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28Apr2017 Market Update: Wall Street Large Caps In The Red, Nasdaq Up Two Percent, Investors Uneasy With Lack Of Consumer Spending

Written by Gary

US stocks were fractionally lower in afternoon trading (SPY -0.2%), after data showed the economy grew at its weakest pace in three years in the first quarter. Some analysts say the bottom is in for crude while the US dollar remains in a weakened state.


Here is the current market situation from CNN Money

North and South American markets are mixed. The Bovespa is higher by 0.90%, while the IPC is leading the S&P 500 lower. They are down 0.54% and 0.17% respectively.

Traders Corner - Health of the Market

Index Description Current Value
Investors.com Members Sentiment: % Bullish (the balance is Bearish) 72%
CNN's Fear & Greed Index Above 50 = greed, below 50 = fear 51%
Investors Intelligence sets the breath Above 50 bullish 66%
StockChart.com Overbought / Oversold Index ($NYMO) anything below -30 / -40 is a concern of going deeper. Oversold conditions on the NYSE McClellan Oscillator usually bounce back at anything over -50 and reverse after reaching +40 oversold. +27.06
StockChart.com NYSE % of stocks above 200 DMA Index ($OEXA200R) $NYA200R chart below is the percentage of stocks above the 200 DMA and is always a good statistic to follow. It can depict a trend of declining equities which is always troubling, especially when it drops below 60% - 55%. Following a major market correction, the conditions for safe re-entry are when:
a) Daily $OEXA200R rises above 65%
Secondary Bullish Indicators:
a) RSI is POSITIVE (above 50)
b) Slow STO is POSITIVE (black line above red line)
c) MACD is POSITIVE (black line above red line)
83%
StockChart.com NYSE Bullish Percent Index ($BPNYA) Next stop down is ~57, then ~44, below that is where we will most likely see the markets crash. 68%
StockChart.com S&P 500 Bullish Percent Index ($BPSPX) In support zone and rising. ~62, ~57, ~45 at which the markets are in a full-blown correction. 74%
StockChart.com 10 Year Treasury Note Yield Index ($TNX) ten year note index value 22.98
StockChart.com Consumer Discretionary ETF (XLY) As long as the consumer discretionary holds above [66.88], all things being equal, it is a good sign for stocks and the U.S. economy 90.10
StockChart.com NYSE Composite (Liquidity) Index ($NYA) Markets move inverse to institutional selling and this NYA Index is followed by Institutional Investors 11,541

What Is Moving the Markets

Here are the headlines moving the markets.

Wall Street slightly lower as weak GDP data weighs

(Reuters) - U.S. stocks were slightly lower in early afternoon trading on Friday after data showed the economy grew at its weakest pace in three years in the first quarter.

U.S. first-quarter growth weakest in three years as consumer spending falters

WASHINGTON (Reuters) - The U.S. economy grew at its weakest pace in three years in the first quarter as consumer spending almost stalled, but a surge in business investment and wage growth suggested activity would regain momentum as the year progresses.

Congress passes short-term bill to avert government shutdown

WASHINGTON (Reuters) - The U.S. Congress on Friday passed stopgap legislation to avert a government shutdown at midnight and give lawmakers another week to reach a deal on federal spending through the end of the fiscal year, with contentious issues remaining to be resolved.

U.S. appeals court blocks Anthem bid to merge with rival Cigna

WASHINGTON (Reuters) - A U.S. appeals court on Friday blocked health insurer Anthem Inc's bid to merge with Cigna , upholding a lower court's decision that the $54 billion deal should not be allowed because it would lead to higher prices for healthcare.

BlackRock's Fink a 'big believer' in Wells Fargo CEO

CHICAGO (Reuters) - BlackRock Inc Chief Executive Officer Larry Fink said on Friday he is a "big believer" in Wells Fargo & Co Chief Executive Tim Sloan and that the scandal-hit bank is now on a good path.

Surging Chevron, Exxon profits signal oil industry turnaround

HOUSTON (Reuters) - Rising crude prices helped Chevron Corp and Exxon Mobil Corp easily beat analysts' quarterly profit expectations on Friday, setting an upbeat tone as the two companies press ahead with shale oil expansions.

Merkel hopes for revival of frozen free trade talks with U.S.: interview

BERLIN (Reuters) - German Chancellor Angela Merkel said she was hopeful frozen negotiations on a free trade agreement between the European Union and the United States would be revived one day, in an interview to be published on Saturday.

Rising U.S. truck, crossover sales drive GM to record profit

DETROIT (Reuters) - General Motors Co on Friday reported a record quarterly

Foxconn plans U.S. investment; plans not final: Chairman Gou

WASHINGTON (Reuters) - Foxconn, the world's largest contract electronic manufacturer and a major Apple Inc supplier, is planning an investment in the United States but has not finalized its plans, Chairman Terry Gou said as he exited the White House on Friday.

Biggest Inflows Into European Stocks Since 2015, Just As The Economic Pullback Begins

Forget the "great rotation" out of bonds into stocks: 6 months into the so-called reflation trade, which so many strategists predicted would unleash a new era of euphoric stock buying driven by bond sales, it just isn't happening; in fact bonds have seen fund inflows on 17 of the last 18 weeks. Instead, two other "great rotations" have emerged: one out of "active management" into passive, or hedge funds to ETFs, while the other - more recent one - is out of various asset classes and into Europe. It was this last rotation that was on display in the past week, when Europe saw the biggest inflows - approximately $2.4 billion - since December 2015, and the 5th consecutive week of inflows in a row.

This is likely just the beginning: as DB observes overnight, "There is a wall of money just waiting to come into Europe", as fund flows into Europe lagged other developed markets in 2016.

There were other notable observations in the latest weekly EPFR fund flow report. In addition to the surge in European inflows, a total of $21 billion was allocated to equities, the most since the US election on hopes Trump's "tremendous" tax proposal could boost risk assets; instead it was a dud. The US alone saw $13.8bn in inflows, the largest inflows in 19 weeks.

Bubble Alert: Stocks Are Trading Based on Accounting Gimmicks and Fraud, Not Growth

Time to bust yet another hole in the "stocks are cheap" argument.

As we've already noted earlier this week, based on the only valuation metric that can't be massaged, stocks are more expensive than they were in 2007 and on their way to tying the all-time high established in 1999.

Source: The King Report

Of course, few people use P/S to value stocks. Most people use Price to Earnings or Earnings Per Share (EPS), since this is meant to represent how expensive stocks are relative to the money a stockowner gains by "owning them."

On that note, according to the "official data" the S&P 500 is sporting a P/E ratio of 25. This is supposedly "cheap" since it's below the P/E ratios established in the past.

Unfortunately, this too has been shown to be a load of nonsense. As Lance Roberts has revealed, only 13% of today's earnings per share results stem from actual "growth" via revenues. The rest are based on accounting gimmicks like buybacks, write offs and the like.

Put another way, 87% of earnings growth since the GREAT CRISIS has been the result of accounting gimmicks.

This is a 1 in 100 year type event. The fact that stocks have rallied to new all-time-highs based on this is like someone winning a Olympic Gold medal while hopping themselves up on every steroid imaginable.

The fall-out will be just as intense.

The below chart ...

Why The Crude Rally Has Fizzled - Part 3 (Of 3)

Authored by James Bambino via Platts blog,

This is the third and final segment of a three-part look at why oil prices have failed to rally despite OPEC's best efforts at managing supply cuts. Not only have prices failed to rally, both NYMEX WTI and ICE Brent have fallen around 9% over the past three weeks. In case you missed them, be sure to read part 1 and part 2.

Refiners do what is in their best interest, too.

Bank of America Merrill Lynch analysts recently said that refiners the world over need to weigh capitalizing on current strong margins — and risk dumping products into an already glutted market — or forgo profits now in the hopes of rescuing global product prices.

"Refiners need to be careful not to repeat last year's mistake and raise production in response to high margins only to add to already high inventories," the analysts said. "In a way, they face a big dilemma: be penny wise now and possibly look pound foolish later, essentially run harder now and suffer in six months, or run softer now and forgo profits."

The recent strength in refining margins across much of the world suggests refiners, like many of the world's oil producers, will continue to do what is in their best interest: use cheap crude to make refined products for profit.

Government Shutdown Averted For 7 Days: Senate Passes Stopgap Spending Bill

One hour after the House of Representative passed the a stopgap spending bill in a 382-30 vote, moments ago the US Senate likewise voted the measure through; the bill which gives the government a week before this specatcle has to be repeated again unless a full spending bill is enacted, now goes to Trump for signing later today.

The Senate's low-drama vote came after Senate Minority Leader Chuck Schumer (D-N.Y.) blocked a deal on passing the stopgap measure over concerns about the remaining hurdles in the larger deal.

But Schumer signaled on Friday morning that Democrats were willing to back the one-week stopgap bill as they try to lock down an agreement.

"We're willing to extend things for a little bit more time in hopes that the same kind of progress can continue to be made," Schumer told reporters. Negotiators are still ironing out a final agreement even as lawmakers prepare to leave Washington until early next week.

Schumer noted Friday that negotiators stayed up past 1 a.m. making a "good deal of progress."

The measure will keep the government open through May 5 and give lawmakers more time to reach a larger agreement on an omnibus bill that would include funding for the rest of the fiscal year, which ends Sept. 30. "The legislation should pass today, and it will carry us through next week so that a bipartisan final agreement can be reached and so that members will have time to review the legislation before we take it up," Senate Majority Leader Mitch McConnell (R-Ky.) said from the Senate floor, cited by The Hill.

Looking ahead, Trump will need Democratic votes to clear the longer spending bill. The legislation will require 60 votes in the Senate, and the GOP has a 52-vote majority. And Republicans could need help in the House if conservative lawmakers balk. One of the biggest hurdles to a deal was resolved earlier this week when the Trump administration backed off its demands t ...

Europe's Surprising Inflation Could Catch Markets Off Guard

Europe isn't following the script many had for it this year. April's inflation numbers are a challenge to perceptions of the eurozone.

Economy Needs Consumers to Shop Again

First-quarter slowdowns have become such a regular feature of the U.S. economy that investors will be tempted to brush off this last one. They shouldn't.

Pressure Mounts on Barclays in More Ways Than One

UBS appears to grab more of U.S. investment banking recovery than its U.K. rival.

Capitol Report: Congress passes one-week funding bill to avert government shutdown

The House and Senate passed a bill Friday to keep the government operating for another week, lifting the threat of a shutdown after midnight and giving lawmakers more time to hammer out a longer-term spending agreement.

Fyre Festival disaster: This is what happens when you believe everything you read on Instagram

Thousands of wealthy millennials are stranded at the Fyre Festival in the Bahamas.

Earnings Outlook: Gilead earnings: Lowered expectations could help when company reports first-quarter results

Disappointing fourth-quarter sales spurred the company to issue a lower 2017 sales guidance.

Earnings Summary for Today

Earnings Calendar provided by Investing.com.

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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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