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08Sep2015 Market Close: U.S. Markets Rallied Hard And Closed Up Over 2%, Oil Steady, U.S. Dollar Showing Weakness, After-markets Sliding Fractionally

Written by Gary

DOW finishes up 2.4% higher (+390) and the SP500 up 2.5% higher while the Nasdaq Closed up 2.84%. The big question now is what happens tomorrow? There is a 50-50 chance the markets could move in ether direction and there is not enough room here to state the salient reasons.

Todays S&P 500 Chart

I am going out on a limb and 'guess' down, but closing near the unchanged line, moderate volume and no volatility to speak of. Investors are going to now take a wait and see approach to Mr. Markets ongoing confusion.

The Market in Perspective

Here are the headlines moving the markets.

Fed should wait with raising rates: World Bank economist

WASHINGTON (Reuters) - The U.S. Federal Reserve should hold off on raising interest rates until the global economy is more stable, the World Bank's chief economist said in an interview with the Financial Times published on Tuesday.

It Really Is As Simple As That

Six years after we first explained the only thing that matters for this "market", JPMorgan finally figured it out, and in doing so proudly joined the ranks of the "tinfoil hat, conspiracy theorists" unable to grasp the finer nuances of the Magic Money Tree theory.

Now, who else can't wait for the Fed's first rate hike in nearly a decade?

Wall St. jumps 2 percent; eyes on China

(Reuters) - U.S. stocks rallied more than 2 percent in the late afternoon on Tuesday, bouncing after losses last week and as hopes increased for more stimulus measures from the Chinese government.

JPMorgan Hires Tech Banker Greg Mendelson From Bank of America Merrill Lynch

At JPMorgan, Greg Mendelson will focus on advising both tech services companies and private equity firms.

Goldman Warns, VIX "Is Pricing In A Lot Of Economic Damage"

If the market is right, Goldman warns that current cross-asset-class volatility appears to be pricing in a lot of economic damage. As they note, VIX doesn't just trade the economy; it also has a strong and often humbling element of risk sentiment baked in.

Goldman Sachs explains...

Mapping VIX levels back versus the economy ... weaker data = higher VIX

Understanding the interplay between volatility and the economic cycle has been a core theme underlying our volatility framework. Although the VIX is often considered a "sentiment indicator", a regression of average calendar month VIX levels on U.S. consumer spending, manufacturing and employment data explains 59% of the variability in VIX levels back to 2000. Updating our model to include last week's ISM and employment data suggests that if the VIX were trading off the recent economic data then average VIX levels should be tracking at 18. The average VIX level in August was 19.4 and the average since mid-August has been 25.9, with a closing high of 40.7 on August 24.

Baseline VIX: ISM in low 50's suggests equilibrium VIX level of 18, even after controlling for the drop in unemployment rate

We estimate that baseline VIX levels tend to increase about one-half of a vol point for every one-point decline in ISM new orders. ISM new orders levels averaged about 10 points higher over the back half of last year relative to where they are now (2H 2014 avg: 61.4 vs current: 51.7), so baseline VIX levels should be about 5 vol points higher. The average VIX level over 2H 2014 was 14.6. An estimate for the average VIX level given just the shift in new orders is approximately 19.7 (14.6 + 0.52*(61.4-51.7) ). Controlling for the drop in the unemployment rate to 5.1% puts our model at 18. A similar analysis on one-month S&P 500 realized volatility suggests ...

Copper Prices Jump on Supply Cuts, China Data

Copper prices surged as U.S. investors had their first chance to respond to Glencore's decision to shut two copper mines in Africa and after data showed China's copper imports improved last month.

Alibaba lowers second-quarter gross merchandise volume estimates

(Reuters) - Alibaba Group Holding Ltd said on Tuesday it expected second-quarter gross merchandise volume (GMV) to be lower than its initial estimates due to weaker consumer spending in China.

Why SocGen Is Very Nervous About The Recent Loss Of $9 Trillion In Global Market Cap

The good news: the collapse in global market cap since May of 2015 is not the worst ever.

The bad news: the $9 trillion drop in combined market cap between the MSCI All World index and Chinese stocks, is the second highest ever, surpassed only by the $13 plunge in global market capitalization in late 2008.

Wait, $9 trillion? Yes: for all the focus on the modest correction in the S&P500, what most have forgotten is that in addition to the US, various other development markets, not to mention emerging markets, have lost trillions and trillions in value since their May peaks. According to SocGen calculations, there has been a $1 trillion drop in emerging markets, a $4 trillion decline in development equity markets, and let's not forget, the bursting of the Chinese stock bubble, which from a peak market capitalization of $10 trillion in early June, or about the same as China's GDP, has lost some $4 trillion, since despite the Chinese government's increasingly more desperate and futile attempts to reflate the bubble.

Combining all this, SocGen summarizes, "we are looking at an overall $US9 trillion loss of market capitalisation in less than 3 months! To put that number in context the most severe loss in market capitalisation over 3 months during the 2008/09 financial crisis was $12.8 trillion." The drop is almost the same as China's $10 trillion GDP (and likely well higher if one uses credible calculations).

But that's not the worst news. As SocGen's Andrew Lapthorne suggests, "such a decline in market values will impact implied leverage calculations and as such all eyes shou ...

GE clears final hurdle to $14 billion Alstom deal

BRUSSELS (Reuters) - General Electric has won EU approval for its 12.4-billion-euro ($13.9 billion) acquisition of Alstom's power business after agreeing to sell some of the French company's turbine assets to Italian rival Ansaldo Energia.

More Investors Betting Against Banking Stocks

The late-summer market tumult has taken a hefty toll on bank shares, the latest sign of the uncertainty plaguing investments that are expected to benefit from rising interest rates.

Bankrate to pay $15 million to settle SEC fraud charges

NEW YORK (Reuters) - Bankrate Inc agreed to pay $15 million to settle U.S. Securities and Exchange Commission charges that it engaged in accounting fraud to ensure that its financial results met analyst expectations.

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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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