THURSDAY 1/23/14

The dollar/yen moves strongly higher to 104.70 so the NIKK jumps +1% higher in early trading. In Davos, Japan’s Abe says “Japan is back.” He speaks about ‘womenomics’ where Japan needs to place more women into the work force to help combat the future demographics of an aging population. The US faces the same demographics problem with a population growing older each year increasing in proportion to the number of young people. TM promises another strong automobile sales year.

China HSBC PMI surprisingly drops to 49.6 under 50 indicating a slowing economy and the first contraction in the last half year. China export orders continue to fade indicating a weaker global economic environment. The Aussie dollar drops to 0.8794. Asia’s mood sours quickly and the major indexes sell off. The dollar/yen collapses lower down to 104.34. The NIKK reverses the earlier gains due to the strengthening yen and ends the day down -0.8%. The Shanghai loses -0.5%. US futures drop overnight with S&P -7. Dow -65. Nasdaq -1. The US courts rule that four Chinese divisions of accounting firms Deloitte and Touche, PricewaterhouseCoopers, KPMG and Ernst and Young, will be barred from practicing in the US for six months. The SEC is frustrated over receiving fraudulent accounting information concerning ongoing investigations into Chinese companies such as QIHU, BIDU, SINA and SOHU. The ruling will be appealed.

Creating a triumphant of bad China news, rumors circulate that a large China trust bank is in trouble and the PBOC is adding liquidity propping up more than just the seasonally-expected new year’s celebrations. Concern grows that China will force individuals investors to take some of the pain of bad financial paper. The circumstances developing are reminiscent of moving into the Lehman event in the States in late 2008.

Concern grows over South African platinum strikes that begin today since there is a past history of horrific violence. Platinum oddly trades lower when the expectation would be turmoil and lower supply with prices moving higher. Copper is down -0.5%. Oil is flat to lower. A terrorism threat against the Olympics received via email is exposed as a hoax. Protestors and police clash in Kiev, Ukraine, which now looks like a war zone, with people fatally shot. Opposition leader Klitshko calls for snap elections but President Yanukovych ignores the plea increasing the violence. The Thailand Baht falls the most in recent days as the protests and social unrest continues in Bangkok and other cities.

Spain’s unemployment rate remains over 26% at depression levels. The structural unemployment is now deep-rooted and will hurt Spain moving forward, especially with jobless benefits expired for many. One-third of Europe’s unemployed are in Spain. Almost two-thirds of the unemployed in Spain are out of work for over two years. Spain’s 10-year yield is 3.74%. German yields are near 7-month lows. Portugal’s 10-year yield is under 5% for the first time since June 2010. Airline easyJet misses forecasts and is beaten -2.6%. Mouse-maker Logitech, now branching deeper into tablet accessories and earphones, beats on earnings and guides higher so the stock jumps +11%. Pearson, owner of the FT and other educational resources, disappoints with earnings and guidance and is smacked -6%.

France PMI is 48.8 remaining in contraction although beating the consensus estimate. Euro zone PMI is a healthy and encouraging 53.9. European indexes trade lower in the early going but then recover to the flat line and higher as morning approaches on the East Coast. The euro launches higher up through 1.36 to 1.3635 which will disappoint European exporters and manufacturers. Swiss bank Credit Suisse and US officials are in talks over an $800 million settlement to put to rest allegations that the bank helped Americans evade taxes. The big wigs continue enjoying the lavish luxury offered by Davos. The world leaders wax worry and concern over growing ‘income inequality’ as they are waited on hand and foot, sip expensive champagne from crystal flutes and sample rare finger foods and delicacies such as caviar. Iran President Rouhani speaks in Davos.

Lenovo confirms the purchase of IBM’s low-end server business. The 10-year yield is 2.84% and 2-year 0.39%. The JNS Biodiesel plant in northern Mississippi, that uses poultry fat as fuel, explodes into a mushroom cloud completely destroying the facility. MCD beats by a penny with top line revenue light. McDonald’s mentions a “challenging” year so it is beaten -1% lower. EBAY is +2% but far off its ecstatic move in the AH’s last evening. UNP beats on earnings reinforcing the NSC positivity from yesterday and gains +1%. South Africa officials agree to meet with striking platinum miners. Traders were privy to this news that is why platinum price is not yet affected by the strike to any great extent. Futures deteriorate as the morning proceeds with the S&P -10 and Dow down -110.

Equities drop like a stone at the opening bell. Volatility spikes higher. The broad indexes are continuing to make new lows moving into the lunch hour with the Dow down almost 200 points. Janus Capital Group is dropping as folks continue to pull their money. HLF plummets -13% on news that Congress may investigate the company. Banks are hit today in response to worries over the China financial markets and the accounting spat. QIHU -10%. BIDU -4%. SINA -6%. SOHU -5%. XLF -1.6%. SLM -5.2%. GS -1.8%. JPM -2.1%. MS -2.5%. FB is down -3% after an article yesterday said Facebook could lose 80% of its users within the next 3 years. SC, the Santander Consumer USA IPO, trades for the first time today bouncing +8%.

The dollar/yen has collapsed over the last few hours from 104.70 down through 104 now way lower at 103.60. The stronger yen is sending the stock market lower. European markets deteriorate and turn strongly negative trading in sync with the US weakness. Existing Home Sales are higher but less than expected. December is typically a slow month. House inventory is flat-lining at 4.6 months showing continued interest. Shockingly, the number of first-time home buyers, the typical young family that everyone envisions when it comes to home sales, is missing in action and buying the least number of homes ever since data has been collected. The hedge funds, speculators, cash buyers and Chinese, Russian and Malaysian wealthy are buying the homes and driving prices higher while the young family with a newborn baby live in the parent’s basement. The central banker policies encourage this reckless market behavior. The rich are richer, thanks to the Fed pumping the stock market, so now the wealthy take the cash and fuel a new real estate bubble.

AMD is down -2% and has collapsed -22% in the last five days. NFLX is up +16%. EBAY +1%. The broad indexes are down about -1%. The 10-year yield is 2.81% as some traders seek safety. Trannies are positive with TRAN printing another all-time high near 7600 as the Dow diverges lower. Equities continue lower with the SPX down -20 and Dow -200. The 10-year yield is down to 2.78% with money moving from stocks to bonds. Dollar/yen 103.44. Markets are strongly negative with copper and financials driving stocks lower. The volume is strong.

AAPL is one of the very few bright spots gaining nearly +1% as Icahn adds more Apple shares. LMT is down -4%, NOC down -3% but GD is up +2%. NE plummets -9%. DO -5%. RIG -4%. Argentina’s financial problems and runaway inflation worries increase with stocks such as BMA, YPF, BFR and TEO, massacred down from -9% to -20%. Brazil stocks such as GOL, EWZ, VALE and PBR are down from -3% to -7%. Emerging markets are all smacked lower. Equities sell off until about 2 PM where a bottom is placed for the day and the indexes float higher into the closing bell.

The SPX loses 16 points, -0.9%, to 1828, with the LOD 24 points down at 1820. The Dow drops 176 points, -1.1%, to 16197, with the LOD 233 points down at 16140. The Nasdaq loses 24 points, -0.6%, to 4219. The RUT loses 9 points, -0.8%, to 1172. Tech and small caps did not lead lower and on the up days did lead higher so this is favorable for bulls. TRAN rockets higher in a down tape printing another record high, however, the Dow Industrials diverge lower. The US stock market selling creates angst among traders that blame the selling on China. After the bell, MSFT handily beats on earnings and gains +4.4% in AH trading. Starbucks beats on EPS but barely meets the top line sales estimate. SBUX trades flat then leaks lower. Despite the large down day, the bullishness among traders and analysts generally continues.