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23Feb2016 Market Close: US Averages End Session Lower Unable To Push Through Resistance, Gold Ends Fractionally Higher; The Oil Verbal Wars Continue

Written by Gary

Minutes before the closing bell the markets slid down near the session lows to end up minus -1.2%.DOW down 189, Spooz down 1.3% and the Nadaq down 1.5%. WTI crude settled in the high 31's, down 4%, the US dollar settled in the mid 97's and ended slightly higher at 1225. Market direction tomorrow may be down if the Cushing inventories come in higher tomorrow. Low volume levels while trying to penetrate the resistance of the major indexes does not bode well for the bulls.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Wall St. falls on further losses in oil

NEW YORK (Reuters) - Wall Street slid on Tuesday on pressure from a renewed drop in oil prices.

JPMorgan gets ready for more energy losses, postpones profit goal

NEW YORK (Reuters) - JP Morgan will increase provisions for expected losses on energy loans by $500 million, or more than 60 percent of its existing reserves, as a sharp drop in the price of oil looks set to further ravage the sector.

Oil drops 4 percent after Saudi oil minister rules out production cuts

NEW YORK (Reuters) - Oil prices fell 4 percent on Tuesday after Saudi Oil Minister Ali Al-Naimi ruled out any production cuts, restating the kingdom's rationale for maintaining output was that demand would absorb excess crude that has crushed prices over the past 20 months.

Automaker group finds multiple factors caused Takata air bag ruptures

WASHINGTON/DETROIT (Reuters) - A combination of three factors is the root cause of Takata air bag inflator ruptures linked to at least 10 deaths worldwide, a group of 10 automakers said on Tuesday.

U.S. judge to stick with plan for GM ignition-switch test trials

NEW YORK (Reuters) - A federal judge in Manhattan said on Tuesday he will not alter, for now, a plan to try five more early test cases this year against General Motors Co over faulty ignition switches linked to nearly 400 injuries and deaths.

Viacom weighs selling minority stake in Paramount film unit

(Reuters) - Viacom Inc is considering selling a "significant" minority stake in its Paramount Pictures movie studio, Chief Executive Philippe Dauman said on Tuesday, sparking a brief rally in the media company's shares.

Time Inc explores bid for Yahoo's core business: source

(Reuters) - Time Inc , publisher of Sports Illustrated, People and Time magazines, has been exploring a bid to acquire Yahoo Inc's core Internet business for several weeks, a source familiar with the situation told Reuters on Tuesday.

Plastic in Snickers bar prompts Mars recall in 55 countries

FRANKFURT/LONDON (Reuters) - Mars Inc has recalled chocolate bars and other products in 55 countries, mainly in Europe, due to choking risk after a piece of plastic was found in a Snickers bar in Germany.

Valeant shares jump 9 percent after announcement of plans to restate

(Reuters) - Shares of Valeant Pharmaceuticals International Inc rose 9 percent on Tuesday, the morning after the drugmaker said a board committee investigation into its dealings with distributor Philidor Rx Services would result in a profit restatement.

Dimon's Bottom In Danger Of Penetration After JPM Warns Of 25% Plunge In Capital Markets Revenue

Just a few hours after JPM admitted that our concerns that the bank was covering up its oil and gas exposure by dramatically underreserving for future loans when it took another 60% reserve for future losses to a total of $1.3 billion, one which as the chart below shows won't be nearly enough on the bank's $44BN in exposure...

... JPM delivered another big surprise to shareholders when it reported that revenue in the bank's critical investment banking group are set to plunge by 25% in Q1 from a year ago.

As Bloomberg reports, JPMorgan's Daniel Pinto spoke moments ago at JPM's investor day saying there's "no doubt" 1Q so far has been very tough. He added that the Markets group is down 20% so far this year; that competition is ''really really tough'' for those areas of trading like equities that require less capital; lending very competitive and that some topline revenue may erode from new trading platform.

But the biggest disappointment is that JPM's revenue in debt and equity capital markets is set to plunge by 25%.

And if JPM is getting crushed by the current increasingly more NIRP and flat curve environment, one can be positive that all other major banks are too.

Finally, for all those who were positive that Dimon's bottom - set when Jamie bought some $26 million in JPM stock two weeks ago - can not possibly be penetrated, keep a close eye on this chart.

The Good(ish), The Bad, & The Ugly Of Equity Valuations

The good news is that lower rates can justify higher valuations, but as former Morgan Stanley guru Gerard Minack explains, the bad news is lower earnings growth. In Minack's view the rally from the 2011 lows was the equity market factoring in the beneficial part of the story: re-rating on the back of a low discount rate; but, markets are only now starting to focus on the corollary: lower trend earnings growth. With the prospective P/E of the S&P500 is now at an 'ugly' all-time high relative to the medium term EPS forecasts, and downgrades set to continue based on macro weakness, equity valuations suggest this 'correction' is far from over.

S&P500 earnings are now falling. Lower oil prices and a strong dollar are hurting, but the biggest issue seems to be rising labour costs capping margins. In addition, medium-term earnings expectations are also falling - rightly, in my view, given current high margins and the prospect of low growth.

UGLY - Consensus forecasts for 2016 and 2017 are being scaled back faster than usual...

UGLIER - Earnings face well-known headwinds, notably a stronger dollar and falling oil. Cycle indicators, such as the manufacturing ISM, point to further larger-than-usual downgrades to EPS forecasts

UGLIEST - The prospective PE of the S& ...

Here Are The Top 50 Most Popular Hedge Funds Stocks, And 2015's 50 Best Performing Hedge Funds

This post is divided in two clear parts. The first one shows what according to the latest set of 13F filings, were the most popular stocks within the hedge fund community.

According, to Goldman, among the entire universe of publicly traded US stocks, the list of 50 names that have the largest number of hedge fund investors are the following.

A slightly different angle on the same data is shown in the next chart: it shows which stocks matter the most to hedge funds, or the 50 stocks that appears the most frequently among the top 10 holdings of hedge funds. This is, for lack of a better wordl, the "hedge fund hotel" as of December 31.

However, as Goldman admits, the "high hedge fund concentration strategy has historically worked best in an upward-trending market." In other words, everyone rushing into the same stocks is anything but a "hedge" and is really just a beta chasing play, in most cases with lots of leverage.

Indeed, as we showed earlier, to outperform the market, the stocks that worked are those that have the lowest hedge fund concentration...

... such as these.

Who Will Be Left Standing At The End Of The Oil War

Submitted by Charles Kennedy via OilPrice.com,

This is a financial cold war - nothing more, nothing less.

While there are billions of reasons to cut output, and every major producing country is reeling from the loss of revenues, some are weathering the current bust better than others, but the devil is in the details, and the details contain tons of variables.

Production cost and breakeven figures that analysts enjoy bandying can trap you in bubble of black-and-white mathematics that is a few brush-strokes shy of a full picture.

Breakeven prices are hard to pin down, and harder yet because they fluctuate. OPEC governments downsize their budgets, cut social spending and put big projects on hold to lower the breakeven price. Independent producers likewise cut spending and delay development to get closer to a feasible breakeven. So the breakeven is elusive.

Saudi Arabia and Kuwait enjoy some of the lowest production costs in the world, at about $10 and $8.50, respectively, according to Rystad Energy data. Production in the UAE costs just over $12 per barrel, which is pretty much the same as in Iran, though Iranian officials say they will eventually be able to produce for as low as $1 per barrel from their central fields.

But these are just the costs of lifting oil out of the ground. State-owned oil companies often have many more responsibilities than just producing oil. They underpin generous spending levels by their governments, and thus any estimate of a "breakeven" price should include ...

Saudi Arabia Oil Minister Says Production Won't Be Cut

Ali al-Naimi, Saudi Arabia's petroleum minister, said oil producers won't cut production to reduce a global supply glut that has sent oil prices plunging over the past 18 months.

Stocks Waver on Slide in Bank Stocks, Commodity Prices

U.S. stocks declined Tuesday as bank stocks slumped and commodity prices retreated.

J.P. Morgan: What's Even Scarier Than Oil?

Investors are freaking out about J.P. Morgan's potential energy exposures. But superlow interest rates remain the biggest threat.

Commodities Corner: Why comments by Saudi Arabia's al-Naimi slammed oil futures

Oil prices suffer a steeper decline after comments from Saudi Arabia's Oil Minister Ali al-Naimi. Here's why.

Outside the Box: The S&P finds itself at a critical juncture

The completion of a bullish bottoming pattern could be coming soon, but a failure to do so means more pain ahead.

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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