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22Dec2016 Pre-Market Commentary: US Market Losses Expected As Investors Pack Up For Christmas Weekend, WTI Crude At 52 Handle, Bitcoin On The Move Upward, US Dollar Trading Sideways

Written by Gary

U.S. stock index futures pointed to modest losses at the open today, with the Dow remaining within sight of 20K mark as traders eyed the release of a big batch of data (Below). The dollar lost some steam, trading sideways (103), Bitcoin surpasses $850, market volumes beginning to thin out ahead of the year-end holiday period.


Here is the current market situation from CNN Money

European markets are mixed. Shares in Germany are lower with the DAX off by 0.01%. The DAX and FTSE 100 are uchanged.

Looking at the last three columns, the first one (Actual), is what was reported this morning. The second column (Forecast) is what analysts had forecast and the third column is the previous report. Full calendar HERE.

10:00 Personal Income and Outlays
10:00 Leading Indicators
10:30 EIA Natural Gas Inventory
11:00 Kansas City Fed Mfg Survey
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

What Is Moving the Markets

Here are the headlines moving the markets.

U.S. jobless claims rise to six-month high last week

WASHINGTON,(Reuters) - The number of Americans filing for unemployment benefits rose to a six-month high last week, but remained below a level that is associated with labor market strength.

U.S. third-quarter economic growth raised to 3.5 percent

WASHINGTON, Dec 22 (Reuters) - The U.S. economy grew faster than initially thought in the third quarter, notching its best performance in two years, amid solid consumer spending and a jump in soybean exports.

Euro, Italian shares up as Monte Paschi heads for rescue

LONDON (Reuters) - European markets were poised for one last burst of action before the end of the year on Thursday, with Italy expected to outline plans to rescue the world's oldest and now its most troubled bank, Monte dei Paschi di Siena.

Iran to sign deal to buy Airbus jets today: sources

PARIS (Reuters) - Iran is set to sign a formal deal to buy up to 100 jets from Airbus on Thursday, two people familiar with the negotiations said, as Tehran and Western companies race to re-open trade almost a year after sanctions were lifted.

'Regtech' startups see more business in Trump era

NEW YORK (Reuters) - President elect Donald Trump is pro-business and anti-red tape. But what if your business is red tape?

Poll: As 2016 ends, 'Trumponomics' tempts investors back to equities

LONDON (Reuters) - Global investors' equity holdings rose to six-month highs in December on bets that U.S. President-elect Donald Trump's promised fiscal splurge would spur higher growth and inflation, a Reuters monthly poll showed on Thursday.

U.S. refiners cash in on Mexico's record fuel imports

NEW YORK/HOUSTON (Reuters) - U.S. Gulf Coast refiners are cashing in on rising fuel demand from Mexico, shipping record volumes to a southern neighbor that has failed to expand its refining network to supply a fast-growing economy.

Wall Street and oil take the 2016 spoils

LONDON (Reuters) - Oil is set to be 2016's top market performer, with its near 50 percent gain an outcome few would have predicted when it plunged to a 12-year low in January.

Uber removes self-driving cars from San Francisco roads

SAN FRANCISCO (Reuters) - Uber Technologies Inc [UBER.UL] has removed its self-driving cars from San Francisco streets, halting the autonomous program one week after its launch as the company faced a regulatory crackdown.

Despite Trump Hope, Durable Goods Tumbles Most Since Aug 2014 As Non-Defense Orders Crash

Despite exuberance in soft "survey" data post-Trump, as hope for change re-appears, "hard" data continues to disappoint with Industrial production weakness and now durable goods orders tumbling 4.6% MoM (slightly better than expected -4.8%) - the biggest drop since Aug 2014.

Aside from the reactive drop in 2014 after the big Boeing order, this is the biggest MoM drop since summer 2013...

Durable Goods New Orders decline YoY once again (-0.5%) as ex-defense orders crashed 6.6% MoM (-2% YoY).

Bitcoin Is Soaring

Just yesterday we noted the resurgence in Bitcoin as China turmoil accelerates, but overnight (as Yuan weakened further), demand for the cryptocurrency has soared once again, sending the price (in USD) to $875 - the highest since Dec 2013. Bitcoin is up over 10% this week alone.

Bitcoin is soaring...We first warned of this 'outlet' for Chinese capital in September 2015 when Bitcoin was trading around $200...now it is trading at $875

And the massive volume coming from Chinese exchanges suggests where the flow is...

The last 48 hours have seen Chinese Bitcoin prices spike over 12% on heavy volume...

As a reminder, back in 2013, the government classified bitcoin as a commodity and not currency, placing it outside the purview of the foreign-exchange regulator, the people said. That does n ...

Rising Investor Sentiment Trumped by Fiscal Policy?

Measuring investor sentiment is the closest thing to a "free lunch" in the investing world. Knowing that the investing public cannot buy or sell forever means that, at some point, they'll stop and prices will react accordingly. Measuring investor sentiment aims to identify these points in time. Fortunately, there are a variety of different ways to gauge sentiment and to identify extremes in investor behavior. These extremes typically indicate turning points in a market or at least peaks in momentum.

Currently, the Trump rally is sparking some excitement with investors, both retail and institutional. The S&P500 rose nearly 10% since the election and CNBC is actively making sure the whole world knows that the Dow Jones inches closer to 20,000. This type of cheerleading should normally be a red flag to viewers, particularly when more traditional indicators show elevated levels of optimism as well.

Mack Research Sentiment Chart

Investor sentiment typically follows prices lower or higher, and this current rally has been no exception. Although investor sentiment is not at an extreme level (yet), it's elevated and rising. The above chart shows one of our sentiment indicators over the past several years. This data set shows optimism bubbling higher, and aside from a brief point in August, the current reading sits at the highest level since early 2015. If U.S. equities grind higher through the New Year, sentiment levels may end up in extreme territory. However, investors should be wondering if it will even matter since major fiscal policy changes are underway.

Can equities rally through a period of excessively high investor sentiment? It has certainly ...

China Says Will Make "Tactical Adjustments" On US Debt

Following the latest TIC report, which showed China dumping over $40 billion in Treasuries in October, bringing its total to the lowest since 2010, and at $1.116 trillion sending China below Japan only for the second time in the list of top US creditors, questions emerged about China's strategy on US debt holdings.

Today, this specific question that was addressed by an official at China's State Administration of Foreign Exchange (SAFE), who calmed nerves and told US reporters at a briefing that while China will make "tactical adjustments" on its US debt holdings, Beijing's long-term investment view on US debt has not changed, adding that U.S. Treasuries are China's long-term strategic investment targets as MarketNews reported.

When asked if China is strategically cutting its US treasury, he replied "absolutely not" adding that it is difficult to forecast value of U.S. dollar and U.S. Treasuries according to Bloomberg.

He also said that there is no barrier for foreign companies to transfer investment returns out of China as long as they comply with relevant rules.

Of course, whould Trump push aggressively for trade concessions, especially following the appointment of Peter Navarro, and demand a decline in Chinese exports to the US, ostensibly by imposing tarriffs, it is likely that China's tactical adjustments will acceleration the recent one-way liquidation trendline.

Shifting from bonds to the other topic du jour, namely China's reserve outflows, the official said C ...

Auto Suppliers May Be the Real Winners as Cars Electrify

The biggest winners of the postrecession car boom haven't been car companies but their suppliers. This is one feature of the automotive landscape the emergence of electric vehicles seems unlikely to disrupt. Suppliers with the right technology are worth their big stock-market premium.

Biotech Stocks: Rate Expectations Matter

Biotech investors shouldn't overlook what happens in the bond market.

The Highly Charged Way to Play Electric Cars

Utilities have received little attention compared with companies like Tesla in the electric vehicle revolution. It presents them with both an opportunity and a burden.

Economic Report: U.S. GDP growth revised up to 3.5% rate in third quarter

The economy expanded at a 3.5% annual rate in the third quarter, the most in two years, the Commerce Department said Thursday.

Economic Report: Initial jobless claims jump by 21,000 to six-month high

U.S. jobless claims jumped to the highest level since mid-June, the government said Thursday.

Economic Report: Durable goods orders drop for first time in five months in November

Order for durable goods fell 4.6% in November pushed down by volatile aircraft orders but the details were stronger, the Commerce Department said Thursday.

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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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