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06Jun2017 Market Update: Wall Street In The Doldrums As News Heavy Thursday Approaches, WTI Spikes Higher To The High 47 Handle, Gold Slows Ascent

Written by Gary

US stocks edged lower in late morning trading today as investors shunned riskier assets ahead of what is expected to be a busy Thursday, when Britain goes to the polls and former FBI director James Comey testifies before Congress. Gold breaks major resistance trendline and crude prices spike higher.


Here is the current market situation from CNN Money

North and South American markets are mixed. The Bovespa is higher by 0.31%, while the IPC is leading the S&P 500 lower. They are down 0.30% and 0.10% respectively.

What Is Moving the Markets

Here are the headlines moving the markets.

Wall St. slips as UK vote, Comey testimony awaited

(Reuters) - U.S. stocks edged lower in late morning trading on Tuesday as investors shunned riskier assets ahead of what is expected to be a busy Thursday, when Britain goes to the polls and former FBI director James Comey testifies before Congress.

GM investors reject Greenlight share plan, board slate

DETROIT (Reuters) - General Motors Co shareholders on Tuesday overwhelmingly rejected proposals by hedge fund Greenlight Capital to restructure the company's stock and reshape its board, backing Chief Executive Mary Barra's efforts to rev up the company's stalled share price.

U.S. job openings hit record high; skills mismatch rising

WASHINGTON (Reuters) - U.S. job openings surged to a record high in April and employers appeared to have trouble finding suitable workers, pointing to a tightening labor market that could encourage the Federal Reserve to raise interest rates next month.

Mexico to cut share of refined sugar sent to U.S., minister says

MEXICO CITY (Reuters) - Mexico will reduce the proportion of refined sugar it can export to the United States to 30 percent under a new agreement likely to be announced later today, Mexican Economy Minister Ildefonso Guajardo said on Mexican radio on Tuesday.

Amazon offers Prime discount for U.S. customers on government aid

(Reuters) - Amazon.com Inc said on Tuesday it would offer a discount on its popular Prime subscription service for shoppers who receive U.S. government aid, taking aim at a key customer base for rival Wal-Mart Stores Inc.

Oil slips on worries about Mideast rift, U.S. production growth

NEW YORK (Reuters) - Oil prices slipped further below $50 a barrel on Tuesday on concerns that an OPEC effort to tighten the market could be coming under pressure from a diplomatic rift in the Middle East and from sustained high inventories in the United States.

Port bans choke Qatar's commodity trade as gas supply worries grow

SINGAPORE/LONDON (Reuters) - A campaign by leading Arab powers to isolate Qatar is disrupting trade in commodities from crude oil to metals and food, and deepening fears of a possible shock to the global gas market, where the tiny Gulf state is a major player.

RBS investor settlement over 2008 cash call back on track: sources

LONDON (Reuters) - Rebel RBS shareholders, who had been determined to bring the bank and former CEO Fred Goodwin to court over losses related to a 2008 rights issue, are set to agree to a settlement and the case is likely to be dropped, sources said on Tuesday.

U.S. small businesses to lobby Congress to oppose border tax

WASHINGTON (Reuters) - About 60 small business owners and a representative from retailer Big Lots will hold meetings with members of Congress this week in an effort to oppose a proposed 'border adjustment tax', organizers said.

China's Scandal Tinged Push To Buy Up Hollywood Media

Via Disobedient Media

As China's economy has boomed, corporations and individuals with historically close ties to the government have been the major beneficiaries. Sitting flush with massive amounts of cash on hand, power players in the Chinese markets have increasingly sought to branch out and increase their investments in foreign countries. Many of these investments target key industries despite their own government often restricting or forbidding the same kind of foreign investment domestically.

Concerningly, figures with ties to anti-American factions of the Chinese government such as real estate mogul Wang Jianlin have targeted American media outlets in the U.S. as investment targets while at the same time beginning to increase rhetoric towards U.S. leaders and becoming involved in corruption scandals. The increased investment comes at a time where Hollywood celebrities have also become increasingly cozy with Asian investors and in some cases become embroiled in Asian financial scandals.

I. Wang Jianlin Is A Former PLA Regimental Commander Whose Dailan Wanda Group Has Been Acquiring Various Hollywood Media Assets

With "Super Thursday" Fast Approaching, This Is What One Trader Plans To Do

With "Super Thursday" fast approaching, which as a reminder will see a trifecta of "event risk" in the form of the UK general election (which nobody seems to care about), the ECB's "allegedly hawkish" decision, and James Comey's Congressional testimony, traders are already putting their hard hats on in a state of self-induced panic.

But according to Bloomberg's Richard Breslow that may be unwarranted, because when all is said and done, while nobody knows how markets will react, "the only thing you can be sure of is that any trading being done now solely in preparation for the "big day" is largely a waste of time" and while "these can be important events. And then we'll inevitably move on."

Why? Because as he adds, "personally, I hope there comes a point when a distant market memory can be jogged of moments that have consequences beyond the next central bank reaction."

In short, whatever transpires on Thursday, the outcome to risk assets will be whatever the world's monetary authorities demand.

That said, here's what Breslow's "prep" for "momentous Thursday" looks like:

You'll Believe Thursday's News When You See It

There seems to be a furious debate raging about just how momentous Thursday's slate of news on hand is going to be. Correctly anticipating what will move markets and in what direction hasn't been an exact science but I'm tempted to approach it as sleight of hand. And in order to plan our schedules accordingly, we're asked to decide which one is the most important event. Aristotle obviously was ...

Gold Breaks Major Resistance Trendline

Having spiked to just shy of 2017 highs, gold has broken the major trend across the highs since Jul. '16 at 1,281. It's also through a longer-term trendline formed across the highs since Sep. '11 (1,274). As a result, according to Goldman's chief technician Sheba Jafari, the next big pivot area in focus is up at 1,304-1,315. Jafari adds that "this includes two separate ABC targets from March and May. Given the overlapping/corrective nature of the run up since December, there's a good chance the market could hold below this area. Moreover oscillators are already at the range highs and looking stretched."

Bottom line, need to be careful of any/all signs of a top near 1,304; need a break higher than 1,315 to suggest potential for a more meaningful advance. Anything back underneath 1,281 signals some near-term weakness.

Daily Chart

Weekly Chart

Macy's Tumbles After Issuing Profit Margin Warning

Another day, another guidance cut by a retailer, this time from Macy's which during its investor meeting, warned investors that the company's gross margin could be below the forecast given just this part February, some 60-80 basis points lower.

According to Fly on the Wall, Macy's CFO Karen Hoguet said at investor day that the gross margin for the fiscal year ending January 2018 is trending 60bps-80bps below FY17, with the 2Q rate ~100bps below 2QFY17. One possible explanation: liquidation of excess inventory as the company is unable to sell enough product per planned prices. Indeed, this was confirmed moments ago by a statement made on the investor call:



MACY'S INC EXEC SAYS NOT SATISFIED WITH INVENTORY LEVELS IN STORES

The silver lining: Macy's, at least for now, reaffirmed its FY18 sales and EPS forecast, and said it plans for exclusive product to reach 40% by 2020.

Some other details from the investor meeting per Bloomberg:



Macy's says it can expand gross margin on apparel side of business over time, but can't say when beauty margin will grow: mgmt speaking at investor day.

Excess inventory, beauty markdowns hurt margin forecast

There is a place for both Amazon, Macy's to succeed

Hoping to scale Backstage next year; beauty working very well in Backstage, partly due to bath & body; home products also working

Herald Square property getting more valuable

Ralph Lauren, Michael Kors are part of M's power brands; they may be having trouble right now, but confident they will turn, just like Tommy Hilfiger did

Nothing in forecast that is counting on traffic changing from current trends

Buy online/pickup in stores capability will be available by year end

Looks at product every day with an eye towards "editing" SKUs

Not satisfied with inventory turns

The market did not take the warning ...

Feel Like Ordering In? Another Food Delivery IPO Sprouts

Delivery Hero is the latest food delivery platform to go public. It isn't far behind Grubhub and Just Eat in terms of sales, but profits remain a missing ingredient.

Alibaba's Fight for Data

Alibaba's recent fight with a big delivery company shows how reliant it is on customer data.

Apple's HomePod Cranks Up the Price

Apple has arguably perfected the art of the up-sell. That is good, as its new home speaker offering, called the HomePod, will test that ability.

April 2017 JOLTS Job Openings Rate Shows Improvement

Written by Steven Hansen

The BLS Job Openings and Labor Turnover Survey (JOLTS) can be used as a predictor of future jobs growth, and the predictive elements show that the year-over-year growth rate of unadjusted private non-farm job openings are now in expansion year-over-year..

Key Words: British Prime Minister Theresa May divulges her naughtiest moment

Theresa May acknowledged, to the surprise of nobody, that she was a "goody two shoes " and "bookish" in her youth. With at least one exception

Lawrence G. McMillan: The S&P 500's upside breakout is the clear signal we needed

Declines in stock prices are now smaller and shallower, says Lawrence G. McMillan.

Market Extra: With bitcoin surge, cryptocurrencies top $100 billion in market capitalization

The investment category of cryptocurrencies hit a new milestone on Tuesday, one that would have been unfathomable just a couple of years ago: $100 billion in combined market capitalization.

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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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