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26Jun2015 Market Close: Markets Closed Mixed Ahead Of A Potentially Volatile Weekend Involving Greece And Its Creditors, Traders Mostly In Cash Positions By The Close

Written by Gary

The SP500 closed below its 50 DMA**, but recovered much of the morning losses. The DOW is solidly in the green thanks to Nike Inc. while the technology sector posted losses.

Crude futures ended little changed on Friday after signs Greece might have a deal by the weekend to avoid a debt default, while Iran faced continued difficulty in securing an nuclear agreement to end sanctions on its oil exports.

Greek Prime Minister Alexis Tsipras summoned an urgent meeting of his cabinet today after euro zone partners warned Athens it had 48 hours to accept a cash-for-reform deal or plunge toward default.

Todays S&P 500 Chart

** Incorrectly reported at the midday, the SP500 was below the 50 DMA and NOT the 100 FMA.

The Market in Perspective

Here are the headlines moving the markets.

Nike Boosts Dow; Nasdaq Slips

U.S. stocks ended mixed Friday, with an advance in Nike Inc. boosting the Dow industrials while the technology sector posted losses.

Oil near flat, Brent up modestly after two-day drop

NEW YORK (Reuters) - Crude futures ended little changed on Friday after signs Greece might have a deal by the weekend to avoid a debt default, while Iran faced continued difficulty in securing an nuclear agreement to end sanctions on its oil exports.

Greece's Tsipras summons cabinet as debt deadline nears

BRUSSELS/ATHENS (Reuters) - Greek Prime Minister Alexis Tsipras summoned an urgent meeting of his cabinet on Friday after euro zone partners warned Athens it had until the weekend to accept a cash-for-reform deal or plunge toward default.

The Last Time This Happened, The Bull Market Ended

In a somewhat stunning reality check for the new normal, companies in the S&P 500 have started paying out more money to shareholders than they produce in operating earnings. The last time spending on buybacks-plus-dividends exceeded operating profit was Q2 2007... that did not end well...

As Bloomberg reports,

S&P 500 companies spent $144.1 billion on share repurchases and paid out $93.6 billion of dividends. The total equaled 104.1 percent of profit, up from 95.1 percent in last year's fourth quarter.

The increase reflects a reliance on repurchases to spur earnings-per-share growth, according to Howard Silverblatt, a New York-based senior index analyst at S&P Dow Jones.

"They're getting a lot more pressure to do buybacks," Silverblatt said yesterday in an interview. "It's almost an entitlement program from an investor standpoint." Repurchases will probably stay at current levels through year-end as many companies buy shares to offset expiring options, he added.

* * *

With the marginal cost of capital on the rise, however, one wonders just how long compensation-desparate CEOs are forced to admit that the short-term benefits of debt-funded buybacks are outweighed by the medium-term releveraging (which is at record highs) and cash flow crush that ensues.

Wall St. Drifts as Investors Weigh Concerns in China and Greece

Nike shares were up 4 percent after the company reported earnings that beat analysts' expectations.

Russell Rebalance Climax - The Busiest Trading Day Of The Year

Today will almost certainly be the busiest trading day of the year, as the Russell indexes go through their annual rebalancing/reconstitution. But, as ConvergEx's Nick Colas notes, Friday's close will be the end of a trade that began almost 2 months ago, as traders began handicapping which equities would be included for the first time or swapped between various Russell indices. Since the beginning of May, for example, the stocks that will be added to the Russell 2000 are up 11%, and those being deleted from the same index are down 2% over the same time period.

Today's trading will likely see those trends continue, with as much as half the total day's volume concentrated in the last 5 minutes of the day. Also look for names swapping between the widely followed Russell 2000 and the less-commonly tracked Russell 1000 to have some one-day volatility. In short, for one day - and this is the day - every U.S. equity market participant, no matter what their investment mandate, needs to think like a trader.

Throw in a little Greek drama going into the weekend, and it could be quite a day...

Groucho Marx had many memorable witticisms in his decades-long show business career, but my favorite is a handwritten note to an exclusive Hollywood watering hole: "Please accept my resignation. I don't want to belong to any club that will accept people like me as a member." The venue in question was the Friars Club of Beverly Hill, where everyone from Judy Garland to D ...

Greek Deal or No Deal: Investors Question Which Is Worse for Euro

Last time Greece headed for a potential departure from the eurozone, investors dumped the euro, betting that an exit would be a disaster for the currency. This time, they're not so sure.

Fearing Government Scrutiny, HSBC Waves Goodbye To China PMI Sponsorship

After five years, HSBC is officially calling it quits on its sponsorship of Markit's EM PMIs, meaning the bank's name will no longer be stamped on the one data point out of China that supposedly retains some degree of objectivity.

Although HSBC claims it's simply time to move on after a "successful" partnership, those 'in the know' (so to speak) say political concerns were almost certainly behind the decision. Put simply: with Beijing struggling to convince the world that despite slumping export growth and weak readings on key data points such as rail freight volumes, the Chinese economy is still expanding at a 7% clip, sponsoring an index that consistently comes in weaker than the official numbers is a politically dangerous move to make. Here's Reuters:

HSBC has ended its marketing tie-up with financial information firm Markit Ltd, both companies told Reuters on Friday, winding down a five-year relationship that some industry insiders said may have become too expensive and a potential political liability for HSBC in China.

Markit and HSBC spokespersons said that HSBC had ended its sponsorship of the closely watched China Purchasing Managers Index and of other emerging markets indexes compiled by Markit.

"The sponsorship arrangement is now coming to an end and we will announce replacement sponsors soon," said Laura Davis, a Singapore-based spokeswoman for Markit in an email statement.

Market insiders have been chattering about the coming end of the partnership for months, with some speculating that HSBC was ending its sponsorship of the indicator because of pressure from Beijing, or ...

Oil Tankers Are Filling Up and Raking It In

The oil-tanker market is heating up, a development some analysts say is a warning flare that signals further price declines for crude.

China Stocks Plunge to Brink of Bear Market

A Chinese stock market slump that began two weeks ago deepened, with the main index tumbling on concerns the government is seeking to cool a yearlong debt-fueled rally.

FedEx says has requested EU approval for $4.9 billion TNT bid

BRUSSELS (Reuters) - FedEx has asked the European Union's competition regulator to approve its 4.4-billion-euro ($4.9 billion) bid for Dutch rival TNT Express , the U.S. package delivery service company.

Collapse, Part 5: Things Fall Apart

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

It is impossible to wean an economy that relies on debt and leverage for its "growth" of excessive debt and leverage.

As noted earlier in this series, collapse is not an event, it's a process, a process we experience as things fall apart. The phrase famously appears in William Butler Yeats' 1919 poem, The Second Coming:
Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.
Why do things fall apart? I have addressed a number of dynamics in the first four essays of this series, but there are many more expressed in Yeats' few brief lines.
1. Magical thinking dominates all discussions. The truth, being too fearful to contemplate, is sidelined in favor of magical thinking:
-- we can grow our way out of debt by expanding debt
-- if we simply print enough money, we can pay for everything we want
-- a miraculous new technology (insert current example) will provide limitless energy/food at near-zero cost
-- if we tweak the system with some minor reforms, all the big problems will go away

Leading Index Review: May 2015 Philly Fed Leading Index Projects Economic Growth Now at 1.6%

Econintersect: This leading index is now forecasting growth at 1.6% over the next 6 months. A review of all major leading indicators follows - and no leading index is particularily strong.

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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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