Major U.S. equity indexes were higher for the day and lower for the week after several days of increasing geopolitical tensions. The Dow gained 14 points, with 15 of 30 components advancing; the S&P 500 Index added 3 points; and the Nasdaq was 39 points higher. Advancers led decliners by 8 to 7 on the NYSE and were about even on the Nasdaq. The prices of 10-year Treasuries strengthened while prices of 30-year Treasuries were unchanged. Gold futures added $3.90 to close at $1,294.00 an ounce. The price of crude oil gained $0.23 to settle at $48.82 a barrel.

For the week, the Dow lost 1.02%, the S&P 500 lost 1.41%, and the Nasdaq was 1.47% lower.

In earnings news:

  • J.C. Penney Co. Inc. reported a net loss of 20 cents per share compared with a loss of 18 cents per share for the same period last year. Sales were $2.96 billion, up from $2.92 billion and ahead of the $2.84 billion consensus, while same-store sales fell 1.3% for the quarter. J.C. Penney reaffirmed its full-year 2017 outlook, expecting adjusted earnings per share of 40 cents to 65 cents and same-store sales between a 1% decline and 1% increase. J.C. Penney’s shares (JCP) fell 16.70%.

In other business news:

  • The Labor Department said the consumer price index (CPI), including core CPI which excludes volatile food and energy costs, rose a seasonally adjusted 0.1% in July. The CPI is up 1.7% over the past 12 months. While Federal Reserve officials looked for inflation to hit a 2% target this year after the core CPI rose 2.3% in January, inflation has flattened. Costs for new and used vehicles, cell phones, and lodging away from home declined in July. Prices for medical care services, commodities, and apparel increased. Real, or inflation-adjusted, hourly wages rose 0.2% in July and 0.7% over the past 12 months.
  • Bloomberg reports that second-quarter corporate profits have beaten estimates at more than three-quarters of the Standard & Poor’s 500 member companies. Of the 454 companies in the S&P 500 that have so far reported second-quarter results, 68% have beaten analysts’ average estimates for revenue and 78% have topped per-share earnings expectations, some of the broadest and strongest results since 2004. Earnings rose an average of 9.8%, while sales have climbed 5.5%. In every sector, at least half of the companies have surpassed or met expectations, with many also getting a boost from the declining U.S. dollar.


Today in the advancement of artificial intelligence (AI), consider its ability to create art and original (kind of) music.

Researchers at Rutgers University’s Art and Artificial Intelligence Laboratory fed a neural network 80,000 digitized images of paintings from the 15th century through the end of the 20th century. Their algorithms prompted the AI to “explore the creative space to generate novel images that differ from what it has seen in art history.”

The researchers explained, “We propose modifications to its objective to make it capable of generating creative art by maximizing deviation from established styles and minimizing deviation from art distribution.” In other words, as one commentator interpreted the AI model’s objective, “Look at what everyone else is doing, and do something different.”

The AI-generated images were mixed with a sampling of Abstract Expressionist paintings dating from 1945 to 2007, as well as images of paintings shown at Art Basel 2016. The collection was shown to 18 evaluators who thought 75% of the time that the AI-generated images were created by humans. Now if I could only get an AI that paints my house.

On the music front, Flow Machines is a project of Sony Computer Science Laboratories in Paris to develop AI that can compose quality music. The AI model is a set of complex algorithms that analyzes songs. Following a particular musical style, the computer calculates the probability of certain chord progressions, melodic sequences, and rhythms, and uses these probabilities to generate variations.

One caveat in this case is that a human composer arranged the songs and wrote the lyrics based on the AI’s production. Stylistic flourishes such as harmonies and instrumentation are from the composer.

About a year ago, the research lab generated a pop song for the first time, Daddy’s Car, which is based on a selection of Beatles tunes. A second song, Mr. Shadow, was created in the style of American musicians Irving Berlin, Duke Ellington, George Gershwin, and Cole Porter. Sony is preparing to release an album completely composed by AI later this year.

A long time ago, computer scientist Alan Turing described the model for AI success to be a computer that could hold a conversation with a human and convince the human that it was a person. It seems that objective is expanding to include a conversation about art with appropriate background music, all generated by computers and algorithms and no one can tell.


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