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12Feb2016 Market Close: Averages Climb Higher In Afternoon Trading, WTI Settles At $30 Bbl And Equities May Have Seen End Of Selling Pressure

Written by Gary

The averages sea-sawed in the green zone in late trading, the DOW remained in triple digits closing up 314 points, The Spooz closed up over 2% and WTI crude surged 12% off 12 year lows on OPEC rumors of production cuts. Short-term indicators are bullish, but lack of volume shows investors don't believe it yet.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Google says will not participate in 2016 U.S. airwaves auction

NEW YORK/SAN FRANCISCO (Reuters) - Alphabet Inc's Google will not participate in the U.S. Federal Communications Commission's upcoming auction of broadcast airwaves that can help the wireless industry improve coverage, a spokeswoman told Reuters on Friday.

Wall Street rebounds with banks, energy; to snap 5-day fall

(Reuters) - U.S. stocks jumped on Friday, putting the S&P 500 on track to end a five-day losing streak, led by financial shares and gains in commodity-related shares.

Apple to launch new iPhone, iPad in March: 9to5mac

(Reuters) - Apple Inc is on target to introduce its next iPhone and iPad models on March 15, and aims to start selling the devices in the same week, technology blog 9to5Mac reported, citing sources.

Late-day buying could be start of turnaround

NEW YORK (Reuters) - As U.S. stocks continue to struggle in 2016, equities are showing some signs selling pressure may be reaching an end.

Argentine debt talks to continue: mediator

NEW YORK (Reuters) - Argentina's ongoing sovereign debt settlement talks will continue despite no resolution between the government and four remaining major holdout creditors, court-appointed mediator Daniel Pollack said in a statement on Friday.

U.S., UK likely to charge multiple banks in Libor rigging: WSJ

WASHINGTON (Reuters) - American and British regulators are likely to charge several banks with rigging interest rates, including Citigroup, the third-largest U.S. bank, and London-based HSBC Holdings, the Wall Street Journal reported on Friday.

Strong U.S. consumer spending counters recession fears

WASHINGTON (Reuters) - U.S. consumer spending regained momentum in January as households ramped up purchases of a variety of goods, in a hopeful sign that economic growth was picking up after slowing to a crawl at the end of 2015.

Department store operator Kohl's eliminates 3 senior positions

(Reuters) - Department store chain operator Kohl's Corp said it was eliminating three senior positions, including chief digital officer, to create a more "nimble organization".

Fed's Dudley dismisses negative US rates, sees economic momentum

NEW YORK (Reuters) - While recently tighter U.S. financial conditions will factor into the Federal Reserve's upcoming policy decisions, it is "extraordinarily premature" to even talk about using negative interest rates to stimulate the economy, a top Fed official said on Friday.

Welcome To Obama's Recovery: Carrier Moving 1400 Jobs To Mexico

In his final state-of-the-union address, President Obama famously accused anyone who dares to question the strength of the US economic "recovery" of "peddling fiction."

Shortly thereafter, we learned that the US economy grew at a paltry 0.69% in Q4. Below estimates.

Perhaps the most disturbing thing about the state of the economy - well, besides the fact that healthcare spending is essentially driving "growth" - is that the labor market has becoming a waiter and bartender creation machine. That's come at the expense of manufacturing jobs, where skilled workers can actually earn a decent living.

Here's what the disparity looks like since 2007:

No fiction "peddling" there. Just numbers.

Additionally, we've noted the fact that foreign born workers account for the vast majority of job creation in America since the crisis:

On Wednesday, United Technologies decided to reinforce both of these trends all at once, when the company announced it ...

Martin Armstrong Warns "Systemic Risk Is Rising For All Markets"

Submitted by Martin Armstrong via ArmstrongEconomics.com,

We are on the precipice of what can only be described as a rising systemic risk for all markets. The Fed is now hinting that banks should prepare for NEGATIVE INTEREST RATES. This insanity of following the crowd is undermining the entire world economy. The increasingly unstable footing that we find ourselves standing on is reflected in widening credit spreads that demonstrate that CONFIDENCE is indeed collapsing.

The EU Commission will no longer classify government bonds in bank balance sheets as "risky." Banks would have government bonds on par with "equity" yet government bonds have proven risky and are inferior to what would, in some financial institutions, result in an increased capital requirement.

Turning to Goldman Sachs, we saw the so-called world's greatest trader close out its long USD trade against a basket of euros and Japanese yen with a potential loss of around 5%, which is being bantered about on the street showing they too got this all wrong. This early 2016 destabilization is stopping out short gold positions, but it is not replacing them with any buying conviction. The euro trade of long Italian 5-year against short German 5-year has also turned into a bloodbath as the euro finally rallied begrudgingly to reach our first resistance target in the mid-113 area.

Global economic growth has been anemic at best; and in the US it is clearly turning down since Q3 2015.

This new world order of NEGATIVE INTEREST RATES is so insane and focuses solely on trying to stimulate borrowing. ...

The "Trade Of The Year" Just Returned 30% In Two Days

It was just two days ago when we laid out what could be "the trade of the year": namely, going long Chesakeapke's $500MM 3.25% bonds of March 15, which were then trading at 80 cents on the dollar in anticipation of a Chesapeake bankruptcy, yielding a whopping 299%.

This is what we said:

... yes, Chesapeake will default, but the question is when. For those who think the company will somehow survive for a more than a month without filing Chapter 11 or arranging some prepackaged bankruptcy, and actually repays the $500 million issue, this could be the trade that makes someone's full year, because with a yield of 299%, and a cash on cash return of 25% (being paid par on March 15 for a bond that can be purchased today for 80 cents), it does look somewhat attractive, especially if hedged with a short on CHK stock, which at last check was trading at an implied market cap of $1.3 billion.

Fast forward barely 48 hours later, when we get this:

CHESAPEAKE SAID PLANNING TO PAY $500 MILLION DEBT DUE IN MARCH

This is what Bloomberg added:

Chesapeake Energy Corp. is planning to pay $500 million of debt maturing in March, using a combination of cash on hand and other liquidity that may include its credit line, according to a person with knowledge of the matter.

The second largest natural gas producer in the U.S. is also considering selling assets to shore ...

Stop Bashing Banks, Please

Authored by Steve H. Hanke of The Johns Hopkins University.

Since the Great Recession, politicians have obsessed over bashing banks and bankers. According to Pols of all stripes, bankers caused the 2008-09 crash and ensuing slump. To make the world safe from banks, the œall-knowing have given us Basel III, Dodd-Frank, and a plethora of banking regulations. This has, among other things, provided Bernie Sanders and his ilk with an open field.

Analyzing the effects of bank bashing requires a model of national income determination. A monetary approach is what counts. The link between growth in the money supply, broadly determined, and nominal GDP is unambiguous and overwhelming. The accompanying chart for the G20 countries makes this clear.

So, why has the post-crisis recovery floundered? Because the growth in broad money has remained well below its trend rate. Indeed, Divisia M4, which is reported by the Center for Financial Stability in New York, is only growing at a 4.0% year-over-year rate. Since the crisis, the policies affecting bank regulation and supervision have been massively restrictive. By failing to appreciate the monetary consequences of tighter, pro-cyclical bank regulations, the political chattering classes and their advisers have blindly declared war on bank balance sheets. In consequence, bank money, which accounts for 80% of broad money in the U.S., has contracted since the crisis (see the accompanying chart). Since bank money is the elephant in the room, even the Fed's quantitative easing and the ensuing surge in the growth of state money has been unable to fully offset the tightness that has enveloped banks and bank money growth.

Oil Soars 12.3% on Production Cut Hopes

Oil prices rallied, rebounding from a 13-year low reached the previous day, on speculation of production cuts among some of the world's biggest suppliers.

U.S. Stocks Extend Gains as Oil, Banks Rally

A rally in recently battered commodities and banking shares lifted U.S. and European stocks on Friday, even as Japan's main index fell to its lowest level in more than a year.

Energy Shares Outperform Consumer Stocks

Energy shares are faring better than consumer stocks this year, marking a reversal of fortune in the S&P 500.

A gold pile-on is coming, and nine other money stories you may have missed

Stock buybacks by private-equity companies and a menu change by Burger King were among topics covered by MarketWatch this week.

Deep Dive: 5 dividend stocks that have only gotten more attractive

T. Rowe Price and Microsoft are among companies that can provide you with income for years to come.

Summary of Economic Releases this Week

Real Time Economic Calendar provided by Investing.com.

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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