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05Aug2015 Market Close: DOW Drops, Oil Falls, U.S. Slips And The Averages May Have More Steam Left Depending On Oil Prices

Written by Gary

Global markets are showing sign of weakness in light of Chinese desperately trying to artificially prop up their markets, Greece Banks sinking fast and oil is filling up tanks faster than a Southern Frog Pounder flooding the back yard play pool. DOW closed Flat and the major averages closed in the green after slipping off the morning highs.

Todays S&P 500 Chart

Oil sank to its 4 month support lows and has paused, gold closed at 1084 and the U.S dollar can't rise above 98.30 and stay there. Markets traded sideways for the afternoon session with the major averages closed in the green, while the blue-chip Dow index closed flat, weighed down by Disney's largest daily drop in seven years.

The Market in Perspective

Here are the headlines moving the markets.

Pulling Apple Out of Its Funk

Apple's recent selloff sparks painful memories of the stock's last correction. But there are reasons this show doesn't have to repeat.

Tech leads Nasdaq, S&P 500; Disney sparks media selloff

(Reuters) - The S&P 500 and Nasdaq Composite rose on Wednesday following three days of losses as tech shares advanced, while the blue-chip Dow index was flat, weighed down by Disney's largest daily drop in seven years.

It Really Is Different This Time: It's Worse

Another talking-head myth destroyed: there has never, ever, been a higher percentage of IPOs that are are unprofitable! It really is different this time, it's worse.

h/t @NorthmanTrader

Robust U.S. services sector keeps Fed rate hike in play

WASHINGTON (Reuters) - U.S. private job growth slowed in July, but a surge in services industry activity to a near-decade high suggested solid economic momentum that strengthens the case for a Federal Reserve interest rate hike this year.

Disney's ESPN Reality Show Doesn't Convince

Disney said it doesn't plan to leave the cable bundle. A closer look at ESPN's subscriber-decline sensitivity suggests it may need to rethink that.

Oil Prices Fall to Multi-Month Lows

Oil prices fell to new multi-month lows after weekly inventory data showed a small increase in U.S. crude production and President Barack Obama urged lawmakers to support the Iranian nuclear deal.

The Dow Curse Strikes Again: AAPL Tumbles, AT&T Jumps After Index Switch

In the weeks before AAPL's adition to The Dow, the stock soared over 13% (for no good reason). In the almost 4 months since - after some sideways trading - AAPL shares have plunged. The announcement on March 6th, that AAPL would be included in The Dow on March 19th marked the end of exuberance and has now turned into a "no brainer" trade as the curse of The Dow strikes again. Ironically AT&T - which was replaced by Apple - has surged since its removal from the venerable index.

AAPL has tumbled...

And AT&T has soared...

As WSJ reports, since 1999, the 16 firms joining the Dow (Apple excluded) have seen their stocks increase an average 1% in the six months after their induction, according to data gathered by Birinyi Associates. That's compared to gains of 11%, on average, for the companies in the six months preceding their inclusion.

Charts: Bloomberg

The Overly-Optimistic Economic Factor No One Is Talking About

Submitted by Jeffrey Snider via Alhambra Investment Partners,

With factory orders continuing to be much worse than they appear, it makes sense to try to measure the effect of over-optimism accounted by inventory. Recessions themselves were once almost exclusively set up by this one factor, as the difference between production and sales, caught up within the supply chain, eventually works out toward alignment. Companies are willing to hold inventory for shorter periods of time as the sales environment is more volatile, but there comes a point when that patience finds a limitation and production suddenly and rapidly dwindles.

That itself makes determining the inventory imbalance difficult, and is made more so by the imprecise manner in which it is measured. The Census Bureau gives us one account, as does the BEA within the GDP context. There are some discrepancies between them, but by and large the raw, generalized account of inventory through either method right now is extreme.

On the GDP side, the annual benchmark revisions last month were not nearly as large in the inventory component as GDP overall (which shows just how over-optimistic trend-cycle was in relation to actual "demand"). The most striking aspect of the revisions were the inventory increases in the past two quarters - record levels. Inventory accounting in terms of GDP being what it is, second derivatives, the second highest inventory build in the entire series actually ended up subtracting a small amount from Q2 GDP because it immediately followed the highest.

Stock Buybacks Set To Soar After SEC Forces Companies To Compare CEO And Worker Pay

In an attempt to publicly shame CEOs into lowering their pay, or boost the compensation they pay their employees (because the forces of labor supply and demand apparently no longer work) moments ago, in a 3-2 vote, the SEC approved a rule Wednesday requiring companies to reveal the pay gap between the chief executive officer and their typical worker.

The vote was split along party lines: with Mary Jo White, who did not recuse herself on this occasion as one of her former Wall Street clients was not directly implicated, voting alongside the two democratic SEC commissioners, Luis Aguilar and Kara Stein, while republicans Michael Piwowar and Daniel Gallagher voted against.

Specifically, the SEC will require companies to disclose the median compensation of all its employees, excluding the CEO, and publish a ratio comparing that figure to the boss's total pay. Companies would have to report the pay ratio beginning in 2017. The metrtic will have to be updated once every 3 years and will allow companies to exclude as much as five percent of their foreign workers from the calculation.

The passage of the vote comes as a bit of a surprise because the agency had delayed progress on the rule for years, with SEC Chair Mary Jo White facing attacks from unions and Democratic lawmakers in recent months for failing to get it done.

As Bloomberg adds, "the disclosure is required under the 2010 Dodd-Frank Act, which hasn't stopped it from splintering the five-member commission. Republican commissioners and business groups argue it's meant to embarrass CEOs and won't be useful to investors."

The SEC gave allowed for some discretion in determining the median pay of workers. ...

Are Bond Markets and the Fed on Same Page?

The Federal Reserve has signaled the economy can withstand a round of interest-rate increases but the bond market may not be so sure.

Stocks Higher as Jobs Friday Looms

Global stocks rose Wednesday as investors waited for an employment report at the end of the week that is likely to shed light on whether the U.S. economy is ready for higher interest rates.

Bank of America Starts to Pull Clients' Money Out of a Paulson Fund

The move comes during a rocky year for the hedge fund billionaire John A. Paulson, who has bets on Greece and Puerto Rico.

With Halo 5: Guardians, Microsoft Seeks to Lure E-Sports Players Back

Microsoft is offering $1 million in prize money to competitive gamers, a crucial leg in the multimillion-dollar marketing push for the video game.

S.E.C. Approves Rule on C.E.O. Pay Ratio

Requiring companies to compare the chief executive's compensation with that of employees could further stoke a debate over income inequality.

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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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