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23Jun2016 Market Close: SP 500 Closes Solidly Above 2100, WTI Crude Settles Above $50, What Could Possibly Go Wrong?

Written by Gary

US markets closed higher as Wall Street bet strongly that Britain is voting to remain part of the European Union, avoiding a likely hit to Europe's economy and possible consequences to global economic growth. Tomorrow may be an volatile wild ride on Wall Street as traders react to the vote on the British referendum and adjust their portfolios to the annual reconstitution of the widely followed Russell stock indexes.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Wall St. bets on Britain staying in EU; stocks rally

(Reuters) - U.S. stocks rose on Thursday as Wall Street bet strongly that Britain is voting to remain part of the European Union, avoiding a likely hit to Europe's economy and possible consequences to global economic growth.

VW to pay over $10 billion for U.S. emissions scandal: source

WASHINGTON (Reuters) - Volkswagen AG will pay nearly $10.3 billion to settle claims by U.S. regulators stemming from its diesel emissions cheating scandal, a source briefed on the agreement said on Thursday.

Index shifts, Brexit vote could make Friday freaky on Wall Street

NEW YORK (Reuters) - Friday could offer an especially wild ride on Wall Street as traders react to the vote on British membership in the European Union and adjust their portfolios to the annual reconstitution of the widely followed Russell stock indexes.

Boeing's deal with Iran to include broad range of jets

PARIS/ANKARA (Reuters) - A provisional deal calling for Boeing to supply a total of 109 aircraft to Iran includes small and large jetliners worth $20.37 billion at list prices, both sold directly and leased, two people with knowledge of the deal, including a senior Iranian official, said on Thursday,

U.S. jobless claims, factory data point to firming economy

WASHINGTON (Reuters) - The number of Americans filing for unemployment benefits fell last week to near a 43-year low, suggesting labor market resilience even though hiring slowed sharply in May.

Behind those Amazon Prime boxes, a bull market in warehouses

NEW YORK (Reuters) - With Amazon and other e-commerce sites continuing to take market share from malls and other physical retailers, U.S. mutual fund managers are upping their bets on an overlooked part of the online shopping boom: warehouses.

Behind Tesla carnage, signs of support for Musk's SolarCity deal

(Reuters) - Some of Tesla Motor Inc's biggest investors have signaled support for CEO Elon Musk's plan to buy solar power company SolarCity Corp , although the electric car maker's stock cratered on Wednesday, lopping more than the $2.8 billion value of the proposed deal off Tesla's market capitalization.

Merrill Lynch to pay $415 million for misusing customer cash: SEC

(Reuters) - Bank of America Corp's Merrill Lynch unit will pay $415 million in the largest customer protection settlement in the Securities and Exchange Commission's history and admit to wrongdoing to settle charges that it misused customer cash, the U.S. regulator said on Thursday.

Longtime Macy's CEO Lundgren to step down next year

(Reuters) - Macy's Inc said Terry Lundgren will step down as CEO next year and be succeeded by former chief merchandising officer Jeff Gennette as the department store operator tries to revive sales hit by stiff competition from online and off-price retailers.

Crude Oil Options Traders "Most Bearish" Since At Least 2010

The 'skew' between bearish puts and bullish calls has not been this negatively positioned since at least 2010 (when Bloomberg data began).

"This negative skew developing is moving in sympathy with what we're observing in the physical market," according to BNP's Harry Tchilinguirian, and just as the skew was drastically bullish at the lows in January, one might wonder if the smart-money is right once again...

Fundamentally, Tchilinguirian warns that "despite outages of production in Nigeria, we're not seeing in the curve structure on the physical side any indication of supply shortages, rather to the contrary."

UBS' Trading Roadmap For The "Day After" Brexit

Moments ago we presented the contrarian thesis from Greg Peters, who hinted that the equity response may be one of "selling the news" in case of Remain, and one where US stocks actually surge if Leave wins, as a result of an influx of global funds seeking US "safe haven" assets. Next, we go back to a more conventional model of how assets would react, and present "a roadmap for the 'Day After'" from UBS, which seeks to answer the question "at what level would we buy or sell each key asset class in either a Remain or a Leave scenario?" It then show ranges of the potential near-term market reactions.

Any moves outside these ranges, UBS says, could signal that the market is under-pricing or overpricing the relevant macro risks. The Swiss bank caveats by warning that it can not predict exactly how the markets will trade immediately following the 23 June vote, as there could be liquidity driven dislocations or surprising reversals of price spikes.

Here are the summary cases:

A "Leave" scenario

Following the risk-rally of the last few days, we believe there is significant room for downside in the event of a "Leave" vote. We estimate percentage moves in the midteens for UK and EU equities but materially smaller moves for the S&P 500 and EM equities. While GBP may come under significant pressure, the EUR may be more stable. Risk currencies (CHF & JPY) would benefit, but policy responses could limit the degree of strength quickly. We think Euro-area core yields and UK yields would decline substantially (roughly 10-40 bps), and potentially even more so in the US. Moves in the range of 50bps look possible in Euro-area periphery yields and corporate credit ...

Is The Market Looking At It Wrong: "Buy US Assets In Case Of Brexit" Says Greg Peters

Several days ago, when sterling soared on early speculation based on betting results that the Remain camp was in the lead, we reported that Citigroup was "stunned" at the reaction in the British Pound, which had soared, and as of today, surpassed its "extreme" and even its "1 day after" prints of 1.48 and 1.485, suggesting the market had effectively priced in the entire outcome. As such, numerous have suggested, that Brexit - should Remain indeed be victorious - could be one of the more significant "sell the news" events in recent years.

However, an even more interesting hypothesis was proposed by Gregory Peters, senior investment officer at Prudential Fixed Income, who told Reuters on Tuesday that he thinks U.S. stocks and bonds are a "great" buying opportunity if Britain votes to exit the European Union.

The thesis in a nutshell: flight to US safety.

"I think it is a bullish U.S. asset story period, if this thing does happen," Peters said. "I think it will be a great buying opportunity for U.S. assets, from Treasuries to high-yield 'junk' bonds. It may not be an immediate response of a U.S. rally, but I do believe it will be a buying opportunity which will unfold in the medium/long term."

Peters of course, is the former Morgan Stanley chief global asset strategist whose reported frequently appears on these pages, and who sounded an early alarm about the financial crisis, said his thesis is that if "Brexit" happens, "it still will be multi-years of uncertainty that will create capital flight to the U.S. marketplace."

So if Brexit occurs, it will be out of United Kingdom and the European Union - and into the United States."

Peters warned in November 2007 that ...

After Legalizing Recreational Weed, Teen Use In Colorado Lower Than Rest Of Country

Submitted by Carey Wedler via TheAntiMedia.org,

Cannabis prohibitionists have long cautioned that legalizing the plant will inevitably lead to increased use among teens, couching their restrictive beliefs in concern for the youth. While some of these concerns may be genuine, a recent survey from the Colorado Department of Public Health and Environment demonstrates — for the second year in a row — that youth in Colorado do not use cannabis any more than teens in other parts of the country. In fact, by at least one measure, they use less.

The Healthy Kids Colorado survey is a "voluntary survey that collects anonymous, self-reported health information from middle and high school students across Colorado," according to the initiative's website. Over 17,000 middle- and high-schoolers throughout the state were randomly selected to participate. The survey is conducted every other year, and the 2015 version, released this week, confirmed the 2013 findings that marijuana use among teens in Colorado had fallen flat.

As the Denver Post reported:

"The 2 ...

Can a 33-Year Veteran Save Macy's?

Macy's next CEO Jeff Gennette is a company veteran. He has a lot to prove when it comes to revamping it.

The Real Reason 'Brexit' Has World on Edge

The biggest, least understood risk in a British exit from Europe isn't to the U.K. itself, but to the wider Western world.

Stocks Send an Inflation Signal

Stocks suggest an upswing in inflation is coming, while bonds' forecast is for prices to stay cold. The stock market's message may be right this time.

Bond Report: Treasury bonds lose favor, yields rise as Brexit vote begins

Government bond prices fell and yields rose Thursday as British citizens headed to the polls to decide on whether to leave the European Union bloc

Market Extra: Beyond Brexit, these 4 things will drive U.S. stocks

The risk-on nature of price action in equities over the week suggests that the U.S. stock market is confident that the "remain" bloc will win in the landmark U.K. referendum on continued membership in the European Union

MarketWatch First Take: Political dysfunction is the new normal, as Brexit and NoBillNoBreak show

Global trade has inevitably flattened out living standards in the West, and that's driven the dysfunctional political scene from Brexit to NoBillNoBreak.

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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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