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28Jan2016 Pre-Market Commentary: US Futures Up But Sliding, China Falls Again, Crude Oil Up, Durable Goods For Dec 'Crashed', Economy Slowing

Written by Gary

US stock future indexes are fractionally higher but are trending down after durable goods orders were down 5.1% in December from the prior month, coming in worst than the estimate for a decline of 0.6%. Adding to this mornings woes, China's volatile shares tumbled again, taking losses this month to about 25% or 13T yuan ($2T).


Here is the current market situation from CNN Money

The Fed finally admitted yesterday that the US economy is slowing but gave little indication of slowing the pace of interest rate hikes despite the turbulence in global markets.

What Is Moving the Markets

Here are the headlines moving the markets.

Jobless claims fall more than expected

WASHINGTON (Reuters) - The number of Americans filing for unemployment benefits fell from a six-month high last week, suggesting the labor market recovery remains intact despite a sharp stock market sell-off and signs the economy has lost significant momentum.

Caterpillar profit beats as cost-cutting efforts pay off

(Reuters) - Caterpillar Inc's quarterly profit beat estimates as the company cut costs in the face of slumping commodity prices that has hit demand for its construction and mining equipment.

Ford Motor quarterly profit beats Street expectations

DEARBORN, Mich. (Reuters) - Ford Motor Co said on Thursday fourth-quarter results beat Wall Street expectations, and it reiterated a forecast that 2016 pretax profit would be equal to or higher than last year.

Deutsche Bank scraps board bonuses after record loss

FRANKFURT (Reuters) - Deutsche Bank scrapped board bonuses this year after posting a record loss for 2015 on Thursday, with Chief Executive John Cryan urging investors to be patient with his revamp of Germany's largest lender.

Alibaba quarterly revenue beats on strong holiday sales

(Reuters) - Chinese e-commerce giant Alibaba Group Holding Ltd's third-quarter revenue rose 32 percent, beating analysts' average estimate, helped by strong holiday sales.

Johnson Controls revenue misses Street

(Reuters) - U.S. auto parts maker Johnson Controls Inc reported lower-than-expected first-quarter revenue, hurt by weak sales in its automotive seating and interiors business.

HSBC curbs mortgage offering to Chinese citizens in U.S.

NEW YORK/ VANCOUVER (Reuters) - Europe's biggest lender HSBC will no longer provide mortgages to some Chinese nationals who buy real estate in the United States, a policy change that comes as Beijing is battling to stem a swelling crowd of citizens trying to get money out of China.

Putin ally absent as Russia considers joint action with OPEC

LONDON/MOSCOW (Reuters) - When Russian officials this week discussed the merits of jointly cutting oil output with OPEC to push up prices, one man -- President Vladimir Putin's ally Igor Sechin -- was conspicuous in his absence.

Futures little changed as Fed stays on course

(Reuters) - U.S. stock index futures were largely unchanged on Thursday, a day after the U.S. Federal Reserve gave little indication of slowing the pace of interest rate hikes despite the turbulence in global markets.

Old News Is Good News - Crude Jumps On Repeat Russia-OPEC Headline, Stocks Shrug

Just when you want that 100% correlation with crude to lift stocks from their post-Fed quagmire, it breaks down. Just as WTI was breaking back red this morning, Interfax headlines hit that confirmed Russia and OPEC in talks for a potential production cut and sure enough old news is good news and WTI ramped back up towards $33. The problem is... higher oil is no longer great news for stocks (for now)...

Russia has confirmed participation in the meeting of OPEC member-states and other oil producers for discussing low oil prices and coordination of a potential crude production cut due in February, Energy Minister Alexander Novak said on Thursday.

"Currently the OPEC member-states are trying to convene a meeting with participation of other OPEC (member-states) and non-(member-states) in February. Certain countries have come forward with this initiative, currently the issue is being worked out with the countries. On our part we've confirmed our potential participation in such a meeting," Novak said. According to the minister, the date for the meeting has not been set yet.

"The date does not depend on us. We can meet any time. The date is being agreed with other countries now," he added.

Similar meetings have been held earlier, Novak said, though now the situation has changed due to continuing plunge of prices. "Everyone estimates how long those prices will be recovering. We think it's reasonable to discuss the situation," the minister said.

He added that the consultations concern issues "related to estimation of the situation on the market, low prices and possible options of production coordination."

Old new ...

"Nobody Really Knows Anything Right Now"

Submitted by Nicholas Colas of Convergex

Three Fed Thoughts, One Conclusion

We learned one thing yesterday: the U.S. Federal Reserve is in the same position as the rest of us when it comes to forecasting the future path of economic growth. Nobody really œKnows anything right now. From that touchstone observation, we add two additional points. First, if you think the Fed is going to reverse course any time soon, be aware that neither Fed Funds Futures nor the 2 Year Treasury agree with you. Both discount a slow but perceptible increase in rates this year. Second, it pays to think a little more long term than just 2016. For example, consider that Chair Yellen has exactly 2 years left in that role before the next U.S. President can opt for someone else. What does she want her legacy to be? Not, I think, the Chair that failed to get (and keep) Fed Funds off the zero lower bound.

There is an old adage in economic circles that œStock market indexes have predicted nine of the last five recessions . The author of that statement is none other than Nobel Prize winner Paul Samuelson, who concluded the observation with œAnd its mistakes were beauties . Fair enough " equity markets are notoriously fickle. But market watchers would be fair in asking, œFine ¦ But how many recessions have œBlue chip economists called correctly?

It is in that philosophical cage match that investors and the Federal Reserve find themselves just now. Global equity market volatility combined with ever-lower crude oil prices are like a traffic signal turning from yellow to red. And red is also pretty much all you see on the screen. The economics-minded stewards at the Fed see an entirely different picture: low notional unemployment, ...

Caterpillar Q4 Sales Miss, Tumble 23%; Guidance Obliterated

As we do every quarter, just before CAT announces its result, we show the monthly retail sales for the heavy industrial conglomerate, and in the month of December things went from really bad to even worse, when the company reported what in our estimate was the worst month since the financial crisis, with global retail sales matching the worst annual decline this decade, while the duration of the sales contraction is now unprecedented in company history.

Today, CAT confirmed the flow through from this depressed picture when it announced that not only did revenue tumble by 23% to $11 billion, but it missed already deeply cut estimates of $11.4 billion, leading to a 111% collapse in operating profit which from $1.1 billion turned into a $114 million loss in the quarter. To be sure, the company tried to pull an Alcoa and stuff massive restructuring charges in the quarter amounting to $689, boosting non-GAAP EPS by $0.89 to $0.74, however one can simply ignore this latest accounting fudge attempt.

Then there was the topic of ongoing inventory liquidation:

Inventory declined about $1.45 billion during the fourth quarter of 2015. For the full year, inventory decreased about $2.5 billion. "Caterpillar inventory declined $1.45 billion during the fourth quarter of 2015, compared to a decline of about $1.1 billion during the fourth quarter of 2014. A fourth-quarter decrease is not unusual, as some of ...

Investors Hedge Bets on Crude-Oil Revival

How bad is the oil bust? Even the big believers in an inevitable rebound are hedging their bets.

Why the Fed Has the Stock Market Spooked

That the Federal Reserve may still raise rates this year amid a profits recession shows U.S. corporate performance is no longer a clear indicator of the domestic economy's strength.

Global Stocks Pressured After Fed Keeps Options Open

Global stocks fell as investors digested the Federal Reserve's latest statement, which left doubts about the timing of the next possible rate increase.

Economic Report: U.S. jobless claims fall 16,000 to 278,000

Initial jobless claims fell last week after touching a seven-month high earlier in January, offering fresh evidence the labor market is still doing pretty well despite a slower U.S. economy.

The Ratings Game: It's 'impossible to deny Facebook's momentum'

Facebook blew out Wall Street's expectations late Wednesday and on first look, analysts are pretty impressed. But there is the issue of a high price tag.

Earnings Summary for Today

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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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