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02Nov2016 Market Close: Wall Street Still In No Mans Land, While Investors Worry About The Presidential Elections And A Fed Rate Increase In December

Written by Gary

US market indexes closed fractionally down after a choppy trading session (SPY -0.6%). Gold failed at its resistance and is slipping after the Feds said, in its policy statement, the central bank for now remains on hold. Short-Term indicators remain neutral with a bearish slant.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Wall St. lower as Fed sets stage for Dec rate hike

(Reuters) - Wall Street stayed weak on Wednesday after the Federal Reserve kept interest rates unchanged but signaled it could hike in December, as equities remained pressured by uncertainty over the impending U.S. elections.

Gawker settles with ex-pro wrestler Hulk Hogan for $31 million: court document

NEW YORK (Reuters) - Shuttered irreverent news website Gawker Media LLC has reached a $31 million cash settlement with Hulk Hogan, the former professional wrestler who won a $140 million judgment against the site over a leaked sex tape.

Fed holds rates steady, sets stage for December hike

WASHINGTON (Reuters) - The Federal Reserve kept interest rates unchanged on Wednesday in its last policy decision before the U.S. election, but signaled it could hike in December as the economy gathers momentum and inflation picks up.

Volkswagen board to discuss brand overhaul on November 4: sources

BERLIN (Reuters) - The supervisory board of Volkswagen will hold an extraordinary meeting on Friday, Nov. 4, to consult on a wide-ranging restructuring of the carmaker, two supervisory board sources told Reuters on Wednesday.

U.S. sues DirecTV for illegal information trading during Dodgers talks

WASHINGTON (Reuters) - The U.S. Justice Department filed a lawsuit on Wednesday against AT&T's DirecTV, alleging the pay-TV provider acted as a ringleader to illegally swap information with rival television companies about negotiations over showing Dodgers baseball games in the Los Angeles area.

Chipmaker Broadcom to buy network gear maker Brocade for $5.5 billion

(Reuters) - Chipmaker Broadcom Ltd said it would buy Brocade Communications Systems Inc for $5.5 billion, pushing deeper into the fast-growing market for network equipment used in data centers.

U.S. appeals court hears arguments on scope of Petrobras class action

NEW YORK (Reuters) - Attorneys for Brazil's state-controlled oil company, Petroleo Brasileiro SA, asked a U.S. federal appeals court on Wednesday to decertify a class of investors trying to recoup billions of dollars in losses stemming from a sprawling corruption scandal.

Tesla obliged to pay $1.7 billion to Panasonic for gigafactory cells

(Reuters) - Tesla Motors Inc had an obligation to pay a total of about $1.7 billion to Japan's Panasonic Corp as of Sept. 30 for electric vehicle battery cells made at Tesla's gigafactory in Nevada, the carmaker said in a regulatory filing.

NY authorities seek $872 million fine on UPS for cigarette shipments

(Reuters) - New York city and state authorities urged a federal judge on Wednesday to impose a fine of $872 million against United Parcel Service for allegedly delivering untaxed cigarettes from smoke shops on Indian reservations.

Unexpected Chart Of The Day: USA Default Risk Tumbles As Trump Gains

While every establishment politician and mainstream media pundit has proclaimed the end of the world as we know it if Donald Trump were to win next week, it appears - perhaps throwing off the narrative of exactly who is the "most dangerous" candidate - that the risk of the US Dollar has dropped along with Trump's resurgence...

Chart: Bloomberg

Of course, there is plenty of noise and illiquidity in that sovereign CDS contract as it combines default and devaluation risk of the US Dollar, but it appears the risk premium associated with buying protection on the USA has fallen notably as Donald Trump gains on Hillary Clinton.

Citi Explains What Time Traders Can Go Home On Election Night

It's all about Florida, North Carolina and Ohio.

For traders hoping to capitalize on volatility next Tuesday as the election results come trickling in, it may all be over by early evening, at least if Trump loses.

That is the calculation of Citi's Steven Englander, who determined that if Trump loses either Florida or North Carolina or Ohio "the math doesn't work and it tells us that the shift to Trump was not as pronounced as feared."

Those states, marked in yellow in the table below, close at 7:00 or 7:30 ET. As Citi adds, even if Trump loses by a little in one of these states, it becomes almost impossible for him to win. It would take a tidal wave in a couple of states that look firmly Democrat.

Citi helpfully adds that "the odds that he loses, say a Florida or North Carolina, but wins a Pennsylvania do not seem high" at which point "vol collapses, MXN rallies and we go home early."

On the other hand, if Trump wins all these states then he still has to win a Pennsylvania, Michigan, Wisconsin, Minnesota, Colorado or New Mexico (shown in brown).

What happens then? Citi explains:



Many of these close later and the odds are the outcomes will be tighter.

Virginia also possible but less likely than some of the others.

Asset markets will be very sensitive to news

Market still not really pricing in substantial risk of Trump win, so we could see huge volatility both in MXN and in asset classes that so far have moved modestly on poll shifts.

So we go home very late.

As a reminder, it took shocked markets a few hours to swing from a "priced-in" Remain victory, to the realization that Brexit was a winner, at which point S&P futures were briefly locked limit down, prompting an emergency announcement by the Bank of England and ECB that this aggression against the wealth effect would not stand, before everything returned largely to normal ...

How Politics Poisoned The Economy

Authored by Bonner & Partners' Bill Bonner, annotated by Acting-Man's Pater Tenebrarum,

Deep State in Control

What is going on in the markets? Well, nothing much. The U.S. stock and bond markets have been as dull as a teetotaler's funeral. No dancing. But no teary breakdowns, either.

1-spx-and-tlt

S&P 500 Index and the long term (20 yr. +) bond ETF TLT - both have weakened recently, but not dramatically (at least not yet) - click to enlarge.

Investors seem to be awaiting the results of the upcoming elections as if they were waiting for him to die. They look at their watches. They check their cell phones. Pollsters tell us it is a "done deal." But you never know; the old boy might surprise us.

So, while we're waiting, let us continue - rounding on our subject, trying to understand it, trying to see how the dots connect. Today, we step back to get a better view.

We have been looking at the way the feds' post-1971 fake money changed our whole society: our economy, our government, and our home life, too. Gone is the wealth-producing economy; now we have one that adds debt and subtracts real wealth.

As we noted, if you calculated "real" (inflation-adjusted) GDP growth according to the methodology used during the Reagan era, you would see that the nation has been getting poorer since 1989.

DOJ Responds To Kadzik's Email To Clinton Campaign; Finds Nothing Wrong

After the revelation that the DOJ's assistant attorney general, Peter Kadzik, was exposed as sending information about upcoming DOJ events to his friend, Clinton Campaign Chairman John Podesta, from a private, non-government gmail account, many were confused, asking if this is i) legal and ii) grounds for termination, if not criminal proceedings.

As a reminder, on May 19, 2015, from his personal gmail account, Peter Kadzik emailed the gmail account of John Podesta (who then promptly forwarded it onward to everyone on the Clinton campaign) the following:

Heads Up

There is a HJC oversight hearing today where the head of our Civil Division will testify. Likely to get questions on State Department emails. Another filing in the FOIA case went in last night or will go in this am that indicates it will be awhile (2016) before the State Department posts the emails.

Kadzik

Perhaps it was the clearly laid out partisan intent to assist the Clinton campaign, coupled with the obvious dissemination of DOJ information using un-FOIAble methods, namely a private email account, that prompted Americans to demand an answer from the DOJ regarding the fate of Kadzik.

However, at least according to an initial statement from the DOJ, absolutely nothing will emerge from today's leak ...

Market Says No, But Math Says Yes on Baker Hughes Deal

The lack of a benchmark share price for General Electric's oil-and-gas business makes it tougher to value the offer to Baker Hughes owners, but it seems like a deal worth accepting.

Fed Won't Make the Same Mistake Twice

A better understanding of the slack in the labor market will keep the Fed from threatening to raise rates rapidly.

The Curious Pre-Election Calm in Corporate Bonds

There is a fine line between keeping cool and being complacent. Credit markets appear to be skating on it.

02 November 2016 FOMC Meeting Statement: Federal Funds Rate Was Not Changed.

Econintersect: The Federal Open Market Committee (FOMC) - the board of directors of the Federal Reserve again did NOT adjust the federal funds rate. There was dissent as two members believed the federal funds rate should have been increased. A summary of how the members viewed the economy:

.... household spending has been rising moderately but business fixed investment has remained soft. Inflation has increased somewhat ...

Bond Report: Short-dated Treasurys rise for 4th day as Fed stands pat

Short-term Treasurys rose for a fourth straight day, pulling down yields, as Democratic nominee Hillary Clinton's narrowing lead in the polls provoked a flight to safety.

Kate Spade keeps promos in check at full-price stores, but loses the battle at outlets

Kate Spade & Co. said tourism headwinds and discounts at outlets had a negative impact, though full-price shoppers are still a highlight.

Capitol Report: Quicken, other non-banks dominate the low-down payment mortgage market

Lending standards may be more pristine, but big structural shifts are reshaping the mortgage 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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