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20Jun2017 Market Update: Wall Street Slips Moderately Into The Red, US Dollar Up Fractionally, WTI Crude Touched The High 42 Handle

Written by Gary

The SP 500 fell in late morning trading today (SPY -0.4%), slipping from record levels yesterday. The DOW hit a new record high and is continuing to trade sideways as a sharp 20% drop (from its highs) in crude prices squeezed energy stocks and a rebound in tech stocks petered out.


Here is the current market situation from CNN Money

What Is Moving the Markets

Here are the headlines moving the markets.

Wall St. falls as oil prices tumble to seven-month lows

(Reuters) - U.S. stocks fell in late morning trading on Tuesday, slipping from record levels, as a sharp drop in oil prices squeezed energy stocks and a rebound in tech stocks petered out.

Boeing gets boost from United and lifts demand forecast

PARIS (Reuters) - Boeing won an endorsement from United Airlines for the latest model of its best-selling 737 jet as it struck an upbeat tone on Tuesday, raising its 20-year industry demand forecast despite recent signs of a slowdown.

Oil prices hit seven-month lows on global oversupply

LONDON (Reuters) - Oil prices fell to seven-month lows on Tuesday after news of increases in supply by several key producers, a trend that has undermined attempts by OPEC and others to support the market through reduced output.

Ford to export Focus car from China to U.S. in 2019

DETROIT/WASHINGTON (Reuters) - Ford Motor Co will export the next-generation Focus compact car from China to North America in 2019, rather than from Mexico as earlier planned, saving the company $500 million, a top executive said on Tuesday.

U.S. banks, corporations establish principles for cyber risk ratings firms

(Reuters) - More than two dozen U.S. companies, including several big banks, have teamed up to establish shared principles that would allow them to better understand their cyber security ratings and to challenge them if necessary, the U.S. Chamber of Commerce said on Tuesday. Large corporations often use the ratings, the cyber equivalent of a FICO credit score, to assess how prepared the companies they work with are to withstand cyber attacks. Insurers also look at the ratings when they make

U.S. current account deficit widens to 2.5 percent of GDP

WASHINGTON, June 20 (Reuters) - The U.S. current account deficit widened slightly in the first quarter, as the country imported more crude oil, car parts and supplies for its factories.

Pamplona Capital to take Parexel private for $4.5 billion

(Reuters) - U.S. pharmaceutical research services provider Parexel International Corp said on Tuesday it would be taken private by Pamplona Capital Management LLP in a $4.5 billion deal.

Apple tells court Qualcomm chip licenses are invalid

(Reuters) - Apple Inc broadened a legal attack on Qualcomm Inc, arguing to a U.S. federal court that license agreements that secure the chip maker a cut of every iPhone manufactured were invalid.

Whole Foods CEO hints at another brand under Amazon

(Reuters) - After Amazon.com Inc completes its takeover of high-end grocer Whole Foods Market Inc , it might launch another brand with different standards, the grocery chain's chief executive said in remarks reported in a securities filing on Monday.

WTI Plunges To $42 Handle - 7-Month Lows - Enters Bear Market

WTI Crude has entered a bear market (down over 20% from its highs) amid concerns OPEC-led output cuts won't succeed in rebalancing the market (and not helped by the fact that Libya is pumping the most crude in 4 years).

For the first time since Nov 2016, WTI front-month traded with a $42 handle...

"People are getting a little fatigued waiting for the production cuts to have effect," Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Mass., says by phone.

"Between the U.S. shale activity and Libya and Nigeria seeing their production go up some, that's making people very nervous about the near-term prospects"

Tonight's API inventory data may provide further impetus for this move.

In Warning To Wall Street, Jefferies Fixed Income Revenue Tumbles 33%

On one hand, the Q2 earnings reported by the last "pure play" investment bank - one with a 1 month leading quarter end as per the pre-new normal tradition and thus a key indicator of what is to come for the rest of Wall Street - were not bad: Jefferies reported a 29.4% increase in overall quarterly profit (even with a recent 6% increase in the company's tax rate) thanks to a 39% bounce in investment banking revenue, i.e. M&A and underwriting fees, to $351.9 million in the quarter, primarily reflecting an "improved environment" for debt and equity new issuance according to CEO Dick Handler.

That was the good news.

The neutral news is that revenue from equities (when stripping away one-time benefits from the sale of KCG) was roughly flat, at $175.5MM in the quarter, up fractionally from $167.5MM one year ago. Total equity revenues were $271.5 million but including $96 million in mark-to-market gain on Jefferies' 24% equity ownership of KCG Holdings vs $223.5 million a year ago (with $56m KCG markup). According to Handler, the core equity sales/trading business "enjoyed a solid quarter and, despite quiet market activity and low volatility, our global cash businesses continued to gain market share."

But the bad news, and a confirmation of recent warnings from JPM and BofA, was that the recent boost in fixed income revenue, Wall Street's most profitable segment, tumbled by 33% in the second quarter, dropping from $238.5 million to $158.6 million Y/Y, and down from $221.9 million last quarter.

Discussing the sharp drop in fixed income revenue, the Leucadia subsidiary said that ...

Things To Watch As Voters Head To The Polls In Georgia's Special Election

Democrats have gone "all-in" on the 30-year-old documentary film-maker and former congressional aide, Jon Ossoff, to win Georgia's 6th Congressional district. Over the past several months, they have repeatedly portrayed the runoff as a referendum on the Trump administration and a preview of the 2018 mid-terms . Now, as voters head to the polls today, the question is whether their gamble will payoff...certainly, given the amount of money they've spent, anything less than a victory will be yet another stinging defeat for Democrats.

The contest for Georgia's 6th district pits Democrat Jon Ossoff against Republican Karen Handel in a race that has drawn national attention and historic levels of spending. As The Mercury News has pointed out, this race has been the costliest in the history of Congressional races with Ossoff raising over $23 million. Ironically, he received nearly 9x more donations from California than from Georgia, a testament to how this special election has morphed into a national contest for Democrats.

Between March 29 and May 31, Ossoff reported receiving 7,218 donations from California, dwarfing the 808 donations he received from Georgia. In the nine Bay Area counties alone, he received 3,063 donations in the same time period.

Those are only a fraction of Ossoff's total donations, as he doesn't have to report contributions from people who give less than $200 in total. In addition, many of the individual donations include the same people giving to his campaign multiple times.

According to the

Russia Credit Risk Spikes To 3-Month Highs After US Expands Sanctions

The US added 38 people (two Russian officials and three dozen other individuals and companies) to a sanctions list prompted by Russia's incursion in Ukraine, the US Treasury Department announced Tuesday, just before US President Trump was due to meet Ukrainian President Petro Poroshenko. Sovereign bond yields and CDS have spiked following the news...

Russia credit risk spike to its highest since March following the news...

And bond prices are tumbling...

As DPA reports, the move targets Ukrainian separatists and their supporters in eastern Ukraine, as well as individuals and companies involved in Russia's annexation of Crimea. It also taps several Russian officials and companies for evading existing sanctions.

The Treasury Department said it was designating the individuals and companies to prevent circumvention of sanctions and to keep US actions in line with other countries.

"These designations will maintain pressure on Russia to work toward a diplomatic solution," Treasury Secretary Steven Mnuchin said in a statement.

"This administration is committed to a diplomatic process that guarantees Ukrainia ...

Barclays's Criminal Conundrum: Plead or Fight?

U.K. authorities filed charges against Barclays and former top executives for fraud related to fee payments to Qatari backers when it received capital infusions in the teeth of the financial crisis. It is the first criminal case against a crisis-era bank chief.

What Virtual Reality Needs to Get Real

High-end VR hasn't created a large enough installed base of customers for game publishers to commit major development dollars. And without must-have games, virtual reality just won't break out of its niche.

Avocado Toast Looks a Better Bet Than Australian Housing

Australia's housing market is particularly vulnerable as Chinese buyers are stymied by capital controls.

How the Republican health plan could hurt those with employer health insurance

Nearly 30 million people could lose important financial protections.

Is Amazon serious about getting into pharmacy? This analyst isn't so sure

Pharmaceutical stocks lost about $10 billion in combined market cap on Friday on news of Amazon's Whole Foods deal.

Brexit one year after vote: Here are the 5 possible scenarios for the EU divorce

Almost a full year after the U.K.'s Brexit referendum, the divorce talks between Brussels and Britain finally kicked off this week, but the outcome of the final agreement remains extremely uncertain.

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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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