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28Sep2016 Market Update: Wall Street In Indecisive Mode As Investors Try To Follow OPEC's Lead

Written by Gary

US markets remain down fractionally (SPY -01%) after opening fractionally in the green. Durable goods orders were unchanged in August from the prior month, crude prices and the US dollar have experienced wide fluctuations throughout the morning and afternoon session. Indicators remain neutral with a bearish slant.


Here is the current market situation from CNN Money

North and South American markets are mixed today. The Bovespa is up 0.31% while the IPC gains 0.23%. The S&P 500 is off 0.06%.

What Is Moving the Markets

Here are the headlines moving the markets.

Wall Street drops as health, financials weigh

(Reuters) - Wall Street was lower on Wednesday as health stocks weighed and financials fell after Federal Reserve Chair Janet Yellen said the central bank was considering changes to the annual stress test.

Fed may change stress tests, capital buffers for U.S. banks: Yellen

WASHINGTON (Reuters) - The Federal Reserve is considering changes to the annual stress tests it gives U.S. banks to move to a more risk-sensitive, firm-specific approach that would raise capital requirements for big banks based on their test results, according to its chair, Janet Yellen.

Wells Fargo CEO forfeits millions as board orders review

(Reuters) - Wells Fargo & Co said on Tuesday that Chief Executive Officer John Stumpf will forfeit unvested equity awards worth about $41 million and will not get a salary while the company's board investigates the bank's sales practices.

IMF chief sees lower U.S. growth, calls trade barriers 'malpractice'

CHICAGO (Reuters) - International Monetary Fund Managing Director Christine Lagarde said on Wednesday the institution would lower its 2016 U.S. growth forecast again and called policies that restrict trade "economic malpractice" that would choke off growth.

Exclusive: Redstone's NAI to call on CBS, Viacom to explore merger - sources

(Reuters) - Sumner Redstone's National Amusements Inc (NAI) is preparing to call on CBS Corp and Viacom Inc to explore a merger, two people familiar with the matter said on Wednesday.

OPEC could announce oil freeze in Algeria, details later: sources

ALGIERS (Reuters) - OPEC could announce an output-freeze deal on Wednesday in Algeria, although full details are unlikely to be firmed up before a formal meeting of the Organization of the Petroleum Exporting Countries in November, two OPEC sources said.

Wells Fargo scandal reignites debate about big bank culture

(Reuters) - In the aftermath of the 2008 financial crisis, the banking industry sought to address an ethics crisis with surveys, town hall meetings, appointments of overseers and mechanisms for employees to report malfeasance.

Germany denies preparing to rescue Deutsche Bank

FRANKFURT (Reuters) - The German government denied that it was working on a rescue of Deutsche Bank after a newspaper report about such plans fueled fears over the future of the biggest lender in Europe's largest economy.

U.S. to expand rules for 'too-big-to-fail' clearing houses

NEW YORK (Reuters) - The U.S. Securities and Exchange Commission on Wednesday said it would adopt rules to strengthen the regulatory framework for clearing agencies deemed systematically important or that are involved in complex transactions, such as security-based swaps.

Treasury Sells 7Y Paper In Another Mediocre, Tailing Auction; Bond Market Yawns

The first hint we had coming into today's auction that it would be weaker than some recent issuance for this maturity, was thanks to the repo rate for 7Y paper, which earlier this morning was quoted at 0.6%, suggesting that unlike this week's 2 and 5Y paper, there would be few shorts looking to cover into the 1pm deadline.

And sure enough, when the results for the sale of $28bn in 7 paper printed, the result was a modest tail, with a high yield of 1.389% tailing the 1.385% When Issued. As a reminder, last month's 7Y auction had an even bigger tail but that was due to concerns of a potential rate hike by the Fed in September; this time there was no such concern.

The internals were modest: the Bid to Cover of 2.474 was slightly higher than last month's 2.383, if below the 12 month average of 2.50. Direct Bidders took down 10.46%, the highest allotment since May, leaving Indirects with 59.4%, higher than August but lower than any preceding month since March, while Dealers were left holding 30.2%.

Overall, a forgettable auction, and like in the aftermath of yesterday's 5Y issuance, the 2s30s curve has seen another modest flattening, something Kuroda will not be delighted by.

"Russian Roulette" - Credit Suisse CEO Admits "EU Banks Not Really Investable"

European banks are in a "very fragile situation" and are "not really investable as a sector" according to Credit Suisse chief executive Tidjane Thiam. Speaking at a conference in London this morning, The FT reports, the CEO of Europe's 'other Deutsche Bank' said "only a fool would try to make a five-year prediction in a world that is so random," wishing John Cryan (DB CEO) well, "I hope that they come out of their current predicament."

"The next nine months are going to be difficult," Thiam began, adding that "risk is everywhere, risk is everything. I trained in maths and physics and all that teaches you is that basically the world is a big random experiment," and Brexit was "like Russian Roulette." Asked specifically about Deutsche Bank, he wished them luck...

"You get extreme movements on the basis of relatively minor piece of news because there's a lot of uncertainty," he said, citing "regulatory uncertainty" about future capital requirements and concerns about "potential fines like you've seen on Deutsche Bank this week".

"I think there is also a lot of doubt, a fundamental doubt, is there a viable business model that covers its cost of equity?" Mr Thiam added.

&nb ...

Obama Humiliated: Senate Overrides President's Veto Of "Sept 11" Bill In Crushing 97-1 Vote

Late last Friday, we reported that in a troubling development for all Americans, Barack Obama sided with Saudi Arabia when he vetoed the Justice Against Sponsors of Terrorism Act , better known as the "Sept 11" bill, allowing Americans to sue Saudi Arabia over its involvement in terrorism on US soil, passed previously in Congress, despite clear signs that the veto may be rejected by both the Senate and the House.

Moments ago, that is precisely what happened, when the Senate voted overwhelmingly 97 to 1, to override President Obama's veto of a bill letting the victims of the 9/11 attacks sue Saudi Arabia, striking a blow to the president on foreign policy weeks before he leaves office. The vote marks the first time the Senate has mustered enough votes to overrule Obama's veto pen.

Democratic Leader Harry Reid was the sole NO vote.

As the Hill reported, not a single Democrat came to the Senate floor before the vote to argue in favor of Obama's position.

Obama has never had a veto overridden by Congress.

Lawmakers don't want to be seen as soft on punishing terrorist sponsors a few weeks before the election, at a time when voters are increasingly worried about radical Islamic terrorism in the wake of recent attacks in Manhattan, Minnesota and Orlando, Fla. Oddly enough, Obama had no problem with those particular optics ...

Citi Has One Unpleasant Chart For Anyone Thinking Of Buying Twitter

With rumors swirling that Twitter may be acquired at any moment, with such suitor names thrown out as Disney, Salesforce, and even Google, overnight Citigroup released a scathing report explaining why a Twitter acquisition would be a bad idea. As the bank's Jason Bazinet, who probably is catering to clients who are short TWTR says, "at a superficial level, this sort of transaction seems to make sense. With its recent BAMTech investment, Disney is taking early steps to pivot its cable nets business to the web. And, of course, Twitter recently took steps to move into live video including on-line streams of NFL games. That's interesting. But, there are four reasons we don't like this potential transaction..."

Here are Citi's 4 reasons why a Twitter deal makes no sense:

Reason #1: History Suggests Internet M&A Fraught with Challenges

In the last 15 years, we cannot think of a single web based property that was successfully acquired by a traditional media firm. This includes both AOL/Time Warner (in 2000) and MySpace/News Corp (in 2005). If history is any guide, Twitter entails significant risks for the buyer.

Reason #2: Twitter Trends are Troubling

Two key US metrics - including monthly average users (MAUs) and ad revenue per MAU - have deteriorated sharply in recent quarters. Moreover, Twitter has experienced an unusual level of management turnover in recent years. These metrics suggest successful integration may be challenging.

Reason #3: All Cash or All Stock Deal Apt to Hurt Disney's Stock

We ran the Twitter merger math two ways: 100% cash and 100% equity. The cash offer would lower Disney's stock by $5 per share. The equity offer would lower Disney's stock by $9 per share.

< ...

European Banks and the Great Mortgage Settlement Game

Royal Bank of Scotland has taken another step toward clearing its crisis-era lawsuits and penalties, but its latest U.S. mortgage settlement and Deutsche Bank's current talks highlight just how much litigation European banks still need to close.

Chip Boom Helps Erase Toshiba's Bad Memories

Toshiba has more than doubled its operating profit forecast on strong memory prices, but it has to stay focused to compete.

Chinese Insurers' Short-Term Strategy Is Getting Old

China's life-insurance industry has been turbocharged by billions of dollars worth of short-term products. It's a peculiar trend.

Bond Report: Treasury yields remain stable after Yellen testimony

Treasury yields ticked lower on Wednesday as investors heard from a bevy of Federal Reserve officials, including Chairwoman Janet Yellen, who testified before the House Financial Services Committee.

Capitol Report: Senate to vote on bill to avoid government shutdown

The Senate on Wednesday was heading toward a vote on a bill that would avoid a government shutdown, after Minority Leader Harry Reid said he felt "comfortable" that Congress would aid the people of Flint, Mich.

Setbacks plague student loan borrowers trying to do the right thing

Why paying off your student loan is harder than it should be.

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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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