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10Feb2017 Market Close: Wall Streets New Highs May Be All Smoke And Mirrors Say Some Analysts, A Spike In Oil Prices Supported Energy Shares, Investors Remained Upbeat

Written by Gary

The three major indexes scored new historical highs today, but backed off during late afternoon trading (SPY +0.4%). US consumer sentiment eased off a 13-year high in early February, but it remained strong enough to suggest that consumers will continue to drive the economy.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Top Federal Reserve official resigns as bank deregulation looms

WASHINGTON (Reuters) - The top Federal Reserve official charged with bank regulation said on Friday that he would resign, giving President Donald Trump the ability to reshape the powerful board governing the U.S. financial system just as he begins revamping and undoing reforms put in place after the 2007-09 financial crisis.

Wall Street rises to records, spurred by Trump economy hopes

(Reuters) - Wall Street's main stock indexes set fresh record highs for a second day as a spike in oil prices supported energy shares and investors renewed their optimism about President Donald Trump's economic policy agenda.

Senators question Goldman on its role in Trump's banking policy

(Reuters) - Two U.S. senators sought details from Goldman Sachs Group Inc's chief executive on the extent to which the bank's employees were involved in drafting of the recent executive orders on banking and fiduciary regulations.

Ford to invest $1 billion in autonomous vehicle tech firm Argo AI

SAN FRANCISCO (Reuters) - Ford Motor Co plans to invest $1 billion over the next five years in tech startup Argo AI to help the Detroit automaker reach its goal of producing a self-driving vehicle for commercial ride sharing fleets by 2021, the companies announced on Friday.

Reckitt finalizes deal to buy Mead Johnson for $16.6 billion

LONDON (Reuters) - Reckitt Benckiser has agreed to buy U.S. baby formula maker Mead Johnson Nutrition for $16.6 billion, giving the British consumer goods company a new product line and expanding its presence in developing markets.

UAW says it will greet Tesla workers with 'open arms'

(Reuters) - The United Automobile Workers union on Friday said it had been approached by workers at Tesla Inc's Fremont, California assembly plant, and it rejected Tesla Chief Executive Elon Musk's charge that a worker who publicly criticized the company was on the UAW payroll.

Facebook to provide ad data for independent audit

(Reuters) - Facebook Inc said it would provide information about ads displayed on its platform for an audit, months after the social network admitted to overstating key ad metrics.

U.S. consumer sentiment falls as election euphoria fizzles

WASHINGTON (Reuters) - U.S. consumer sentiment eased off a 13-year high in early February likely as some of the jubilation over Donald Trump's election victory ebbed, but it remained strong enough to suggest that consumers will continue to drive the economy.

Aon to sell benefits outsourcing to Blackstone for up to $4.8 billion

(Reuters) - Insurance broker Aon Plc said on Friday it agreed to sell its employee benefits outsourcing business to private equity firm Blackstone Group LP for up to $4.8 billion.

Dead Market Ramping - Stocks Hit Record Highs As Activity Hits Record Low

Herd mentality..." yes, we are all individuals... he's not the messiah, he's a very naughty boy"

Dead Market Walking

Lowest 90-day realized vol for the S&P 500 in 10 years...

85 days in a row without a 1% drop... 44 days without a 1% close to close gain or loss... 39 days in a row without a 1% intraday swing...

But The Biggest Short Squeeze since the election...

Has sent stocks to record highs... Trannies were best on the week, but the massve squeeze lifted everything...

On an ever-decreasing bed of lower volum ...

Annotated History Of The Democratic Party

Presented with no comment...


RBC Warns "It's The Melt-Up That Hurts"

After an outstanding start to the year for Equity hedge funds, this most recent gap move higher in stocks (while rates and FX remain firmly 'in range') is pretty-much exactly what RBC's Charlie McElligott warned is a "bad scenario" for equities funds.

Risk-assets to fresh highs alongside a "reflation impulse" re-rack (S&P eminis through their 1 year trendline resistance as we speak, while the early scan (revisions / updates coming later of course) of new positioning data shows a remarkable jump in TY (UST 10Y fut) open interest +70k (!) as shorts re-engage SIZE, h/t RBC Futures).


First-and-foremost, the Trump drive-by statement on a "phenomenal" tax plan to purportedly be released in the next "two or three weeks" satiates the market's primary desire for clarity and positive-messaging on the tax cuts and how they are going to be funded to keep them 'rev neutral' (BAT? VAT? Cash flow taxation? No interest deduction? A replacement of "amortization of cap goods" by instead a deduction of "capital purchases"? Have House and Senate somehow shockingly 'aligned' after being so 'apart' on this topic?) As a reminder, the tax cuts are by far-and-wide the largest driver of the S&P target upgrades that daisy-chained Street-wide in December.

More market rewarding "Good (focused) Trump," as the President has agreed to honor the "One China" policy in a phone call to with China's Xi, and squelching fears of "that" left-tail. And in general, a President Trump that is refocused on "momentum" after the messy immigration battle: TRADE (Xi patch-up and Abe ...

Recession Alert: Treasury Receipts Turn Negative For The First Time Since The Financial Crisis

On the surface, today's monthly budget statement showed good news: in January the US Treasury brought in total receipts of $344 billion, versus outlays of only $293 billion, resulting in a surplus of $51 billion, substantially greater than the $40 billion expected (and well above last year's $28 billion deficit), a surplus which however was largely due to a law requiring the IRS to delay sending out tax refund checks to household claiming certain tax credits. For the fiscal year through Jan.31, the total US budget deficit was $157 billion, and set to keep rising this year and for the foreseeable future.

However, a more concerning datapoint emerges when looking at the annual change in the rolling 12 month total. It is here that we find that for the LTM period ended Jan 31, total government receipts were $3.27 trillion. This number was 0.3% lower than the $3.28 trillion reported one year ago.

Why is this important? Because as the chart below shows, every time since at least 1970 when government receipts have turned negative on an annual basis, the US was on the cusp of, or already in, a recession. Indicatively, the last time government receipts turned negative was in July of 2008.

One potential mitigating factor this time is that much of th ...

'Phenomenal' Waiting Around as Markets Search for Direction

Trump's vague promise of a "phenomenal" tax cut illustrates the frustrations for popular trades. Investors could need more patience yet.

Reckitt-Mead Deal Needs Enriched Formula in China

Possible cost savings in the proposed Reckitt Benckiser-Mead Johnson deal offer little reassurance to investors.

How Intel Is Playing Its Chips

The chip maker can afford to spend big to stay on top.

Thirlwall's Law in Historical Context

by Philip Pilkington

Fixing the Economists Article of the Week

There has been some reticence on the blogs to discuss Thirlwall's Law and I myself have also been somewhat reluctant to deal with it in any great detail (although I did hint at some problems with it in this post). I think it might be worth discussing it in more depth, however, because I think that the model it is based on is actually quite interesting - albeit misleading. I will rely for this exposition on a very succinct account of the model in a recent paper by Thirlwall entitled Kaldor's 1970 Regional Growth Model Revisited.


Trump Today: Trump Today: Additional security measures coming next week, president says

President Donald Trump says more security measures are coming next week; presses Japanese Prime Minister Shinzo Abe on 'free, fair and reciprocal' trade; and takes off for Florida with Abe.

Capitol Report: Mar-a-Lago visit a 'gift' to Abe from Trump, White House says

The White House is describing President Donald Trump's plan to host Japanese Prime Minister Shinzo Abe at his golf resort in Florida as a "gift," a day ahead of the meeting between the two leaders.

The Ratings Game: Twitter free fall continues as analysts see little hope

Twitter Inc.'s fourth-quarter earnings showed a company that was still weighed down by user growth issues, and revenue problems. And analysts do not see those problems ending soon.

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