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17Jun2015 Market Close: U.S. Equities Closed Up Modestly As The U.S. Dollar Digs Into Support, Indicators Calling For Down Day Tomorrow

Written by Gary

Today's elevator session is looking more and more like the norm over the next few weeks and I would be cautious reading too much into the tea leaves in the sessions ahead. Another spinning top candle which have been VERY consistent in calling market reversals in the past, look for another down day tomorrowwith volatility.

Stocks rose to new session highs after plunging deeply earlier this morning because of investor concerns, worries and unrest. Bonds regained some ground and the dollar weakened as the Fed signaled that interest rates would increase more slowly than many investors had been expecting.

Todays S&P 500 Chart

As Greece moves closer to default, the ECB must decide whether to strictly apply its lending rules and risk making matters worse, or keep money flowing to Greek banks and damage its own credibility.

The Greek central bank warned on Wednesday that the country risks a painful exit from the euro and ultimately even the European Union if Athens and its creditors do not strike a swift aid-for-reforms deal.

The Market in Perspective

Here are the headlines moving the markets.

Fed sees stronger economy but wants further gains before starting to hike key interest rate

WASHINGTON (AP) — The U.S. economy has strengthened since a slump early this year, the Federal Reserve said Wednesday, but it wants to see further gains in the job market and higher inflation before raising interest rates from record lows. While the Fed gave no timetable for a rate hike, all but two of its 17 policymakers think the Fed will raise its key short-term rate sometime this year.

That rate has been held near zero since 2008. Many analysts say that if the economy keeps improving, the Fed will likely raise rates in September. In a statement issued after its latest policy meeting, the Fed said it expects the economy's gains to accelerate later this year. The Fed's decision, which had been widely expected, was approved on a 10-0 vote.

GE's Immelt: U.S. retreat from ExIm, trade will cost jobs, influence

WASHINGTON (Reuters) - General Electric Co Chairman Jeff Immelt warned on Wednesday that the company would move manufacturing jobs to Canada and Europe if the Export-Import Bank closes and that U.S. economic influence will wane if Congress blocks a major Pacific-rim trade pact.

PetroYuan Proliferation: Russia, China To Settle "Holy Grail" Pipeline Sales In Renminbi

Last week, in "The PetroYuan Is Born: Gazprom Now Settling All Crude Sales To China In Renminbi," we discussed the intersection of two critically important themes which have far-reaching geopolitical and economic consequences. The first is the death of petrodollar mercantilism, the USD recycling system that has helped to buttress decades of dollar dominance and the second is the idea of yuan hegemony, a new, post-Bretton Woods world economic order characterized by the ascendancy of China-led supranational institutions.

These themes came together recently when it became apparent that Gazprom has begun settling all crude sales to China in yuan. Here's a summary of the prevailing dynamics: Western economic sanctions on Russia have pushed domestic oil producers to settle crude exports to China in yuan just as Russian oil is rising as a percentage of total Chinese crude imports. Meanwhile, the collapse in crude prices led to the first net outflow of petrodollars from financial markets in 18 years, and if Goldman's projections prove correct, the net supply of petrodollars could fall by nearly $900 billion over the next three years. All of this comes as China is making a concerted push to settle loans from its newly-created infrastructure funds in renminbi.

Now, it appears Russia and China will de-dollarize natural gas settlements as well.

First, a bit of history is in order.

Last month, Chinese President Xi Jinping visited Moscow, where Gazprom Chief Executive Alexei Miller and China National Petroleum Corp Vice President Wang Dongjin signed a gas export deal which paves the way for 30 bcm/y to China via a new "Western Route."

Natural Gas: A Halloween Horror Story

Oil's collapse dominates the energy sector, but don't forget trouble building in the natural-gas market.

Fed says U.S. economy still strong enough to handle rate hike

WASHINGTON (Reuters) - The U.S. economy is growing moderately after a winter swoon and likely strong enough to support an interest rate increase by the end of the year, U.S. Federal Reserve officials indicated on Wednesday.

17 June 2015 FOMC Meeting Statement: Still No Clue to When the Federal Funds Rate Will Be Raised But Economy Doing Better

Econintersect: The Federal Open Market Committee (FOMC) - the board of directors of the Federal Reserve continued to give no clues as to when they will raise the Federal Funds rate. However, they stated ....

.... that economic activity has been expanding moderately after having changed little during the first quarter.

The FOMC members did lower their economic forecast for 2015.

Greece's future in EU in doubt if talks fail, central bank warns

ATHENS (Reuters) - The Greek central bank warned on Wednesday that the country risks a painful exit from the euro and ultimately even the European Union if Athens and its creditors do not strike a swift aid-for-reforms deal.

Robotica Episode 6: A Robotic Dog's Mortality

Since Sony stopped making replacement parts for its Aibo robotic dog, devoted owners are facing the loss of their mechanical pets.

Did Yellen Just Throw Greenspan/Bernanke Under The Bubble-Blowing Bus?

Reflecting on the rate hikes undertaken in the 2004-2006 period (ensuring the world not think that The Fed would repeat that) Janet Yellen appears to have thrown Greenspan and Bernanke under the bubble-blowing bus with an off the cuff comment that "with hindsight, The Fed should have hiked rates faster," during that period...

Which is odd since we assumed it was The Fed's job to inflate financial assets to prove the real economy was doing great?

California pokes big hole in Uber's business model

(Reuters) - A San Francisco-based driver for smartphone-based ride-hailing service Uber is an employee, not a contractor, according to a ruling by the California Labor Commission.

Regulators Group Admits Funds Aren't Like Banks

Global regulators have admitted they were wrong to pursue a new approach to overseeing large funds, handing a major lobbying victory to many of the biggest money managers in the U.S.

Broad Decline In "Dot Plots" Suggest Fed Rate Hike Confidence Shaky

While virtually every single word change from the June statement compared to the April document shows a Fed that is increasingly more confident in the economy, the reason why the dollar has encountered a sudden air pocket following the Fed release is not due to the statement but what is in the Fed's projection materials, where the Fed unambiguously cut its 2015 GDP central tendency forecast from 2.3%-2.7% in March to just 1.8%-2.0%, coupled with a pick up in the unemployment rate from 5.0%-5.2% to 5.2%-5.3%, suggesting quite implicitly that while on one hand the Fed is more optimistic, when it comes to quantitative metrics it just got that much more bearish.

But nowhere is the Fed's ambivalence more evident than in the latest dot, or dart as we call them, plots of where every single FOMC member expects the Fed Funds rate at the end of 2015 and 2016. The wholesale drop in FF expectations, from 1.875% in March to 1.625% currently for 2016, is quite clear and suggests that while 15 people said it was time to hike rates in 2015 (vs 2 in 2016), their conviction is even lower than 3 months ago.

2015 dot plot:

And 2016:

FOMC Reaction: Bonds & Bullion Bid... Dollar Dumped

Update: Stocks reverting...

The kneejerk reactions so far are Dollar down hard and bullion, bonds, and stocks bid... let's see if Yellen can keep that going...

"Stingy" Fed Whisperer Hisenrath Confirms Hawkish Fed Ready To Hike Rates

Working at the usual blistering pace, WSJ's Fed mouthpiece Jon Hilsenrath cranked out 648 words in the space of just four minutes on the heels of today's FOMC announcement. "The Federal Reserve signaled it was moving toward interest rate increases in the months ahead now that signs of a dip in economic activity early in the year are waning," Hilsy notes, confirming that stocks are indeed still set for a rendezvous with 1937.

Via WSJ:

The Federal Reserve signaled it was moving toward interest rate increases in the months ahead now that signs of a dip in economic activity early in the year are waning, but the path of rate increases could be less steep than officials anticipated before.

For now, the Fed said, a benchmark interest rate near zero "remains appropriate."

But in forecasts the Fed made public about its interest-rate outlook, 15 of 17 officials said they expected to start raising short-term interest rates before the end of 2015. The projections suggest officials are gravitating toward one or two quarter percentage point interest rate increases by December. That would move the Fed's benchmark interest rate up from near zero, where it has been since December 2008.

The last time the Fed made such projections, its consensus appeared to be building around two rate increases this year. Fed officials also nudged down their rate projections for 2016 and 2017 by a quarter percentage point. The shifts suggested officials have become less certain about the longer-run vigor of the U.S. economy and its capacity to withstand much higher rates. Expansion of output is on track again in 2015 to un ...

Traders keep bets on December for first Fed rate hike

(Reuters) - U.S. short-term interest-rate futures contracts dropped, then rose, on Wednesday as traders tried to assess the likely timing of a first rate hike after Federal Reserve officials indicated they see the economy strong enough to handle a rate hike by the end of the year.

Lockheed names partner for commercial sales of giant airships

PARIS (Reuters) - Lockheed Martin Corp on Tuesday named a private firm, Hybrid Enterprises LLC, as the exclusive sales agent for its Hybrid Airships, a new type of aircraft that company officials say could revolutionize the way oil and mining companies haul equipment to the Arctic and other remote areas without roads.

U.S. Restricts Six Banks Over Foreclosures

The Office Comptroller of the Currency imposed restrictions on the mortgage-servicing operations of six banks, including the national bank arms of J.P. Morgan Chase and Wells Fargo, for failing to fully comply with enforcement orders related to home foreclosure abuses.

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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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