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31May2016 Market Close: Wall Street Mixed, Small Caps Gain, WTI Crude Falls Sharply On Rumors, SP500 Can't Break Above 2100

Written by Gary

Markets closed mixed with the DOW down 92 points, the Spooze down 0.2% and the Nasdaq up 0.1%. Crude prices tumbled after scare rumors and settled with a loss at $49.10 a barrel. The SP500 remains below 2100, closing today at 2096 dashing any hopes the bulls might have had for climbing above the resistance seemingly unable to break decisively above 2090.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

U.S. consumer spending increase strongest in over six years

WASHINGTON (Reuters) - U.S. consumer spending recorded its biggest increase in more than six years in April as households stepped up purchases of automobiles, suggesting an acceleration in economic growth that could persuade the Federal Reserve to raise interest rates soon.

Wall St. flat as energy offsets utilities' gain

NEW YORK (Reuters) - The S&P 500 wrapped up its third straight month of gains on Tuesday on a flat note, as weaker energy shares were countered by a rise from Amazon and safe-haven utilities.

Carl Icahn acquires 'large position' in Allergan, backs CEO

(Reuters) - Billionaire investor Carl Icahn said on Tuesday he had acquired a "large position" in Botox-maker Allergan Plc and that he was very supportive of Chief Executive Officer Brent Saunders.

U.S. home prices rise more than expected in March

NEW YORK (Reuters) - Annualized U.S. single-family home prices rose more than expected in March, a survey showed on Tuesday.

Valeant's former CEO to receive $9 million severance payment, other fees

NEW YORK (Reuters) - Michael Pearson, the former chief executive officer of Valeant Pharmaceuticals International , will receive a $9 million severance payment and agreed to a consulting agreement worth hundreds of thousands of dollars, according to a document filed with regulators.

U.S. stocks fall on economic worries, dollar firms

NEW YORK (Reuters) - U.S. stock prices fell on Tuesday on weaker-than-expected economic data, while expectations of a possible Federal Reserve interest rate increase lifted the dollar to near a two-month high against a basket of currencies.

Cost squeeze helps VW brand back to profit after diesel debacle

BERLIN (Reuters) - Volkswagen's mass-market VW brand returned to profit in the first quarter, in a sign deep cost cutting is starting to revive the business at the heart of the German carmaker's emissions test cheating scandal.

EU cautions governments against banning Uber, Airbnb

BRUSSELS/LONDON (Reuters) - European Union governments should not ban services like home-rental site Airbnb or ride-hailing app Uber except as a last resort, the EU says in new guidelines, seeking to rein in a crackdown on the "sharing economy".

Goldman's Cohn defends bank's trading business amid revenue slump

(Reuters) - Goldman Sachs Group Inc President and COO Gary Cohn defended the bank's trading business on Tuesday, as investors have questioned the units' slumping revenue.

Brexit Bounce, Crude Crumble, & Dismal Data Slam Stocks, Bid Bonds & Bullion

Spending rose (thanks to higher costs for energy) and everything else was dismal... and then Brexit moved into the lead - Inconceivable...

Following the flash crash in China overnight...

From Friday's close, things went a little turbo with crude crumbling and gold and bonds bid...

Which left "Sell In May" working for Trannies.. but the late-day panic bid (sparked by USDJPY) saved the month for The Dow...

PMs were May's laggard (Silver was worse than gold), Crude oil the big winner...

* * *

On The Month:


USD Index Up 3% - best month since Nov 15

AUD Down 4.9% ...

Here's Proof That The US Dollar Is Insanely Overvalued

Submitted by Simon Black via SovereignMan.com,

Shocking. Astonishing. Jaw dropping.

There's just no other way to describe how cheap South Africa is right now.

Between the worldwide decline in commodities prices, and a major crisis of confidence in the national government here, the local currency (South African rand) remains at the lowest level it's been... ever.

And that's made nearly EVERYTHING here dirt cheap if you're spending foreign currency... especially US dollars.

Just doing something simple like eating out at a restaurant or going to the grocery store can be startling.

Once you do the math and convert the prices back to US dollars, it almost seems like you're missing a zero.

This also carries over into many asset prices, including certain areas in the property market.

Here in Johannesburg, I saw an amazing home for sale in one of the nicest, upscale neighborhoods with an asking price of about $515,000 US dollars.

Now, half a million bucks might not sound terribly cheap- until you find out what you're getting for the money.

The house is an enormous seven-bedroom compound of nearly 13,000 square feet.

Pool. Courtyard. Fountains. Private chef's kitchen. Parking for eight. Separate home for live-in staff. Wonderful neighborhood with top schools, shops, and restaurants.

Something like this would go for at least 20 times that price in Los Angeles, and 40 times the price in London.

Much of this price mismatch is due to the currency anomaly- that the South African rand is so undervalued, AND that the US dollar is so overvalued.

Perh ...

These Are The Two Most Important Questions Facing The Market

With the S&P500, seemingly unable to break decisively above 2090, investors are wondering what are the main catalysts that can push the market higher, and are asking questions. To help with the confusion, Deutsche Bank has laid out the top five recurring questions asked by investors who are trying to figure out what will push stocks higher. Among these are whether European (and global) equities will rally as Brexit fears are being priced out; is there scope for earnings upgrades and will value stocks finally start outperforming.

However, the two most important questions by far, those whose answer will determine not only the near term return of the S&P, but also global equity markets as well as that all-important commodity, oil, are the following:

Can the oil price hold up even as the dollar rises?

and


Can the CNY depreciate without hurting asset prices?

Let's take a look at these in sequence; first: will the recent disconnect between rising oil and a rising dollar persist? This is Deutsche Bank's answer:

Can the oil price hold up even as the dollar rises? The oil price has risen above $50/bbl this week, despite a number of negative catalysts: a) the broad dollar TWI is up 3% since the start of May on increased market expectations for a Fed rate hike - consistent with oil below $40/bbl, according to historical correlations; b) iron ore has already dropped by 30% from its late April peak as the China rebound has faded (historically the correlation with the oil price has been very strong at around 60%); and c) the oil price has rallied far ahead of what sluggish global economic momentum would have suggested. Oil remains crucial, given that it has been the key driver of US high-yield credit spreads in this cycle, with the risk premium ...

The New Battle Of Britain

Submitted by Patrick Buchanan via Buchanan.org,

In his op-ed in The Washington Post, Chris Grayling, leader of the House of Commons, made the case for British withdrawal from the European Union — in terms Americans can understand.

Would you accept, Grayling asks, an American Union of North and South America, its parliament sitting in Panama, with power to impose laws on the United States, and a high court whose decisions overruled those of the U.S. Supreme Court?

Would you accept an American Union that granted all the peoples of Central and South America and Mexico the right to move to, work in, and live in any U.S. state or city, and receive all the taxpayer-provided benefits that U.S. citizens receive?

This is what we are subjected to under the EU, said Grayling.

And as you Americans would never cede your sovereignty or independence to such an overlord regime, why should we?

Downing Street's reply: Prime Minister David Cameron says leaving the EU could cost Britain a lot of money and a loss of influence in Brussels.

The heart versus the wallet. Freedom versus security.

While Barack Obama, Cameron and Angela Merkel are pulling for Britain to vote to remain in the EU, across Europe, transnationalism is in retreat, and tribalism is rising.

As Britain's Independence Party and half the Tory Party seek to secede from the EU, the Scottish National Party is preparing a new referendum to bring about Scotland's secession.

The strongest party in France is the National Front of Marine Le Pen. In Austria's presidential election, Norbert Hofer of Jorg Haider's Freedom Party came within an ...

Why Oil's Cost Is as Important as Its Price

Cheaper services are allowing some oil producers to survive, particularly in Russia, while others, such as Venezuela, are facing steep production declines.

U.S. Consumers Start Their Engines

With incomes rising amid a better job market, recent gains in consumer spending may actually stick.

U.S. Car-Buying Boom: Time to Downshift?

Better-than-expected sales might not give auto stocks any juice.

Deep Dive: These dividend 'kings' have had average annual returns of up to 21% for 25 years

Eighteen U.S. companies have increased their dividends for at least half a century, writes Phil van Doorn.

Currencies: Dollar posts strongest monthly gain against yen in 18 months

After a rocky start to the year that saw the dollar weaken precipitously against many of its rivals, the U.S. currency managed to bounce back in May.

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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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