Wednesday, July 12, 2017

THURSDAY 7/13/17; India’s BSE Sensex Tags 32K; South Korea’s KOSPI Above 2400; DAL; PPI (Producer Price Index); Federal Reserve Chair Yellen Testifies Before Senate Banking Committee; 30-Year Bond Auction; INDU (Dow Industrials), TRAN (Dow Transports) and NYA (NYSE Composite) Print All-Time Record Highs

S&P +1. Dow +3. Nasdaq +2. Euro 1.1415. Dollar/yen 113.30. Pound 1.28990. Aussie dollar 0.7678. Dollar/yuan 6.7878.

WTIC oil 45.37. Brent oil 47.74. Natty 3.00. Gold 1219. Silver 15.88. Copper 2.6835.

Treasury yields are; 2-year 1.34%, 5-year 1.87%, 10-year 2.32%. 30-year 2.88%. The 2-10 spread is at 98 bips.

The Fed Funds futures indicate a 43% chance for a Federal Reserve rate hike in December and a 44% chance for January 2018. Before Fed Chair Yellen’s slightly more dovish posture yesterday, where she is willing to raise rates only at an extremely slow and gradual pace due to the lack of inflation, the Fed Funds futures indicated a 50% chance of a December rate hike.

After Yellen flaps her dovish wings, she is the Queen of the Doves after all, the bond market says the chances of another rate hike are less than a coin flip into next year. Yellen is concerned about the lack of inflation dynamics. This sends the US dollar index lower. Treasury yields relax lower. The 2-10 US yield spread, a measure of the yield curve, drops from above 100 basis points a day ago back to 98 bips.

The stock market rallies since the central bankers will keep pumping equities higher with easy money rewarding the wealthy class. Life is great the last nine years if you are the privileged elite class. The global central banker accommodative monetary policies (money printing) has made the wealthy class filthy rich at the expense of the remainder of society. The huddled masses continue accumulating stockpiles of pitchforks and torches. The world will likely become a very ugly place very quickly once a global recession arrives and takes hold.

Aussie and Asia stocks begin trading higher. Emerging markets are rallying after Yellen’s slightly less hawkish comments to the House yesterday. Today Yellen testifies before the Senate Banking Committee and will have a chance to walk her dovish stance back if she desires.

The China trade data is better than expected. In US dollar terms, Exports are up +11.3% year-on-year with Imports up +17.2% both numbers handily beating forecasts. The Aussie dollar moves above 0.77 to 0.7709.

China’s trade with North Korea rises nearly +11% in H1. The Beijing communist leaders are two-bit liars telling the United States they are working to resolve the North Korea situation when in fact they increase trade with the rogue nation and at the same time are supplying missile parts to nutcase Kim Jong-un. President Trump likely realizes he cannot trust the communists. President Xi is smiling and nodding at Trump telling him he is working on the North Korea situation when in fact he is stabbing the United States in the back.

The NIKK rises +0.3%. The ASX 200 jumps over +1%. South Korea’s KOSPI prints a new record high up more than +1% tagging 2422.26. The Bank of Korea decides to maintain its key rate at 1.25% as expected.

SK Hynix +2.5%. Toshiba -4.5%. Fitch downgrades Sunac that is buying assets from the troubled Dalian Wanda; there may be some shaky financial engineering occurring with these companies.

The computer screens are glowing green. Equities catch a bid around the world. India stocks follow the Aussie and Asia lead with the BSE Sensex jumping higher above 32K for the first time in history.

The dollar/yen is at 113.15 reflecting a weaker dollar and stronger yen. The Nikkei Index trends lower during the session as the yen rises. US dollar index 95.54. The loonie continues strengthening after the Bank of Canada hiked its key rate yesterday. Canadian dollar 1.2736. WTIC oil 45.39. Brent oil 47.63.

The trading session in the Pacific theater displays green screens across the board. The NIKK ends the session eking out a tiny gain at 20100. The ASX 200 rallies +1.1% to 5737. The KOSPI finishes up +0.7% after printing a new record high at 2422.26. The SSEC gains +0.666% to 3219. The HSI finishes up +1.2% to 26346. The India session continues with the Nifty up 56 points, +0.6%, to 9871 gunning for 9.9K.

In Brazil, former President Lula is convicted of corruption and sentenced to prison harpooning any hopes that he had to participate in elections next year. The stock market and investors are positive on the news. Corruption probes and investigations continue throughout Brazil. It is difficult to eliminate corruption that has been engrained in all levels of Brazilian government and business for decades.

At 3:00 AM EST (8 AM London; 9 AM Frankfurt), European indexes begin trading flatter than a newlywed’s soufflé. DAX flat. CAC flat. FTSE -0.1%. UK housing data is the weakest since directly after the Brexit referendum. The UK’s economy is beginning to get hit with the uncertainty surrounding the Brexit process.

President Trump and First Lady Melania are in Paris to meet with President Macron and participate in the Bastille Day (14 juillet) celebrations. The national holiday marks the Storming of the Bastille in 1789 which started the French Revolution.

Babcock International rallies +3%. Casino Guichard +2.8%. German retail giant Metro demerges splitting into two units a food unit and a consumer electronics business.

Automaker Daimler becomes tangled-up in a potential engine and emission scandal. Engines in over 1 million cars may not be following regulations. The diesel engines may have a ‘defeat device’ that allows cars to pass emissions tests much like the Volkswagen scandal. Daimler drops -1.4%. The selloff is not too dramatic since the potential costs may only total around $500 million nowhere near the VW fiasco that cost billions and billions.

S&P +4. Dow +20. Nasdaq +18. Russell +2. VIX 10.07.

Euro 1.1449. Euro/yen 129.46. Dollar/yen 113.07. Pound 1.2941. Euro/pound 0.8847. Mexican peso 17.767. Canadian dollar 1.2772. Dollar/yuan 6.7776. Indian rupee 64.46. Aussie dollar 0.7723.

Oil is down -0.5%. WTIC 45.27. Brent 47.49. Natty 3.01. Gold 1223. Silver 15.90. Copper 2.69.

Treasury yields are; 2-year 1.35%, 5-year 1.87%, 10-year 2.32%, 30-year 2.87%. The 2-10 spread is 97 bips.

The IEA says there is less certainty about the oil market rebalancing (between supply and demand) since OPEC production is rising. The IEA forecast was rosy two months ago. The OPEC compliance with the production cut agreement is at the lowest since the start of the year. The Arabs are starting to slit each other’s throats. WTIC oil is down -0.6% at 45.22. Brent oil is down -0.7% at 47.43.

Markets are steady and quiet. S&P +4. Dow +18. Nasdaq +15. Russell +2. VIX 10.09. Euro 1.1413. Dollar/yen 113.03. Pound 1.2935. Aussie dollar 0.7726. Natty gas 3.01. Gold 1223. Silver 15.87. Copper 2.693.

Treasury yields are; 2-year 1.34%, 5-year 1.87%, 10-year 2.31%, 30-year 2.87%. The 2-10 spread is 97 bips. German bund 0.57% back under the 0.60% level after breaching above yesterday. Japan 10-year yield 0.07%. The BOJ intervention this week has temporarily succeeded at preventing the 10-year JGB from moving above 0.10%. The central bankers are the market.

US futures float higher as volatility sinks lower the VIX drops under 10 printing a 9-handle at 9.97. S&P +7. Dow +35. Nasdaq +26. Russell +5. The Nifty is up 71 points, +0.7%, to 9886.

WTIC oil 45.26. Brent oil 47.49. Natural gas 3.01. Gold 1222. Silver 15.87. Copper 2.69.

Euro 1.1406. Euro/yen 129.00. Dollar/yen 113.09. Pound 1.293. Euro/pound 0.8821. Mexican peso 17.7504. Canadian dollar 1.2736. Dollar/yuan 6.7822. Indian rupee 64.46. Aussie dollar 0.7728. USD 95.76.

Treasury yields are; 2-year 1.35%, 5-year 1.87%, 10-year 2.31%, 30-year 2.87%.

DAX +0.4%. CAC +0.666%. FTSE +0.1%. MIB +0.3%. IBEX +0.9%. PSI +0.9%. SMI +0.4%. OMX -0.1%. The Nordic stocks are the skunks at the garden  party sinking lower as oil prices sag. WTIC 45.18. Brent 47.40.

At 6:18 AM EST, the VIX is back above 10. S&P +4. Dow +21. Nasdaq +20. Russell +2. VIX 10.13. DAX +0.2%. CAC +0.5%. FTSE +0.1%.

The Nifty finishes the India session up 76 points, +0.8%, to 9892. The BSE Sensex ends the session up 233 points, +0.7%, to 32037 a new record high.

Euro 1.14. Euro/yen 128.81. Dollar/yen 112.96. Pound 1.2921. Euro/pound 0.8825. Mexican peso 17.7144. Canadian dollar 1.2723. Aussie dollar 0.774. USD 95.73. WTIC oil 45.35. Brent oil 47.54. Natural gas is at 2.99 with inventory data on tap in about four hours.

Treasury yields are; 2-year 1.34%, 5-year 1.86%, 10-year 2.30%, 30-year 2.87%.

DAL loses altitude down -1.4% on earnings. Target boosts its guidance for Q2 sales and earnings and TGT bounces +5%. AstraZeneca CEO Pascal Soriot is leaving to join Teva. TEVA +2.7%. AZN -0.9%. MNK +2.3%. FOLD is folding -6% after Amicus Therapeutics announces a secondary. SNAP gains +5% on a Stifel upgrade a much needed lifeline for the flailing IPO.

UK PM May unveils a Brexit repeal bill which dictates that European law no longer applies in the UK. It is one of many steps in the ongoing Brexit process that will continue for months if not years. Pound 1.2921. Euro/pound 0.8814. UK gilt 1.25%.

Wharton economics professor and permabull Jeremy Siegel that has correctly cheerleaded the stock market higher for the last two years remains a raging bull. Siegel correctly predicted the Dow would run through 18K to 19K and 20K and had the door open to 21K and all have occurred. With the central bankers placing their thumb on the scales, the permabulls look like geniuses over the last few years.

Siegel touts strong earnings and guidance as the main reason for higher stock prices. He also says a growing world economy, stability in China and a dovish Fed send stocks higher. Further, Siegel expects tax reform will send stocks ever higher. Siegel expects GDP growth at +2.5% and more. Siegel stands on a soap box and proclaims, “The market has plenty of reasons to keep on rallying.”

The future is so bright that you have to wear shades. Market participants agree with Siegel since the CPC put/call ratio is down to 0.71 and the VIX prints a 9-handle today verifying the uber complacency and euphoria in the stock market.

The stock market is one big party day after day with traders drinking Fed wine and buying stocks with total disregard for price. There is no reason to ever worry about any substantive sell off in equities since the Federal Reserve will always save the day. The central bankers are the market. Life is great if you are wealthy and own a large stock portfolio; not so much if you are poor and disadvantaged and cannot find a job.

S&P +2. Dow flat. Nasdaq +11. Russell +1. VIX 10.28.

Oil drops -0.8%. WTIC 45.14. Brent 47.34. Natty 2.98. Gold 1221. Silver 15.87. Copper 2.692.

Treasury yields are; 2-year 1.35%, 5-year 1.88%, 10-year 2.32%, 30-year 2.88%.

At 8:30 AM EST, PPI is up +0.1% month-on-month above the 0% expected and prior 0%. Year-on-year is up +2.0% compared to the prior +2.4%. Less food and energy is +0.1% month-on-month below the +0.2% expected and prior +0.3%. Year-on-year is up +1.9% versus the prior +2.1%. Prices are slipping lower. PPI less food, energy and trade services is up +0.2% month-on-month matching the expectation and above the prior -0.1%. Year-on-year is +2.0% below the prior +2.1%. The headline number may have beat by a hair but inflation data in general remains weak and lackluster.

Jobless Claims are down 3K to 247K in line with the 246K expected. The 4-week moving average is 246K remaining at multi-decade lows.

S&P +3. Dow +12. Nasdaq +13. Russell +1. VIX 10.23. WTIC 45.46. Euro 1.1413. Dollar/yen 113.24. Pound 1.2942. USD 95.72. Natural gas slips -1% to 2.95 with inventories only an hour away.

At 9:30 AM EST, US stocks begin trading flat to higher. SPX 2444. INDU 21538. COMPQ 6266.66. RUT 1425. VIX 10.32.

Retail and tech stocks are higher with energy lower. Banks are flat. Target’s joy ripples through retail. TGT +3.6%. WMT +1.6%. XRT +1.2%. RTH +0.8%. XLP +0.1%. XLY +0.2%. DLTR +1.9%. JCP +3.6%. M +3.3%. GPS +3.3%. ANF +1.6%. Abercrombie has crashed -27% this week. RH prints a new record high up +3.1%. TSRO tumbles -4% on news that a takeover deal for the biopharma stock falls through. DAL -2.3%.

Tech stocks float higher. XLK +0.2%. SOX +0.2%. Traders continue chasing NVIDIA higher throwing money at the chip darling without any worry about price. NVDA +0.5%. TSM +0.7%. STX is down -5% on a BCS downgrade. WDC -1.1%. Financials are generally flat to lower with earnings on tap tomorrow through next week. XLF +0.1%. JPM -0.7%. C -0.8%. WFC -0.5%. KRE +0.2%. PNC +0.666%.

Euro 1.1409. Euro/yen 129.37. Dollar/yen 113.39. Pound 1.294. Euro/pound 0.8817. Mexican peso 17.7519. Canadian dollar 1.2755. USD 95.71.

WTIC oil 45.666. Brent oil 47.85. Natural gas 2.96. Gold 1220. Silver 15.85. copper 2.679. VIX 10.24.
Treasury yields are; 2-year 1.36%, 5-year 1.89%, 10-year 2.33%, 30-year 2.90%. The 2-10 spread is 97 bips. German bund 0.59%.

DAX +0.1%. CAC +0.4%. FTSE -0.1%. MIB +0.1%. IBEX +0.9%. PSI +1.4%. SMI +0.1%. OMX -0.4%. Portugal is throwing a party while the Nordic stocks sink lower.

At 9:40 AM, Fed Chair Yellen is testifying before the Senate Banking Committee for the semiannual meeting. She repeats opening remarks from yesterday and the lawmakers begin asking the chair questions. Yellen walks back her prior comment from a talk in Europe that she does not think a serious financial crisis will occur again in our lifetimes. She realizes how foolish she would look if a serious market and economic downturn occurs so she is watering down her prior comments on this prognostication.

Yellen says Federal Reserve monetary policy is not on a preset course. She says gradual rate hikes are a prudent path forward.

At 10:18 AM, SPX 2446. INDU is dead flat at 21532. COMPQ 6266.66. RUT is down -0.2% at 1421. European indexes are flat. DAX and FTSE are slipping negative. VIX 10.11. Euro 1.1398. Dollar/yen 113.45. Pound 1.2922.

Oil is moving higher. WTIC 45.80. Brent 48.00. Gold 1218. Silver 15.76. Copper is down -0.5% to 2.666.

Treasury yields are well-behaved during Yellen’s Q &A; 2-year 1.36%, 5-year 1.90%, 10-year 2.35%, 30-year 2.92%. Yellen says she does not favor revealing the models for the bank stress tests.

Oil is running higher up +0.9%. WTIC oil 45.89. Brent oil 48.10. Natural gas is unchanged at 2.98. US dollar index 95.84.

The EIA Natural Gas Inventories are 57 BCF not as big as the 72 BCF build last week. The hot muggy weather increases air conditioner use. Natty prices should rise on the data. Natural gas gains +0.2% to 2.99. WTIC oil is up +1% to 45.92. Brent oil gains +0.8% to 48.14.

SPX 2443. INDU 21525. COMPQ 6256. RUT 1417. VIX 10.19.

Treasury yields are; 2-year 1.37%, 5-year 1.90%, 10-year 2.35%, 30-year 2.92%. Yellen receives a grilling from Senator Elizabeth Warren who describes the daily dishonesty occurring at the investment banks but no one ever goes to jail.

European indexes end the session mixed. The DAX gains +0.1% to 12641. The CAC gains +0.3% to 5235. The FTSE drops -0.1% to 7413. The MIB gains 0.4% to 21522. The IBEX gains +0.9% to 10658. Portugal’s PSI finishes up +2% to 5319 a huge rally.

Fed Chair Yellen concludes her testimony on Capitol Hill. The Senate releases an updated version of their healthcare bill but two senators quickly nix the proposal. The insurance and hospital stocks are on the move. CYH -5.5%. HUM -0.4%. UNH -0.6%. THC -1.2%. AET +0.3%. CI +0.6%. PRU +0.666%.

SPX 2447. INDU 21562. COMPQ 6269. VIX 9.97.

At 12:30 PM (6:30 PM Paris), President Trump and President Macron conduct a joint press conference and each take a couple of questions. The two leaders appear to get along well.

At 1 PM, the 30-Year Bond Auction goes off at 2.936%. Yields are relatively well-behaved today during and after Yellen’s testimony. The Wall Street Journal reports that the ECB will likely announce in September that the asset program will be wound down.

Treasury yields are; 2-year 1.36%, 5-year 1.89%, 10-year 2.35%, 30-year 2.92%. The 2-10 spread is 99 bips.

Higher oil prices create a midday rally. WTIC oil rallies +1.3% to 46.07. Brent oil is up 0.666 points, +1.4%, to 48.39. Natural gas is down -0.5% to 2.97 losing the gains after the inventory data. Gold 1219. Silver 15.71. Copper 2.666.

The S&P 500 is up 4 points at 2447. The Dow Industrials are up 20 points to 21553. The COMPQ rises 3 points to 6263. The RUT is down 4 points, -0.3%, to 1421. The small caps are punched in the face. VIX 10.16.

Euro 1.1401. Euro/yen 129.10. Dollar/yen 113.23. Pound 1.2937. Euro/pound 0.8813. Indian rupee 64.445. Mexican peso 17.735. Canadian dollar 1.2727. Dollar/yuan 6.7835.

President Trump says, “China is dumping steel. I’m not happy about it. It will stop.” Trump says the US may impose tariffs and/or quotas against China and others. Steel stocks jump higher. X +4.7%. NUE +2.6%. AKS +8%. The iron ore suppliers are critical for steel making and move in opposite directions. CLF +2.2%. VALE -2.7%.

As evidenced by the economic data out of China this morning, the mainland has actually increased trade with North Korea while providing lip service to the US that they are working hard on calming the trouble with their commie little brother. President Trump knows President Xi is playing games so the orange-headed leader fires a warning shot across the bow at China threatening steel tariffs and/or quotas.

Trump is signaling to Xi, ‘we can do this the easy way or the hard way’. Either China helps address the North Korea problem or the United States will figure out a solution on its own while at the same time likely starting a trade war with the communists. Xi is in a weak bargaining position since the 19th Party Congress is on tap in three months where the top leaders will be appointed for China.

President Xi and Premier Li will likely retain their power until 2022 but about one-half of the 18-member core Politburo will likely be replaced. Xi does not want to appear weak before the Party Congress and will be very unhappy that Trump is escalating a potential trade war. Tough beans; let the communist squirm. When the new all-powerful and controlling Politburo members are finalized this Fall, the future leader of China will be one of these men. For the next three months, Xi must appease the US with progress on North Korea while at the same time exhibiting power and strength to the Chinese people into the all-important Party Congress.

Retail stocks lead the rally. XRT +2.2%. TGT +4.8%. WMT +1.5%. TIF +1.7%. GPS +5.6%. KSS +4.8%. NUE +2.7%. NRG +5.3%. NBR +3.7%. ORLY +4.3%. PYPL +2.4%. IP +1.6%. AAPL +1.4%. MSFT +0.9%. TEVA +3.5%. GS +1.3%.

DAL -1.8%. AMD -5.3%. STX -3.5%. EW -2%. FOX -3.2%. NTES -2.3%. TSLA -2%. T -1.7%. WDC -1.4%. DD -1.2%. MCD -1%. UTX and NKE each lose -0.5%.

SPX 2447. INDU 21547. COMPQ 6271. RUT 1424. WTIC 46.01. Brent 48.37. Natty 2.96. The agricultural commodities are slapped for another day. Soybeans -4.5%. Wheat -4.2%. Corn -3%.

Four banks are flat to higher ahead of tomorrow morning’s earnings. C -0.1%. JPM +0.5%. WFC +0.5%. PNC +1%. XLF +0.5%. Tech is mixed. XLK +0.2%. SOX -0.2%. NVDA -1.3%. AMZN -0.9%. NFLX -0.4%.

Fed’s Brainard says the FOMC does not explicitly coordinate policy with other global central bankers. She says inflation is a concern and the +2% goal is a focus of the Federal Reserve parroting Yellen’s comments over the last two days.

The banks recover into the closing bell. JPM +0.6%. WFC +0.8%. C +0.2%. PNC +1.2%.

Euro 1.1407. Dollar/yen 113.22. Pound 1.2943. Aussie dollar 0.7731. WTIC oil 46.05. Brent oil 48.42. Gold 1218. Silver 15.70.

Treasury yields are; 2-year 1.36%, 5-year 1.89%, 10-year 2.34%, 30-year 2.91%.

US stocks finish the session higher with all-time records again printing in the trannies and industrials. The SPX finishes 5 points higher, +0.2%, to 2448. HOD is 2449 only 5 points from a new all-time record high.

The Dow Jones Industrials are up 21 points at 21553.09 a new all-time record closing high the 24th record high this year. The HOD is 21568.72 not enough for a new all-time high. The Dow Transports lose 13 points to 9703 but shortly after the opening bell did print a new all-time high at 9742.76.

The COMPQ ends up 13 points, +0.2%, to 6274. The NDX is up +0.3% to 5793. The RUT gains 1 point to 1426. The Russell 2000 missed a new all-time closing high by only 1 point and is only 8 points from a new all-time high.

The NYSE Composite is up 19 points, +0.2%, to 11844.79 a new all-time closing high. The NYA needs 25 more points for a new all-time high. The VIX drops to 9.90. The market bears are beaten like a rented mule by the uber low volatility.

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