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02May2017 Market Close: Wall Street Completed Another Sideways Trading Session As Investors Contemplate Earnings Reports, WTI Crude Slips Further, Settling In The Mid 47 Handle

Written by Gary

US stock markets closed flat to fractionally higher today (SPY +0.04%), as gains for the tech and industrial sectors countered weakness in auto and energy stocks and investors digested a heavy day of earnings reports.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

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

WASHINGTON (Reuters) - U.S. lawmakers threatened United Airlines and other U.S. carriers on Tuesday with legislation aimed at improving customer service after a passenger was hauled down the aisle of an overbooked flight last month.

Tech, industrials buoy Wall Street ahead of Apple results

NEW YORK (Reuters) - Wall Street edged higher on Tuesday as gains for the tech and industrial sectors countered weakness in auto and energy stocks and investors digested a heavy day of earnings reports.

Tesla is most painful stock for short sellers in 2017

SAN FRANCISCO (Reuters) - Traders short selling Tesla's soaring stock have lost $3.7 billion this year, eclipsing the combined losses of traders shorting Apple , Amazon.com and Netflix .

Wall Street elite find it hard to bank on Trump's breakup talk

NEW YORK (Reuters) - At an annual gathering of the world's most powerful thinkers and trendsetters in Beverly Hills this week, business leaders and major investors said they have gotten used to dismissing most things that President Donald Trump says or tweets.

Exclusive: Akzo sees latest PPG bid inadequate, weighs options

(Reuters) - Dutch paint maker Akzo Nobel NV's supervisory board is scheduled to meet on Tuesday to discuss how to proceed after deeming PPG Industries Inc's latest $29 billion offer to be insufficient, people familiar with the matter said.

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.

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.

Union calls for investigations of McDonald's rent policies

LOS ANGELES (Reuters) - The Service Employees International Union, backer of a five-year campaign to improve pay and job conditions for fast-food workers, on Tuesday asked Illinois and California officials to investigate how McDonald's Corp calculates restaurant rents, which generate about one-fourth of its revenue.

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.

Big Institutionals Sold The Most Stocks Since Brexit As Retail Investors Can't Stop Buying

By now it is generally accepted that the primary source of fund inflows into stocks (aside from buybacks of course) are ETFs, the retail investor's new favorite passive investing vehicle.

On the other side, are outflows from active managers - mutual and hedge funds - such as Och Ziff which as presented earlier today, suffered its biggest YTD redemptions and drop in AUM in history.

The underlying dynamics here are simple: institutional investors, whether voluntarily or because they are forced to through redemptions, are selling risk exposure to retail investors, something JPM observed two months ago in "Institutions, Hedge Funds Are Using The Rally To Sell To Retail."

Overnight, Bank of America gave the latest confirmation that this dynamic is accelerating, when it reported that it had just observed the biggest institutional sales in nearly a year. Specifically, "last week, during which the S&P 500 rallied 1.5% amid optimism on tax reform that we think may signal the end of the "Trump put", BofAML clients were net sellers of US equities for the second week, in the amount of $2.9bn."

As BofA's Jill Hall adds, "

Trump, Putin Hold Phone Call, Discuss North Korea, Syria; Agree To Set Up Meeting

As the White House announced late on Monday, today shortly after noon. Russia's Vladimir Putin and U.S. President Donald Trump held a phone conversation in which they agreed to try to meet in July and work together to try to strengthen a shaky ceasefire in Syria, the Kremlin said in a statement.

"Vladimir Putin has called for restraint and decreasing of the level of tensions on the Korean peninsula" the statement said. "It has been agreed to work jointly on a diplomatic solution that will settle the crisis."

The Kremlin called the talks between Putin and Trump business-like and constructive, and said the two leaders had emphasized coordinating their actions to fight international terrorism, the traditional cop out when the real topic of discussion is something entirely different.

Putin and Trump decided to "activate the dialogue between the heads of the foreign ministries of both countries who will seek variants to secure the ceasefire regime, stabilize it and control it," the statement says. "The goal is to create the background that would help launch a real peace process in Syria. This means that Russia's foreign minister and the US secretary of state would inform their leaders about progress in this regard."

On North Korea, the Kremlin said Putin called for restraint and that the two leaders had agreed to work together to make diplomatic progress there too. The two presidents also spoke in favor of organizing a face-to-face meeting around the time of the G20 summit in Hamburg July 7-8.

Separately, in a read out from the "other side", the White House released a similar statement, which said that the two presidents agreed that "all parties must do all they can to end the violence" in Syria and that Trump and Putin also discussed working together against Islamic militants throughout the Middle East.

"The conversation was a very good one, and inclu ...

'Reflation' In Danger Due To Low Liquidity

Via Variant Perception blog,

Over the past few weeks we have expressed scepticism on the Trump reflation trade and we have argued that bank stocks should underperform.

We have shown previously that when you look at the 3 and 6 month change in Commercial & Industrial lending as well as the change in bank assets, these have ground to a standstill.

Normally such declines have corresponded with recessions. (We're not calling for a recession and rely on our models.) Worryingly, we are also seeing real M1 growth slow, and the 6 month change has now turned slightly negative. The six month change in real M2 is now the lowest since 2011.

The poorer liquidity backdrop for broad and narrow money will represent a headwind to economic growth, risk assets and specifically bank stocks, which we recommend as shorts...

US Deploys High Altitude Drone To Spy On North Korea

The US Air Force deployed an RQ-4 Global Hawk high-altitude surveillance drone at Yokota Air Base on Monday night, starting a five-month operation in Tokyo, Japan Times reports. The drone, the first of five to arrive in Japan, is tasked to survey ballistic missiles and nuclear facilities in North Korea, and is part of the 69th Reconnaissance Group Detachment 1. Global Hawks do not have offensive capabilities.

Its mission is to provide near real-time aerial imagery reconnaissance support to U.S. and partner nations, according to the base's website. Four more Global Hawks are slated to be deployed to the base, and a total of 110 staff members, including mechanics, are set to be stationed there in a related move.

According to Japan's Defense Ministry, the drone is capable of capturing aerial images and electronic data from an altitude of around 50,000 feet (15,240 meters) or more, higher than the altitude at which commercial aircraft typically fly. The drone will be controlled by remote from Yokota during takeoff and landing, and then from the U.S. mainland once it reaches a sufficient altitude.

In the past, Global Hawks have been deployed at the US Misawa Air Base in the northern prefecture of Aomori. But work to revamp the runway at Misawa led to the switch to Yokota, where the Command of US Forces in Japan is located. To boost its own defense capabilities, Japan's Defense Ministry decided to introduce three of them for the Self-Defense Forces, and will start deploying one at Misawa at the end of fiscal 2019.

"This rotational deployment of the Global Hawk is temporary but necessary to provide a base from which the platform can be reliably operated during the summer," the US Pacific Command

High Stakes in Big Pharma's Latest Cancer Race

Merck & Co.'s blockbuster cancer drug faces a big test next week.

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.

March 2017 CoreLogic Home Prices Year-over-Year Growth Rate Now 7.1%.

Written by Steven Hansen

CoreLogic's Home Price Index (HPI) shows that home prices in the USA are up 7.1 % year-over-year year-over-year (reported up 1.6 % month-over-month). Last month's 7.0 % year-over-year gain was revised downward to 6.3 %. CoreLogic HPI is used in the Federal Reserves' Flow of Funds to calculate the values of residential real estate.

Trump Today: Trump Today: President calls for 'good' government shutdown while declaring budget victory

President Donald Trump on Tuesday said the U.S. government might need a "good shutdown" in September, declared victory after Congress struck a budget deal and made plans to meet Russian leader Vladimir Putin in the summer.

Market Extra: The stock market and bonds are soaring, Wall Street's 'fear gauge' is falling—something's gotta give

Curious moves in assets have raised eyebrows on Wall Street.

Capitol Report: Invoking 'central planners' and 'foreclosure factories,' House panel debates Dodd-Frank replacement

House Republicans and Democrats hold diametrically opposite views of the Dodd-Frank banking legislation as the GOP starts efforts to gut it.

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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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