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30Oct2015 Market Close: Markets Post Best Month Since October, 2011, Today's Session Ends Down In Surprise Last Five Minutes

Written by Gary

Markets closed down on a sour note as expected after starting the afternoon session in the green. The last 5 minutes saw the bottom fall out taking some investors completely by surprise as the DOW closed down 92 points and the Nasdaq only down 0.4%. Overall, the markets posted the best month since October 2011.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Stocks inch lower, still track to best month in four years

(Reuters) - U.S. stock indexes edged lower on Friday as investors sorted through mixed earnings reports, but were still poised to finish with their best monthly performances in four years.

Chevron slashes jobs and spending to weather low oil prices

(Reuters) - Chevron Corp is slashing 10 percent of its workforce and sharply paring back its budget, with Chief Executive Officer John Watson giving a downbeat view on Friday of an industry beleaguered by low oil prices.

Largest U.S. banks face $120 billion shortfall under new rule

(Reuters) - Six of the eight globally systemically important U.S. banks need to raise an additional $120 billion to comply with a regulatory requirement proposed Friday by the Federal Reserve.

UniCredit's new business plan envisages 12,000 layoffs: source

MILAN (Reuters) - UniCredit's new business plan envisages 12,000 job cuts worldwide, a source close to the matter said on Friday, indicating a larger reduction compared with 10,000 layoffs that had been expected.

Weak U.S. data clouds December rate hike possibility

WASHINGTON (Reuters) - U.S. consumer spending in September recorded its smallest gain in eight months as personal income barely rose, suggesting some cooling in domestic demand after recent hefty increases.

Exxon third-quarter profit falls 47 percent but beats expectations

(Reuters) - Exxon Mobil Corp said on Friday third-quarter profit fell 47 percent on low crude prices but results were better than expected, helped by higher profit in the oil company's refining business.

'Happy' Halloween Kids!

Trick... No Treat!


MOMO Rules: In A "World Of Disappointments" Trade Like An Idiot, Citi Recommends

In a "world of disappointments", where beta is king and where alpha has become a joke (or, now that equity is a risk-free asset and debt is risky, is outright punished) where growth no longer exists, drowning under the weight of $200 trillion in debt, and where value strategies have been all but forgotten replaced instead with "stories" about companies that have no cash flows but just might be "the next big thing" (one day), what should one to do? Why, engage in the most idiotic of strategies: chase momentum.

At least that is Citi's recommendation, and - we are very sad to say - in this broken "market", it works.

Here is the summary from the note by Citi's Jonathan Stubbs

World of disappointments… â€" The post-GFC world has been consistently disappointing, in terms of growth expectations. Economists and analysts have both consistently lowered GDP and EPS growth expectations at a global level.

...has not stopped equity bull â€" Despite this backdrop, equity markets have performed strongly over the same period. There has been enough growth to support rising share prices. The growth “hurdle rate†on Planet QE appears to be pretty low.

Disappointments drive momentum bull â€" This world of disappointment has been responsible for one of the most important equity market themes of the past few years: outperformance of momentum strategies, eg earnings, dividends, estimates.

Favoured Research Quant style â€" Our research Quant colleagues, Chris Montagu and team, have placed a strong emphasis on the importance of Estimates Momentum over the last few years. It remains one of their preferred Quant styles.

Momentum winning â€" We show that investors who have ru ...

S&P Downgrades Saudi Arabia On Slumping Crude, Ballooning Fiscal Deficit

Over the course of the last several months, the consequences for Saudi Arabia of deliberately keeping crude prices suppressed in an effort to, i) bankrupt uneconomic producers in the US, and ii) pressure Moscow into giving up Bashar al-Assad have begun to make themselves abundantly clear.

Not only has the kingdom been forced into liquidating its SAMA reserves...

... but the pressure from simultaneously maintaining the riyal peg and preserving the standard of living for everyday Saudis has driven Riyadh back into the debt market in an effort to offset some of the pressure on the country’s vast store of USD-denominated petrodollar assets (see second pane below).

Meanwhile, the war in Yemen is also weighing on the budget and now, the Saudis are staring down a fiscal deficit that amounts to some 20% of GDP and the first current account deficit in years.

All of the above have caused to market to lose faith in Riyadhâ ...

Mother Yellen's Little Helper - The Rate-Hike Placebo Effect

Via ConvergEx's Nicholas Colas,

Americans are increasingly likely to respond positively to a placebo in a drug trial - more so than other nationalities. That's the upshot of a recently published academic paper that looked at 84 clinical trials for pain medication done between 1990 and 2013. Over that time, Americans reported an almost 30% incremental reduction in pain symptoms when given a sugar pill or other placebo as compared to a 10% reduction for in non-U.S. studies. Why the difference? The paper's authors suggest that drug advertising - only allowed in New Zealand and America - may be giving trial populations more confidence that a drug - any drug - will work. Also a factor: drug trials are better funded now, and therefore have more participants and go longer. All that may well spark more confidence in trial participants, even those taking placebos.

These findings, while bad for drug researchers, does shed some light on our favorite topic: behavioral finance.

Trust and confidence makes placebos work, and those attributes also play a role in the societal effectiveness of central banks. That's what makes the Fed's eventual move to higher rates so difficult; even if zero interest rates are more placebo than actual medicine, markets believe they work to support asset prices.

I keep a mental list of underappreciated scientific developments of the 20th century, and near the top is the placebo. While you can argue that the roots and herbs of ancient societies were the first faith-based medicines, modern placebo research dates to a relatively recent 1955. That was the year Harvard research Henry ...

Futures Movers: Oil ends higher, scores 3.3% monthly gain

Oil futures settle higher for the session after Baker Hughes reports a weekly decline in the number of active rigs drilling for oil. Prices also post gains for the week and month.

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