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18Feb2016 Market Close: US Markets Slide South, But No Determinable Direction Trend For The Short-Term, Crude Falls Off Session High Mark, DOW Down 41 Points

Written by Gary

US averages sea-sawed trending down, but without enough volatility for scalping trades. Crude continued it down-trend and settled in the low $30's while the US dollar remained trading in the high 96's. Short-term indicators are mildly bearish, but no real marker as to what Mr. Market is going to do next. We are at another cross road, where one will have to flip a coin to determine the market direction.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Wall Street slips after three-day rally; Wal-Mart weighs

(Reuters) - Wall Street edged lower on Thursday as Wal-Mart shares dragged on major stock indexes after a lackluster earnings report and investors locked in gains after a three-day rally.

Fed's next move much more likely a rate hike than a cut - survey

(Reuters) - The Federal Reserve's next policy move is much more likely to be a rate hike than a rate cut, although over the next two years a return to zero rates is a rising possibility, according to a New York Fed survey of primary dealers published on Thursday.

FCC approves proposal to boost TV set-top box competition

WASHINGTON (Reuters) - The Federal Communications Commission approved on Thursday a proposal to let consumers swap pricey cable boxes for cheaper devices and apps, a change that would boost competition in the $20 billion television set-top box market while delivering a blow to major cable companies.

Brent down as U.S. crude build eclipses output freeze plan

NEW YORK (Reuters) - Brent settled lower on Thursday after data showing U.S. crude inventories rose to record highs overshadowed production freeze plans by oil major producers that had sharply boosted the market this week.

Credit Suisse to fast-track top junior bankers to retain talent: sources

LONDON (Reuters) - Credit Suisse will establish a fast-track program for top-performing investment banking juniors, sources familiar with the situation told Reuters, as major banks step up efforts to attract and retain their lower ranks.

U.S. jobs market firming; manufacturing still on the ropes

WASHINGTON (Reuters) - The number of Americans filing for unemployment benefits unexpectedly fell last week, pointing to labor market strength that keeps Federal Reserve interest rate hikes on the table this year.

P&G needs to be more agile, says new CEO Taylor

(Reuters) - Procter & Gamble Co needs to be more nimble in its decision-making, Chief Executive David Taylor said in his first interaction with analysts after taking the helm in November.

Citigroup plans to exit retail banking in Argentina, Brazil - Bloomberg

(Reuters) - Citigroup Inc plans to exit retail banking in Argentina and Brazil, Bloomberg reported, citing a person familiar with the matter.

Wal-Mart forecasts tepid sales growth; stock slides

(Reuters) - Wal-Mart Stores Inc on Thursday reported a lower quarterly profit and gave a lackluster sales outlook as declining prices for grocery products and sluggish apparel demand took a toll, and its shares fell more than 3 percent.

2016 Is Off To A 'Good' Start

If bad news is good news again (which judging by Bullard's bullshit overnight it is), then 2016 is off to a 'great' start...

Charts: @Not_Jim_Cramer

What did you do Janet?


P2P Site That Financed San Bernardino Massacre Hikes Rates Citing "Turbulent Markets"

Å“Peer-to-peer lending is probably a bad idea, we wrote, earlier this month.Securitizing peer-to-peer loans is definitely a bad idea, we added.

The P2P space has witnessed monumental growth over the past several years. P2P platforms lent over $12 billion in 2015 alone and as we documented last summer, Wall Street is supercharging the space by securitizing the loans.

Obviously, the idea of pooling and packaging consumer loans is a dicey proposition even when the lender is a corporation (see our coverage of Springleaf and OneMain for example). But when the lender is an individual, we're in uncharted waters entirely.

That is, P2P-backed paper effectively embeds person-to-person counterparty risk in the financial system. Investors are buying paper backed by thefull faith and credit of individuals seeking to refi their credit cards and the loans are made by other individuals whose capacity to absorb losses is completely opaque.

As Michael Tarkan, an equities analyst at Compass Point Research put it last year,We've created a mechanism to refinance a credit card into an unsecured personal loan [and that] hasn't been tested yet through a full credit cycle.

Well guess what? We're about 1% from entering a full-on default cycle according to Deutsche Bank and that means that when it comes to P2P, we're about to see what happens when widening junk spreads collide head on with abysmal economic growth, lingering student loan debt, and the waiter and bartenderrecovery.

Forget "The Great Moderation", This Is "The Great Intellectual Failure"

Via Scotiabank's Guy Haselmann,

A well-known central banker once said to me, "if you don't have a Plan B, then you don't have a plan". When he spoke those words over a year ago, he was referring to the Fed's lack of an exit strategy from zero rates and its QE-swollen balance sheet. He was telling me that the Fed was so focused on bettering 'today' through aggressive stimulus that it could not worry about 'tomorrow'. He speculated that central banks were "terrified of looking as if they were doing too little".

Part of the Fed's aggressiveness entailed waiting as long as possible to initiate its first hike. However, many believe that the Fed waited much too long, and in doing so missed the ideal window of opportunity to hike (for the first time in almost nine years). Some would even characterize Twist, QE2 and/or QE3 as unnecessary, labeling it monetary over-reach and the underlying source of the violent market behavior observed since the hike in interest rates.

It is likely that a non-linear direct correlation has existed between the length of time the Fed maintained its extreme accommodation and the market's reaction at the point of rate 'lift-off'. If this is true, then financial risk assets would have been even more adversely affected if the Fed had waited longer to hike; alternatively, markets would have had a lesser reaction if the Fed had hiked back in 2013/14. This formula likely became even more precise the further nominal GDP underperformed rosy forecasts.

Paradoxically, the quick and sharp declines in equity and credit markets have caused many pundits to allege the opposite point of view - that the Fed made a 'mistake' by hiking rates in December. It is counter-factual to know for sure, but I maintain that the market reaction would have lik ...

Is This Why Treasury Yields Surged In The Past Three Days?

Amid last Thursday's cataclysmically illiquid flash-crash like collapse in Treasury yields, speculators in extreme net short positions reached for anything to hedge their positions. Most remarkably, call-buying (i.e. betting on / hedging lower yields) relative to put-buying exploded to a record skew. It would appear that the utter panic protection positioning is being unwound in the last few days and that has dragged yields considerably higher. Today the skew is back to "normal" and Treasury yields are once again falling, unfettered by the technical flow from panicced options hedges.

Aggregate (10Y equivalents) speculative positioning in Treasury futures was already near record shorts...

And so last week's yield crash sent the Treasury skew crashing to record lows... (positioning/hedging for lower yields)

Those apparently panicced hedges have been quickly lifted as rumors, news, central banker promises, and flows have calmed the chaotic moves - dragging the skew back to "normal" and smashing yields higher...

And now that the skew has normalized, yields are falling o ...

U.S. Stocks Lower After Rally

A rally that sent U.S. stocks to their biggest three-day rise since August faded Thursday as investors resumed selling bank and energy stocks amid worries about uneven economic growth.

Investors Clamor for Energy Share Offerings Despite Oil Slump

North American oil-and-gas producers have sold more than $5 billion of follow-on stock offerings during the first two months of the year.

Bond Report: One-day tumble in Treasury yields is largest in a week as stocks, oil falter

Treasury prices rose Thursday, pushing yields lower, as stocks wavered and the oil rally appeared to lose steam, driving investors to assets perceived as safe, mainly government debt.

Futures Movers: Oil gives up big price gains after Saudi comments, rise in inventories

Oil futures end mixed, giving up big gains after an official from Saudi Arabia said the swing producer of the Organization of the Petroleum Exporting Countries wasnot prepared to cut oil production, according to reports.

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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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