Tuesday, July 4, 2017

WEDNESDAY 7/5/17; North Korea Geopolitical Turmoil; Global PMI Services and Composite Indexes; Factory Orders; Oil Collapses -4%; FOMC Minutes; MLHR; PSMT; YUMC; President Trump Travels to Poland Ahead of G20 Summit

US stocks and bonds resume trading today after the July 4th Independence Day holiday. Light trading volume is expected in the US as traders and investors nurse hangovers from the festivities. Stomachs churn from the unsettled mixture of beer, hotdogs and apple pie.

S&P +1. Dow -8. Nasdaq -6. WTIC oil 47.05. Brent oil 49.61. Natty 2.98. Gold 1224. Silver 16.09. Copper 2.68.

Euro 1.1349. Euro/yen 128.50. Dollar/yen 113.22. Pound 1.2921. Euro/pound 0.8784. Mexican peso 18.2031. Canadian dollar 1.2939. Dollar/yuan 6.8007. Indian rupee 64.74. Aussie dollar 0.7605.

US Treasury yields are; 2-year 1.41%, 5-year 1.93%, 10-year 2.35%, 30-year 2.87%.

The North Korea situation is escalating. The US and South Korea are conducting joint military drills in response to the North Korea missile launch and aggression. In addition, South Korea President Moon orders missile firing drills. China says there is not much more that they can do to resolve the situation. Liars. China is refusing to become more proactive in addressing North Korea’s nefarious missile and nuclear program.

The Beijing communists have been dragging their feet with North Korea for the last eight years since President Obama always turned a blind eye to the problem. China is playing games since they provide much of the missile parts and technology to North Korea. President Trump appears more willing to confront the North Korea problem head-on.

North Korea continues to threaten the United States and claims they will have a missile capable of reaching the west coast (California) this year (the ICBM missile launched yesterday has a range that can target Alaska). A few weeks ago, President Trump said that North Korea would not acquire an ICBM on his watch. They just did. The US security and intelligence agencies are caught off guard by the successful ICBM launch by the rogue nation.

Tin-pot dictator Kim Jong-un says he plans to give a gift package to the US frequently. The US, South Korea and Japan say the North Korea aggression will be brought before the UN Security Council.

The dollar/yen is at 113.14 remaining stable as North Korea rattles its saber. Traders are relatively sanguine to geopolitical events and may need to see an actual shooting war occurring before the markets are seriously impacted.

The super hot New Zealand property market cools off last month. New Zealand stocks are trading down -0.1%. NZD-USD 0.7287.

S&P -2. Dow -15. Nasdaq -10. WTIC oil 47.14. Brent oil 49.61. Natty 2.98. Gold 1227. Silver 16.13. Copper 2.68.

Euro 1.1358. The yen is strengthening as traders seek a safe haven due to the North Korea turmoil. The dollar/yen pair moves lower below 113 to 112.97. A stronger yen will weigh on Japanese stocks. Pound 1.2934.

Minutes before the opening bell for the regular sessions, the Nikkei Index futures are down -0.2% while South Korea and Aussie index futures are marginally higher.

Aussie and Asia stocks begin trading mixed. The NIKK is down -0.3%. Topix -0.1%. ASX 200 -0.3%. KOSPI +0.1%. S&P -2. Dow -17. Nasdaq -15.

Euro 1.1358. Dollar/yen 113.04. Pound 1.2937. Dollar/yuan 6.8007. Aussie dollar 0.7613.

Oil trades marginally higher. WTIC oil 47.12. Brent oil 49.70. Natty 2.99. Gold 1226. Silver 16.11. Copper 2.68.

The Thai central bank keeps its key rate unchanged at 1.5% and maintains its accommodative monetary policy. The central bank says the economy is recovering but inflation forecasts are lowered. Thai Exports are up +5% year-on-year more than the +2.2% during Q1.

The China Caixin PMI Services is 51.6 below the prior 52.8 but remaining in expansion above 50. China June PMI Composite is 51.1 below the prior 51.5.

As the Asia session continues, the yen weakens sending the dollar/yen pair above 113 and Japanese stocks higher. The auto and tech sectors paint a happy tape in Asia except for Australia. In Hong Kong, Tencent is up +0.9% making back one-quarter of the prior day’s losses. Tencent receives criticism that its video games are addicting for young people.

USD 96.16. Dollar/yen 113.05. Aussie dollar 0.7616. Oil slips lower. Russia is opposed to further oil production cuts as part of its agreement with OPEC. WTIC oil 46.97. Brent oil 49.55.

The Pacific theater ends trading with the major indexes in the green sans Australia. The NIKK ends the session gaining +0.3% to 20083. The SPASX200 sinks -0.4% to 5763. The KOSPI finishes up +0.3% to 2388. The SSEC gains +0.8% to 3207. The HSI is up +0.3% to 25466.

India’s Nifty is up 6 points at 9620 as the trading session continues. European index futures are indicating a flat open across the pond.

The Qatar drama continues. Qatar says it will not concede to demands that threaten its sovereignty. The Saudi block of countries are considering more sanctions against Qatar. The Qatar DSX 20 Index is down -16% this year and down -0.666% today. The Qatar stalemate continues.

At 3:00 AM EST (8 AM London; 9 AM Frankfurt), European indexes begin trading flat. DAX -0.1%. CAC -0.1%. FTSE +0.1%. UK homebuilder Persimmon jumps +4% on strong sales and margins. On line grocer Ocado +0.9%. Domino’s Pizza loses -3% on a downgrade. Adidas jogs higher.

S&P +1. Dow -4. Nasdaq -13. Russell -8. VIX 11.17.

Euro 1.1362. Euro/yen 128.71. Dollar/yen 113.28. Pound 1.2921. Euro/pound 0.8793. Mexican peso 18.1955. Canadian dollar 1.2941. Dollar/yuan 64.76. Aussie dollar 0.7620.

WTIC oil 47.08. Brent oil 49.64. Natural gas is up +1.2% to 2.99. Gold 1226. Silver 16.12. Copper is down -0.5% to 2.6795.

Troubled Italian bank Monte dei Paschi receives a bailout. Of course they do. Italian Finance Minister Pier Carlo Padoan says the agreement is a turning point for the banking system. BMPS agrees to close 600 branches and can 5,500 employees by 2021. The Italian government is stuck with the bad loans from the banks as part of the recent restructurings. The Italian taxpayers are on the hook for at least $20 billion euros ($23 billion).

France President Macron and Prime Minister Edouard Philippe vow to cut government spending and provide tax cuts. Philippe says the debt is “unbearable.” He says France is dancing on the side of a volcano with the chronic overspending and high debt.

S&P +2. Dow +5. Nasdaq -10. Russell -7. VIX 11.12.

Spain PMI Services is 58.3 above the prior 57.3 the highest read in about two years. Spain services employment index is 55.4 at one-year highs. Sweden industrial production data is better than forecast.

Italian PMI Services is 53.6 below the prior 55.1. PMI Composite is 54.5 below the prior 55.2. France PMI Services is 56.9 above the preliminary (flash) 55.3 but below the prior 57.2. France PMI Composite is 56.6 versus the prior 56.9.

German June PMI Services is 54.0 versus 53.7 expected and prior 55.4. German June PMI Composite is 56.4 below the prior 57.4. The German 10-year bund yield is at 0.49% continuing to tease the 0.50% level.

The BOE continues to talk about a rate hike later this year. The Bank of England has not raised its key rate in a decade. Governor Carney receives the most criticism since he took the top job at the BOE. UK car registrations are down -4.8% year-on-year.

At 4 AM EST (9 AM London; 10 AM Central Europe), Euro-zone PMI is 55.4 beating the 54.7 expectation but below the prior 56.3. PMI Composite is 56.3 above expectations. The European PMI Services and Composite data is lackluster. Germany sputters slightly.

S&P +3. Dow +10. Nasdaq -6. Russell -8. VIX 11.01. DAX +0.2%. CAC +0.2%. FTSE +0.3%. India’s Nifty is up 14 points at 9627.

Euro 1.1360. Euro/yen 129.00. Dollar/yen 113.53. Pound 1.2910. Euro/pound 0.8298. Mexican peso 18.222. Canadian dollar 1.2939. Dollar/yuan 6.7976. Indian rupee 64.78. Aussie dollar 0.7614.

WTIC oil 47.08. Brent oil 49.68. Natty is up +1.1% to 2.98. Gold 1223. Silver 16.04. Copper is down -1% at 2.666.

US Treasury yields are; 2-year 1.42%, 5-year 1.94%, 10-year 2.35%, 30-year 2.86%.

UK PMI Services is 53.4 versus the 53.5 expected and prior 53.8. Britain’s economy is stagnant and losing momentum into Q3. UK car sales are down -8% year-on-year for June producing a three-month down trend.

US futures slip negative. S&P -1. Dow -10. Nasdaq -17. Russell -9. The VIX is rising at 11.25. The DAX slips negative down a smidgeon -0.1% since the German PMI data is disappointing. CAC +0.1%. FTSE +0.2%.

Euro 1.1349. Dollar/yen 113.57. Pound 1.2906. Aussie dollar 0.7616. WTIC oil 47.03. Brent oil 49.63.

At 5 AM EST, European indexes and US futures are flat. Thin trading volume is expected after the US holiday. S&P +1. Dow +6. Nasdaq -13. Russell -7. VIX 11.16.

DAX +0.1%. CAC +0.2%. FTSE +0.1%. MIB -0.4%. IBEX -0.2%. PSI +0.1%.

Euro 1.1336. Euro/yen 128.70. Dollar/yen 113.53. Pound 1.2915. Euro/pound 0.8778. Mexican peso 18.3218. The peso is weakening slightly. Canadian dollar 1.2963. USD 96.41.

Oil tanks -1.5%. WTIC oil 46.34. Brent oil 48.89. Natural gas is up +2% to 3.01. Gold 1223. Silver is down -0.4% at 16.04. Copper 2.668.

Treasury yields are steady; 2-year 1.42%, 5-year 1.94%, 10-year 2.35%, 30-year 2.86%. The 2-10 spread is 93 bips widening from the 78 bips last week. The yield curve is steepening over the last week. German bund 0.49%. Japan 10-year yield 0.08%. UK gilt 1.29%. France 10-year yield 0.83%.

At 6:16 AM EST, S&P +1. Dow -1. Nasdaq -14. Russell -8. VIX 11.20. US 10-year yield 2.34%.

India’s Nifty ends the session up 24 points, +0.3%, to 9638. The BSE Sensex finishes up +0.1% at 31245. Poland’s central bank leaves its key rate at 1.50%.

S&P +4. Dow +14. Nasdaq +14. The Nasdaq futures stage a strong turnaround. Russell -6. VIX 11.08.
DAX +0.2%. CAC +0.2%. FTSE +0.2%. SMI -0.3%. OMX +0.2%.

WTIC oil is down -1.3% to 46.48. Brent oil is down -0.9% to 49.16. Gold 1219. Silver is down -1.3% to 15.89. Copper is down -1.4% to 2.655.

Euro 1.1324. Euro/yen 128.67. Dollar/yen 113.67. Pound 1.2911. Euro/pound 0.8771. Mexican peso 18.2876. Canadian dollar 1.2963. Dollar/yuan 6.802. Indian rupee 64.78. Aussie dollar 0.7590. USD 96.42.

Treasury yields are; 2-year 1.41%, 5-year 1.93%, 10-year 2.34%, 30-year 2.86%.

Canaccord Genuity strategist Tony Dwyer remains a raging bull on the stock market. Dwyer says a recession is at least two to three years away and markets typically peak eight months before the recession. Dwyer concludes that stocks have plenty of upside ahead.

Credit card processing company Vantiv buys the UK’s payment company Worldpay for $9.9 billion. JP Morgan was considering an offer. VNTV -1.4%. Worldpay is down -6.3% in London. JPM +0.6%.
ORCL rises +0.7% on a KeyBanc upgrade. GM rises +0.7% on strong China auto sales. BWLD is downgraded by Stephens. BMY rises +0.9% on a positive mention in Barron’s on the weekend. NVS is down -1.7% on a CS downgrade.

At 9:30 AM EST, US stocks begin trading flat to higher. The SPX is up 3 points at 2432. The Dow gains 24 to 21503 above the 21.5K level. The Nasdq Composite is up 14 points, +0.2%, to 6124. The RUT loses 1 point to 1426. VIX 11.19.

Tech and chips lead higher. XLK +0.6%. SOX +1.6%. ORCL gains +0.6%. Most sectors are trading flat. Utilities, financials, retail and energy stocks lead lower. XLU -0.3%. XLF -0.4%. XRT -0.5%. XLE –0.666%. COP -1.1%. CHK -2.8%.

Auto parts companies drive into a brick wall after Overly reports disappointing sales numbers. ORLY -10%. AZO -6.4%. AAP -7%. TSLA is dropping like a rock down -3.5%. Nike trips over its oversized overprices sneakers with NKE falling -1.4%.

DBD crashes -20%. NCR collapses -4.2% and lives up to its old nickname from years ago “national crash register (National Cash Register changed its name to NCR Corp years ago since the former name became too antiquated).” NCR tumbles lower in sympathy to the Diebold Nixdorf crash.

DAX, CAC and FTSE are each up +0.1%. SMI -0.4%. OMX +0.4%. Euro 1.1320. Dollar/yen 113.60. Pound 1.2906. USD 96.46.

WTIC oil drops -1.1% to 46.56. Brent oil is down -0.7% to 49.26. Natural gas is down -1.4% to 2.91. Gold 1219. Silver is down -1.4% at 15.88 under the 16 level. Copper is down -1.4% to 2.6565.

Treasury yields are; 2-year 1.42%, 5-year 1.94%, 10-year 2.35%, 30-year 2.86%.

At 10 AM, Factory Orders are down -0.8% month-on-month worse than the -0.5% expected and below the prior revised lower -0.3%. Analysts and traders had much higher expectations for the orders and are disappointed in the lackluster data.

At 10:10 AM, SPX 2423. The S&P 500 loses the 200 EMA on the SPX 60-minute chart at 2425 which is a key short-term market signal. The market bears are growling. Market bulls must push the S&P 500 back above 2425 pronto or stocks will sell off rapidly. INDU 21423. COMPQ 6106. RUT 1416. DAX +0.1%. CAC and FTSE are flat. President Trump is flying to Poland ahead of the G20 Summit.

Oil prices are in free fall. WTIC oil is down-3.1% at 45.61. Brent oil sinks -2.5% to 48.35. XOM -1.5%. CVX -1.5%. COP -3%. The energy sector is in collapse. XLE -2%. Natty is down -1.8% at 2.90. Gold 1222. Silver 15.92. Copper is down -1.666% to 2.648.

Treasury yields are; 2-year 1.41%, 5-year 1.92%, 10-year 2.34%, 30-year 2.85%. The 2-10 spread is 93 bips. German bund 0.47%. Japan 10-year yield 0.08%. UK gilt 1.28%. France 10-year yield 0.81%.
European indexes end the session mixed. The DAX gains +0.1% to 12454. The CAC finishes up +0.1% at 5180. The FTSE is up +0.1% at 7368. Italy’s MIB sinks -0.4% to 20939. Spain’s IBEX drops -0.4% to 10524. Portugal’s PSI gains +0.4% to 5203.

At 11:34 AM, SPX 2430. The bulls recover. INDU 21463. COMPQ 6135. The RUT is down 12 points, -0.9%, to 1414. VIX remains elevated at 11.54.

The credit card providers catch a strong bid after the Vantiv deal. V +0.7%. MA +1.2%. VNTV -2.4%. Worldpay tanks -6.4% in Europe but is up +28% this year.

Venezuela’s economic and political collapse continues. Anti-government protestors storm the assembly building. 12 members of parliament are injured. President Maduro is losing control. A hungry and thirsty population is an angry and desperate group of people.

All Volvo vehicles will either be hybrids or electric starting in 2019. Swedish carmaker Volvo, owned by Chinese company Geely, shuns the internal combustion motor. GELYF -1.3%. Volvo vehicles are not popular for their look but instead for their safety ratings. It is debatable if consumers will welcome an electric car with open arms even if the Volvo cars and trucks are typically safer to drive than most other vehicles.

TSLA mini-crashes -8% after GS cuts the price target to 180 for Tesla. TSLA is down about -15% since the June top. Tesla sales are bumping along sideways and not ramping up as expected.  CEO Musk’s sales projections are questioned.

Auto parts suppliers are taken to the shed out back and beaten severely with a belt. ORLY is bludgeoned -19%. That is going to leave a mark. AAP crashes -12%. AZO -10%. The blood is flowing like water in the auto space. BWA is flat. GM -1.8%. F -2.2%. FCAU -1.4%.

Mr Softy is planning a major reorganization of the global sales team but the tech giant is keeping quiet on the details. Microsoft is aligning its workforce with its expanding cloud services business plan. MSFT +1.5%.
Recent IPO TNTR is down -3% and briefly slipped under its initial offer price from when it came to market. Ditto APRN down -9% on the day. CLDR is up +0.4% but hovering near its initial IPO price. SNAP sinks -1.5% trying to hold its initial offer price when it came to market. The IPO’s are losing luster. The IPO ETF that tracks IPO’s peaked one month ago.

Two key changes occur in the home mortgage market. First, the TransUnion, Equifax and Experian credit rating agencies, that provide information to lenders concerning consumer loans, announce plans to drop tax liens and civil judgments from consumer profiles. This will result in a higher FICO score and an easier pathway to acquire a loan.

Second, mortgage agencies Freddie Mac and Fannie Mae are allowing consumers to maintain higher levels of overall debt and still qualify for a mortgage loan. Obviously, the changes will result in loans to folks that really should not be buying a home reminiscent of the housing bubble in 2004-2008. Those who do not learn from the past are doomed to repeat it. If you can fog a mirror, you can get a loan for a house, car or college no problemmo.

The SEC charges Kamilla Bjorlin, an actress, with securities violations for hiring writers to place fake news stories on social internet sites that tout specific stocks; the age-old pump and dump scam. Bjorlin will go to court over the next couple months to defend her actions. The fake news stories appeared on websites such as Forbes and Motley Fool which attached credibility to the articles that hyped individual stocks. Wall Street is a corrupt cesspool just like Washington, DC.

At 2 PM, the FOMC Minutes state that several members are concerned about high equity valuations. A few Fed members say that investors may be taking on excessive risk which is sending asset prices higher. The Federal Reserve is discussing the plan to shrink its massive balance sheet but there is no timetable as yet. The Fed says the balance sheet can be reduced with limited disruption to financial markets. Of course they do; what else would they say?

The Federal Reserve members discussed the ongoing loose monetary policy and how it may be creating financial risk in the economy. The low inflation is worrying several Fed members but the general opinion is that the lack of inflation is temporary. The members are generally agreeing on a gradual rate hike path ahead with several wanting to wait towards the end of the year for the next hike. This is dovish talk that the stock market will like.

Fed’s Kashkari was the lone dissenter last month voting against the rate hike. Kaskari is dovish because the easy money conditions will continue to enrich his friends at Goldman Sachs and other investment banks. The central bankers are the market.

The market reaction is muted. Stocks float higher so the minutes are perceived as dovish. The VIX drops to 11.07. SPX 2430. INDU 21461. The COMPQ gains 34 points, +0.6%, to 6144. The RUT drops 8 points, -0.6%, to 1418.

Euro 1.1330. Euro/yen 128.49. Dollar/yen 113.40. Pound 1.2916. Euro/pound 0.8772. Indian rupee 64.78. Mexican peso 18.2868. Canadian dollar 1.2953. Dollar/yuan 6.8019.

WTIC oil collapses -3.7% to 45.33. Brent oil drops -3.3% to 48.00. Natural gas is down -3.8% to 2.84. VIX moves higher to 11.29.

Treasury yields are steady and unresponsive to the FOMC Minutes; 2-year 1.41%, 5-year 1.93%, 10-year 2.34%, 30-year 2.86%.

At 2:40 PM EST, all four major US stock indexes are green. The central bankers truly are the market. SPX 2435. INDU 21480. COMPQ 6162.

Treasury yields are; 2-year 1.42%, 5-year 1.94%, 10-year 2.35%, 30-year 2.86%.

WTIC 45.13. Brent 47.81. Natty 2.85. Gold 1221. Silver 15.89. Copper 2.66. VIX 10.86.

Euro 1.1327. Euro/yen 128.54. Dollar/yen 113.49. Pound 1.2912. Euro/pound 0.8772.

Energy stocks are beaten today. XLE -2.3%. NFX -6.3%. CVX -1.6%. CHK -6.66%.

Tech stocks especially semiconductors lead the gains. XLK +0.9%. SOX +2.1%. MU +4.7%. AMD +8.6%. AMAT +3%. INTC +2.8%. BIDU +2.5%. AAPL +0.5%. AMZN +1.9%. NFLX +1%. FB +1.3%. ADSK +3.3%. XLNX +3.3%. TER +4%. FTNT +4%. IBM does not participate in the tech party losing -1.2%. NVDA +2.666%.

Biotech stocks are strong. IBB +1.5%. CELG +2.2%. REGN +1.9%. ALXN +3.3%. SHPG +3.2%. Interestingly, biotech is strong but the pharma stocks are weak. TEVA -1.8%. MYL -0.9%. PFE -0.5%. MRK -0.1%.

BA +1.6%. JPM +1%. UNH +1%. PYPL +3.5%. JUNO +6.8%.

NKE -1.6%. DIS -1.7%. HD -1%. TSCO -3.6%. VIAB -3.3%. DLTR -2.4%. A dark cloud appears  over SunPower with SPWR crashing -9%. REIT’s are weak. VNO -1.8%.

An emergency meeting occurs at the UN Security Council to discuss the North Korea threat. The United States says it will use military force against North Korea to defend ourselves and allies.

WTIC oil sinks -4.4% to 44.99. Brent oil is down -3.9% to 47.67. Natty gas is down -3.4% at 2.85. Gold 1226. Silver 16.02. Copper 2.66. Wheat is up +26% over the last month.

Euro 1.1344. Euro/yen 128.42. Dollar/yen 113.20. Pound 1.2927. Euro/pound 0.8776. Indian rupee 64.78. Mexican peso 18.3138. Canadian dollar 1.2971. Dollar/yuan 6.8019. Russian ruble 60.19. South Africa rand 13.41. USD 96.27. VIX 10.99.

Treasury yields are; 2-year 1.41%, 5-year 1.92%, 10-year 2.33%, 30-year 2.85%.

US stocks are choppy sideways after the FOMC Minutes and rise into the closing bell. The muted response in markets after the minutes indicates that the Fed’s comments strike a generally even balance between doves and hawks.

US stocks finish the session mixed with the SPX and COMPQ higher and INDU and RUT lower. Thus, the broad market and tech and biotech stocks lead higher while the blue-chip stocks and small caps lead lower.

The S&P 500 finishes up 4 points, +0.2%, to 2433. The Dow Industrials lose one paltry point after today’s drama to 21478. The Nasdaq Composite finishes +0.666% higher to 6151. The Nazzy was on the verge of printing four consecutive down days which has not been seen since October 2016. The NDX gains +0.9% since the hotshot tech stocks such as Google, Netflix and Facebook and biotech stocks such as Celgene and Regeneron trade higher. The Russell 2000 drops -0.5% to 1420. VIX 11.07.

After the closing bell, office and home furniture provider MLHR jumps +6% on earnings. PSMT crashes -9.1% after PriceSmart reports earnings. YUMC earnings are yummy in line with estimates but the stock tanks -7.8%. Kentucky Fried Chicken sales are robust but Pizza Hut sales are a drag. YUMC is up +31% in the last three months and up about +50% this year. MRK drops -1% due to disappointing results with its blood cancer drug.

President Trump lands in Warsaw, Poland, to begin his European trip. The G20 meetings are Friday and Saturday in Hamburg.

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