FRIDAY 6/27/14; Ukraine Signs EU Trade Deal; KBH; Consumer Confidence; Russell Indexes Rebalancing

Asian indexes reverse the universal happy bullish day yesterday with a sad bearish day across the board today. NIKK drops -1.4%. The dollar/yen currency pair drops to 101.30 so the yen is at the strongest level in over one month beating down stocks. Japan’s May consumer prices increase month over month. Feeding off of TM’s fuel cell hype this week, Mitsubishi Kakoki Kaisha, a hydrogen station manufacturer, drives +21% higher. Traders chase the latest shiny object with central banker easy money.

Other indexes including Australia are down or flat. Korea’s industrial output data is disappointing far weaker than expected. Iron ore prices are stabilizing at $95 per ton. The RBA says there are no signs of a housing bubble. In the States, the Fed has never been able to forecast one single asset bubble in its entire 100-year history. Not one single bubble. Currently, Fed Chair Yellen cheers the stock market and says there are no asset bubbles as senior citizens invest their entire social security checks into dividend stocks.

Ukraine signs a trade deal with the EU that will open up trade between Moldova, Georgia, Ukraine and Europe. This is what precipitated the unrest in Ukraine many months ago. Russia is not happy and says the agreement will result in "grave consequences." Russia is feeling unintended consequences as refugees migrate across the eastern Ukraine border into Russia to avoid the violence; 110K people so far this year with about 10K seeking asylum.The cease-fire expires in a few hours but the violence in East Ukraine has continued through the cease-fire. The key today is if the Ukraine government and the pro-Russian separatists (Russia) extend the cease-fire agreement. Russia’s Micex Index is soft the last couple days dropping -0.6% the day before, -2.6% yesterday and is down -1% today. The next round of sanctions proposed by Europe and the US may finally bite Russia.

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The MIK IPO ends at 17.02 after a disappointing first day of trading. The chemical sector is hit today precipitated by the negative Dupont news this morning which hints that the economic environment is weaker than everyone thinks. The chemical sector should be going like gangbusters if the economy was strong. DD finishes down -3.3%. DOW loses -1% in sympathy. FFIV gains +3.6% on favorable analyst comments. AMED jumps +30% after raising forward guidance. The homebuilders, XHB, gain +0.5%.

The long darling trade DG is axed -7.3% after CEO Rick Dreiling announces retirement. The FDA approves the Afrezza inhaled insulin drug manufactured by MannKind but traders remain unconvinced over the viability sending MNKD -5.5% lower. Struggling retailer BEBE is up +0.6% after announcing job cuts and plans to ditch the 2b affordable clothing line which is not performing well. WUBA, 58.com, the Craigslist of China, pops +5.2% after Hong Kong-listed Tencent buys a 20% stake.

For the week, the SPX is down a smidge -0.1%. The INDU also logs a down week losing -0.6%. The Nasdaq gains +0.7% this week and the RUT small caps are a smidge higher +0.1%. Traders are chasing tech, healthcare and utility stocks. XLK +0.7%. XLV +0.6%. XLU +1.0%. The dividend stock bubble grows larger. Integrated oil companies take a breather this week dropping for the last few days. XOM ends the week down -2.5% and CVX is off -1.5% but this is after a strong two-year rally.

Traders and analysts continue the debate over whether the stock market is pumped higher due to a better economy and rising earnings, or, due to Fed and other central banker money printing. The answer is obvious; of course it is the central banker pumping and has been since 2009. Shockingly, nearly 60% of the global financial environment is operating under a ZIRP or near-zero interest rate policy currently. This obscene central banker behavior creates the uber low volatility and rampant complacency in markets. The easy money is used to buy stocks and bonds and to fund an orgy of buybacks, dividend hikes, IPO’s and M&A activity all artificially pumping the stock market higher and creating new bubbles across all asset classes. The Fed says there are no asset bubbles in markets currently.

Under the cover of darkness on Friday night, when no one is paying attention, GM recalls another 428K vehicles for air bag, shock absorber and software issues for the Chevy Silverado, Corvette, Cruze and other models. The recalls are a bottomless pit for General Motors. GM is soft in AH trading moving slightly negative. The SEC issues a Wells Notice to BLK as an investigation expands into potential illegalities involving a former employee that left the asset management company two years ago.

The IRS chief tells Congress and the media to expect Lois Lerner email documents by the end of next week. The same promises were made in the past but result in baby games. The sincerity of the IRS is in question since the Independence Day July 4th holiday is Friday so nothing will come of the so-called new emails until the following week. The IRS is simply stalling and delaying another two weeks.

A poll shows that three-fourths of the country believes the IRS deliberately destroyed the Lois Lerner emails. Surprisingly, President Obama continues to refer to the IRS and other scandals, such as the VA debacle and Benghazi terrorist attack before the 2012 presidential election, as “phony scandals.” People are refusing to testify invoking the Fifth Amendment before Congress, others are prohibited from testifying by the Whitehouse and evidence is being destroyed, none of which conger up the word “phony.” 75% of the country agrees which means many democrats want answers as well as republicans especially concerning the IRS scandal.

The World Cup football (soccer) matches continue with ESPN, owned by DIS, setting record viewership numbers. 3.2 million viewers logged on to ESPN with viewership peaking during the US-Germany match (the US lost 1-0 but does proceed in the tournament). Remarkably, 1 in every 100 people in the US tuned into ESPN. Although many are quick to say that soccer has finally hit the main stream and will be a well-viewed sport here forward, do not get too excited since the interest in soccer is more likely due to the games occurring in the reasonable hours of the eastern time zone rather than very late or very early, where viewership would likely be far lower like in past years. Companies such as DIS, NKE and FINL are benefiting from the soccer love all gaining over +1% today.