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A major misconception about the market exposed in one chart

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There’s one chart that could cast doubt on an age-old market adage.

As Treasury yields hover around multiyear highs with the 10-year inching toward the 3 percent mark, Oppenheimer technician Ari Wald says that history shows that rising rates are actually bullish for the market. A more common belief is that a rising rate environment bodes ill for stocks, but Wald says the technicals point to the opposite.

“The key point for us is that the direction of interest rates is equally, if not more important, than the level of interest rates,” he said Tuesday on CNBC’s “Trading Nation.” “So in general, we’re of the view that low and rising tends to be bullish for stocks and high and [falling rates] is what’s bearish.”

On a chart of the 10-year yield and the S&P 500 going back to 2000, Wald points out that since then falling interest rates have actually coincided with a drop in the market.

“If you look back through history, you’ll see that it was a downturn in interest rates that coincided with market tops in 2000 and 2007, as well as what we’ve been calling the top in risk in that 2014 to 2015 period,” he said. “So we see rising rates as growth coming back into the market.”

As a result, Wald believes that if investors are looking to put money to work, cyclical sectors like financials look to be a good bet right now. He cautions against bond proxies like utilities, telecom and real estate investment trusts as he believes they are going to “get hammered” in the current environment.

But Boris Schlossberg, managing director of FX strategy at BK Asset Management, says that from a fundamental standpoint, the rate rally could still pose a threat to stocks.

“We could be in a situation where rates are rising because of deficit financing, we could be in stagflation,” he said on “Trading Nation.” “That is in no way positive for stocks, so I remain highly dubious that rising rates are actually positive for stocks unless we have 3 to 4 percent growth.”

And according to Schlossberg, that high growth percentage looks unlikely. “If you have rising rates and not strong growth, then you have P/E compression and then you definitely have a decline in stocks,” he added.

On Wednesday, the 10-year yield was sitting at around 2.89 percent, hovering near highs unseen since January 2014.

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Foreign Amazon sites named in U.S. ‘notorious markets’ list for counterfeit goods

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Peter Endig | AFP | Getty Images

A handful of Amazon‘s foreign websites were included in the U.S. government’s annual “notorious markets” list due to concerns they host some counterfeit goods.

The United States Trade Representative (USTR) office released its 2020 review of notorious markets on Thursday. The list identifies e-commerce sites and companies that are believed to be facilitating the sale of counterfeit goods, engaging in intellectual property violations or piracy.

Amazon sites in the U.K., Germany, Spain, France and Italy were named in the report. Complainants against the foreign sites alleged that Amazon’s counterfeit removal process is slow, even for companies that are enrolled in its brand protection programs. They also argued that Amazon doesn’t thoroughly vet third-party sellers on its marketplace or make it clear to brands and consumers “who is selling the goods.”

Amazon disputed the trade representative’s report, which didn’t include Amazon’s U.S. site, and pointed to its extensive programs and tools that are designed to stop counterfeiters.

“Including Amazon in this report is the continuation of a personal vendetta against Amazon, and nothing more than a desperate stunt in the final days of this administration,” an Amazon spokesperson told CNBC in a statement. “Amazon does more to fight counterfeit than any other private entity we are aware of.”

Representatives from the USTR didn’t immediately respond to a request for comment.

President Donald Trump has repeatedly been critical of Amazon and its CEO Jeff Bezos during his four-year term. Bezos owns The Washington Post, which Trump has criticized for its unfavorable coverage of his administration. Amazon has also claimed it didn’t win a Pentagon cloud-computing contract, which could be worth as much as $10 billion, as a result of attacks from Trump against the company and Bezos.

Amazon sites were added to the USTR’s notorious markets list for the first time in 2019. The American Apparel & Footwear Association in 2018 urged the trade representative to include some Amazon sites on the list.

Beyond Amazon, other companies named on the list include Chinese e-commerce site Pinduoduo, South American e-commerce company Mercadolibre and file sharing site The Pirate Bay.

Amazon has stepped up its efforts to curtail counterfeits as the third-party marketplace has grown. The marketplace now accounts for more than half of the company’s overall sales and hosts millions of third-party merchants.

While it remains a critical component of Amazon’s business, the marketplace has also faced a number of issues related to the sale of counterfeitunsafe and expired goods. In 2019, Amazon began mentioning counterfeit products as a risk factor in its annual filing.

The company has pursued counterfeiters in court, rolled out various programs to seek and detect sales of counterfeit goods, and in June launched the Counterfeit Crimes Unit, made up of former federal prosecutors, investigators and data analysts, to mine the site for fraudulent activity.

As a result of these and other efforts, 99.9% of pages viewed by customers on the site have never had a valid report of counterfeit, the spokesperson said.

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Facebook builds A.I. to predict likelihood of worsening Covid symptoms

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Dr. Dan Ponticiello, 43, and Dr. Gabriel Gomez, 40, intubate a coronavirus disease (COVID-19) patient in the COVID-19 ICU at Providence Mission Hospital in Mission Viejo, California, January 8, 2021.

Lucy Nicholson | Reuters

Artificial intelligence researchers at Facebook claim they have developed software that can predict the likelihood of a Covid patient deteriorating or needing oxygen based on their chest X-rays.

Facebook, which worked with academics at NYU Langone Health’s predictive analytics unit and department of radiology on the research, says that the software could help doctors avoid sending at-risk patients home too early, while also helping hospitals plan for oxygen demand.

The 10 researchers involved in the study — five from Facebook AI Research and five from the NYU School of Medicine — said they have developed three machine-learning “models” in total, that are all slightly different.

One tries to predict patient deterioration based on a single chest X-ray, another does the same with a sequence of X-rays, and a third uses a single X-ray to predict how much supplemental oxygen (if any) a patient might need.

“Our model using sequential chest X-rays can predict up to four days (96 hours) in advance if a patient may need more intensive care solutions, generally outperforming predictions by human experts,” the authors said in a blog post published Friday.

William Moore, a professor of radiology at NYU Langone Health, said in a statement: “We have been able to show that with the use of this AI algorithm, serial chest radiographs can predict the need for escalation of care in patients with Covid-19.”

He added: “As Covid-19 continues to be a major public health issue, the ability to predict a patient’s need for elevation of care — for example, ICU admission — will be essential for hospitals.”

In order to learn how to make predictions, the AI system was fed two datasets of non-Covid patient chest X-rays and a dataset of 26,838 chest X-rays from 4,914 Covid patients.

The researchers said they used an AI technique called “momentum contrast” to train a neural network to extract information from chest X-ray images. A neural network is a computing system vaguely inspired by the human brain that can spot patterns and recognize relationships between vast amounts of data.

The research was published by Facebook this week but experts have already questioned how effective the AI software can be in practice.

“From a machine learning perspective, one would need to study how well this translates to new, unseen data from different hospitals and patient populations,” said Ben Glocker, who researches machine learning for imaging at Imperial College London, via email. “From my skim reading, it appears that all data (training and testing) is coming from the same hospital.”

The Facebook and NYU researchers said: “These models are not products, but rather research solutions, intended to help hospitals in the days and months to come with resource planning. While hospitals have their own unique data sets, they often don’t have the computational power necessary to train deep learning models from scratch.”

“We are open-sourcing our pretrained models (and publishing our results) so that hospitals with limited computational resources can fine-tune the models using their own data,” they added.

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Biden’s stimulus plan could drive funds from Asia, China to the U.S.: JPMorgan

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SINGAPORE — Asia’s emerging markets could become a casualty as a result of U.S. President-elect Joe Biden’s latest $1.9 trillion Covid relief plan.

That’s according to James Sullivan, head of Asia ex-Japan equity research at JPMorgan.

“Most investors were very positive on Asia and emerging markets relative to the U.S.” before details of the latest rescue package were announced, Sullivan told CNBC’s “Street Signs Asia” on Friday.

“We’ve seen over 18 consecutive weeks of fund inflows into Asia ex-Japan over the course of the last couple of months,” he said, adding that it is “highly likely” that funds start to rotate out of emerging markets in Asia back to the U.S. as a result of the boost to economic growth from Biden’s plan.

U.S. President-elect Joe Biden speaks as he lays out his plan for combating the coronavirus and jump-starting the nation’s economy at the Queen theater January 14, 2021 in Wilmington, Delaware.

Alex Wong | Getty Images

Biden on Thursday revealed the breakdown of his proposed package, titled the American Rescue Plan, which includes measures aimed at sustaining families and firms until vaccines are widely distributed. The plan includes stimulus checks as well as unemployment support.

Sullivan said JPMorgan previously forecast a two percentage point drag on U.S. GDP as a result of the lack of fiscal stimulus.

“We had baked into our forecast a $900 billion fiscal stimulus package, that drove a move from a 2 percentage point drag to a 70 basis point push to U.S. GDP,” he said of the previous forecast.

With Biden’s $1.9 trillion plan now coming in at more than twice the amount expected by JPMorgan, the analyst said it will be a “positive surprise” for the market as well as for overall levels of economic growth in the U.S.

“Investor fund flows into Asia have been very aggressive over the course of the past couple of months, you could start to see that reverse out,” the analyst said. “I’d say, we’re maybe about halfway through the trade at this stage.”

China’s markets — among the top performers regionally in 2020 — could be among the first to be affected by this shift, Sullivan predicted.

“You’re likely to see the aggressive outperformers of 2020 be a source of funds,” he said. “China would be very much front and center there.”

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