memory, displays, sensors, digital cameras, software and communications bandwidth, continue to get faster, cheaper, and smaller roughly at the pace Moore anticipated. And through economies of scale, low prices encourage more uses, which raises production and lowers costs in a virtuous cycle. With each cycle of Moore’s Law, computing power doubles, even as price holds constant. If you want to have any understanding of the digital revolution, you have to be able to grasp Moore’s Law.

Thanks to Moore’s Law, tomorrow’s digital products are certain to be better and cheaper. Think of it as the granddaddy of disruption, and the life blood of innovation. Fifty years ago, Moore thought the exponential growth cycle might last for 10 years, but 50 year later it still applies. Every time it seems like innovation has hit a wall, we just break through. And that means there is something new and wonderful just around every corner.