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29Aug2016 Market Close: Major US Indexes Closed In The Green, But Fell Off Session Highs Along With The US Dollar

Written by Gary

Wall Street snapped a three-day losing streak today (SPY +0.5%) as financial stocks rose after Fed Chair Janet Yellen said the case for an interest rate hike had strengthened. Short-term indicators are mildly bullish after the US dollar dropped from session highs. Crude prices remained at the 47 handle and gold fell fractionally.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Wall Street gains as financials rally on Fed rate comments

(Reuters) - Wall Street snapped a three-day losing streak on Monday as financial stocks rose after Federal Reserve Chair Janet Yellen said the case for an interest rate hike had strengthened.

EU to hand Apple Irish tax bill of over 1 billion euro, source says

DUBLIN (Reuters) - The European Commission will rule against Ireland's tax dealings with Apple on Tuesday, two source familiar with the decision told Reuters, one of whom said Dublin would be told to recoup over 1 billion euros in back taxes.

Valeant is sued over Philidor ties, alleged racketeering

NEW YORK (Reuters) - Valeant Pharmaceuticals International Inc was sued on Monday by buyers of its drugs, who accused the Canadian company of racketeering by forcing them to pay exorbitant prices.

Solid U.S. consumer spending boosts prospect of Fed rate hike

WASHINGTON (Reuters) - U.S. consumer spending increased for a fourth straight month in July amid strong demand for automobiles, pointing to a pickup in economic growth that could pave the way for the Federal Reserve to raise interest rates this year.

White House says it sees a path to approval of Pacific trade deal

WASHINGTON (Reuters) - The White House said on Monday it could still win congressional approval of the Trans-Pacific Partnership trade pact before President Barack Obama leaves office, and warned that failing to do so would undermine U.S. leadership in the region.

Facebook CEO says group will not become a media company

ROME (Reuters) - Facebook Inc. will not become a media company, its founder and CEO Mark Zuckerberg said on Monday, telling students the firm would remain a technology platform.

Truck carrying Takata air bag inflators explodes in U.S., killing one

(Reuters) - A truck that was transporting Takata Corp air bag inflators and propellant material at the center of a global recall exploded in Texas last week, killing one woman and injuring four other people, the auto parts supplier said on Monday.

HSBC executive pleads not guilty in U.S. over forex scheme

NEW YORK (Reuters) - A senior HSBC Holdings Plc executive pleaded not guilty on Monday to charges that he participated in a fraudulent scheme to front-run a $3.5 billion currency transaction by one of the bank's clients.

Caesars shares plummet as it faces $11 billion in bondholder lawsuits

CHICAGO (Reuters) - Shares in Caesars Entertainment Corp shed 16 percent on Monday after a U.S. judge cleared the way for billions of dollars in bondholder lawsuits against the casino group to proceed, setting up a possible judgment as soon as Tuesday in New York.

Risk-Parity Panic Looms As Bonds, Stocks, Gold Rally; Reject Fed Hawkish Chatter

The market's message to The Fed...

Rate hike hopes from Friday were rapidly unwound today in Fed Funds Futures...

Volume for this ramp was a fraction of the volume during Friday's dump...

On the day, equities were all higher...

But rolled from the Fischer cliff...

Note that from Yellen's statement, stocks managed to get green...

VIX ...

Mission Creep - How The Fed Will Justify Maintaining Its Excessive Balance Sheet

Submitted by Eugen von Bohm-Bawerk via,

FOMC have changed their normalizing strategy several times and we now see the contours of yet another shift. The Federal Reserve was supposed to reduce its elevated balance sheet before moving interest higher as it would be impossible to increase the fed funds rate in the old fashioned way when the market was saturated with trillions of dollars in excess reserves. When it finally dawned on the FOMC that selling large quantities of TSY and MBS into the market was probably not a very bright idea, they created the O/N RRP to be able to raise rates without draining the financial system of reserves beforehand. Still, the thought of selling, or more accurately not rolling over, trillions worth of government debt, when SWF's and foreign FX managers are desperate to raise USD is still not something the FOMC even want to contemplate.

So a case needs to be built for the FOMC to justify maintaining its bloated balance sheet indefinitely; conveniently enough ex-FOMC member Jeremy Stein with his Harvard colleagues Robin Greenwood and Samuel Hanson did just that in a paper called "The Federal Reserve's Balance Sheet as a Financial-Stability Tool" presented at the Jackson Hole Symposium.

Their argument is simple. When the FOMC starts to raise rates, demand for positive yielding cash-like instruments will increase, thus re-enabling financial institutions to use the commercial paper market to fund themselves cheaply and enjoy a positive carry on their maturity transformation. As our chart below shows, commercial paper outstanding, with extremely short duration, grew exponentially prior to the GFC as financial institutions used the wholesal ...

Dallas Fed Respondent: "Sometime After The Election, Data Will Show That In 2016 The U.S. Was In Recession"

When the Dallas Fed released its latest manufacturing outlook survey, it revealed that when it comes to the state which during the shale boom was responsible for the bulk of highly-paid job creation in the U.S., things remain bad: as we reported earlier, after unexpectedly surging from -18 to -1.3 in July, August's Dallas Fed plunged back to -6.2, contracting for the 20th month in a row.

However, it wasn't the notoriously volatile data that attracted our attention, but rather the sampling of traditionally outspoken, well-formulated responses said as part of the survey. Here are some selected highlights:

The global economies and the U.S. economy are very weak and uncertain.

U.S. manufacturing is suffering because of the high dollar value.

A good indication of business outlook is how many calls we get from truckers looking for freight business. On one day we received four calls. It was probably more calls than orders we received for the day.

Refinery margins continue under pressure and the level of spending on equipment is being reduced significantly. I believe that the continued low level of spending will result in several providers going out of business. The market is getting very tough.

Pricing has deteriorated to win bids, and many projects seem to be on hold. Owners are reevaluating capital expenditures priorities or deferring them all together.

Despite some "hoopla" about construction metrics being ...

Iceland Sounds Alarm After Largest Volcano Rocked By Big Earthquake Cluster

Six years after the eruption of Iceland's Eyjafjallajokull volcano in 2010 caused the cancellation of more than 100,000 flights across Europe on concern that glass-like particles formed from lava might melt in aircraft engines and clog turbines, Iceland met office raised the alarm after its largest volcano was hit by the biggest tremors since 1977. Katla, named after an evil troll, is in southern Iceland about 140 kilometers (87 miles) from the capital, Reykjavik.

Two quakes larger than 4 in magnitude early Monday rocked the crater of Katla, the country's Met Office said in a statement. That was followed by at least 10 more tremors at the volcano, which rises 1,450 meters (4,757 feet) into the air on the North Atlantic island's southern coast.

The good news is that the Icelandic Meteorological Office is reporting that so far no tremor is currently recorded currently at Katla, which suggests that at least for the moment, no magma is making its way to the surface. Icelandic officials have not changed the alert status for Katla from normal at this point.

As Bloomberg notes, there were no immediate reports of casualties or damages to property.

The earthquake swarm that occurred on the night of August 29
at Katla in Iceland. The green stars are earthquakes over M4.

From the

Why Fitbit's New Band Got a Healthy Reception

Fitness band maker has much cheaper multiple as it updates flagship devices.

Market Extra: These crowded trading positions are ringing alarm bells

While U.S. equities witness the least volatile 30-day period in more than two decades, a danger lurks: overcrowded positions.

Gene Wilder, star of 'Willy Wonka,' dies at age 83

Gene Wilder, the famed actor from classics such as "Willy Wonka and the Chocolate Factory," and "Young Frankenstein" and other Mel Brooks comedies, has died.

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