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19Feb2016 Market Close: Markets Close Mixed Near Unchanged Line, Crude Trending Higher, Daily Volume Declining, Investors Consulting 'Tea Leaves' For Guidance

Written by Gary

US averages closed mixed not far from the noontime report levels. The DOW closed in the red (- 22 points), the Nasdaq closed in the green (+ 17 points) and WTI crude while trending higher, settled in the low 32's. Obviously, the US and Global markets are at a cross-road of sorts with declining daily volume levels and investors wondering if we are already in a recession. The Wall Street casino has become a guessing game.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

U.S. ramps up Apple offensive with new filing in iPhone unlocking case

WASHINGTON/LOS ANGELES (Reuters) - The U.S. Department of Justice filed a motion seeking to compel Apple Inc to comply with a judge's order for the company to unlock the iPhone belonging to one of the San Bernardino shooters, portraying the tech giant's refusal as a "marketing strategy."

Buffett's Berkshire Hathaway avoids S&P rating downgrade

(Reuters) - Standard & Poor's on Friday left its "AA" credit ratings for Warren Buffett's Berkshire Hathaway Inc alone, saying the company's growing diversification and "modest" financial risks meant a downgrade was not necessary.

Southwest Airlines' ground staff approve wage-hike contract

(Reuters) - Southwest Airlines Co's ground staff narrowly approved a tentative agreement, which includes pay raises of more than 20 percent over the five-year life of the contract, the union representing the workers said.

Oil slide drags on Wall Street; S&P poised for best week of 2016

(Reuters) - Wall Street dipped on Friday, hurt by a drop in oil prices and disappointing earnings from Nordstrom, while investors digested inflation data that could raise prospects for further interest rate hikes this year.

Dudley gets another five years atop New York Fed

NEW YORK (Reuters) - William Dudley has been reappointed as president of the Federal Reserve Bank of New York, as expected, giving him another five years as one of the U.S. central bank's most influential policymakers.

S&P warns it may cut Icahn Enterprises to junk status

BOSTON (Reuters) - U.S. ratings agency Standard & Poor's warned on Friday it may cut the credit rating of billionaire investor Carl Icahn's Icahn Enterprises to junk status because the portfolio had suffered heavy losses in the last few months.

Exclusive: Terex stops Konecranes merger integration work

(Reuters) - Terex Corp , the U.S. crane maker that has received a $3.3 billion acquisition offer from China's Zoomlion , said on Friday it had halted all work on its integration with Finland's Konecranes Abp .

Faster U.S. CPI inflation still not moving key dial for Fed

WASHINGTON (Reuters) - A rise in the barometer of consumer prices most familiar to Americans has failed to show up in an inflation measure closely watched by the Federal Reserve, making it unlikely the central bank will raise interest rates next month.

Witnesses in Shkreli case worried about retaliation: U.S. prosecutors

NEW YORK (Reuters) - U.S. prosecutors said several witnesses in the criminal securities fraud case against notorious former pharmaceutical executive Martin Shkreli are concerned about retaliation and have received threats from him in the past.

Bank of America: "Corporate Balance Sheets Are The Most Unhealthy They Have Ever Been"

BofA's HY credit strategist Michael Contopoulos, whose work we have recently presented on several occasions, has been rather dour over the past year on the future of HY debt, as the junk bond market first descended into purgatory, and then right into the 9th circle of hell, courtesy of a collapse in the energy sector unlike anything seen in history...

... a collapse which virtually everyone admits will spread into all other sectors and products: it's just a matter of time.

However, rarely if ever have we heard Contopoulos as downright apocalyptic as he is in his latest note, "A Minsky Moment", which has to be read to be believed, if only for the selected excerpts below:

With a view that the market will eventually price in a much worse default environment than it is currently, we are left trying to determine when peak spreads will occur and for how long they will last. Unfortunately, when peak spreads are reached is not consistent across time periods, making it difficult to time the optimal entry. For example, in 1989 spreads peaked 178 days before the default rate peaked, in 2002 it was 165 days after, and in 2008 it was 290 days before (Chart 2). Convoluting the picture today is that the Energy default rate has the potential to skew that of the overall market. For example, if high yield E&P companies re ...

Sam Zell:"We Are Already In Recession"

"We are either already in a recession or rapidly moving towards one," warns billionaire investors Sam Zell. A stunned Maria Bartiromo is shocked to hear from Zell that world trade has slowed dramatically and currency wars and election uncertainties have contributed to this. Most shocking of all to the Keynesian pump-primers (and oil bulls) is Zell's remarks that "when I look around the world for prospective demand, it's not there... demand is pretty weak." Markets are not pricing in recession and Zell warns, even with recent declines that "this is pretty frothy" thanks to easy money and he is a seller not a buyer.

Zell warns - "The Fed is out of tools [to save the markets].. and that is going to make this more problematic."

Correlation Between Oil And Stocks Highest Since 1980

Submitted by Eric Bush via Gavekal Capital blog,

Stock prices and oil prices have been moving in a more positive correlated fashion recently than at any point since 1980. The 65-day correlation between Brent Crude Oil and MSCI World Index peaked at 52% on 11/13/2015 and has since fallen back a bit to 41%. The 200-day moving average is also at 41% and continues to climb higher. The current correlation of 41% is the highest correlation between stocks and oil prices ever over the history we have for both series.

1 - Copy - Copy

Of course there have been certain sectors of the stock market that have been highly correlated to the price of oil for quite a while. And fortunately for investors, there have been sectors that have had a negative correlation. In the first chart below, we show GKCI Developed Market cyclical sectors (Consumer Discretionary, Energy, Financials, Industrials, Information Technology, Materials) relative to the overall stock market (blue line). The red line shows the 5-day moving average for Brent Crude Oil. Over the past five years, these two series have had a 85% correlation. As oil has fallen, cyclical stocks have fallen with it.

1 - Copy (2) - Copy

In the second chart, we show GKCI Developed Market growth counter-cyclical sectors (Consumer Staples and Health Care) relative to the overall stock market (blue line). Once again, the red line shows the 5-day ...

U.S. Stocks Mostly Lower, but on Pace for Weekly Gains

Stocks slipped Friday as oil resumed its monthslong slide, but both remained on pace for broad gains this week. U.S. stocks were poised for weekly gains of around 2.5%.

CFPB Tries to Play Nice With Fintech Firms

The Consumer Financial Protection Bureau says it will try to make it easier for firms to introduce new consumer-finance products with a process aimed at reducing uncertainty about how regulators will view them.

IPO Market Dries Up as Investors Retreat

The market for initial public offerings is foundering. Of the almost 175 companies that made their U.S. stock-market debuts in 2015, more than 70% are now trading below their debut prices.

Bond Report: Treasury yields snap three-week string of declines

Treasury yields finished the volatile week "dominated by swings in oil and equity markets "marginally higher, snapping a three-week losing streak.

Currencies: Dollar logs largest 3-week drop vs. yen since June 2013

The dollar logged its third straight weekly drop vs. the yen Friday despite a strong reading on consumer-price inflation, as falling oil prices revived demand for haven assets.

Market Extra: If recession strikes, central banks might be out of ammo

If the global economy spins off its axis, don't count on the Federal Reserve, the European Central Bank, and the Bank of Japan to step in with first aid because the troika is running out of ammunition to combat a recession, say economists at Bank of America Merrill Lynch.

Summary of Economic Releases this Week

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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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