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08Jun2016 Market Update: Markets Trading Sideways, While Falling Volume Has Bearish Overtones, Crude Remains Up, US Dollar Weaker

Written by Gary

Wall Street is in the green, but near the unchanged line and has continued in a narrow trading range early into this afternoon, with the S&P 500 inching towards its all-time high, as oil prices hit 2016 highs above $50 a barrel. The U.S. crude traded at its highest level since July, but trimmed gains slightly after government data showed U.S. crude inventories fell last week. Short-term indicators are bullish, while medium term indicators are turning bearish.


Here is the current market situation from CNN Money

North and South American markets are broadly higher today with shares in Brazil leading the region. The Bovespa is up 2.32% while Mexico's IPC is up 0.43% and U.S.'s S&P 500 is up 0.21%.

What Is Moving the Markets

Here are the headlines moving the markets.

Wall Street gains as oil prices grind higher

(Reuters) - Wall Street was higher in a narrow trading range early on Wednesday afternoon, with the S&P 500 inching towards its all-time high, as oil prices hit 2016 highs above $50 a barrel.

Hiring in April at slowest pace in nearly two years

WASHINGTON (Reuters) - The pace of hiring by U.S. employers slowed to near a two-year low in April, pushing up job openings in a potential sign that firms are having a hard time finding workers.

Services data suggest upward revision to first-quarter GDP

WASHINGTON (Reuters) - The U.S. economy was probably not as weak as has been reported in the first quarter, with data on Wednesday showing stronger consumer spending and investment in intellectual products than previously estimated.

Oklahoma medical examiner rules oilman McClendon's deadly crash an accident

OKLAHOMA CITY (Reuters) - The fiery crash that killed U.S. oilman Aubrey McClendon in March after his car hit a wall was an accident, Oklahoma's medical examiner said on Wednesday, echoing a police inquiry's findings a day earlier that there was no evidence of suicide.

Morgan Stanley pays $1 million SEC fine over hacked customer data

(Reuters) - Morgan Stanley agreed to pay a $1 million fine to settle U.S. Securities and Exchange Commission charges that security shortfalls enabled a former employee to transfer data regarding roughly 730,000 accounts to his personal server, which was later hacked.

Top auto regulator: Nimble rules needed for self-driving cars

(Reuters) - The top U.S. vehicle safety regulator said on Wednesday the government needs to be more nimble in designing rules for self-driving vehicles.

SEC adopts trade acknowledgment, rules for swaps

WASHINGTON (Reuters) - The U.S. Securities and Exchange Commission on Wednesday said parties in swaps must now acknowledge their trades electronically within a day, and also promptly verify or dispute the terms of the swap under rules it had adopted.

Verizon strike seen hitting second-quarter earnings: CFO

NEW YORK (Reuters) - The seven-week strike by Verizon Communications Inc's wireline workers will hurt the company's second-quarter earnings and potentially cost up to 7 cents per share, its chief financial officer said.

Cuomo's pick for NY financial regulator signals business-friendly tact

(Reuters) - New York Governor Andrew Cuomo's pick to become the state's top financial regulator signaled during hearings on Wednesday that she would take a more business-friendly approach than her predecessor, who was known for his pursuit of big banks.

Blistering 10-Year Auction Stops Through Thanks To Record Foreign Central Bank Demand

Heading into last month's 10 Year auction, there was a surprising development: the 10Y paper was trading super special in repo as a result of pervasive shortages. This time, however, this did not happen and in fact after trading tight in repo, earlier today, 10Y actually had a positive sign suggesting perhaps some weakness going into today's auction.

However, all fears were laid to rest moments ago when the Treasury announced the results of today's 10Y reopening: printing at a high yield of 1.702%, this not only stopped through the 1.708% when issued, but was the lowest yield for a 10 Year auction since December 2012. Furthermore, the Bid to Cover, rebounded from last month's 2.68 and printed at 2.70, above the six month average of 2.65.

But once again the biggest action was in the internals, where Indirects Took down a whopping 73.6%, higher than last month's 73.5% and the highest on record. Directs were left with 7.2%, the lowest since last August, while Dealers ended up with only 19.2% of the issue.

We can conclude that the insatiable foreign appetite for US paper, especially at auction, continues, and will continue to do so as a result of rate differentials between trillions in NIRPing foreign bonds and US paper.

Finally, the bond market was quite happy with the result, and yields have dropped to new LODs after the announcement.

Judging by the action in both stocks and bonds, it would appear that the market is positioned not for rate hikes here but for more QE.

Next Banking Scandal Explodes in Spain

By Don Quijones, Spain & Mexico, editor at Wolf Street.

Next Banking Scandal Explodes in Spain

The last five years have been a bumper period for banking scams and scandals in crisis-ridden Spain. From Bankia's doomed IPO in 2012 to the "misselling" of complex preferentes shares to "unsophisticated" retail bank customers, including children and Alzheimers sufferers, all of the scandals have had one thing in common: the banks have consistently and ruthlessly sacrificed the welfare and wealth of customers, investors, and taxpayers on the altar of short-term survival.

Some commentators claim that the problem of banking instability in Spain has been put to rest in recent times, thanks chiefly to a robust, debt-fueled recovery, a tepid resurgence of the real estate sector and the transfer of the most toxic assets from banks' balance sheets to the festering balance sheets of the nation's bad bank, Sareb. They could not be more wrong.

Despite the untold billions of euros of public funds lavished on "cleaning up" their balance sheets and the roughly 240 billion of provisions booked against bad debt since December 2007, the banks are just as weak and disaster-prone as they were four years ago.

And now, it seems a new scandal is in the works. Last month Spain's sixth largest financial institution, Banco Popular, announced that it was urgently seeking to raise 2.5 billion in capital in a desperate bid to shore up its finances. The news triggered a sell-off that wiped out 33% of the bank's market capitalization in just two days, before investor nerves were steadied somewhat ...

Is This The Line In The Sand For US Treasuries?

With the auction looming, 10Y Treasury yields appear right at the 'line in the sand' with aggregate net positioning in Treasury futures near record shorts...

Across the entire Treasury futures complex - from 2Y to Ultras - net aggregate speculative positioning is about as short (in 10Y equivalents) as it has been since 2010...

Which could be a major problem given that 10Y Yields are testing 1.70% once again - the 'red' line in the quicksand of Fed credibility...

What happens next? By way of interest, with the S&P back near May 2015 highs, we note that 10Y yields are 60bps lower from the same date!!

h/t @Not_Jim_Cramer

Central Banks have Mimicked Japan`s Dysfunctional Financial System (Video)

By EconMatters

The short of a lifetime is the Global Debt Crisis coming down the pipeline, this crisis will make all other financial disaster scenarios look like peanuts in comparison.

Japan was the model for what not to do to try and stimulate an economy for 20 plus years, and yet when faced with its own crisis the developed central banks all reacted by copying the one model everybody pointed to as the flawed economic model for stimulating economic growth.

There is a direct correlation between government and central bank debt and deflationary growth trajectories around the world. The fact that central banks believe they have no role in deciding the "New Normal" through effective policy, which in this case means less central bank involvement, is disconcerting to say the least.

It also points to the reason that every financial crisis of the last 20 years has been the direct result of the unintended consequences of central bank involvement here in the United States in the form of flawed Monetary Policy.

Excessively loose monetary policy has major side effects, which escalate with duration of loose monetary conditions, and we are already starting to see these unintended consequences right now with regard to risk taking in financial markets, irrational investment decisions, and debt choices being made by consumers&n ...

The Tesla Effect: Elon Musk's Tweet Saps Samsung's Battery

Elon Musk's tweet about Tesla's Model 3 batteries essentially shifted more than half a billion dollars of value from Samsung to Panasonic.

Time to Cut Power to This Hong Kong Lighting Play

Tech Pro Technology's rebuttal to criticism doesn't address the uncomfortable suggestion that its stock is its currency, and its high share price is integral to the business.

Valeant: Still the Sick Man of Pharmaceuticals

The clouds hanging over Valeant's prospects just won't go away. The drugmaker's quarterly results have dashed any immediate hopes that its business is turning around.

Market Snapshot: Dow flirts with 18,000 as oil rallies, dollar softens

The Dow Jones Industrial Average rose on Wednesday to test a key level of 18,000, on the back of a rally in crude-oil prices to $51 a barrel and a weaker dollar.

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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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