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29May2015 Market Close: Indexes Close Down For The Week, Greece, China And Weak U.S. Data Worry Investors

Written by Gary

U.S. stocks fell, weighed down by fresh worries about Greece and its likelihood to secure a deal with its international creditors. U.S. Markets weakened by data that showed the economy contracted in the first quarter and as weak data for May added to concerns about the strength of a recovery.

The main indexes were on track to finish the week modestly lower, but set to end the month with gains.

Todays S&P 500 Chart

Crude oil prices jumped almost 5 percent on today, their biggest rally in 1-1/2 months, as a steady, but volatile, U.S. dollar and a bigger than expected drop in U.S. oil rigs in operation set off a renewed rush of bullish bets.

The Market in Perspective

Here are the headlines moving the markets.

US oil and natural gas rig count drops by 10 to 875; down 4 in Texas

HOUSTON (AP) — Oilfield services company Baker Hughes Inc. says the number of rigs exploring for oil and natural gas in the U.S. declined by 10 this week to 875. Houston-based Baker Hughes said Friday 646 rigs were seeking oil and 225 explored for natural gas.

Four were listed as miscellaneous. A year ago, with oil prices nearly double the current levels, 1,866 rigs were active. Among major oil- and gas-producing states, Texas lost four rigs, California declined by three and Arkansas, Louisiana and Pennsylvania each dropped two. North Dakota was down one. Colorado and Oklahoma gained two rigs apiece. Alaska and New Mexico were up one each. Kansas, Ohio, Utah, West Virginia and Wyoming were all unchanged.

Ross Ulbricht, Creator of Silk Road Website, Is Sentenced to Life in Prison

Mr. Ulbricht was sentenced to life in prison for his role as what prosecutors described as "the kingpin of a worldwide digital drug-trafficking enterprise."

Oil leaps 5 percent as dollar rally stalls, U.S. rigs fall

NEW YORK (Reuters) - Crude oil prices jumped almost 5 percent on Friday, their biggest rally in 1-1/2 months, as a steady U.S. dollar and a bigger than expected drop in U.S. oil rigs in operation set off a renewed rush of bullish bets.

The Most Confusing Reason Why Millennials Aren't Buying Houses

In "This Is What Happens When Millennials Try To Find A Job," we discussed high youth unemployment rates and the difficulty many recent college graduates have in finding a job in today's double-adjusted US economic "recovery." We also noted that a lack of gainful employment opportunities and stagnant (at best) wage growth are forcing some millennials to delay "important life decisions … like buying a house."

So while we were certainly not surprised to learn that excessive student loan and credit card debt were responsible for keeping many of America's youth from buying their first home, we were surprised to discover that for millennials in around one third of US states, the chief impediment is apparently "not knowing how to start"...?

Draw your own conclusions.

"They Don't Want To Get Burned Again" - Oil ETF Sees Biggest Outflows In 6 Years

"The oil rebound has run out of gas and now you are seeing nervous investors with itchy trigger fingers bailing out of USO," notes Bloomberg, as the biggest US ETF that tracks oil is heading for the largest two-month outflow in six years, raising concern that crude's 30% rally may stall. As BNP points out, "we do not think that the bulls have enough supporting fundamental factors to make a case for a higher oil price," and judging by the mass exodus from USO, as Bloomberg concludes, knife-catching 'investors' "don't want to get burned by another drop in oil."

As Bloomberg reports,

Holders of the United States Oil Fund, known as USO, have withdrawn almost $1 billion so far in April and May, according to data compiled by Bloomberg. Crude dropped about $12 a barrel after a $1.4 billion exodus from the fund in the two months ended June 2009.

Oil has rebounded from a six-year low in mid-March on speculation that the falling number of drilling rigs will reduce output. U.S. crude stockpiles near the highest level in 85 years and OPEC's refusal to cut production will continue to weigh on price ...

Just One Chart

Catch me if you can...

Chart: Bloomberg

Intel close to deal to buy Altera for $16 billion: sources

(Reuters) - Intel Corp has resumed negotiations to buy smaller chip maker Altera Corp and is close to a $16 billion acquisition agreement, people familiar with the matter said on Friday.

U.S. warns G7 of global economy 'accident' without Greece deal

DRESDEN, Germany (Reuters) - The United States warned on Friday of a possible accident for the world economy if Greece and its creditors miss their June deadlines to avert a debt default.

What You Need To Know Ahead Of Today's Annual Russell Rebalance

Want to try and frontrun an index rebalancing? There's a formula for that.

The Russell 3000 â€" to which more than $5 trillion in assets were benchmarked as of 2013 â€" will be reconstituted next month based on market capitalizations calculated at the end of trading today. Here's the schedule:

Clearly, correctly anticipating which names will ultimately be added or dropped has the potential to produce outsized gains as portfolio managers will need to rebalance to match the composition of the index. It's possible to attempt this ahead of time using Russell's own methodology and indeed, Wall Street employs strategists whose job it is to do just that.

H.C. Wainwright has attempted the exercise, and for those interested, the results are below.

Given the size of the exchanging pie, the attraction of properly anticipating the changes associated with the potential for lucrative trading gains captivates bulge-bracket firms, independent research houses, and money managers alike in postulating on how the cards might fall on that last business day in May when Russell reconstitution market capitalizations are calculated.

The dynamics are not missed by the academic community either, and the index reshuffling process has attracted the attention of various financial scholars in attempt to map the effectiveness of gaming the index changes. With this paper, we attempt to offer a snapshot of the task required and the scope of inherent difficulties in forecasting changes in the Russell universe while offering a stab at the process ourselves. As a backdrop and according to people we talked with, ...

Wall St. slips on weak economic data

(Reuters) - U.S. stocks were lower in early afternoon trading on Friday, weighed by data that showed the economy contracted in the first quarter and as weak data for May added to concerns about the strength of a recovery.

Margin Debt Breaks Out: Hits New Record 50% Higher Than Last Bubble Peak

For a few months in mid/late 2014 there was some concern among those who still don't get that in this New Paranormal market the only real buyers are central banks, that while the stock market kept on rising, and rising, NYSE margin debt was flat, and in fact the total amount of purchases on margin at the end of 2014 was nearly the same to those in January. Meanwhile the S&P 500 had soared to recorder highs.

A few things here: first, as we explained one year ago, in a world in which levered purchases take place via such shadow banking conduits as repo and primary broker arrangements, margin debt has become an anachronism from a bygone generation in which there wasn't $2.5 trillion in Fed reserves supporting the market, and is now almost entirely meaningless

But for those who still cling on to margin debt as indicative of anything, the latest NYSE report should provide some comfort: finally the long-awaited breakout in participation has arrived, and after stagnating for over a year, investors - mostly retail - are once again scrambling to buy stocks on margin, i.e., using debt, and as of April 30, the amount of margin debt just hit a new all time high of $507 billion, $30 billion more than the month before, and nearly 50% higher than the last bubble peak reached in October 2007.

It's not just margin debt that hit a record high. Investor net worth, which is the inverse, or investor cash and credit balances less total margin debt, just dropped to ($227 ) billion, ...

Inaccurate Statistics And The Threat To Bonds

Submitted by Alasdair Macleod via GoldMoney.com,

Statistics have become very misleading: in particular we are being badly misled into believing that the US is teetering on the edge of price deflation, because the US official rate of inflation is barely positive, a level that US bonds and therefore all other financial markets have priced in without accepting it is actually significantly higher.

There are two possible approaches to assessing the true rate of price inflation. You can either reverse all the tweaks government statisticians have implemented over the decades to reduce the apparent rate, or you can collect a statistically significant sample of price data independently and turn that into an index. John Williams of Shadowstats.com is well known for his work on the former approach, but until recently I was unaware that anyone was attempting the latter. That is until Simon Hunt of Simon Hunt Strategic Services drew my attention to the Chapwood Index, which deserves wider publicity.

This is from the website: "The Chapwood Index reflects the true cost-of-living increase in America. Updated and released twice a year, it reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation." It is, therefore, statistically significant, and it consistently shows price inflation to be much higher than that indicated by the Consumer Price Index (CPI).

The table below shows this difference since 2011, and how it affects real GDP.

WTI Crude Continues To Soar As Oil Rig Count Decline Re-Accelerates

With production soaring by the most in almost 2 years, the rig count declines (or additions) appear to have become noise but following last week's single oil rig decline but this week's re-acceleration of declines is rather notable. Total rigs declined 10 to 875 and oil rigs declined 13 to 646 (the biggest weekly drop in a month). Crude prices had soared into the rig count data (despite the record production in Russia, OPEC's promise to keep production at highs, US production surging, and economic growth slumping) and kept going after.

*U.S. OIL RIG COUNT DOWN 13 TO 646, BAKER HUGHES SAYS

And Total Rigs decline 13...

Crude was ripped higher into the data and kept going...

Charts: Bloomberg

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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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