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01Oct2015 Market Update: Averages Drop Off Morning Highs, DOW Off 200, WTI Oil Drops 2 Points, Biotech Stocks Retreat

Written by Gary

Midday U.S. markets dropping after ISM Manufacturing report this morning was a 'not so good (50.2 vs. 50.6 expected), lowest level since May of 2013. The health of the US economy has been in question for some time now, despite what the Fed heads want us to think.

Here is the current market situation from CNN Money

North and South American markets are lower today with shares in U.S. off the most. The S&P 500 is down 0.87% while Mexico's IPC is off 0.47% and Brazil's Bovespa is lower by 0.45%.

Thinking we were going to have a quiet session and closing in the green has to be retracted. As long as we remain in a downward trend in this sideways channel, anything could happen.

Traders Corner - Health of the Market

Index Description Current Value Members Sentiment: % Bullish (the balance is Bearish) 63%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 15%
Investors Intelligence sets the breath Above 50 bullish 25.1% Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. -9.87 NYSE % of stocks above 200 DMA Index ($NYA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Dropping below 40%-35% signals serious continuing weakness and falling averages. 19.40% NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 30.67% S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 30.40% 10 Year Treasury Note Yield Index ($TNX) ten year note index value 20.21 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 73.83 NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 9,800

What Is Moving the Markets

Here are the headlines moving the markets.

Autonomy's Mike Lynch counter sues HP over $11 billion deal

LONDON (Reuters) - British tech entrepreneur Mike Lynch on Thursday said he would file a claim against Hewlett-Packard for $150 million in damages over allegations the U.S company made about his role in the acquisition of his software company Autonomy in 2011.

Alliance Trust CEO steps down from board as Elliott forces overhaul

LONDON (Reuters) - Katherine Garrett-Cox, one of the City of London's most high profile women CEOs, is to step down from the board of Alliance Trust in an overhaul of the fund manager which has faced pressure from activist investor Elliott to make changes.

"Hedge Fund Hotels" Blow Up: September Slams Billionaire Stock Pickers

In August, hedge funds blamed risk-parity funds for their dramatic underperformance.

In September, the underperformance continued however this time, with risk-parity funds supposedly buying stocks, one can't blame them. To be sure, some such as Ackman whose 20 million shares of Valeant are hurting badly, will blame the Martin Shkrelis of the world for the biggest biotech tumble in years, but others may have to bite the bullet and admit it is their own lack of ability to come up with alpha in a centrally-planned "market" that is the reason.

That, and idea "clustering", of course, because over the past few years the best performers have been the "hedge fund" hotels - stocks that have dozens if not hundreds of hedge funds invested and piggybacking on each other. The problem is that in the past two months it was the hedge fund hotels that have led to the biggest losses. Even the mainstream media finally discovered this little "short cut" to creating if not alpha, then levered beta.

A few days ago, Reuters reported that "new data shows that some of the industry's biggest firms' top 10 stock picks bear striking resemblances to each other."

You don't say....

The same four holdings appear on the top 10 lists of John Paulson's Paulson & Co and Nehal Chopra's Ratan Capital, according to a report Symmetric IO released on Monday.

The data also showed Coatue Management had five of the same top 10 picks as Whale Rock Capital Management, and four listings in the top 10 list of Stephen Mandel's Lone Pine were a ...

Wall Street slips as Apple falls, factory activity slows

(Reuters) - Wall Street started the last quarter of the year in the red on Thursday as Apple fell and investors parsed mixed U.S. data.

VW says emission scandal investigations to take months

BERLIN (Reuters) - Volkswagen said on Thursday it would take longer than expected to investigate its rigging of vehicle emissions tests, raising the prospect of months of uncertainty as it grapples with the biggest business crisis in its 78-year history.

After Rough Quarter, Investors Buckle Up

Investors are bracing for more large price swings across stocks, bonds and commodities heading into a month that is associated with market tumult.

GM targets double-digit earnings growth in 2016

MILFORD, Mich. (Reuters) - General Motors Co told Wall Street on Thursday that its recovery is gathering momentum with improving margins, strong brands, new markets for high-tech vehicles, and prospects for stronger profits in coming years.

Apple appoints former Boeing CFO to its board

(Reuters) - Apple Inc said on Thursday it appointed James Bell, Boeing Co's former chief financial officer, to its board.

DAX Reverses Month-End Ramp, Suffers Worst Start-To-Q4 Since 2009

Germany's DAX has given back all of yesterday's exuberant month-end gains and more to suffer the worst start to Q4 since 2009 (and actually worse than 2007 and 2008)...

Early hope collapsed into reality...

Charts: Bloomberg

Global economy loses steam as Chinese, European factories falter

BENGALURU/LONDON (Reuters) - World economic growth lost momentum in September, with China's factory output shrinking again, euro zone manufacturing growth slowing, and U.S. activity steady.

Cheap gas, Labor Day weekend drive automakers' U.S. sales in September

(Reuters) - The big three U.S. automakers - General Motors Co, Ford Motor Co and the U.S. operations of Fiat Chrysler Automobiles NV - reported a jump in September sales on Thursday as cheap gasoline and ultra-low interest rates drove demand for sport utility vehicles and pickup trucks.

Consumer Sentiment Plunges On 401K Drop

Submitted by Andrew Zeitlin of Moneyball Economics

Connect the Dots

The University of Michigan's Consumer Sentiment dropped from 91.9 to 85.7 â€" the lowest level in a year.

Meanwhile the S&P 500 remains down, -5% year over year and -10% since July.

It's no coincidence that consumer sentiment stumbled at the same time that the stock market plunged.

Coming back from Summer vacations, households saw:

The deepest drop in 401K wealth in years

The most prolonged drop in years

It has been a shock because investors have been conditioned to ignore the dips; or better still, to buy the foolish dips (BTFD) because time-after-time the dips reverse within a few weeks and the market plows onward and upward. In July last year, the market tumbled 3% and then fully recovered within four weeks.

This time is very different. Household 401Ks tumbled 10% and remain down after ten weeks â€" deeper and longer. That's a big break from the normal routine. Another difference is that previous market drops had identifiable causes: a government sequester, a Greek bond collapse, and so on. Not this time, and that will create a lot more anxiety and uncertainty because without a clear reason for the collapse there can be no clear remedy.

Investors are asking what's wrong and they can't help but notice reports of negative economic news, from a slump in payrolls to slowing ...

Dunkin' Donuts estimates slower U.S. comparable sales growth

(Reuters) - Dunkin' Brands Group Inc estimated slower comparable sales growth at its U.S. Dunkin' Donuts stores for the third quarter and said it would close 100 stores in the country.

U.S. Factories, Labor Market Give Conflicting Signals

The pace of growth at U.S. factories slowed in September while new jobless claims pointed to a tightening labor market, giving mixed messages on the economy's health that could complicate the Federal Reserve's plans to raise interest rates.

The Best And Worst Performing Assets In September, Q3 And 2015 YTD

Both September and Q3 were market bloodbaths, periods most asset managers wish they could have completely avoided - perhaps they should have just sold in May? But it was not all red. As the following breakdown by Deutsche Bank shows there were quite a few asset classes that did quite well not only in September but in the third quarter. Here is the full breakdown.

* * *

Q3 2015 proved to be the weakest quarter for risk assets for some years and most market participants are probably glad to see the back of it. Indeed Q3 saw the poorest quarterly performance for the S&P 500 (-6.4%) and the Stoxx600 (-8.4%) since Q3 2011. It was also the worst quarter for the Nikkei (-14%) since 2010 whereas in EM the Shanghai Composite (-28%) and Bovespa (-15%) posted their worst quarterly scorecard since 2008.

In many ways September picked up many of the unresolved issues that we left behind in August. The sell-off in commodities and EM gained further momentum as recessionary fears deepened. That was enough to raise further questions around sustainability of global growth and DM valuations were certainly tested at various points. Macro themes aside, micro stories added their fair share of uneasiness for investors. The sharp sell-off in VW and Glencore were just two of those that amplified the weaknesses into the quarter end. Putting all those aside, the center stage event for September was clearly the seminal FOMC decision, in which the Fed decided against a hike even though it had been flagging it repeatedly earlier in the summer. This lower central bank confidence in the outlook has perhaps added further uncertainty to global markets.

Taking a closer look at the specific moves in Sept ...

U.S. factories, labor market give conflicting signals

WASHINGTON (Reuters) - The pace of growth at U.S. factories slowed in September while new jobless claims pointed to a tightening labor market, giving mixed messages on the economy's health that could complicate the Federal Reserve's plans to raise interest rates.

August 2015 Construction Spending Growth Is Again Strong.

Written by Steven Hansen

The headlines say construction spending grew. The backward revisions make this series very wacky - but the backward revisions this month were downward making the data worse than the headline view. In any event, construction spending is growing much faster than the economy in general.

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