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06Feb2017 Market Close: US Stock Markets Turned Down, Crude Prices Slipped, US Dollar Falling Back To The 99 Level

Written by Gary

Wall Street closed down with SPY (-0.2%) leading the way dipping ahead of a heavy week of corporate results. The decline mostly led lower by the energy sector as oil prices dropped, while investors sought further clarity on President Donald Trump's economic policies.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

U.S. tech leads nearly 100 companies in legal brief against Trump travel ban

(Reuters) - Nearly 100 companies, including some of high-tech's biggest names, joined a legal brief opposing President Donald Trump's temporary travel ban, arguing that it would give companies incentives to move jobs outside the United States.

Wall Street dips as oil prices weigh on energy sector

NEW YORK (Reuters) - U.S. stocks fell on Monday, led lower by the energy sector as oil prices dropped, while investors awaited the next run of major earnings reports and sought further clarity on President Donald Trump's economic policies.

Stocks, euro dip amid political, economic uncertainty

NEW YORK (Reuters) - The euro fell to a one-week low against the dollar on Monday on uncertainty ahead of several impending European elections, while European and U.S. stock markets dipped ahead of a heavy week of corporate results.

Credit conditions for most business lending unchanged in fourth quarter : Fed

WASHINGTON (Reuters) - Loan officers at U.S. banks reported largely unchanged lending standards and slightly looser terms for business loans in the last three months of 2016, the Federal Reserve reported on Monday in a quarterly survey.

Hasbro's record holiday quarter lifts shares to all-time high

(Reuters) - Hasbro Inc , the No. 2 U.S. toymaker, reported record holiday-quarter revenue, helped by strong demand for Disney princess dolls and its board games, sending the company's shares up 17 percent to an all-time high.

Rebel creditors file emergency appeal against Peabody reorganization

CHICAGO (Reuters) - Opponents of Peabody Energy Corp's reorganization plan have filed an emergency appeal against a key piece of the coal producer's proposal they say violates U.S. bankruptcy law by prematurely requiring creditors to promise support it.

Pimco Total Return Fund posts January cash withdrawals of $1.6 billion

NEW YORK (Reuters) - Investors pulled $1.6 billion from the Pimco Total Return Fund in January, leaving assets under management of $75 billion, Morningstar data showed on Monday.

Despite risks, public pensions put faith in long-term returns

SAN FRANCISCO (Reuters) - U.S. public pension funds are cutting their expectations for investment returns over the next 30 years or more, but some do not expect to meet even the new targets over the coming decade.

ECB sees seeds of next crisis in Trump deregulation plan

FRANKFURT (Reuters) - The European Central Bank rejected U.S. accusations of currency manipulation on Monday and warned that deregulating the banking industry, now being openly discussed in Washington, could sow the seeds of the next financial crisis.

BofA Sees "Head And Shoulders" Everywhere It Looks

In his latest slidepack, BofA's chief technician Paul Ciana sees nothing but head & shoulder reversal patterns in virtually every currency pair and rate chart: i.e., the unwind of "Trump trade." As he writes in a just released note, "many US dollar and euro crosses, US rates, US 2s10s and US 10y TIPS have just formed or are developing a head and shoulders reversal pattern. The breadth of these patterns suggests the January correction of the 4Q16 trends will continue in 1Q17, or at least delay a continuation of stronger USD and higher rates."

This appears to be the chartist validation of the recently concluded Trumpflation trade, which is now being appreciated by technicians and other squiggle-drawers everywhere.

As Ciana further notes, FX crosses have broken more necklines, while US rates are still forming the right shoulders. These patterns are confirming bearish RSI divergences and TD Sequential signals.

First, looking at FX, BofA has spotted head and shoulders in USD and euro crosses. Bearish patterns have formed in US dollar indices such as the DXY and BBDXY. Crosses showing this technical reversal pattern include CCN+1M, USD/SGD, KWN+1M, EUR/RUB and EUR/NOK. Two crosses, EUR/USD and EUR/GBP, are still forming a right shoulder. Of note, Ciana says that unless the patterns are cancelled, he expects the DXY to slide to 97.86 and the EURUSD to rise as high as 1.108.

The same is applicable to rates, where right shoulders are still forming: lower rates technical patterns are developing, but they have yet to be confirmed by any neckline breaks. We see patterns starting to take shape on the daily chart of US 2s, 5s, 10s, 30s, US 2s10s and US 10y tips. Here, again, unless the patterns are cancelled, the 10Y and 30Y could drop as far as 2.03% and 2.65%, respectively.

Some of the more notable formations:

DXY breaks neckline and begins oversold bounce

Price ac ...

Yield Curve Inverts, Swap Spreads Spike Signal Panic As Debt-Ceiling Looms

US swap spreads (indicative of bank counterparty/liquidity risks) is surging once again, to its highest since June 2012 signaling a growing concern at the looming US debt ceiling deadline.

With about five weeks until the expiration of the U.S. debt-ceiling suspension pact, Bloomberg notes, swap spreads are suggesting traders are getting nervous that any hiccup in efforts to remove the burden could trigger a shortage on short-term government securities.

The difference between 2-year swap rates and Treasury yields is widening back to the 32.3 basis points level which was the most since June 2012. Societe Generale analysts led by Subadra Rajappa expect net bill issuance to drop by about $150 billion as Treasury shrinks its cash balance to $23 billion from $339 billion by the March 15 deadline.

And to make things even more clear, something odd is going on in the Treasury bill market..

Bloomberg notes that investors are willing to pay more for bills maturing in four weeks instead of five. That's because they don't want to be caught empty handed while the Treasury slows debt sales to push its cash balance lower as part of the 2015 pact to suspend the debt ceiling. The spread between the March 9 and March 16 bills may get a "a little more noticeable" as Treasury cuts issuance and provides a "clearer sense of how long bill supply is going to be lower than normal" going into the March 15 deadline,

7 Yrs to create Dodd-Frank, doubt repeal anytime soon. Bank rally will reverse but we'll be back to client pillaging

Bloomberg reports: Dodd-Frank's Tentacles Go Deep. They Won't Be Cut Fast or Easily. It took seven years to put these regulations in place. Is it rational to think they can be removed in less than 4? If not, then the financial's rally may be a tad bit premature and overdone.

There will be quite a bit fo time before financial institutions see relief from the repeal of Dodd Frank under Trump, Here's a quick rundown of the reasons why:

  • Whether by Democrat's machinations or Trump's performance, this administration does not have the appointees running the agencies that oversee financial rules.
  • New legislation have to be passed in order to ease the current legislation. That means all will have to get along and play nicely, and quickly. Two weeks into the presidency, the Democrats are playing sc ...

California Senate Leader Admits: "Half Of My Family" In Country Illegally With "False Social Security Cards"

In testimony provided before the California Senate's Public Safety Committee, Senate President Pro Tem Kevin De Leon (D-Los Angeles) decided to admit that "half of his family" is residing in the United States illegally and with the possession of falsified Social Security Cards and green cards. Lest you think we're exaggerating, here is the exact quote:

"...I can tell you half of my family would be eligible for deportation under [President Donald Trump's] executive order, because if they got a false Social Security card, if they got a false identification, if they got a false driver's license prior to us passing AB60, if they got a false green card, and anyone who has family members, you know, who are undocumented knows that almost entirely everybody has secured some sort of false identification. That's what you need to survive, to work. They are eligible for massive deportation."

The quote came from a hearing being held on SB54, a California Senate bill that was introduced by De Leon that would make the entire state of California a "Sanctuary State" (we discussed SB54 here: "California Considering Legislation To Become First Ever Sanctuary State"). Fast forward to the 1:27:00 mark for the relevant comments from De Leon:

Of course, in a follow-up interview with Larry Mantle of KPCC, De Leon was pressed but minimized the problems a ...

Time to Hop Off Disney's Thrill Ride

Volatility has picked up substantially for Walt Disney ever since it warned about trouble at ESPN.

More Cash-Back Rewards Coming for Bank Investors

Most banks will be able to significantly boost payouts to shareholders following this year's stress tests.

ComScore Can't Get Its Numbers Straight

ComScore's revelation that it will miss its Nasdaq filing deadline suggests the company's accounting problems run deeper than previously thought.

Meet the man who sold a multimillion-dollar company so he could help troubled teens

At-risk children make a more successful transition to adulthood if they have a mentor.

Earnings Outlook: Coca-Cola earnings: Here's what is concerning analysts

Coca-Cola is scheduled to report fourth-quarter results before the market opens on Thursday, with analysts expecting a seventh straight quarter of year-over-year declines in earnings and revenue.

Called to Account: Earnings releases are still a confusing mess, and it's investors who pay the price

Just two weeks into the fourth-quarter earnings season, and companies, including some big blue-chips, are producing some unusual and confusing releases that are certainly making life difficult for investors.

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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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