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28Sep2016 Market Close: Wall Street Closes Higher After A Sluggish Start In The Morning, Crude Prices Close Higher In Face Of GS Saying Crude Will Fall, Indicators Neutral

Written by Gary

US markets closed up nicely after spending the morning and early afternoon in the red (SPY +0.5%). WTI crude prices rebounded to 47.40 before settling in the high 46 handle. The US dollar was volatile today and it slipped off its session highs (95.66) to a low 95 support. Indicators are neutral to bullish, but one can expect a repeat tomorrow.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

OPEC reaches first deal to cut oil output since 2008 - sources

ALGIERS (Reuters) - OPEC agreed on Wednesday to cut its oil output for the first time since 2008, with the group's leader Saudi Arabia softening its stance on arch-rival Iran amid mounting pressure from low oil prices.

Oil soars 6 percent as OPEC reaches deal to limit output in November

NEW YORK (Reuters) - Oil prices settled up nearly 6 percent on Wednesday after OPEC sources said the group has struck a deal to limit crude output at its policy meeting in November, its first agreement to cut production since the market crashed two years ago on oversupply.

Wall Street rallies as OPEC reaches output deal

(Reuters) - Wall Street moved higher on Wednesday after an OPEC agreement to limit crude output fueled a rally in oil and more than offset nervousness about a tight race for the U.S. presidency.

Fed's Yellen defends regulatory role, raises stress test changes

WASHINGTON (Reuters) - Federal Reserve Chair Janet Yellen was thrust into the election-year boxing ring during a congressional committee hearing on Wednesday, defending the central bank's regulatory role, taking and landing punches on Wells Fargo and other banks considered too big to fail, and addressing accusations of political conflicts of interest.

Wells Fargo plans to eliminate sales goals sooner than planned

(Reuters) - Embattled Wells Fargo & Co plans to eliminate sales goals for its retail banking business sooner than planned, according to prepared remarks its chief executive officer will deliver at a congressional hearing on Thursday.

Apple deepens enterprise push with Deloitte partnership

(Reuters) - Apple Inc and Deloitte LLP announced a partnership on Wednesday in which the consultant will open a new practice to help corporate clients work with Apple products, the tech firm's latest attempt to boost enterprise sales as its key product, the iPhone, shows signs of maturation.

Och-Ziff unit to plead guilty in U.S. bribe probe - sources

NEW YORK (Reuters) - Och-Ziff Capital Management Group LLC will pay $400 million and a subsidiary will plead guilty to resolve U.S. probes into its involvement in bribes paid to African officials, two people familiar with the matter said on Wednesday.In a deal expected to be announced on Thursday, the largest publicly traded U.S. hedge fund firm will enter a deferred-prosecution agreement with the U.S. Department of Justice while a subsidiary will plead guilty, the sources said.

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.

Eclusive: U.S. approves sale of Boeing fighter jets to Qatar, Kuwait - sources

BERLIN (Reuters) - The U.S. government has approved $7 billion in sales of Boeing Co fighter jets to Kuwait and Qatar, and has begun an informal notification process with U.S. lawmakers, two sources familiar with the decision said on Wednesday.

What's The Opposite Of "Nailed It"?

"The Fed"

As Deutsche Bank's Peter Hooper points out in the chart below, The FOMC has been too optimistic for many years.

Or as many are increasingly realizing... they are f##king clueless!

General Collateral Rate Surges To Highest Level In 7 Years

In what may be an indication of a major collateral shortage, but most likely is simply a case of quarter-end "window dressing", the overnight general collateral rate soared to 0.82% this morning, its highest print in nearly seven years, and roughly where it would trade if the Fed had hiked in September. GC soared to 0.85% yesterday afternoon yesterday after opening at around 0.68%.

As SMRA points out, the GC rate often spikes as quarter end approaches. The early morning fed funds rate is at 0.40% this morning, unchanged from 0.40% yesterday. Both the effective fed funds rate and overnight bank funding rate were in line with the fed funds rate at 0.40% on Monday, unchanged from the prior couple weeks.

It wasn't just general collateral surging. As the Fed announced eariler today, in today's fixed-rate reverse repo, 59 counterparties parked $272.3bn in cash in exchange for with the Fed in what by Sept 30 - or quarter end - will likely be the highest reverse repo use of the year by the final day of Q3 as the cumulative totals typically peak on the last day of the month and, in this case, quarter.

This is how Wedbush's Scott Skyrm explains the surge in both GC and RRP:

As Deutsche Bank Implodes, The ECB Is Making A "Strategic" Hire...

With Deutsche Bank crashing and burning for the second time in 2016, with its stock taking out all time lows and CDS spiking to record levels not seen even during the financial crisis, the ECB - which earlier denied its policies are at fault for the German lender's woes - has realized that in addition to bond buyers (if not so much sellers), it needs to beef up its staffing in one critical area: banking supervision.

In a very ironic job posting announced on the ECB's twitter feed, the ECB announced a job alert according to which it is now (or, perhaps at long last) hiring a banking supervision analyst.

Job alert: Banking Supervision Analyst https://t.co/DnTHQCpFVT

— ECB (@ecb) September 28, 2016

While the ECB did not explicitly name Deutsche Bank in the posting, it detailed what the central bank is looking for in a qualfied candidate, one which the ECB probably should have hired years ago, as follows:

Banking Supervision Analyst

Functional area: Micro-Prudential Supervision III

Function: The European Central Bank (ECB) is seeking professionals with experience in the prudential supervision of credit institutions, in supervisory policies, standards and principles, and/or in financial policy development with a supervisory authority, commercial bank or related consulting services, to fill the position of Supervision Analyst within its Directorate General Microprudential Supervision III (DG/MS III), in the Analysis and Methodological Support Division.

The main tasks of the Analysis and Methodological Support Division include: establishing and updating methodologies for risk assessment systems and supervisory review processes f ...

OPEC Has "Reached An Understanding On A Production Cut", Will Wait Until November To Finalize

As was leaked earlier today by Reuters, which reported that 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, moments ago Reuters blasted that a production cut - the organization's first in 8 years - is precisely what OPEC has agreed on (citing a source so don't be surprised if everything is denied in a few minutes) at its Algiers meeting, when it announced that a deal to limit oil production has been reached, however the execution won't take place for another two months.


OPEC REACHES DEAL TO LIMIT OIL PRODUCTION, EXECUTION IN NOV - OPEC SOURCE

AFTER REACHING TARGET, OPEC WILL GO TO NON-OPEC FOR OUTPUT SUPPORT - ONE OPEC SOURCE

We also learned what the output cap would be: 32.5 mmbpd, or about 1.2mmbpd below the August production record of 33.7 million:


OPEC AGREES TO LIMIT OIL PRODUCTION TO 32.5 MLN BPD - TWO OPEC SOURCES

Amusingly, the "cap" would put OPEC production at about the highest it has ever been.

That said, as the WSJ carefully phrased it, "OPEC Has Reached and Understanding on Output Cut" adding that:

OPEC on Wednesday reached an understanding that a crude-oil-production cut is needed to lift petroleum prices, people familiar with the matter said, but the cart ...

Companies Pick Wages Against the Machine

This year's weak capital spending figures are at odds with the strength in U.S. hiring.

BlackBerry Can't Let Software Get Hung Up

BlackBerry's exit from handsets puts all hope on software, where competition is fierce.

Costco Must Do More to Battle Amazon

Costco shares should continue to suffer under the weight of competition from Amazon.com and others.

Personal Finance Daily: Stanford tops U.S. colleges list and residents in these states may have a tough time voting

Wednesday's top personal finance stories

Currencies: Crude rally boosts ruble, Canadian dollar

Currencies with a high correlation to the price of oil rallied on Wednesday, supported by reports that an OPEC deal to limit output could be reached before the end of the year.

In One Chart: Crisis at Europe's banks threatens to roil global markets

Europe's problems with some of its largest financial institutions could buffet the rest of the global market.

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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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