WEDNESDAY 3/26/14; Durable Goods Orders; Bank Stress Tests Part Two

Asia indexes are higher from +0.4% to +1.2% except for China’s SSEC which trades slightly lower. Markets are buoyant since global traders are expecting the ECB to provide stimulus to Europe. China is lower as trading floor rumors say that two Chinese banks are insolvent and about to go belly-up. China places limits on cars to decrease the air pollution. The Aussie dollar is at a four-month high at 0.9217 and Australian stocks are at the highest levels in two weeks. India’s benchmark BSE Sensex index prints an all-time high at 22172 logging six new highs during March. Foreign investors are rushing into India with both hands chasing stocks higher. TM offers a buyback no doubt to pump the stock price higher with the same accounting gimmicks used in the States.

The effects of sanctions against Russia are moot as the Micex Index rises +1% to 1338 and the ruble gains strength to 35.467 rather than weakening. Ukraine needs from $15 to $20 billion in funding and the IMF is providing a decision today. The euro remains elevated above the 1.38 pivot at 1.3814. UK raises funds by selling more of its Lloyds Bank stake now reduced to a 25% holding. The UK owns portions of many banks and is attempting to reduce these holding and pay off government debt with the proceeds. Lloyd’s collapses -5.2% from 79 to 75. The pound jumps higher to 1.6548. The US Dollar index drops under 80 to 79.95. Gold 1315. Copper trades flat.

European futures are higher following Asia’s lead and stocks open to the upside about +0.5% across the board. Peugot jumps +2%. European banks are weak in early trading. The US Dollar index drops under 80 to 79.95. Gold 1315. Copper trades flat. US futures are flat overnight but begin lifting after Europe opens. The DAX is up over +1%. S&P +4. Dow +41. Nasdaq +10. The dollar/yen rises to 102.31 so the weaker yen fuels the stock market higher. Copper weakens. WTIC oil is under 100 and Brent is above 107.

Mortgage Applications fall -3.5%. The new mortgages are very thin and the hot hedge fund money and wealthy Chinese and Russian buyers are playing out. Fed’s Bullard says the unemployment rate will probably be under 6% by the end of the year and the recovery is strong. He says there is no month-specific date set to end QE. He says the end to QE and the rate hike will be data-driven and not time-driven. Fed’s Lockhart says the Fed will wait at least six months between the end of QE and the first rate hike, and possible longer. Fed members keep walking back Chair Yellen’s statements about a rate hike occurring six months after the end of QE and this provides bullish lift to markets. Yellen said QE would end this Fall so this yields the following consensus schedule for the Fed moving forward; QE should end between September and November of this year; then, adding from 6 to 9 months, the first rate hike would occur between March and August 2015, only 12 to 17 months ahead. The DAX jumps +1.4%. CAC +1.1%. Dollar/yen climbs higher to 102.39 so US futures run higher. S&P +7. Dow +68. Nasdaq +18.

[Text is Redacted: Purchase March 2014-03 to Read the Complete Chronology]

Capital One maintains the existing divvy and increases the buyback by $2.5 billion. COF launches +.4%. PNC announces a 1.5 billion buyback. USB plans to increase the divvy and buyback and bounces +0.4%. Interestingly, the MS buyback joy fades quickly in the AH and it is now trading negatively. C keeps puking now down -5.6%. JPM plans to buy back $6.5 billion of stock and will increase the divvy. JPM pops +0.4%. BAC is offering a larger buyback so it recovers to the flat line in AH trading. The FHFA Fannie and Freddie regulators announce a $9.3 billion settlement with BAC for its mortgage fraud. The bank buyback news creates an orgy of excitement late day; however, the moves appear lackluster having the feel of a sell-the-news event. Perhaps much of the buyback joy was already priced into banks.

American Express raises the divvy and will buyback $4.4 billion of stock this year. AXP pops +0.4%. WFC increases the dividend and will repurchase 350 million shares. WFC pops +0.3%. Again, the upside moves are a bit tame. The banks are not getting as much bang for their buyback buck. GS provides a vague statement about their capital plan but pops +0.5% anyway. JPM is up +1%. C is collapsing down -6.2%. USB turns negative. STT provides a $1.7 billion buyback and dividend boost so it pops +2.2%.

Essex Property Trust will replace Cliff Natural Resources in the S&P 500 on 4/1/14. ESS gains +2% in the AH and CLF is beaten -1.5%. The shameful automobile recalls continue. Today’s announcement is Nissan recalling one million vehicles due to the passenger air bags sometimes activating without incident punching the passenger in the face. There are a limited number of injuries. When equities have strong down Wednesday’s the weakness typically carries into Thursday.