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07Apr2015 Market Close: Session Ends Day With The Averages Sliding Off Morning Highs Into The Red, Oil Trending Down, U.S. Dollar Trending Up

Written by Gary

By 4 pm the markets were headed south on relatively low volume and ended in the red on heavier volume. The DOW ended flat, in the red and the $RUT down -0.57 % The oils are still trending down and the U.S. Dollar is trending upwards, neither of which paints a rosy picture for the markets.

Todays S&P 500 Chart

The afternoon U.S. Financial report showed in February, consumer credit (G-19) increased at a seasonally adjusted annual rate of 5-1/2 percent. Revolving credit decreased at an annual rate of 5 percent, while nonrevolving credit increased at an annual rate of 9-1/2 percent. Eventually, this report helped move the averages downward.

The Market in Perspective

Here are the headlines moving the markets.

Low Gasoline Prices Will Continue This Summer, Government Says

An Energy Department forecast says that gasoline prices this summer will be the lowest since 2009, even though oil prices have stabilized.

Oil rallies on U.S. jobs data, bullish EIA monthly report

NEW YORK (Reuters) - Oil futures rallied on Tuesday, erasing losses on strong jobs data, U.S. government forecasts for lower domestic crude production growth and higher global demand for oil.

Revolving Debt Crashes Most In Four Years, As Student, Car Loans Go Exponential; Bank Lending Freezes

There was only bad news in the just released Fed consumer credit report for the month of February.

First, the "good credit", the one that consumer should load up on when they feel comfortable about the future, i.e., credit card, or revolving debt, continued its recent plunge, and in February crashed by $3.7 billion, following January's $1 billion plunge. This was the worst month for revolving credit since December 2010 and explains perfectly why the consumer has literally gone into hibernation - it has nothing to do with the weather, and everything to do with the unwillingness to "charge" purchases, which in turn is a clear glimpse into how the US consumer sees their financial and economic future.

This plunge, however, was more than offset by a surge in "bad" credit, the type that even Obama wants to do away with, namely non-revolving credit, mostly student and to a lesser extent auto credit. In February, this debt funded almost exclusively by the US government, soared by $19.2 billion, the highest monthly notional since July 2011!

And while we will never tire of watching just how exponential this non-revolving credit chart has gotten, here it is again, for any non-frequent readers. Truly a thing of beauty.

Scathing Assessment: "The UK Economy Is A Ticking Time Bomb"

Submitted by Simon Black via Sovereign Man blog,

Despite being an otherwise staid, traditional news service, the professional banking division of the Financial Times recently released an utterly scathing assessment of the British economy.

It was entitled, "The UK economy is a ticking time bomb," and the editor didn't pull any punches in completely shattering the conventional fantasy that 'all is well', and that advanced economies can simply print and indebt their way to prosperity.

I'll quote below, emphasis mine:

"What is the problem? Quite simply, the key numbers are terrible. According to the OECD, after five years of 'austerity' the UK's budget deficit is 5.3%, down from 11.2% in 2009.

"In other words, it has gone from being close to meltdown to a situation that is merely dreadful.

"Since the government is spending more than it earns, it is hardly surprising that it is borrowing more, and that the debt-to-GDP has risen from 68.95% in 2009 to 93.30% in 2013, again according to OECD figures.

"As the UK is currently growing it should really be running a budget surplus, providing it with the means to run deficit financing during the next downturn.

Economic Scene: In Parched California, Innovation, Like Water, Has a Limit

California's challenge is economic and political. The state may have plenty of water, but it doesn't have enough for every possible use.

Wall St. gains on deal news; biotechs jump

NEW YORK (Reuters) - U.S. stocks rose on Tuesday, adding to recent gains, after deal news including a bid from FedEx for a Dutch peer suggested companies still see value in the market.

Mercedes, Nissan expand cooperation to build pickup

FRANKFURT (Reuters) - Daimler AG on Tuesday said it would expand its cooperation with partner Nissan Motor Co Ltd to develop a mid-sized pickup truck for Mercedes-Benz as the German premium automaker seeks to narrow its sales gap with rival BMW.

SocGen's 4 Reasons Why The Euro Will Keep Falling

After the abysmal March payrolls last Friday, the EUR briefly spiked only to lose all of its gains over the next two several days and then some. And if SocGen is correct, the European currency has much more room to fall. The reasons are not new, recapping what is already widely known, however those wondering why the EURUSD just took out its low stops for the day, the following 4 reasons from SocGen's Patrick Legland should be a useful refresher why Euro parity may be coming faster than most think.

Reason 1: strong bond outflows set to continue

In Q1 15, the euro depreciated against all major currencies (JPY, GBP etc.). Having dropped sharply since May 2014 (-22%), the EUR/USD is now tracking relative yields more closely (see chart). With disappointing US economic data in Q1 â€" including nonfarm payrolls well below expectations last week (126k) â€" the EUR/USD could remain range-bound near term, as markets are pricing in a slower pace of rate hikes by the Fed. But the desynchronisation of central bank policies is a long-term theme, with euro rates expected to stay low, while US and UK rates should rise in the medium term. With eurozone yields stuck at extremely low levels, investors must reallocate their investments into higher-yielding assets, in part overseas. Given the large amount of maturing European principals and coupons to be reinvested in 2015 (c.€1.15trn), this could lead to strong outflows over the next quarters and weigh on the euro.

Reason 2: Lingering political risks on Greece and Spain

On 20 February, the Eurogroup agreed to extend the Greek programme until late June and to provide €7.2bn of new funding to Greece on condition that the government passes economic reforms by the end of April. The country is running out of cash but faces only ...

Jim Grant Warns: Cost Of "The Unmasking Of The [Fed-Driven] Mis-Allocation Of Capital" Is Dire

"The Fed is 'ever-interested' in doing something later," Jim Grant notes, explaining why he believes the timetable for rate hikes will be pushed back further as fear of allowing a free market in the "most critical" of prices - that of interest rates - would lead to the "unmasking of the misallocations of capital that will have come about through the levitation of asset prices." Grant further unleashes his verbal attack of truthiness when he points out that the central bank's persistent easy money policies is on display currently in the form of stifling American enterprise and sending millions of people from the workforce "more or less permanently."

Jim Grant 'unedited'...

"If companies can't fail that means somebody else can't start. You're looking at a petrified forest rather than dynamic capitalism,"

Behold "The fruit of heavy-handed government manipulation... no matter what 'famous-blogger' Ben Bernanke says"

In Republican Attacks on the Fed, Experts See a Shift

Democrats used to propose most bills to change the Federal Reserve, but that has changed in recent years.

Euro zone price discounting drives growth in activity

LONDON (Reuters) - Price discounting drove growth in all of the euro zone's major economies in March, helping business activity increase at its fastest rate for nearly a year, a survey showed on Tuesday.

Solid 3 Year Auction Prices At Lowest Yield Since March 2014

Anyone wondering what the bond market thinks about the prospects of an imminent rate hike need but look at the high yield of the just concluded 3 Year auction, which saw a yield of only 0.865%, pricing through the 0.87% when issued, and the lowest since March of 2014.

While one can barely see the blip on the chart below, the Bid to Cover was a fraction lower compared to March, at 3.252 down from the 3.330 TTM average and 3.330 record last month.

Completing the internal picture was an Indirect take down of 49.4% which was in line with recent auctions and solidly above the 12 month moving average of 37.6, while Dealers took 1% less than in March, at 39.5% of the final allotment, leaving Directs with 11.1% of the auction.

The final outcome: neither good nor bad, as the bond curve was largely unchanged after today's 3 Year.

Recall as noted earlier, the real test is tomorrow, when we get this month's 10 Year auction, and which is currently trading super special in repo suggesting anyone who could short the bond ahead of the auction, already has, and the shortage is now the biggest since June of last year.

Bits Blog: Measuring Social 'Trust' to Make Loans

Vouch Financial is putting a digital-age spin on the old banking concept of using social references to make lending decisions.

U.S. Jobs Opening Data Points to Skills Mismatch

U.S. job openings surged to a 14-year high in February but a steady pace of hiring suggested employers are having trouble finding suitable workers, a trend that could put upward pressure of wage growth.

U.S. jobs opening data points to skills mismatch

WASHINGTON (Reuters) - U.S. job openings surged to a 14-year high in February but a steady pace of hiring suggested employers are having trouble finding suitable workers, a trend that could put upward pressure of wage growth.

Work-Life Balance: Silicon Valley: Perks for Some Workers, Struggles for Parents

The technology industry highlights the difficulties that the American economy has had adapting to modern family life.

Mohamed El-Erian Explains Why He Is Now "Mostly In Cash"

"I am mostly concentrated in cash... because I think most asset prices have been pushed by central banks to very elevated levels. Central banks look at growth, at employment, at wages. They are too low. They don't have the instruments they need, but they feel obliged to do something; so they artificially lift asset prices... Because they hope that they will trigger what's called the wealth effect, but there is a massive gap right now between asset prices and fundamentals."

"The Fed has been pushing everybody into the public markets... it makes sense to reduce your exposure to the most trafficked assets."

Reflecting Julian Robertson's warnings from yesterday that, unless The Fed acts to end this bubble, there will be a "complete explosion," El-Erian points out the difference between what The Fed will do and what The Fed should do...

That will probably be the last time Mohamed El-Erian is invited to CNBC for a while. Here is what El-Erian said previously on this topic from the OC Register.

Q. Where is your money? Stocks? Treasuries? Bonds?

A. It is mostly concentrated in cash. That's not great, given that it gets eaten up by inflation.

But I think most asset prices ha ...

Was This It For America's "Hiring Spree"?

On the surface today's JOLTS report was good: in fact, for some it was great because the one item that everyone automatically looks for, the number of job openings rose once more, surging to 5.133 million in February (recall that JOLTS is one month behind the most recent NFP report). This was the highest since January 2001.

Looking at the internals, something Janet Yellen is sure to do as the JOLTS is supposedly her favorite labor market indicator, however showed some other aspects of a job market that were hardly encouraging.

First, unlike in previous years, the BLS has managed to coordinate the two data sets - the payrolls and the net turnover (hires less separations) - into a coherent picture. This is what the latest data looks like when reconciling the NFP report and the JOLTs: again, it looks largely as it should.

As a reminder, it was Zero Hedge who back in September 2013 caught the BLS fabricating either NFP or JOLTS data, when the drift between the two data series soared to a record cumulative 200K, and which the BLS had no choice but to "fix" with a major data revision.

The divergence in the two data series, historically convergent, was seen highlighted on the chart below:

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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