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04May2017 Market Close: The DOW Closes Down Six Points, Other Major Indexes Flat, But In The Green, WTI Crude Settles In The Mid 45's, US Dollar Slips To Mid 98's

Written by Gary

US stock markets closed flat, mostly in the green (SPY +0.06%) after the US House passed legislation repealing Obamacare. Crude prices continue to remain low, tumbling 5% and the US dollar threatens to fall further.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

U.S. labor market tightening; productivity drops in first quarter

WASHINGTON (Reuters) - New applications for U.S. jobless benefits fell sharply last week and the number of Americans on unemployment rolls hit a 17-year low, pointing to a tightening labor market that could allow the Federal Reserve to raise interest rates next month.

Wall Street stays flat after House clears health bill

(Reuters) - U.S. stock indexes were little changed on Thursday as a steep fall for the energy sector countered some solid earnings reports, with Wall Street remaining flat after the U.S. House of Representatives passed major healthcare legislation.

U.S. Senate passes bill to fund government through September

WASHINGTON (Reuters) - The U.S. Senate on Thursday gave final legislative approval to a $1.2 trillion spending bill to keep the government open through September, a measure President Donald Trump is expected to sign before Friday's deadline.

Dip in Tesla's customer deposits triggers worries over orders

(Reuters) - A 7 percent drop in Tesla Inc's customer deposits in its latest quarter raised concerns about future sales at the U.S. luxury electric-car maker.

Airlines 'self-inflicted' problems under glare of U.S. Senate panel

WASHINGTON (Reuters) - Chicago Aviation Commissioner Ginger Evans on Thursday apologized for the behavior of employees who forcibly removed a United Airlines passenger at a U.S. Senate hearing on the industry's customer service failures.

Viacom beats estimates but faces distribution headwinds

(Reuters) - Viacom Inc , the owner of MTV, Comedy Central and Nickelodeon, reported second-quarter profit that beat estimates on Thursday, but worry that it will lose revenue from a big cable distributor weighed on its stock.

Automakers betting on Trump infrastructure boost: Toyota North America CEO

Saline, Mich. - (Reuters) - Automakers could be betting on a potential boost in demand from a new federal infrastructure program to boost sagging sales and clear inventories of cars and trucks, the head of Toyota Motor Corp's North American operations said on Thursday.

Oil dives 5 percent; OPEC looks unlikely to deepen output cuts

NEW YORK (Reuters) - Oil prices tumbled about 5 percent on Thursday, breaking below $50 a barrel to the lowest since late November on signs that OPEC and other producing countries would not take more drastic steps to reduce the world's stubbornly persistent glut of crude.

Wall Street earnings strength enliven investors, industrials a surprise

NEW YORK (Reuters) - U.S. companies are reporting their strongest profit and sales growth in more than five years this earnings season, with more beating expectations and particular strength in the industrial sector.

Who Are The Biggest Losers From The Puerto Rico Bankruptcy

Back in 2013, markets tumbled (if briefly) on the news that Detroit would file for bankruptcy, at the time the biggest municipal bankruptcy in US history with over $18 billion in liabilities. Yesterday, algos barely even bothered to look up when Puerto Rico's governor announced that the US Commonwealth would submit Title III (aka bankruptcy) protection, despite a debt load of more than $70 billion, or nearly four times greater than Detroit's.

So does that mean that there are no losers or casualties (metaphorically speaking for now) from the bankruptcy filing? The answer is that in addition to the citizens of Puerto Rico of course, more than half of whom live in poverty and who are about to be crushed by even more austere financial conditions (that said, nobody ever complained when Puerto Rico was raking in the billions in debt), the biggest losers are a handful of hedge and mutual funds, all of whom were attracted by the island's high yields forgetting that yields were high in the first place for a reason.

Here's a list, courtesy of the WSJ:



At the top of the pile are plain vanilla mutual funds, which held about $14 billion of Puerto Rico's outstanding bonds as of March, according to Morningstar Inc. Two fund families, OppenheimerFunds and Franklin Templeton Investments, held most of the debt. About 7% of Franklin's debt was insured as of mid-March, the WSJ calculates, which also means that 93% was not and will suffer impairments.

Investors who currently own Puerto Rico general obligation bonds include: Aurelius Capital Management, Autonomy Capital and Monarch Alternative Ca ...

Watch Live: Trump Holds Rose Garden Press Conference To Celebrate Obamacare Repeal

After just voting to repeal and replace Obamacare with a 217-213 vote, House Republicans have been invited by President Trump to the White House for a victory press conference.

If victorious, Republicans will be having a big press conference at the beautiful Rose Garden of the White House immediately after vote!

— Donald J. Trump (@realDonaldTrump) May 4, 2017

Of course, the party already got started in the House when Republicans launched into spontaneous song on the House floor:

"Na na na na, hey hey hey, goodbye!"

Democrats chant "na na na na hey hey goodbye" as the House passes the Obamacare repeal bill https://t.co/6KitWdxyRi pic.twitter.com/7p5zfs13F2

— POLITICO (@politico) May 4, 2017

Tune in below for the celebratory gathering:

Of course, all of the celebrations are undoubtedly premature as the bill will now be sent to the Senate where it will likely have to be substantially modified in order to attract 51 Republican votes. Per the Washington Post, here is what happens next:

Fasanara Capital Explains How The "Fake Market" Works In One Chart

Via Francesco Filia of Fasanara Capital

"Learn how to see. Realize that everything connects to everything else." - Leonardo da Vinci

Hard data ceased to be a driver for markets, valuation metrics for bonds and equities which held valid for over a century are now deemed secondary. Narratives and money flows trump hard data, overwhelmingly.

'Fake Markets' are defined as markets where the magnitude and duration of artificial flows from global Central Banks or passive investment vehicles have managed to overwhelm and narcotize data-dependency and macro factors. A stuporous state of durable, un-volatile over-valuation, arrested activity, unconsciousness produced by the influence of artificial money flows.

Be Short, Be Patient, Be Ready

Markets driven by Central Banks, passive investment vehicles and retail investors are unfit to price any premium for any risk. If we are right and this is indeed a bubble (both in equity and in bonds), it will eventually bust; it is only a matter of time. The higher it goes, the higher it can go, as more swathes of private investors are pulled in. The more violently it can subsequently bust.

The risk of a combined bust of equity and bonds is a plausible one. It matters all the more as 90%+ of investors still work under the basic framework of a balanced portfolio, exposed in dif ...

Meanwhile In Hong Kong...

The Hong Kong Dollar has plunged to its weakest level against the dollar (to which it is pegged) since February 2016, even as the Hang Seng surges higher. As HKD nears 7.80, triggering likely HKMA intervention, we wonder whether we will see a replay of last year's liquidity-driven stock market slump.

In January last year, the HKMA stepped in to defend the currency from weakening too much. As SCMP reports, this came after the Hong Kong dollar fell to an eight-and-a half year low to 7.8924 per US dollar amid worries over capital outflows after US interest rates were lifted in December 2015. The result was a sharp fall in the Hong Kong stock market.

The Hong Kong dollar then entered a period of relative stability, before rebounding in the second half of 2016 as the euro and pound retreated against the US dollar.

Fast forward to today and we find that the situation is once again changed. Major global currencies are rising against the US dollar. Hong Kong, which did not follow the Fed's tightening moves in December and March, finds itself particularly vulnerable.

If the Hong Kong dollar weakens to 7.8 or below, the HKMA may need to intervene to help prop up the currency, potentially triggering a replay of the sharp fall of the stock market seen in January last year.

The intervention would also be accompanied by an interest rate rise in Hong Kong which would negatively impact mortgage borrowers.

HKMA chief executive Norman Ch ...

Wall Street Shouldn't Ignore Health-Care Overhaul

Investors have barely stirred over the high drama in Washington over the American Health Care Act, but they need to carefully monitor developments as the bill may be less kind to the health-care industry than the Affordable Care Act was.

Has U.S. Productivity Gone Hiding Overseas?

Productivity has been slowing, attributed to everything from weak capital spending to stumbles in innovation. But new research suggests some of America's productivity gains are effectively being hidden offshore.

Tesla's "Anti-selling" Has Investors Selling

Tesla Inc.'s adoption of the soft sell ahead of its most important product yet raised a few eyebrows.

The Fed: Fed returns to pulpit with six speeches Friday

There are six Fed officials speaking on Friday and analysts are hoping mainly for clues about the shrinking the balance sheet

Key Words: Alphabet's Eric Schmidt says he's a 'denier' when it comes to the robot revolution

Worried about losing your job to a robot? Don't be, says Eric Schmidt, executive chairman of Google parent Alphabet Inc.

The Ratings Game: Tesla off to a solid start to 2017, say mostly bullish analysts

Analysts look past a bigger-than-expected quarterly loss to focus on the plans for the Model 3, the electric car maker's first mass-market electric vehicle.

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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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