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29May2015 Market Update: Averages Move Down On Disappointing U.S. Data

Written by Gary

U.S. stocks fell this morning after data showed a contracting U.S. economy and that consumers remain cautious. Oil prices rose Friday, helped by a drop in U.S. inventories, ahead of closely watched drilling data.


Here is the current market situation from CNN Money

North and South American markets are lower today with shares in Brazil off the most. The Bovespa is down 0.94% while U.S.'s S&P 500 is off 0.41% and Mexico's IPC is lower by 0.04%.

U.S. stocks extended their losses in late morning trading on Friday after weak GDP and consumer sentiment data added to investor concerns about the strength of the economy.

The first column is what was reported this morning. The second column is what was expected and the third is the last report.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 61%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 46%
Investors Intelligence sets the breath Above 50 bullish 58.0%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -17.56
StockChart.com NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 58.37%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 62.41%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 63.80%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 21.09
StockChart.com Consumer Discretionary ETF (XLY) As long as the consumer discretionary holds above [66.88], all things being equal, it is a good sign for stocks and the U.S. economy 76.48
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 11,068

What Is Moving the Markets

Here are the headlines moving the markets. xxxxxxxxxxx

U.S. economy contracts in first quarter; dollar hurts corporate profits

WASHINGTON (Reuters) - The U.S. economy contracted in the first quarter as it buckled under the weight of unusually heavy snowfalls, a resurgent dollar and disruptions at West Coast ports, but activity already has rebounded modestly.

Wall Street lower after first-quarter GDP contraction

(Reuters) - U.S. stocks extended their losses in late morning trading on Friday after weak GDP and consumer sentiment data added to investor concerns about the strength of the economy.

Intel close to deal to buy Altera for $15 billion: source

(Reuters) - Intel Corp has resumed negotiations to buy smaller chip maker Altera Corp and is close to a $15 billion acquisition agreement, a person familiar with the matter said on Friday.

Oil up 3 percent as dollar rally stalls and U.S. inventories ease

NEW YORK (Reuters) - Oil rose 3 percent on Friday, as a rally in the dollar faded and after data from a day ago showed a fourth straight weekly draws in U.S. crude oil stockpiles.

De-Dollarization Du Jour: Russia Backs BRICS Alternative To SWIFT

Back in February, Russia detailed a SWIFT alternative that would link 91 domestic banks to the Central Bank of Russia.

On the one hand, the plan represented yet another move towards global de-dollarization but on the other, was borne out of necessity when Russia began to believe it may be expelled from SWIFT as punishment for its support of rebels in Ukraine. Prime Minister Dmitry Medvedev warned of "unlimited consequences" if the West decided on a punitive SWIFT freeze.

Two months later, Moscow would receive a seat on the SWIFT board.

Now, Russia is taking de-dollarization a step further by suggesting that a BRICS alternative to SWIFT may be in the cards. RT has more:

The Central Bank of Russia has proposed a discussion about establishing an analogue to the SWIFT global network for transmission of financial information that processes $6 trillion worth of communiqués daily.

The CBR hopes to cut the risks of possible disruptions.

"Seriously speaking, there is no analogue to SWIFT at the moment in the world, it is unique. The only topic that may be of interest to all of us within BRICS is to consider and talk over the possibility of setting up a system that would apply to the BRICS countries, used as a backup," sai ...

U.S. Households Under Pressure: Stagnant Incomes, Rising Basic Expenses

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

How do you support a consumer economy with stagnant incomes for the bottom 90%, rising basic expenses and crashing employment for males ages 25-54? Answer: you don't.

Frequent contributor B.C. passed along a sobering set of charts that provide context for How The Average U.S. Consumer Spends Their Paycheck. The basic story is well-known to the bottom 90%: most of the household income goes to taxes, housing, food and transportation, with healthcare and insurance, pensions and retirement contributions rounding out the big-ticket items. (Higher education is, as we all know, paid with student loans by all but the top-tier of families.)
Here's the question this raises: is the sliver that's left enough to support a $17 trillion consumer economy? The answer is obvious: no.
Stagnant household income has a number of systemic causes, including the generational decline of full-time employment (A Rising Share of Young Adults Live in Their Parents' Home) and the concentration of wage gains in the top 10%. These dynamics are not easily addressed, for the simple yet profound reason that the amount of human labor that generates a meaningful profit in a stagnant, over-indebted, financialized economy is declining.
The only way most enterprises can sustainably earn a profit is to offload costly ...

Is Bad News, Bad Again? Europe And US Stocks Slump

It seems bad news is bad news after all...

US and European stocks are sliding...

Leaving all major US indices red for the week...

And European bond risk is surging (Portugal +25bps on the week, Spain +16bps)

Charts: Bloomberg

Final May 2015 Michigan Consumer Sentiment Still Worse Than Last Month

by Doug Short, Advisor Perspectives/dshort.com

The University of Michigan final Consumer Sentiment for May came in at 90.7, down from the 95.9 April final reading and well below the interim high of 98.1 in January. Investing.com had forecast 89.9 for the May final.

April 2015 Coincident Indicators Generally Show Slowing Growth

The rate of growth of the US Coincident Index was unchanged in April 2015 data. A comparison of US Coincident Index, Aruoba-Diebold-Scotti business conditions index, Conference Board's Coincident Index, ECRI's USCI (U.S. Coincident Index), and Chicago Fed National Activity Index (CFNAI) coincident indicators follows. In general, most coincident indices are showing slower growth.

GDP Report Confirms Global Trade Is Crashing, And Why That Is Good News For Some

We did not actually need confirmation that global trade is slowing to a crawl (and has in fact reversed): after all, we have been showing just that for the past year, most recently earlier this week...

World-Trade-Monitor-Volume-2012-2015_03

... but it is important to note that in today's negative GDP print, it was net trade (exports less imports) that subtracted -1.9% from the final GDP print, driven by a -1.03% annualized drop in exports. This was the biggest hit to US trade since the great financial crisis.

The breakdown of the chart above is shown as follows, with Net Trade in real dollar terms subtracting $545 billion from US GDP, following the lowest exports number since Q2 2014 even as imports rose to a new all time high (most of it likely going to boost alr ...

UMich Consumer Sentiment Slumps To 6-Month Lows, Current Conditions Tumble

Following the collapse in Gallup's consumer confidence and Bloomberg's Consumer Comfort, UMich Consumer Senitment printed 90.7 (against expectations of a rise to 89.5 from 95.9). With May's preliminary print the biggest miss in 17 months, this final drop leaves Consumer Sentiment at its lowest since November 2014. Hope dropped from 88.8 to 84.2 but it was the collapse in Current conditions - which fell from 107 to 100.8 - that crushed the headline. This is the biggest plunge in current conditions since Summer 2011 (the US debt downgrade). Business expectations plunged to 8-month lows, employment expectations tumbled... but the number who think it's a good time to buy a house rose.

Charts: Bloomberg

May 2015 Chicago Purchasing Managers Barometer Crashes

Econintersect: The Chicago Business Barometer fall back into contraction in May. There was a very sharp contraction for new orders. Authors of this index now suspect there will be no economic bouce in the second quarter.

Goldman Sachs Warns "Too Much Debt" Threatens World Economy

Goldman Sachs Warns "Too Much Debt" Threatens World Economy

- Debt load of many countries is an economic risk
- Ageing populations in developed world to put pressure on economies
- Goldman proposes "creative" social policy to deal with looming crisis
- Entire debt-based monetary system needs reform

goldcore_chart1_29-05-15

The debt burden â€" particularly in "developed" countries â€" along with ageing populations poses a risk to the economies of those countries, Goldman Sachs has warned. Andrew Wilson, Goldman Sachs Asset Management's chief executive in Europe said, "There is too much debt and this represents a risk to economies. Consequently, there is a clear need to generate growth to work that debt off but, as demographics change, new ways of thinking at a policy level are required to do this."

Japan, as an example of a major economy, now has a government debt-to-GDP ratio of over 200%, which Wilson says is "not sustainable over the long term." Other countries with very high debt loads include the U.S., most of Europe and Brazil.

Among those countries on the other end of the scale are Russia, other central Asian countries and most of the Gulf states demonstrating the latent and as yet widely unacknowledged strength of the emerging Eurasian Economic Union and its ties to the Chinese New Silk Road project.

Wilson is particularly focussed on the issue of an ageing population:

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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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