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17Apr2015 Market Close: DOW Off Triple Digits, China And Greek Problems Send Markets Plummeting

Written by Gary

Not a very exciting day after the opening that is. The DOW finally dropped below $300 at one point and finally recovering 25 points at the close. Volume dropped to anemic levels several times as it appeared some investors are holding out for the 'eventual' rise back up. On that note, I am not sure that will happen next week.

By 4 pm we saw oil fall and then rise and the reverse for the U.S. Dollar. The 'Grexit' seems to be a sure things in the minds of the Germans and concerns over regulations in China putting the S&P 500 on track for its biggest daily percentage loss since March 25. The averages closed much lower today and next week may have a few surprises.

Todays S&P 500 Chart

For one this may be another mini-correction like we have seen many times before. The market slumps 5% or so and then moves back up to record new historic highs. Is this time different?

Maybe, maybe not as oil seems to be the driving force behind market fluctuations lately. There is strong evidence that oil will fall further driving the markets lower, but not next week even with the rig count dropping another 44 today. The U.S. Is not a bustling financial center lately, not is it going to dogs either. Because of the excruciatingly painful slow growth, I see the markets easing back up again, but not on such a sure path before. The really big thing to consider is the rising stock market is shockingly divergent from the US Macro picture (the greatest divergence ever). This has happened before (in 2006/7) but on a lesser scale, and did not end well. (Charts Below)

The Market in Perspective

Here are the headlines moving the markets.

Artist's Impression Of This Week's ISIS Terror Attack Planning Meeting

Presented with no comment...

Source: Townhall

Wal-Mart cutting layer of management in stores: Bloomberg

(Reuters) - Wal-Mart Stores Inc, the world's largest retailer, is cutting the role of zone manager from its stores as part of efforts to simplify its operations, Bloomberg reported, citing people familiar with the matter.

Well That's Never Happened Before - Exhibit 1

We have never, ever, seen the US equity market so disconnected from underlying macro fundamentals.

As the chart shows, the rising stock market is shockingly divergent from the US Macro picture (the greatest divergence ever). This has happened before (in 2006/7) but on a lesser scale, and did not end well.

Charts: Bloomberg

Comcast-Time Warner Cable deal drawing Justice Dept opposition: Bloomberg

(Reuters) - Staff attorneys at the Justice Department's antitrust division are nearing a recommendation to block the proposed $45 billion merger of Comcast Corp and Time Warner Cable Inc, Bloomberg reported on Friday, citing people familiar with the matter.

Wall Street selloff accelerates amid China, earnings fears

(Reuters) - U.S. stocks fell on Friday afternoon, putting the S&P 500 on track for its biggest daily percentage loss since March 25, as concerns over regulations in China, Greece's debt negotiations and disappointing earnings weighed on sentiment.

Exclusive: Greece scrapes bottom of barrel in hunt for cash to stay afloat

ATHENS (Reuters) - Greece will need to tap all the remaining cash reserves across its public sector -- a total of 2 billion euros ($2.16 billion) -- to pay civil service wages and pensions at the end of the month, according to finance ministry officials.

The ECB Is Considering A Parallel Greek Currency

As we first reported yesterday, one of the proposed measures to be implemented in Greece just before, or during its default and/or exit from the Eurozone, in addition to pervasive capital controls of course, is the implementation of a parallel "currency", or as explained yesterday, a government paying its citizens with IOUs.

This is what we said less than 24 hours ago:

Greece might resort to IOUs and/or capital controls to avoid a disorderly default and keep the banks afloat for now. But such measures would offer a temporary solution at best and could be the first steps towards a euro-zone exit.

Assuming that a deal is not reached next week, there are a couple of routes that the Greek Government might take to avert disaster in the short term. First, it could issue IOUs to pay public sector workers and pensioners and free up money to repay its debts. But this could cause economic chaos if fears that the IOUs would never be paid sparked riots or public sector employees simply refused to work.

Even if Greek people accepted IOUs, they could only function for a very short period. Before long, those receiving incomes in IOUs could only afford to pay their taxes through the same medium. And given that the Government's international creditors would not accept IOUs as repayment, this would still lead to a debt default. Effectively, the IOUs would become a parallel currency whose value was ...

G20 strikes hopeful tone, but officials fret over Greece

WASHINGTON (Reuters) - The Group of 20 leading economies struck a hopeful tone on the outlook for global growth on Friday even as officials fretted that Athen's inability to strike a deal with its lenders could upset Europe's tentative recovery.

Ford to spend $2.5 billion on new Mexico engine, transmission operations

MEXICO CITY (Reuters) - Ford Motor Co said on Friday will spend $2.5 billion to build a new generation of fuel-efficient engines and transmissions in Mexico, creating 3,800 jobs.

When The ECB Starts Buying Corporate Bonds And Stocks Here's Where It Should Look

On Thursday we documented why the ECB will soon be forced to buy corporate bonds. Paraphrasing Soc Gen, we noted that as yields on risk-free assets plunge further into negative territory (and don't look now but the 10-year bund is 5 bps from zero), the wider spreads to corporate must go because investors simply don't want to lend money to companies at negative rates. Here's what we said:

The concept is pretty simple: no one wants to loan money to a company at a negative interest rate (although they'll do it for a recently insolvent sovereign) and so the further into negative territory you push the risk-free rate, the wider the spread to corporate credit. This, SocGen says, may force the ECB to purchase corporate bonds which will have the happy consequence of checking two Keynesian insanity boxes at once. Further imperil the central bank balance sheet? Check. Strip whatever's left of the market's ability to signal anything about credit risk by sending yields below zero for assets which are by their very definition not risk free and thus contribute to the growing number of NIRP-inspired aberrations? Check.

So when the ECB is finally forced, by distortions of its own making, to dive into the corporate bond market, and when, after that, Mario Draghi goes full-Kuroda and throws the ECB's balance sheet behind European equities, the central bank may want to check in the following places for relative value because according to Bloomberg, these are the countries where the "bargains" are to be found in equities and fixed income:

Via Bloomberg:

Strong dollar hit to GE, Honeywell may bode poorly for other industrials

(Reuters) - General Electric Co and Honeywell International Inc said on Friday they will take steps to cushion the impact of a stronger dollar, which hurt first-quarter results at both companies.

Clash Of The Wealth Redistributing Titans: Caption Contest

When Barry met Yanis... "honest broker" Barack Obama left Greek FinMin Yanis Varoufakis disappointed yesterday when, as Bild reports, the US will not give financial aid to Greece (but will send advisers to Athens to compile a list of possible savings measures).

Thanks but no thanks...

Source: KTG

GM counting on high-speed Internet services in car to drive profits

DETROIT (Reuters) - Buyers of General Motors Co vehicles will increasingly be able to use in-car mobile broadband systems to book hotel rooms, cut deals on driver insurance, pay for data usage and conduct a host of other transactions.

At Global Economic Gathering, Concerns That U.S. Is Ceding Its Leadership Role

Economists and political leaders see an American government so bitterly divided that it is on the verge of deserting the global economic stage it has commanded since the end of World War II.

Dow Dumps 400 Points, Gives Up All Post-Payrolls Gains

But bad news is good news, right?

Dow dumped 420 points off yesterday's highs back to pre-payrolls levels... Futures down from 18,093 to 17,675 for now...

S&P and Nasdaq remain green-ish...

Stocks Off Sharply on Wall Street After a Slump in Europe

Investors are worrying that Greece may default on its debt, and several big United States companies fell after reporting disappointing results.

U.S. consumer prices edge up, supporting Fed rate rise

WASHINGTON (Reuters) - U.S. consumer prices increased for a second straight month in March on rising gasoline and housing costs, a sign of an uptick in inflation that should keep the Federal Reserve on course to start raising interest rates this year.

Stocks Re-Tumble After DOJ Said To Block Comcast-Time Warner Deal

Time Warner is down 5-8% on the news that the DoJ is "leaning against" the Comcast deal:


*DOJ LAWYERS SAID CLOSE TO RECOMMENDING SUIT TO BLOCK CABLE DEAL

*U.S. SAID GATHERING EVIDENCE TO SUPPORT BLOCKING TWC PURCHASE

This has dragged the broad market lower as Comcast hit back stating "there is no basis for a lawsuit to block the TWC merger."

As Bloomberg reports,

Staff attorneys at the Justice Department's antitrust division are nearing a recommendation to block Comcast Corp.'s bid to buy Time Warner Cable Inc., according to people familiar with the matter.

Attorneys who are investigating Comcast's $45.2 billion proposal to create a nationwide cable giant are leaning against the merger out of concerns that consumers would be harmed and could submit their review as soon as next week, said the people.

The antitrust lawyers will present their findings to Renata Hesse, a deputy assistant attorney general for antitrust, who will decide, along with the division's top officials, whether to file a federal lawsuit to block the deal, they said.

The Justice Department lawyers have been contacting outside parties in the last few weeks to shore up evidence to support a potential case against the merger, one of the people said.

Furthermore, officials at the antitrust division and the Federal Communications Commission, which is also reviewing the deal, aren't negotiating with Comcast about conditions to the merger that would resolve concerns, such as selling parts of its business or changing practices, said two people familiar with the situation.

Comcast hit back...

Brent crude seesaws but heads for 10 percent weekly gain

NEW YORK (Reuters) - Brent crude seesawed, while U.S. crude fell on Friday after both contracts rallied to 2015 peaks the previous session, and turmoil in Yemen and the region limited losses.

Greece Is About To Be 'Fixed' For Good

What could possibly go wrong?

Tomorrow I will be meeting with the Nobel Prize-winning economist @NYTimeskrugman #Greece

Alexis Tsipras (@tsipras_eu) April 17, 2015

Just wait until he tells the Greek PM that "debt doesn't matter."

Meet The Latest Country With Negative Rates

Submitted by Simon Black via Sovereign Man blog,

Let's talk about idiots.

Somewhere out there, some absurdly well-paid banker just placed his investors' capital in yet another financial instrument which is guaranteed to lose money: Australian government debt.

47 investors participated in the Australian government's $200 million bond tender; the participants typically bid the amount they're willing to pay, and the highest bids win the auction.

In this case, and for the first time in Australia, every single one of the 47 bidders offered a price so high that it implies a negative interest rate.

Even the lowest bid in the auction, for example, implied a net loss... or an effective yield of NEGATIVE 0.015%. The highest price implied a yield of negative 0.085%.

What's really bizarre is that this particular issue was for 'inflation-linked' bonds. Which means that if the government's official monkey math shows that inflation is falling, the yield could actually become even MORE NEGATIVE.

Insane? Of course. But here's the thing. These bankers aren't investing their own money.

It's not like some guy is taking his million dollar bonus and saying, "Hey I think I'll go buy some government debt that guarantees I'll lose money."

No. He buys a Maserati. Then he picks up this garbage debt with his customers' money.

Not only is this idiotic, it's borderline criminal. At a minimum it's seriously unethical.

Banks and other money managers have a solemn obligation... a fiduciary responsibility that c ...

Cyprus Provided a Template For the Coming Bank Holidays and Account Seizures

Behind the veneer of "all is well" being promoted by both world Governments and the Mainstream Media, the political elite have begun implementing legislation that will permit them to freeze accounts and use your savings to prop up insolvent banks.

This is not conspiracy theory or some kind of doom and gloom. It's basic fact.

In the last 24 months, Canada, Cyprus, New Zealand, the US, the UK, and now Germany have all implemented legislation that would allow them to first FREEZE and then SEIZE bank assets during the next crisis.

With that in mind, I want to devote some time to what has come out concerning the Cyprus "bail-in" and its implications. The reason for this is that this tiny country has provided the world with a template of what is eventually going to be a global phenomenon.

The quick timeline for Cyprus is as follows:

· June 25, 2012: Cyprus formally requests a bailout from the EU.

· November 24, 2012: Cyprus announces it has reached an agreement with the EU the bailout process once Cyprus banks are examined by EU officials (ballpark estimate of capital needed is €17.5 billion).

· February 25, 2013: Democratic Rally candidate Nicos Anastasiades wins Cypriot election defeating his opponent, an anti-austerity Communist.

· March 16 2013: Cyprus announces the terms of its bail-in: a 6.75% confiscation of accounts under €100,000 and 9.9% for accounts larger than €100,000... a bank holiday is announced.

· March 17 2013: emergency session of Parliament to vote on bail ...

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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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