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04May2016 Market Update: DOW Remains Down Triple Digits, Larger EIA Oil Inventories Snap Crude Prices, Short-Term Indicators Remain Bearish As Markets Continue To Show Weakness

Written by Gary

US markets opened down about three quarters of a percentage point and have traded sideways during the late morning hours on decreasing volume. The DOW is down triple digits and further losses are expected. The Institute for Supply Management's gauge increased to 55.7 topping the expectation of 54.7 and the March Trade Deficit narrowed to $40.44 billion. EIA report shows larger-than-expected build of 2.8 million barrels.


Here is the current market situation from CNN Money

North and South American markets are mixed. The Bovespa is higher by 0.43%, while the IPC is leading the S&P 500 lower. They are down 1.06% and 0.64% respectively.

What Is Moving the Markets

Here are the headlines moving the markets.

Wall St. falls as tepid data adds to growth worries

(Reuters) - Wall Street was lower on Wednesday as tepid U.S. economic data and lackluster corporate results added to concerns about the health of the global economy.

U.S. services sector expands strongly as orders, employment rise

WASHINGTON (Reuters) - The vast U.S. services sector expanded in April as new orders and employment accelerated, bolstering views that economic growth would rebound after almost stalling in the first quarter.

U.S. confirms recall of 35 million-40 million Takata air bag inflators

(Reuters) - The U.S. Transportation Department confirmed on Wednesday that automakers will recall another 35 million to 40 million U.S. air bag inflators installed by Takata Corp by 2019.

Two Tesla production chiefs to leave: Bloomberg

(Reuters) - Two top manufacturing executives are leaving Tesla Motors Inc at a time when the electric-car maker is working to launch its first mass-market car, the Model 3, Bloomberg reported.

Exclusive: Big data breaches found at major email services - expert

FRANKFURT (Reuters) - Hundreds of millions of hacked user names and passwords for email accounts and other websites are being traded in Russia's criminal underworld, a security expert told Reuters.

Exclusive: Target gets tough with vendors to speed up supply chain

CHICAGO (Reuters) - Discount retailer Target Corp is cracking down on suppliers as part of a multi-billion dollar overhaul to speed up its supply chain and better compete with rivals including Wal-Mart Stores Inc and Amazon.com Inc .

Time Warner profit beats expectations, boosted by Turner, HBO

(Reuters) - Time Warner Inc reported higher-than-expected earnings on Wednesday on strong revenue from its HBO cable channel and Turner Broadcasting unit.

Oil turns lower after bigger-than-forecast U.S. crude build

NEW YORK (Reuters) - A bigger-than-expected build in U.S. crude inventories to fresh record highs pushed oil markets down after an early rally on Wednesday over concerns about production cuts in Canada's oil sands region due to a wildfire.

Exclusive: Pfizer approaches Medivation about potential takeover - sources

(Reuters) - Pfizer Inc has approached U.S. cancer drug maker Medivation Inc to express interest in an acquisition, raising the possibility of a bid rivaling a $9.3 billion offer by Sanofi SA , people familiar with the matter said on Tuesday.

Saxo Warns Further Upside For Crude Hard To Achieve After Market "Change Of Focus"

The dollar's gyrations remain a key source of inspiration for traders with the fundamental focus continuing to switch between falling US and rising OPEC production, according to Saxo Bank's Ole Hanson.

The nervousness and negative price action seen this week was triggered by a change in focus from falling US production towards the rising supply from others, especially within OPEC. Having seen calendar 2017 almost hit $50 last week the realisation that further upside may be hard to achieve may has helped trigger increased demand for protection.

The speculative net-long remains very elevated so just a small change in the fundamental or technical outlook can trigger increased demand for hedging.

This has been reflected in the options skew on WTI crude which during the past week has seen increased demand for put options.

The skew or "smile" shows that the cost of out-the-money puts has ri ...

With Jim Chanos Short, Is SolarCity The Next SunEdison? The Full Bear Case

One year ago, SunEdison was the darling of the hedge fund world. It is now bankrupt. Moments ago, Jim Chanos revealed that (in addition to Tesla) he is also short Elon Musk's SolarCity, sending the stock sliding.

But what is the bear case?

Well, courtesy of Axiom's Gordon Johnson, here are some very specific reasons why Chanos may once again have a home run on his "short" hands. Below is his "big picture" summary:

SOLARCITY CORP. (SCTY " $26.45 " SELL)

Is The Entire Sell-Side Incorrectly Giving SCTY Credit For Cash It Can't Access?

The Good, the Bad, & the Ugly. In a widely anticipated move (evidenced by the recent outperformance of SCTY's shrs), yesterday SCTY announced its first-ever cash equity deal w/ John Hancock Financial ( œJHF ). Under the terms of the deal, SCTY will sell 95% of the cash flows generated from a portfolio of 201MW of residential & commercial solar projects to JHF over the next 20yrs.

The Good: in return for the cash flows, SCTY will receive $227mn in upfront equity, while retaining a 5% minority interest over 20yrs; including tax equity investments + upfront rebates/prepayments, this transaction will raise $3.00/W in total financing (or ~$603mn), & reflects a blend of $2.35/W for commercial projects & $3.24/W for residential projects; the IRR is ~8.2%; the majority of the installations were completed in '15; the projects are spread over 18 states, w/ no single state comprising >35% of the portfolio; & th ...

The War On Paper Currency Officially Begins: ECB Ends Production Of ‚¬500 Bill

Following the denial in February that this action is in any way about reducing cash, The ECB has made its decision on the EUR500 Bill:


*ECB ENDS PRODUCTION AND ISSUANCE OF 500 BANKNOTE

*ECB SAYS ISSUANCE OF EU500 NOTE TO STOP AROUND THE END OF 2018

*ECB SAYS OTHER EURO BANKNOTES WILL STAY IN PLACE

*ECB: EU500 CAN BE EXCHANGED AT CEN BANKS FOR UNLIMITED TIME

And just like that the second highest denominated European bank note in circulation (after the CHF1000 Bill) is dead...

And so now, everyone rushes into the CHF 1000 note.

So what, big deal, eliminate it. The people will still have 5, 10, 20, 50, 100 and 200 euro bills right.

As we wrote previously, the answer is not that simple at all. Recall that the 500 note is the second highest currency denomination in G10, after the CHF1,000 note. More importantly, the total value of 500 notes in circulation amounts to 306.8bn and has been rising as shown in this BofA chart:

China Unleashes SPR (Strategic Porcine Reserve) As Pork Price Surge Threatens Social Unrest

As we detailed recently, in addition to its sub-prime debt crisis, China is dealing with an issue that is just as troubling, if not more so: Porkflation. Due to a drop in global production of pig meat, pork prices in China have been skyrocketing at both the wholesale and retail levels.

Retail prices

And wholesale prices

As we also noted previously, Pork's role in CPI is also being felt (factors heavily into the CPI basket), as China's broad-based CPI is creeping up.

Porkflation is a very delicate, and very concerning issue for China. The massive amounts of layoffs that China has experienced as a result of a slowing economy has already lead to some social unrest, and pork prices exploding higher for those unemployed will ...

What It Takes for Royal Dutch Shell to Break Even

Shell says it will do œwhatever it takes to balance its cash flows in an era of lower oil prices. There is still much work to be done.

Sainsbury and Tesco: Same Problem, Different Answers

In yet another move away from its struggling core grocery business, Britain's second-largest supermarket chain has announced a return to the mortgage market.

Apple: What Will Make the Stock Tick Again

As Apple's recent share-price travails show, the tech giant needs to be about more than just the iPhone. But the company faces challenges in trying to diversify its business. In that regard, the performance of the Apple Watch is telling.

March 2016 Manufacturing New Orders Improved?

Written by Steven Hansen

US Census says manufacturing new orders improved. Our analysis says sales declined. However, the rolling averages improved, but remain in contraction.

Encore: Uber settlement first step in evolving labor market relationships

Finding a way to provide some traditional worker benefits to non-traditional workers.

Beer Goggles: U.S. craft beer can learn from Belgium's legendary breweries

While America is greatly influencing the Netherlands, Belgium still has a lot to teach us, says Jason Notte.

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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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