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14Nov2016 Market Close: Wall Street Closes Flat, Crude Prices Shoot Back Up And The US Dollar Settles In The 100's

Written by Gary

US stocks were flat in afternoon trading today and technology was the weakest sector, offsetting a steep rise in financial stocks as investors bet on higher interest rates. U.S. inflation expectations held mostly steady at low levels in October and WTI crude rose from a 3 month low settling at yesterday's highs.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Wall Street down as tech drag offsets financial sector's rise

(Reuters) - U.S. stocks were slightly lower in afternoon trading on Monday and technology was the weakest sector, offsetting a steep rise in financial stocks as investors bet on higher interest rates.

Exclusive: Audit of U.S. stress test ready, may aid Dodd Frank overhaul fight

WASHINGTON (Reuters) - A independent study of the financial costs and benefits of Wall Street 'stress tests' could be released as soon as Tuesday and may strengthen calls to reform U.S. banking rules, said sources familiar with the report.

Election over, Congress pivots to lame-duck debate over spending

WASHINGTON (Reuters) - With a bitter election campaign finally over, the Congress will reconvene this week to try to set aside its partisan differences long enough to keep the government from closing.

'Trump Thump' whacks bond market for $1 trillion loss

NEW YORK (Reuters) - Donald Trump's stunning victory for the White House may mark the long-awaited end to the more than 30-year-old bull run in bonds, as bets on faster U.S. growth and inflation lead investors to favor stocks over bonds.

Too early to tell impact of Trump policies: Fed's Kaplan

WICHITA FALLS, Tex. (Reuters) - Markets are betting heavily that the man Americans last week elected as their next president will enact fiscal and other policies that will boost U.S. growth and inflation, but at least one U.S. central banker is pushing back.

U.S. inflation expectations flat, low in October: NY Fed survey

NEW YORK (Reuters) - A measure of U.S. inflation expectations held mostly steady at low levels in October, with only some momentum higher, according to a Federal Reserve Bank of New York survey taken before Americans voted in this month's presidential election.

Oil rebounds from three-month lows on renewed hopes for OPEC cut

NEW YORK (Reuters) - Oil prices were largely steady on Monday, rebounding from three-month lows, on a report saying that OPEC members were seeking to resolve their differences on a deal to cut production ahead of a meeting later this month.

Samsung to buy car tech company Harman for $8 billion

SEOUL (Reuters) - Samsung Electronics has agreed to buy Harman International Industries in an $8 billion deal, marking a major push into the auto electronics market and the biggest overseas acquisition ever by a South Korean company.

Big-name investors remained bearish on financials before U.S. election

NEW YORK (Reuters) - Several big-name hedge fund investors remained significantly underweight financial stocks at the end of the third quarter, helping sow the seeds of the rally in bank shares following Donald Trump's surprising victory in the U.S. presidential race.

Where The Professionals Hedged (And Why Stocks Have Soared... Too Much)

Just days before the historic Trump victory sparked utter chaos in global financial markets, we warned of 'Brexit'-like red flags in the equity derivatives markets. While equity markets did crater, it appears the unprecedented systemic-overlay of protection by the professionals was enough to create an equally unprecedented bid for US equities as hedgers covered their positions.

The massive spike in implied correlation - soaring 9 straight days from 35 to 75 - suggested fear had turned into panic.

Chart: Bloomberg

As a reminder, implied correlation measures the relative demand for macro overlays (index hedges) vs micro risk (individual stock hedges/concerns). The higher it is, the more systemically worried investors are and the more traders believe a high correlation 'event' is due (typically the high correlation event is a big downturn in stocks).

But as the chart above shows, implied correlation has puked back to an unprecedentedly low level - over-reacting as systemic hedges are liquidated - and given overall positioning going in, this levered move has sent US stocks higher..

But, The Dow in particularly, due to its sensitivity to several high price names, ...

RBC Market Commentary: "Under The Hood, It's Not Good"

With the "Trump reflation" rally fizzling, not helped by a Goldman note which forecast that no matter what Trump does, it will lead to a slowdown in the global economy, momentum chasers, pardon, traders are once again confused what to do next: if we are approaching an inflection point, and algos get cold feet about ramping upside stops, well, the downside beckons.

So, for some much needed perspective on what may happen, here is RBC's cross-asset wizard, Charlie McElligott explaining why "Under the Hood It's Not Good"

Spooz hovering near flat, while the long-end of USTs see a meaningful relief rally, boosted by Goldman's "stagflation scenario" call (which outside the policy component is also receiving increased note from clients, in light of the US Dollar and RMB moves "deflation impulses")...although now fading a bit again as meaningful IG issuance sees some rate lock sellers. Outside of that though, I wanted to communicate on some performance observations.

As touched on this a.m. in "RBC Big Picture," the single-name / sub-sector / sector level dispersion within both equities and credit universes has been gut-wrenching in the post-election period. But also think about the past two week span: most funds went into a fierce de-risking mode (taking down gross, where others actually added to single-name shorts / took down nets) into the election event-risk, while since then, the market has found the point of max pain with a gap index jump higher, while under-the-hood, we've seen popular positioning and pairs-trade unwinds in almost every sector. Just thematically, seeing more of this too: everything (for example) from biotech vs healthcare facilities, banks vs fintech, even Dow Industrials vs Nasdaq (outperf by 6.0% MTD already)... ...

Obama Holds Press Conference Before Departing On His Last Official Foreign Trip - Live Feed

After repeatedly calling Trump "uniquely unqualified" throughout the 2016 campaigning cycle, Obama is now set to embark on his last official foreign trip as commander-in-chief and must explain to anxious foreign leaders what the 2016 presidential election means for U.S. foreign policy going forward. Per Bloomberg, Obama's trip will include visits with the leaders of China, Germany, U.K., Peru, France, Italy, Spain, Greece, Australia and several Southeast Asian nations all of whom will be peppering him with questions ranging from the fate of various trade deals to the Syrian refugee crisis.

"His role now becomes a bridge to an administration with which he has very different views," said Patrick Cronin, senior adviser for the Asia-Pacific Security Program at the Center for a New American Security. "He's got to reassure the global community that what's coming next will not lead to complete fragmentation and a breakdown of order."

"I don't know there's much he could say to effectively calm their anxieties," Miller said in a telephone interview. "But I certainly expect that he'll offer reassurances, most likely by highlighting the strong fundamentals of our relationships."

The task is made more difficult because Obama campaigned vigorously against Trump's election, declaring at a series of rallies that the billionaire was "uniquely unqualified" to be president and "temperamentally unfit" to hold the codes to America's nuclear arsenal.

Alth ...

SolarCity Could Give Tesla Too Much Sun

SolarCity's third-quarter results highlight a major risk for Tesla Motors shareholders.

Chip-Merger Bash Finally Nearing Last Call

Heady pace of big deals over past two years leaves few good options remaining.

Samsung-Harman: Getting in an Automotive Groove

Samsung's $8 billion deal for automotive tech player Harman International looks like a ride worth taking

Currencies: Dollar jumps to 1-year high on fiscal stimulus hopes

Dollar soars on continued speculation that U.S. President-elect Donald Trump's fiscal stimulus will boost the U.S. economy and lead to further rate increases by the Federal Reserve.

Futures Movers: Natural gas at 1-week high; oil pares loss but ends near 2-month low

Natural-gas futures rally to their highest level in a week, and oil futures cut their losses but still finish at a nearly two-month low.

Unhappy with the election? Some people are calling the Sierra Club

Disenfranchised voters protest with their wallets.

Summary of Economic Releases this Week

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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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