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06Jun2017 Market Close: Wall Street Again Sour To Upcoming Major Headlines Thursday, WTI Settles In The Mid 40 Handle, DOW Closed Down 48 Points

Written by Gary

US stocks edged lower today as traders shied away from risk ahead of UK vote, ECB, Comey testimony (SPY -0.3%). WTI crude continues to trend higher as the US dollar slips. South Africa unexpectedly plunges into recession, but is not expected to move Wall Street.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Caution sets in on Wall Street ahead of UK vote, ECB, Comey testimony

NEW YORK (Reuters) - U.S. stocks edged lower on Tuesday as traders shied away from risk ahead of major political and economic headlines expected on Thursday.

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.

Uber fires 20 employees after harassment probe: source

SAN FRANCISCO (Reuters) - Uber Technologies Inc [UBER.UL] told staff on Tuesday that it had fired 20 employees following an internal investigation into harassment and related claims by law firm Perkins Coie, a person familiar with the matter said.

U.S., Mexico reach sugar pact without backing from U.S. producers

WASHINGTON (Reuters) - The U.S. and Mexican governments reached a new agreement to significantly shift their sugar trade mix, but U.S. sugar producers have failed to endorse the deal, leaving question marks over whether it could still sour broader trade relations.

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 jolt to the global gas market, where the tiny Gulf state is a major player.

Exxon says Qatar LNG not affected by Arab states tension

(Reuters) - Exxon Mobil Corp said on Tuesday that production and exports of liquefied natural gas from Qatar have not been affected by rising diplomatic tensions in the Middle East.

GM investors reject Greenlight share plan, board slate

(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.

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.

Anthem to leave Ohio's Obamacare insurance market in 2018

(Reuters) - Anthem Inc, which has urged Republican lawmakers to commit to paying government subsidies for the Obamacare individual health insurance system, on Tuesday announced it would exit most of the Ohio market next year.

Despite Near Certainty Of June Rate-Hike, Millions Of Eurodollar 'Bets' Are Set To Expire Worthless

Via Long Convexity blog,

As a trader one of the most frustrating things is to have the correct view on the direction of the market, while not being able to monetize that view because you have the wrong structure on.

Due to the lack of a deep & liquid options market in fed fund futures, many market participants - particularly macro players - instead leverage the highly liquid eurodollar options market to express views on the direction of short-term interest rates.

However, one wrinkle traders weren't factoring into their analysis was the collapse of LIBOR-OIS spreads (Fig. 1) due to recent changes in funding markets, primarily attributed to money market reform.

Fig. 1-LIBOR-OIS Spread via Bloomberg

In short, the rise in LIBOR hasn't kept up with expectations for more rate increases from the Federal Reserve causing this spread to tighten dramatically.

With the front month eurodollar contract (EDM7) trading around 98.74, a report (Fig. 2) of options open interest from software QuikStrike shows...

Fig. 2 -Option Open Interest on EDM7 via QuikStrike

Millions of put optio ...

South Africa Unexpectedly Plunges Into Recession

Despite expectations (among 19 'economists') that growth would be up 1.0% in Q1, South African GDP tumbled 0.7% (the second drop in a row) pushing the nation back into recession after eight years.

The median of 19 economists' estimates in a Bloomberg survey was for 1 percent expansion. There was only one forecast for a contraction. This was a four standard deviation miss...

Indicating contraction for the second quarter in a row - technically signaling a recession - as all bar two industries shrank.

"We can now pronounce that the economy is in recession," Statistics South Africa Deputy Director General Joe de Beer said. "The major industries that contracted in the economy were the trade and manufacturing sectors."

The Rand retraced some its recent gains on the GDP print...

As Bloomberg reports, while rains are helping Africa' ...

Warning: the Subprime 2.0 Bubble is About to Burst

As we've been outlining for weeks now, Subprime 2.0 is the subprime auto-loan industry. And just as the collapse in the subprime mortgage lending was what signaled the beginning of the housing crisis... trouble in the subprime auto-loan industry will be what signals that the next Debt Crisis is here.

On that note... subprime auto-loan defaults are soaring, hitting 11.96%. The last time they were anywhere near these levels was in early 2008 right before the credit crisis hit.

Even worse, the subprime auto-loan industry is just the tip of the iceberg for our current debt bubble.

All told the world has added $57 TRILLION in debt since 2008... bringing the total debt in the world to $217 TRILLION.

That's means that globally the world is sporting a Debt to GDP of 325%.

And when this Debt Crisis begins, Central Banks will be powerless to stop it as they've already used up most of their ammunition during the 2008 Crisis.

A Crash is coming... and it's going to horrific.

Best Regards

Graham Summers
Chief Market Strategist
Phoenix Capital Research

"It's Not An ETF" - Industry Expert Warns, Be Wary Of The Skyrocketing Bitcoin Fund

Authored by Sumit Roy via ETF.com,

Bitcoin is flying. Prices for the digital currency briefly topped $2,800 in May, the latest milestone in what's become a parabolic move higher. Consider these figures: In the past month, bitcoin is up 68%; year-to-date, it's up 154%; over the past year, it's up 350%; and over the past two years, it's up 973%.

But as incredible as those moves have been, the performance of one bitcoin fund makes them look paltry by comparison. That fund is the Bitcoin Investment Trust (GBTC), which has more than tripled in the past month alone, while rising an eye-popping 1,600% over the past two years.

2-Year Returns For Bitcoin And GBTC

The market value of the trust ballooned to as much as $1.1 billion in May, compared with $224 million at the beginning of the year.

Dangerous Premium To NAV

GBTC is an "open-ended trust" and the first publicly traded bitcoin investment vehicle. The fund made its debut on the OTC market in May 2015, and since then has been doing its best to track the price of bitcoin?with limited success.

Indeed, even though GBTC is a self-proclaimed open-ended trust (and its sponsor Grayscale has periodically created new shares), it's acted more like a closed-end fund, with huge premiums the norm.

The share price of GBTC was last trading at double the value of its underlying bitcoin holdings. At 131%, GBTC's premium to its net asset value is astronomical by any measure, and close to the highest level it's ever been. For investors buying into the fund, such large pre ...

Some Inconvenient Facts for the Fed

The Federal Reserve is primed to raise rates next week despite a slow-growth economy showing weak wage gains for workers, cooling inflation and dimming prospects for near-term fiscal stimulus.

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.

Market Is Ignoring Risks to Telecom

Telecom stocks have shown some signs of life recently after suffering amid a brutal price war. This isn't the time for optimism.

Bond Report: 30-year Treasury yield lowest since Trump's election amid geopolitical jitters

Treasury prices rise, pushing down yields, as growing geopolitical worries draw investors into U.S. government paper and assets perceived as safe.

Johnson & Johnson's new prostate cancer advances could signal trouble for Pfizer

Two big clinical trials, which have dazzled scientists and Wall Street, are likely to give the company a big leg up.

Market Extra: Millennials are finally warming up to the stock market

The financial crisis ended years ago, but the devastation of that market collapse is still being felt, particularly by younger investors, who may have been scared off from Wall Street during what could have been one of the most fruitful times for them to invest.

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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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