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18Jan2017 Market Close: US Stock Markets Closed Mostly Higher, Crude Prices Slipping Further, US Dollar Trending Higher, Yellen Says US Economy Improving

Written by Gary

Wall Street closed mostly down (SPY +0.5% 7 DJI -0.1%) and the S&P 500 ended a choppy session slightly higher. Janet Yellen said the American economy is gaining momentum, giving central bankers leave to start raising interest rates.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Netflix adds more subscribers than expected

(Reuters) - Netflix Inc's international and U.S. subscriber additions sped past analysts' estimates as the video streaming service released shows including the award-winning British drama "The Crown" and a revival of "Gilmore Girls".

S&P 500 edges up as Yellen boosts financials

NEW YORK (Reuters) - The S&P 500 ended a choppy session slightly higher on Wednesday, helped by gains in financials following comments by Federal Reserve Chair Janet Yellen that it "makes sense" to gradually lift interest rates.

Credit Suisse finalizes $5.3 billion mortgage deal with U.S.

NEW YORK (Reuters) - Credit Suisse has formally agreed to pay $5.3 billion to settle with U.S. authorities over claims it misled investors in residential mortgage-backed securities it sold in the run-up to the 2008 financial crisis.

Fed's Yellen says 'makes sense' to gradually raise interest rates

SAN FRANCISCO (Reuters) - With the U.S. economy close to full employment and inflation headed toward the Federal Reserve's 2 percent goal, it "makes sense" for the U.S. central bank to gradually lift interest rates, Fed Chair Janet Yellen said on Wednesday.

South Korean court dismisses arrest warrant for Samsung chief

SEOUL (Reuters) - A South Korean court on Thursday dismissed a warrant to arrest the head of the Samsung Group [SAGR.UL], the country's largest conglomerate, a court spokesman said, amid a graft scandal that led to the impeachment of President Park Geun-hye.

JPMorgan agrees to $55 million settle of mortgage discrimination complaint: source

NEW YORK (Reuters) - JPMorgan Chase & Co has agreed to pay $55 million to settle a U.S. Justice Department lawsuit accusing it of discriminating against minority borrowers by allowing mortgage brokers to charge them more for home loans, a person familiar with the matter said on Wednesday.

Goldman Sachs profit soars on bond-trading surge

(Reuters) - Goldman Sachs Group Inc reported a nearly fourfold rise in quarterly profit on Wednesday thanks to a surge in bond trading revenue, with its finance chief offering a sunny outlook for business in 2017.

Jump in manufacturing, tight labor markets show U.S. economic health: Fed

WASHINGTON (Reuters) - A pickup in manufacturing, "widespread" reports of labor shortages and improving business investment set the stage for the Federal Reserve's December rate hike amid signs of steady economic growth across the country, the Fed reported Wednesday in its latest Beige Book compendium of economic conditions.

Citigroup CEO asks for investor patience on financial targets

(Reuters) - Citigroup Inc Chief Executive Michael Corbat asked investors for more patience on Wednesday in explaining how the bank failed to meet four-year-old performance targets, even as vibrant markets drove profits higher in the fourth quarter.

Alibaba'a Jack Ma Drops a Redpill in Davos: The U.S. Wasted $14 Trillion on Wars Over the Past 30 Years

And there it is, the unvarnished, raw, truth about how everything went wrong for middle class America.

Since the Vietnam war, more than 45 years ago, the US has embarked on a neocon strategy of war in an effort to build a global empire. The result of that strategy has left American infrastructure second rate, its school system in shambles, and its healthcare system a complete and utter joke.

Just imagine what America could've done with $14t of investable dollars, instead of waging wars.

Aside from the wars, America spends more than 50% of its discretionary budget on the military, per annum, 16% of its overall budget.


That's the main issue, the sordid topic that is rarely discussed in American politics, for fears of crossing the military-industrial complex.

Jack Ma from Alibaba doesn't share those same fears, being a Chinese national worth $27b of zero f*cks

In a very rare glimpse into what the Chinese really think about American imperialism and how it shaped the global economy, all the better for China might I add, Jack Ma spoke candidly today in an interview with CNBC's Andrew Ross Sorkin.

"It's not that other countries steal jobs from you guys," Ma said. "It's your strategy. Distribute the money and things in a proper way."

He ...

RBC On The Treasury Standoff: "Someone Is Going To Get Hurt Badly"

Following up on his note from yesterday in which he discussed the unwind of the Trumpflation trade and the beginning of the "pain trade", and having received feedback from clients following yesterday's sudden reversal in the US Dollar (which is fading fast following the latest hawkish comments from Janet Yellen), RBC's Charlie McElligott writes that the general tone is "downplaying fear of a larger VaR-episode (see: last Jan / Feb in the market neutral community via an excruciating factor rotation) developing at this point beyond the "now regularly scheduled" January mean-reversion, largely due to the remarkably-tight range now built-into US rates (as they ping between 2.30 and 2.40 for 10s and 2.90 to 3.00 for 30s).

That said, he notes that government bond shorts are staying firm as "leveraged funds are impressively adding to shorts last week despite the rally", while 'real money' has continued to add duration, forcing a price stalemate. His conclusion "there is no clearer example of this positioning standoff than by looking at the CFTC 5Y UST futures positioning data-- somebody is going to get hurt badly"

Additionally, below we present some additional commentary on other asset classes from the head of RBC's cross-asset strategy.

* * *

As I've been stating over the past few weeks, there are multiple fronts with regards to answering the "what inning are we" question and the 'reflation trade.' Per expectations, we see the 'slow-to-turn super tanker' real money commu ...

Extrapolate At Your Own Risk

Submitted by 720Global's Michael Lebowitz via,

As we dig through S&P 500 price forecasts for the year 2017, we discover that a majority of "Wall Street's top strategists", are calling for a year-end S&P 500 price in the 2,300-2,450 range. None of the forecasters expect a down year, but that's an article for another day. Not surprisingly, a year-end index price in the aforementioned forecasted range would put growth in line with that experienced since 2012. While the strategists will claim they have extensive multi-factor models that help them arrive at their estimate, it is quite likely many of them rely on extrapolating prior price performance into the future based on the dangerous assumption that the future will be like the past.

Such a forecasting strategy may seem logical, and has worked well for the last four years, but it fails to acknowledge that earnings growth, which have repeatedly been grossly over-estimated, have been relatively flat over the same period. Since 2012, the S&P 500 has risen almost 70% while earnings are up a mere 2%. The graph below plots the S&P 500, earnings per share and their respective trend lines.

Data Courtesy: Bloomberg and Standard & Poor's

When price increases are not accompanied by earnings increases, it indicates that multiple expansion has occurred. In other words, the ratio of price-to-earnings (P/E) is expanding almost entirely because of its numerator- price increases.

Janet Yellen Explains "The Goals Of Monetary Policy"... Seriously - Live Feed

Less than two days before Donald Trump is inaugurated as the 45th president of the United States, Fed chair Janet Yellen takes to the stage at the Commonwealth Club of San Francisco to explain (after all these years), what "the goals of monetary policy are... and how we pursue them." We can't wait to hear how increasing asset prices to untenable levels, depriving savers of income, and driving the largest wedge between rich and poor since the great depression have been part of the solution...

Headlins from her prepared remarks include:









Live Feed (Yellen due to speak at 1500ET)...

Full speech here:

Good afternoon. It is a pleasure to join all of you at the Commonwealth Club for lunch today, not the least because the club and the Federal Reserve have a few things in common. Both organizations, as it happens, have a board of governors and a chair. And both the club's and the Fed&# ...

IBM: Paying Now for Work in Progress

IBM's stock has risen sharply in the past year, raising the stakes for a continuing transition.

Citigroup Is the Last of the Cheap Banks

Citigroup is the last major bank trading at an ultracheap valuation.

Shale Rebound Will Cramp OPEC's Style

U.S. shale oil production is rising too quickly for OPEC's and Russia's comfort.

January 2017 Beige Book: Reading Between The Lines - Little Change in the Rate of Growth

Written by Steven Hansen

The consolidated economic report from the 12 Federal Reserve Districts (Beige Book) stated "the economy continued to expand at a modest pace across most regions from late November through the end of the year". The previous report stated the economy expanded at "that the economy continued to expand across most regions from early October through mid-November".

HHS Secretary nominee Tom Price rebuts accusations of improper stock buys

Shares of a medical device maker and a small Australian biotech were a key focus of a Wednesday hearing.

Outside the Box: Davos elite promise global solutions, but they're part of the problem

The annual Davos conference is a gathering of the rich, powerful, and disconnected, writes Satyajit Das.

The restaurant recession turned even more damaging in December

Restaurants had their weakest same-store sales in more than five years, according to industry tracker TDn2K.

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