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17Feb2016 Market Close: Averages Close Plus 1.5% Higher, Crude Settles In Mid $30's, FOMC Does Not Raise Rates

Written by Gary

The FOMC minute release trimmed market gains fractionally, but then climbed up to set new session highs. The averages slipped again, but closed solidly in the green with the DOW closing up257 points and the Spooz closing up 1.6%. WTI settled in the mid $30's, the US dollar settling lower in the high 96's. Analysts are evenly divided on what happens tomorrow, be forewarned.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Yahoo to shut down digital magazines

(Reuters) - Yahoo Inc said on Wednesday it would shut down its digital magazines as part of a plan to simplify its business.

Some Boeing, Airbus suppliers have cold feet about increasing production

SEATTLE (Reuters) - Some suppliers to Boeing and Airbus are putting the brakes on expansion plans, saying they fear that planned increases in production by the big plane makers may not be sustained in the face of slowing growth and low oil prices.

Energy leads Wall St. rally, as oil prices jump

(Reuters) - Wall Street steamed toward a third straight session of gains on Wednesday, led by energy shares as oil prices jumped.

AmEx to overhaul management, cut jobs

(Reuters) - American Express Co said it would overhaul its management, streamline its marketing operations and cut jobs as it looks to reduce $1 billion in costs over the next two years.

Strong U.S. industrial output bolsters growth picture

WASHINGTON (Reuters) - U.S. industrial production in January rose by the most in 14 months as manufacturing and utilities output increased, the latest sign the economy regained some ground early in the year.

HSBC effectively scraps pay rise for managers at UK retail bank: source

LONDON (Reuters) - Most managers at HSBC's UK retail and wealth unit will not be getting a pay rise this year, a source familiar with the matter said on Wednesday, in what marks the bank's third change to pay policy in as many weeks.

Fed policymakers discussed changing interest rate path: minutes

WASHINGTON - Federal Reserve policymakers worried last month that tighter global financial conditions

Oil deal optimism fuels rally in crude, global stocks

NEW YORK (Reuters) - Global equity markets rallied on Wednesday, buoyed by a jump in oil prices on optimism that top crude producers could reach a deal to freeze production, while the Mexican peso surged after Mexico's central bank hiked its benchmark interest rate.

Iran offers no action in support of global oil pact

ANKARA/DUBAI (Reuters) - Iran on Wednesday stopped short of offering to restrain oil output as part of a global pact to freeze production to prop up prices, making clear it wants to recapture the market share it lost during years of sanctions.

If Oil Stays At $35, This Is What Energy Company Leverage Will Look Like

With the market enjoying its biggest three-day short-squeeze since 2011, one can be forgiven to forget, if only briefly, that nothing has been fixed. Furthermore, if the OPEC meetings of the past two days have demonstrated anything, it is to confirm that not only is OPEC finished as a cartel, but that OPEC has no power over the marginal oil producers in Texas, aside from bankrupting them by pressuring prices lower.

Which is precisely what it will do.

And going back to the original point of how nothing has been fixed, here is a chart from DB showing what will happen to the average oil and gas company net debt/EBITDA ratio if oil rises to and remains at $35/bbl.

Why is $35 important? Becase as a recent Wood MacKenzie study found, less than 4% of the world's oil supply is actually in the red at that price. Here's Platts:

Citing up-to-date analysis of production data and cash costs from over 10,000 oil fields, Wood Mac said it believes 3.4 million b/d, or less than 4% of global oil supply, is unprofitable at oil prices below $35/b.

Even the majority of US shale and tight oil, which has been under the spotlight due to higher-than-average production costs, only becomes cash negative at Brent prices "well-below" $30/b, according to the study.

This is what is sure to make the Saudis very frustrated:

Despite widespread fears of a major supply collapse, the US' shale oil output since late 2014, sharp deflation in ...

Should You Believe The Vampire Squid On Gold?

Submitted by Jim Quinn via The Burning Platform blog,

I find it fascinating the mainstream corporate media and Wall Street shysters spend SO MUCH time talking down gold and spending an inordinate amount of electronic ink trying to convince the masses that only nutjobs would buy it. I believe less than 2% of people have gold in their investment portfolio, so why the endless articles bashing it?

The suppression of gold prices through the paper market since 2011 by the Fed and their Wall Street bank co-conspirators has thus far been successful, but it is fraying at the edges as China continues to accumulate physical gold and pushing the ponzi scheme towards its inevitable conclusion. Soaring gold prices tells the masses central bankers are a fraud, that's why they are desperate to keep the price capped.

With zero and negative interest rates throughout the world, gold should be skyrocketing. It is showing signs of calling the central banker bluff. Jesse's comments below should be heeded. The stock market dead cat bounce and the holiday manipulation of gold down $30 will fail.

Chart of the Day

Gold Daily and Silver Weekly Charts - Goldman Says Have No Fear and Buy Our Paper

Goldman analyst Jeffrey Currie came out this morning with a 'sell gold' recommendation for Ma and Pa Muppet.

I was fortunate enough to hear his exp ...

As "Plan A" Fails, This Is What The Fed's "Plan B" Would Look Like

As you might have noticed, the Fed made a policy mistake in December.

We could delve deeply into the specifics, but quite frankly it all boils down to this: Yellen hiked right into a recession.

There's more to it than that obviously, including the fact that EM is circling the drain amid the global commodities rout, meaning excessive USD strength is especially damaging and the fact that the uncertainty swirling around the depth of the ongoing yuan devaluation has markets on edge from Shanghai to London to New York.

Put simply: nothing has gone as it should since liftoff. Stocks sold off dramatically in January signaling the Fed failed to convey a sense of confidence in the US economic recovery (which, if good news was indeed good news again should have triggered risk-on sentiment) and yields on the 10-year have plunged since the start of the year (Marc Faber has been exactly right so far).

Meanwhile, the monetary policy divergence between the Fed and the BoJ and ECB has only grown and we learned late last month that the US economy only managed to grow at a 0.69% pace in Q4 (we suppose the BEA are "fiction peddlers").

So with the pressure mounting, and with Janet Yellen having failed (miserably) to reassure the market with her testimony on Capitol Hill earlier this month, what's in the cards for the Fed if the situation (both in financial markets and in the real economy) continues to deteriorate?

Here to explain œPlan B (i.e. the steps the Fed will take œwhen push comes to shove ), is BofA.

* * *

From BofA

As they s ...

SEC Suspends Deutsche Bank Research Analyst For "Not Meaning What He Said"

Over a decade ago, Henry Blodgett was barred from the securities industry for promoting dot com companies which he personally though were a "piece of crap." And while nothing has changed since then, and sellsiders dutifully pump companies which deserve to be dumped, but refuse to do so over fears of ruining relationships with management - as a reminder, the only function sellside research provides to the buyside community is arranging one on one meetings with CEOs during which material inside information is often disclosed - today for the first time in years, the SEC fined and suspended a now former Deutsche Bank analyst (who has also worked for JPM and Sterne Agee) for "not meaning what he said."

Specifically, the former analyst, Charles Grom, did not downgrade the stock for discount retailer Big Lots Inc from a "buy" reco in March 2012, despite having concerns about the company, because he wanted to provide value in the only way he could: maintain his relationship with Big Lots management.

According to the SEC, the March 29, 2012 research report about discount retailer Big Lots which was supposed to accuretly reflect his own beliefs about the company and its securities... did not, because in private communications with Deutsche Bank research and sales personnel, Grom indicated that he didn't downgrade Big Lots from a œBUY recommendation in his report because he wanted to maintain his relationship with Big Lots management.

According to the SEC, this is what happened:


Grom violated the analyst certification requirement of Regulation AC, which requires research analysts to include a certification that the views expressed in a research report accurately reflect their own beliefs about the company and its securities.

Grom and Deutsche B ...

Stocks Lifted by Oil Rally, Consumer Sector

U.S. stocks rose Wednesday, with the Dow industrials and S&P 500 logging their first three-day rally this year.

The Fed's Stock-Market Dependency Problem

Stocks' relief rally points to a problem for the Federal Reserve.

Fed Minutes Lay Bare a Split on Outlook, Rate Path

Federal Reserve officials struggled with uncertainty about the outlook for inflation and growth at their January policy meeting "and whether rising risks to the economy might alter their plans to raise interest rates.

27 January 2016 FOMC Meeting Minutes: Participants Uncertain When To Raise Federal Funds Rate

Fed-sealSMALLThe 27 January 2016 meeting statement presented the actions taken. This post covers the economic discussion during this FOMC meeting between the members (minutes were released today). There was a significant amount of discussion about econoomic conditions and how it relates to the federal funds rate. The quote of these minutes was:

... policymakers thought that the extent to which tighter conditions would persist and what that might imply for the outlook were unclear, and they therefore judged that it was premature to alter appreciably their assessment of the medium-term economic outlook .....

Although there was not a universal alignment of perceptions amongst the FOMC participants - these meeting minutes showed more consensus previous meetings.

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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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