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02May2017 Market Update: Wall Street Continues Three Day Streak Of Sideways Trading, WTI Crude Continues To Fall, Apple Pushes Nasdaq Higher

Written by Gary

US stocks were fractionally higher in early afternoon trading today (SPY +0.1%) with the Nasdaq Composite eking out another record high, helped by an Apple-led rise in technology stocks.


Here is the current market situation from CNN Money

North and South American markets are broadly higher today with shares in Brazil leading the region. The Bovespa is up 2.20% while Mexico's IPC is up 0.44% and U.S.'s S&P 500 is up 0.13%.

What Is Moving the Markets

Here are the headlines moving the markets.

Wall St. modestly higher as Apple leads tech stocks' gains

(Reuters) - U.S. stocks were modestly higher in early afternoon trading on Tuesday, with the Nasdaq Composite eking out another record high, helped by an Apple-led rise in technology stocks.

Despite record highs, fund managers globally remain underweight Apple

NEW YORK (Reuters) - Active stock fund managers around the world are holding the lowest percentage of Apple Inc shares in their portfolios when compared to the iPhone maker's overall weighting in indexes, even as the shares hit record highs, according to a research note by investment bank UBS late Monday.

Wall St. eyes Apple and Facebook to fuel new leg of tech rally

SAN FRANCISCO (Reuters) - Apple and Facebook may expand their already outsized share of U.S. technology revenue when they report their earnings this week, as investors look for evidence to justify this year's U.S. stock market rally.

U.S. lawmakers eye airline legislation, citing 'terrible' experiences

WASHINGTON (Reuters) - Angry U.S. lawmakers threatened United Airlines and other carriers on Tuesday with legislation to force improvements as they expressed disgust after a passenger was dragged off an overbooked flight last month.

Merck eyes key cancer drug growth as others lose patent protection

(Reuters) - Merck & Co Inc on Tuesday reported better-than-expected profit in the first quarter as surprisingly strong demand for animal health products, vaccines and its hepatitis C treatment offset nearly $700 million in lower sales from drugs that lost patent protection.

Exclusive: Cerberus, Sycamore Partners wrestle with Staples buyout

(Reuters) - Cerberus Capital Management LP and Sycamore Partners are the two private equity firms actively exploring an acquisition of Staples Inc , the U.S. office supplies retailer, people familiar with the matter said on Tuesday.

Prescription for growth at Pfizer? Analysts say deals

(Reuters) - Pfizer Inc posted basically flat first-quarter earnings, prompting suggestions that the largest U.S. drugmaker needs to do deals in order to improve its growth prospects.

Automakers' April U.S. sales drop; Wall St. fears boom is over

DETROIT (Reuters) - Major automakers on Tuesday posted declines in U.S. new vehicle sales for April in a fresh sign the long boom cycle that lifted the American auto industry to record sales last year is losing steam, sending carmaker stocks down.

GM writes down Venezuela operations after authorities seize plant

(Reuters) - General Motors Co said on Tuesday it would take a charge of up to $100 million after a judge ordered the seizure of its plant in Valencia last month, a move that prompted the halting of its operations in Venezuela.

Is This The Scariest Chart In The World Now?

The scariest chart in the world this week, indeed this month, comes from the US... and plots U.S. real GDP growth.

Yes, explains True Economics' Constantin Gurdgiev, the 0.7% print for Q1 2017 ranks 13th from the bottom for any positive growth quarter since 2Q 1947. And yes, the rate of growth is (a) preliminary (subject to revisions) and (b) seeming one-off (driven by fall-off in consumer demand, despite strong indicators on consumer confidence side). There are reason and heaps of arguments why this print should not be treated as huge concern and that things might improve in 2Q and on.

But... the really scary stuff is longer-term trend in U.S. growth. And that is illustrated in the chart below:

Look at the grey bars: these take periods of expansion in the U.S. economy and average rates of growth over these periods. Notice the pattern? Why, yes, the average expansion-consistent rates of growth have fallen, steadily, since 1975 through today. Worse, controlling for volatile growth (average rates) in pre-1975 period, an exponential trend for average expansion-consistent growth rates (the yellow line) is solidly trending down.

The latest period of economic expansion is underperforming even that abysmal trend. And 1Q 2017 is underperforming that worse than abysmal average.

Now, let me highlight that point: yellow line only considers periods of consistent growth (omitting official recessions, and one unofficial recession of 2001). So, no: the depth of the Great Recession has nothing to do with the yellow line dir ...

JPMorgan Lists Six "Red Flags" Why It Is Starting To Sell Stocks

Last week, Bank of America presented 4 reasons why it finally threw in the towel on its long-held bullish small-cap trade reco, among which valuations, growth and confidence, credit and volatility. Today, JPMorgan's equity strategist Mislav Matejka similarly called for a near-term top in the market, saying key positive catalysts for equities are over for now, and recommended investors use any further near-term strength as opportunity to cut exposure to asset class.

Specifically, the JPM equity team notes that while "the big picture supports for stocks remain in place" the banks warns that "the near-term risk-reward might be getting less exciting. Some of the positive catalysts we have been looking for, such as a robust earnings season and the easing in political tail risks, have delivered and are now behind us."

At the same time, JPM warns that the six red flags have emerged for future risk upside:



As demonstrated yesterday, the Citigroup's economic surprise index has entered negative territory. CESI has a good correlation with the S&P500 and points to 10%+ downside for stocks - see page 9. US loan growth is weaker. Eurozone M1, an important lead indicator, points to lower PMIs, as well. Additionally, China new project starts have collapsed.

Sentiment is getting complacent, with SX5E in overbought territory and VIX back to record lows. Cyclicals vs Defensives are now overbought, as are Banks.

Summer seasonals are negative. In the past 40 years, equities tended to post their best returns in April, but May onwards would see the worst returns.

Bond yields bounced recently, but are struggling to break out of their ytd range.

Commodity prices are weaker, specifically iron ore and Brent. Th ...

Are American Debt Slaves Getting In Trouble Again?

Authored by Wolf Richter via WolfStreet.com,

The economy depends on them, but they're cracking.

American consumers are holding $1 trillion in revolving credit, mostly in credit card debt. So how well is this segment of consumer debt holding up?

Synchrony Financial - GE's spin-off that issues credit cards for Walmart and Amazon - disclosed on Friday that, despite assurances to the contrary just three months ago, net charge-off would rise to at least 5% this year. Its shares plunged 16% and are down 27% year-to-date.

Credit-card specialist Capital One disclosed in its Q1 earnings report last week that provisions for credit losses rose to $2 billion, with net charge-offs jumping 28% year-over-year to $1.5 billion.

Synchrony, Capital One, and Discover - a gauge of how well over-indebted consumers are managing to hang on - have together increased their Q1 provisions for bad loans by 36% year-over-year. So this is happening.

Other worries about consumer debt in the US are piling up. The $1.4 trillion in student loans are already in crisis, though the government backs them, and they cannot be charged off in bankruptcy. Mortgage debt is still hanging in there, given the surge in home prices that make defaults unlikely. But of the $1.1 trillion in auto loans, subprime l ...

Infosys To Hire 10,000 American Workers After Trump Blasts "Rampant, Widespread H-1B Abuse"

Earlier this year a Trump draft executive order on foreign worker visas was leaked to the press and revealed the administration's intention to craft legislation prioritizing "the interests of American workers and — to the maximum degree possible — the jobs, wages, and well-being of those workers." While that specific executive order was never issued, rule changes quietly implemented by the Department of Homeland Security in April effectively accomplished the same goal and took direct aim at tech companies and their excessive use of the H-1B program. Per The Hill:

Without fanfare, the Department of Homeland Security's U.S. Citizenship and Immigration Services on Friday issued a policy memo that would make it harder for companies to fill computer programmer positions with workers on H-1B visas. The memo stated that being a computer programmer is no longer sufficient to qualify as a "specialty occupation."

The agency followed up Monday by announcing that it would begin to crack down on H-1B visa abuses by conducting targeted site visits to companies with a high proportion of high-skilled visas in their workforce.

"The H-1B visa program should help U.S. companies recruit highly-skilled foreign nationals when there is a shortage of qualified workers in the country," the agency said. "Yet, too many American workers who are as qualified, willing, and deserving to work in these fields have been ignored or unfairly disadvantaged."

In a separate release on Monday, the Department of Justice said that it "will not tolerate employers misusing the H-1B visa process to discriminate against U.S. workers."

Now, Infosy ...

Investment Banking's Winners and Losers---In Europe, Mostly Losers

The signs were that a great investment banking rebound was coming. But with the big five U.S. banks and four of Europe's largest having reported, the revenue recovery doesn't look as strong as investors might have hoped.

The Hot-Air Model of Chinese Asset Markets

Chinese regulators are cracking down on stock and bond speculation. Real-estate markets are, however, suddenly doing just fine. This is unlikely to be a coincidence.

Investors in DryShips Are Not Completely Crazy

There is a method to shareholders' madness in buying the sinking shares of George Economou's DryShips.

March 2017 Leading Index Review: Trends Remain Mixed

Written by Steven Hansen

This post is a review of all major leading indicators follows - and their trends remain mixed.

The Wall Street Journal: Jared Kushner disclosure form left out stake in tech startup Cadre: Wall Street Journal

Trump son-in-law's fellow investors in the tech startup are believed to include George Soros and Peter Thiel.

The Technical Indicator: Nasdaq extends spike to uncharted territory, S&P 500 breakout attempt underway

Technically speaking, the major U.S. benchmarks have diverged slightly against a still firmly bullish bigger-picture backdrop.

Deep Dive: The 10 best, 10 worst U.S. stocks of 2017

The S&P 500 Index is up 7%, helped by tech, consumer and health-care companies.

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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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