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11May2016 Market Close: Markets Close Down Over One Percentage Point, Brent Up 4%, US Dollar Trending Up Off Session Lows

Written by Gary

US markets closed down SPY -0.9%, DOW down 217 points (-1.2%) and the decline may extend into tomorrow's trading as short-term indicators have turned bearish. WTI crude trading pit settled at 46.06 and indicators suggest crude may rise at least another point with Brent up more than 4 percent for a second day in a row.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Wall Street ends down sharply with retailers, Disney

NEW YORK (Reuters) - U.S. stock indexes dropped about 1 percent on Wednesday as feeble quarterly reports from Walt Disney, Macy's and Fossil undermined confidence across the consumer sector.

Macy's forecast cut adds to apparel gloom; shares dive

(Reuters) - Macy's Inc reported a much bigger-than-expected drop in quarterly sales and slashed its full-year forecast, underscoring U.S. department stores' uphill struggle against slumping demand for apparel.

Disney shares stumble as expectations outpace reality

(Reuters) - For Walt Disney's Peter Pan, flying was "all a matter of faith and trust." Investors in Walt Disney Co showed a lack of both in the company's stock on Wednesday.

U.S. posts $106 billion budget surplus in April

WASHINGTON (Reuters) - The U.S. government posted a $106 billion budget surplus in April, down 32 percent from the same period last year, the Treasury Department said on Wednesday.

EU blocks Hutchison's deal to buy Telefonica's O2 UK

BRUSSELS (Reuters) - The European Union's competition regulator blocked on Wednesday CK Hutchison Holdings' plan to become Britain's biggest mobile telecoms network operator, in a decision which also cast doubts on whether it can still win approval for another deal in Italy.

IMF: Global corruption costs trillions in bribes, lost growth

WASHINGTON (Reuters) - Public sector corruption siphons $1.5 trillion to $2 trillion annually from the global economy in bribes and costs far more in stunted economic growth, lost tax revenues and sustained poverty, the International Monetary Fund said on Wednesday.

Mitsubishi Motors says has cash to ride out widening mileage affair

TOKYO (Reuters) - Mitsubishi Motors Corp is confident it has enough cash to weather a damaging fuel efficiency scandal alone, even as it warned incorrect data may have been used for more of its cars.

Macy's forecast drives sell-off in U.S. retailer shares

NEW YORK (Reuters) - Investors heavily discounted U.S. retailers on Wednesday after a series of disappointments in the sector, including a weak forecast from Macy's Inc .

Oil jumps on first U.S. drawdown since March; Brent up 4 percent

NEW YORK (Reuters) - Oil jumped on Wednesday, with Brent up more than 4 percent for a second day in a row, after the U.S. government unexpectedly said crude inventories fell the first time since March, adding to concerns over supply outages in Canada and Nigeria.

Big Test Looms For Oil Stock Rally

Via Dana Lyons' Tumblr,

Oil stocks are at a seemingly "must-hold" level within their long-term reversal attempt.

If there is one sector that best symbolizes the prospects of the post-February stock market rally, it is energy. It isn't that energy stocks have been the only area performing well in this rally. To the contrary, we have pointed out on numerous occasions the evidence of strong breadth within the rally. As such, many segments of the market have been working, from longer-term relative strength leaders that continue to score new all-time highs to those beaten up sectors exhibiting momentous mean-reversion bounces. Oil stocks would fall into that latter category, of course. The question now is, will the bounce in oil stocks only be a mean-reverting move - or the start of a longer-term, more meaningful rally? One key index may be undergoing a test right now that could go a long way toward answering that question.

The index is the NYSE Oil & Gas Index, or XOI. We have mentioned the XOI several times in recent months as oil stocks have indeed been in the spotlight. Our main focus in those posts, including this April 13 piece most recently, has been on the lifetime (post-1986) Up trendline in the XOI, and its significance in delineating bullish prospects from bearish ones among oil stocks. This trendline is our "line in the sand", as we called it, in determining the well-being of the XOI. And after dropping below the trendline in January for the first time in 30 years, the index was able to reclaim the line as we mentioned in the April post.

In the past 2 weeks, oil stocks have been hit hard, though. And over t ...

According To JPM's Quant Guru, This Is The "Main Risk For The Market" Right Now

Over the past two weeks we observed two curious, vol-related phenomena.

First, it was Tom DeMark cautioning that even as stocks have surged, the amount of VXX shares outstanding has soared to record highs, a seemingly contradictory confluence of events because it suggested that investors, traditionally "going with the market flow", are betting on a major vol reversal and furthermore the move contradicts historical shifts in VXX holdings at times of extreme market upside.

Second, just days later, Goldman confirmed as much when looking at overall market volatility, admitted that "our view that the VIX may remain low in the near term is at odds with the VIX ETP market, as investors seem to be pouring money into levered long VIX ETPs." Goldman's derivatives team also wrote that "while long ETP exposure has been growing, the appetite for inverse VIX ETPs, which benefit from declines in volatility such as the XIV and SVXY, has been muted, with vega exposure remaining range-bound in recent weeks. That's surprising, since the benchmark index which these underliers track (SPVXSPI) is up 73% since the market low on February 11 and investors often follow performance!"

Goldman's punchline: "Vega exposure on longs has tripled since February 11: The total amount of vega exposure across four popular long VIX ETPs (VXX, VIXY, UVXY, TVIX) has tripled since February 11 and recently stood at ~290 million, a record high."

Spring Hasn't Sprung for Wall Street's Bond Traders

Bond-trading volumes rose in April, but big Wall Street banks remain under pressure

Office Depot: This Paper Cut Won't Heal

Office Depot's tumble may tempt some investors, but they should heed the example of Sprint's deal rejection by regulators.

Electronic Arts: There Is Life Beyond 'Star Wars'

A strong, diverse pipeline along with a growing digital side plays well for videogame publisher EA.

Capitol Report: Trump adviser says his candidate has unreleased plan to create a $7 trillion surplus in a decade

Donald Trump's chief policy adviser said Wednesday that the presumed Republican presidential nominee's economic plans could result in a budget surplus of as much as $7 trillion in 10 years.

Market Snapshot: Dow, S&P 500 on the verge of erasing all of Tuesday's rally

A selloff in U.S. stocks accelerated in late-trade Wednesday as disappointing earnings from Disney and a slump among retailers led to disquiet on Wall Street.

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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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