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29Jan2016 Market Close: Great Bad News Today To Lift The Markets

Written by Gary

Great day for the markets. As usual, bad news is good news - and the best bad news of the day was a very sick GDP number. The market boyz believe this will muzzle the Federal Reserve from serving up another rate increase in the near future. Markets bounced up over 2%.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Boeing 737 MAX jet successfully completes first flight

(Reuters) - Boeing Co's 737 MAX aircraft completed its first flight on Friday, taking off from rain-slick tarmac and conducting tests for about three hours before landing safely at Boeing Field in Seattle.

Xerox to split into two companies, Icahn to get board seats on one

(Reuters) - Xerox Corp will split into two companies, one holding its legacy printer operations and the other its business process outsourcing unit, it said on Friday, in a bid to be more nimble after years of trying to integrate the businesses.

U.S. economic growth slows to a 0.7 percent rate in fourth quarter

WASHINGTON (Reuters) - U.S. economic growth braked sharply in the fourth quarter as businesses stepped up efforts to reduce an inventory glut and a strong dollar and tepid global demand weighed on exports.

Fed will be patient on US policy given global risks: Kaplan

NEW YORK (Reuters) - The Federal Reserve will be patient as it decides how trouble overseas could hit the U.S. economy, a Fed policymaker said in an interview, suggesting the central bank will be slower to raise interest rates this year.

Microsoft drives tech rally; Wall Street up almost 2 percent

(Reuters) - Wall Street surged nearly 2 percent on Friday after the Bank of Japan unexpectedly cut interest rates and Microsoft led a strong rally in technology shares.

Nissan recalling 930,000 cars for hood latch problem

(Reuters) - Nissan Motor Co said Friday it will recall nearly 930,000 Nissan cars worldwide for potentially faulty hood latches, marking the third time since 2014 the automaker has recalled vehicles to address the problem.

El-Erian says countries weakening currencies in fight for global growth

NEW YORK (Reuters) - Mohamed El-Erian, the chief economic advisor at Allianz, said on Friday the Bank of Japan's shocking move to take one of its main interest rates into negative territory underscored the country's hope to weaken the yen to re-inflate its economy.

Oil trims gains as Iran shuns talk of output cuts

NEW YORK (Reuters) - Oil prices trimmed early gains on Friday on a report that Iran would not participate in a possible deal between OPEC and other producing countries to trim output.

Valeant defends price hikes after Clinton remarks; shares jump

(Reuters) - Shares of Valeant Pharmaceuticals International Inc jumped 6 percent on Friday, after the company responded to criticism by Democratic presidential contender Hillary Clinton over price hikes for its migraine drug.

Bank of Japan Policy Panic Unleashes Stock, Bond Buying Pandemonium

Some soothing month-end meditation..

So let's start with today's idiocy... US equities driven by fundamentals!!


*S&P 500 EXTENDS GAIN TO 2.1%, HEADED FOR BEST DAY SINCE SEPT.8

But here is some context for January's moves...

For China...

Worst ever...

For US markets - apart from 2009's collapse, this is the worst January ever...

The BoJ "Gift" Is A One Day Reprieve - Use It Wisely

Via Scotiabank's Guy Haselmann,

By surprising markets with a move to a negative deposit rate, the Bank of Japan gave investors temporary reprieve, providing a much needed opportunity to pare portfolio risk at better prices. Unfortunately, the improvement in financial asset prices will be short-lived; except, of course, for long-maturity Treasuries.

As I wrote on January 4th, "Investors should be careful not underestimating just how far long-maturity Treasury yields can fall". These conditions still exist.

The BoJ action to drop its deposit rate from 0% to -0.10% will likely prove to be more symbolic than impactful. However, it is understandable why the BoJ wanted to take action. In January, the TOPIX was down 10% and the traded-weighted Yen appreciated by 3.5%. Currency strength and the fall in oil prices conspired to push Japan's preferred inflation measure back into deflation. However, if Japan (which only strips out food) stripped out energy from its measure (like other countries do), then its inflation measure would be above 1%.

The BoJ issued a highly informative and clear 4-page explanation of its action (China could use this clarity as an example of effective communication). It introduced a three-tiered system for rates, similar to that used in some European countries. The BoJ made it clear that the negative rate is not applied to outstanding balances of current accounts, but rather applied only to marginal increases in cur ...

Hillary Unveils New Campaign Logo

Going down? To The White House... or The Big House

Source: Investors.com


The Keynesian Monetary Quacks Are Lost - Grasping For The Bogeyman Of 1937

Submitted by Pater Tenebrarum via Acting-Man.com,

An Imaginary Bogeyman

What's a Keynesian monetary quack to do when the economy and markets fail to remain "on message" within a few weeks of grandiose declarations that this time, printing truckloads of money has somehow "worked", in defiance of centuries of experience, and in blatant violation of sound theory?

In the weeks since the largely meaningless December rate hike, numerous armchair central planners, many of whom seem to be pining for even more monetary insanity than the actual planners, have begun to berate the Fed for inadvertently summoning that great bugaboo of modern-day money cranks, the "ghost of 1937".

Bugaboo of monetary cranks
The bugaboo of Keynesian money cranks - the ghost of 1937.

As the story goes, the fact that the FDR administration's run-away deficit declined a bit, combined with a small hike in reserve requirements by the Fed "caused" the "depression-within-the-depression" of 1937-1938, which saw the stock market plunging by more than 50% and unemployment soaring back to levels close to the peaks seen in 1932-33.

Central Banks Go to New Lengths to Boost Economies

The Bank of Japan's surprise move Friday to lower a key interest rate below zero for the first time is the starkest example yet of central banks having to push to new extremes to goad a persistently sluggish economy back to life.

Stocks Soar After Japan's Rate Move

U.S. stocks climbed Friday, boosted by a surprise interest rate cut in Japan, at the end of a turbulent month for financial markets.

For Mining Chiefs, Doomsday Scenarios Could Become Reality

The vicious decline in commodity prices is upending the forecasts of the leaders of the world's top commodities companies and scrambling their plans to cope with the worst rout in decades.

Mars Landing

This is an advertisement we would like to see in the superbowl. Here is your smile for the day. It's a 43 second commercial and the sponsor isn't identified until the final few seconds. Written and directed by Animator Alvise Avati and produced by Animation Director Eamonn Butler. Beans, a short film with an unexpected ending, showcases Cinesite's creature animation skills.

22 January 2016: ECRI's WLI Growth Index Again Marginally Declined

ECRI's WLI Growth Index which forecasts economic growth six months forward - declined marginally and remains in negative territory. This index now spent 24 consecutive weeks in negative territory. ECRI also released their lagging index this week.

The Fed: Fed's Fischer to get opportunity to clear up central bank message

Fed Vice Chair Stanley Fischer will get a lot of attention on Monday when he speaks in New York

Junk bonds suffer a rare negative return in January--and that's bad news for stocks

The bearish trend in high-yield bonds has continued in January with the asset class showing negative returns of almost 2%.

The Tell: Wall Street sees shrinking likelihood of any rate hike in 2016

Market expectation of another interest rate hike this year have dwindled

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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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