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03Jan2017 Market Close: Wall Street Closed Higher Finding New Footing After Crude Prices Tumble And US Dollar Weakens As Post-election Rally Extended Into The New Year

Written by Gary

Wall Street closed higher after as data showed a large build in crude inventories at the Cushing hub came in over one million barrels higher. U.S. stocks have surged over the past two months on expectations that Trump will stimulate the economy with tax cuts and infrastructure spending and slash regulations in the financial industry.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Wall Street extends rally, but some investors wary

(Reuters) - Wall Street rose on Tuesday as a post-election rally extended into the new year, even as some investors warned they need to see results from President-elect Donald Trump before pushing stock prices significantly higher.

Ford scraps plan for $1.6 billion plant in Mexico after Trump criticism

FLAT ROCK, Mich./WASHINGTON (Reuters) - Ford Motor Co said Tuesday it will cancel a planned $1.6 billion factory in Mexico and invest $700 million at a Michigan factory, after President-elect Donald Trump had harshly criticized the Mexico investment plan.

Intel to take stake in German mapping firm HERE in automated driving push

FRANKFURT (Reuters) - U.S. chip maker Intel will take a 15 percent stake in German digital mapping firm HERE, it said on Tuesday, as it seeks to build its presence in automated driving technology.

Trump assails GM over car production in Mexico, threatens tax

DETROIT/WASHINGTON (Reuters) - President-elect Donald Trump on Tuesday threatened to impose a "big border tax" on General Motors Co for making some of its Chevrolet Cruze compact cars in Mexico, an arrangement the largest U.S. automaker defended as part of its strategy to serve global customers, not sell them in the United States.

Oil business seen in strong position as Trump tackles tax reform

WASHINGTON (Reuters) - Big Oil could be in a unique position to protect its interests against a Republican proposal to tax imports, given that President-elect Donald Trump's cabinet is studded with oil champions sensitive to the risk of higher gasoline prices.

U.S. manufacturing, construction sectors shine as year ended

WASHINGTON (Reuters) - U.S. factory activity accelerated to a two-year high in December amid a surge in new orders and rapidly rising raw material prices, indicating that some of the drag on manufacturing from prolonged dollar strength and a slump in oil prices was fading.

Twitter's China boss Kathy Chen quits after eight months

NEW YORK/BEIJING (Reuters) - Twitter Inc executive Kathy Chen, brought in to run Greater China just over eight months ago, has quit, according to a tweet sent by her over the weekend.

EU regulators delay ChemChina/Syngenta merger decision to April 12

BRUSSELS (Reuters) - European Union antitrust regulators have extended the deadline for a decision on ChemChina's proposed buy of Swiss pesticides and seeds group Syngenta by 10 working days to April 12.

Icahn sweetens offer for Federal-Mogul for third time

(Reuters) - Billionaire Carl Icahn's investment firm, Icahn Enterprises LP , sweetened its offer for a third time to buy shares of Federal-Mogul Holdings Corp it does not already own.

"The World Has Materially Changed": Why Morgan Stanley Began To Fade The Trump Rally

Morgan Stanley's Adam Parker has undergone an epistemological catharsis of sorts in the past year: having called 2013-2015 largely accurately, 2016 threw him for a loop, when he entered the year bullish, only to turn bearish, and then to flip again (along with most other sellsiders) shortly after the Trump victory. Then, going into year end, Parker remained steadfastly optimistic, however much of that appears to have now changed, because, as he admits in his latest research outlook issued early this morning, he has turned decidedly more sour on the market (although he still expects the S&P to close the year at 2,300, same as Goldman), as his "view of the world has materially changed in the last couple of months" following the furious market rally, which has little optimistic upside left.

To wit: "What increasingly optimistic news are we going to start embedding in our earnings outlooks post-inauguration that hasn't already been contemplated? A number of stocks are up a lot for which we don't expect much incrementally positive news for at least the next couple of earnings seasons. So to us, it is WHEN, not IF we should fade this recent reflation trade."

And speaking of the WHEN to fade the reflation trade, Parker provides a tenative answer: "Part of us thinks we should just sell the inauguration. After all, what incrementally positive and exciting outcomes could be produced in the first few weeks after that? We are worried that there is an arrogance in telling people that they should be worried, but to stay bullish for now. We are getting more cautious and are trying to be prudent as the market has materially appreciated."

Finally, for those worried that the selling may begin sooner (or later), the note concludes by laying out the list of red flags the Morgan Stanley strategist is monitoring for an indication that the "optimistic" upside case is about to be undone.

Below are selected excerpts ...

Mexico Responds To Ford's Decision To Scrap Its New Plant

Mexico "regrets" Ford's decision to scrap the plan to build a plant in the central Mexican state of San Luis Potosi, the Economy Ministry said on Tuesday, adding that it has made sure Ford will reimburse any costs and expenses from the state government to facilitate the now defunct investment.

In a surprising statement on Tuesday at 11am ET, in an act of goodwill toward the president-elect, the second largest U.S. automaker said it will scrap the $1.6 billion factory in Mexico and will invest $700 million at a Michigan factory, after President-elect Donald Trump had harshly criticized the Mexico investment plan.

The Mexican ministry said that jobs created in Mexico have contributed to maintaining other manufacturing jobs in the U.S. that would have disappeared to Asian competition.

Meanwhile, Mexico vowed to maintain its commitment to making Mexico a competitive nation to attract investment, and reiterated its commitment to modernizing NAFTA in a way that strengthens competitive capacity of North America.

It may find roadblocks in that regard if Trump follows through with his threat to build a "great, big wall" between the two nations.

OPEC Deal Non-Compliance Begins: Iraq Accuses Kurds Of Pumping More Than Permitted

Back on December 15, two weeks ahead of the day the OPEC production cut agreement was set to begin, according to which some 1.2 million barrels per day in oil production from OPEC member states would be removed, a report emerged that contrary to its mandated production cut of 210Kbpd, Iraq was actually preparing to boost its exports by 7%. As the WSJ first reported, instead of cutting its crude production by 4% as it "promised" it would do in the Vienna November 30 meeting, Iraq instead planned to increase crude-oil exports in January, according to government records, immediately raising questions about its commitment to the OPEC's landmark production agreement. Iraq's national oil company, the State Organization for Marketing of Oil, or SOMO, had plans as of December 8, nine days after agreeing to cut production, to instead increase deliveries of its Basra oil grades by about 7% compared with October levels, according to a detailed oil-shipment program viewed by The Wall Street Journal. Those oil shipments represent about 85% of Iraq's exports.

And while that story quietly disappeared, and was promptly replaced with the more optimistic narrative of OPEC production cut compliance by Kuwait, which as noted earlier today reportedly cut output by 130,000 barrels a day to about 2.75 million a day, while Oman was said to cut 45,000 barrels a day from 1.01 million, it appears that the Iraq overproduction "issue" isn't going away; it does, however, have an interesting narrative to go with it.

As Reuters reports, while Iraq's Prime Mini ...

Trump Tells DHS To Prepare For Border Wall Construction

A memo from the Department of Homeland Security, which was recently reviewed by Reuters, suggest that the Trump administration plans to hit the ground running on the construction of that U.S.-Mexico border wall when they move into the White House later this month. The memo apparently summarized a meeting held between DHS officials and Trump's transition team on December 5th in which requests were made for an assessment of "all assets available for border wall and barrier construction."

In a wide-ranging request for documents and analysis, President-elect Donald Trump's transition team asked the Department of Homeland Security last month to assess all assets available for border wall and barrier construction.

The requests were made in a Dec. 5 meeting between Trump's transition team and Department of Homeland Security officials, according to an internal agency memo reviewed by Reuters. The document offers a glimpse into the president-elect's strategy for securing the U.S. borders and reversing polices put in place by the Obama administration.

The Trump transition team also allegedly took aim at Obama's executive actions, requesting "copies of every executive order and directive sent to immigration agents since Obama took office in 2009."

The transition team also asked for copies of every executive order and directive sent to immigration agents since Obama took office in 2009, according to the memo summarizing the meeting.

Trump has said he intends to undo Obama's executive actions on immigration, including a 2012 o ...

Trump Rally Darkens Skies for All-Weather Portfolio

All-weather and risk-parity portfolios designed to produce smooth returns have hit a rough patch since the U.S. election.

How Credit-Card Data Might Be Distorting Retail Stocks

Hedge funds and other big investors are relying on credit-card data to give them an edge, and that could be affecting trading in retailers.

Making Banks Safer Waits for Another Day

Global regulators have delayed an agreement over "Basel IV" bank-capital rules that would bring U.S. and European lenders closer together.

MarketWatch First Take: Ford's Mexico shift shows Trump's bully pulpit has some value

There's going to be a tendency in the media to minimize the impact of soon-to-be President Trump, in part because he so readily takes credit for positive developments. But it's hard to deny that Trump is reshaping the business climate, even if it's fair to debate how radically.

Outside the Box: Donald Trump would break with tradition if the U.S. avoids a recession in the next 4 years

Pimco's Joachim Fels see two potential paths to a recession sometime over the next four years.

The Moneyologist: My sister-in-law is unwilling or unable to settle her mother's $500,000 estate

Procrastination is related to anxiety rather than laziness.

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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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