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06Jul2017 Market Close: Wall Street Closes Sharply Lower, DOW Down Triple Digits, Nasdaq Off One Percentage Point And Crude Prices Off From Morning Highs

Written by Gary

US stocks were sharply lower today (SPY -0.9%) after disappointing labor market data clashed with the possibility of a more hawkish Federal Reserve, while rising tensions . . .

Todays S&P 500 Chart

. . . in the Korean peninsula providing additional pressure as investors continue to rotate out of battered technology names. WTI crude prices settled in the low 45 handle and the US dollar settled at 95.58.

The Dow Jones Industrial Average DJIA, -0.74% and the S&P 500 index SPX, -0.94% the most popular stock-market gauges, usually move in lockstep, displaying what is known as a positive correlation. But in recent trade, the equity indicators have seen the lowest level of correlation since 2003, according to data from WSJ Market Data Group, tracking a 20-day rolling average of the benchmarks over the past 15 years.

The Dow and the S&P 500 haven't been this disconnected since 2003

Stock market sinks as tech shares extend downdraft

The Market in Perspective

Here are the headlines moving the markets.

Qualcomm accuses Apple of infringing six patents in iPhone, iPad

WASHINGTON (Reuters) - Chipmaker Qualcomm Inc will ask the U.S. International Trade Commission to bar Apple Inc from selling some iPhones and iPads in the United States on the grounds that they infringe on six Qualcomm patents.

Wall Street drops on labor market data, North Korea concern

(Reuters) - U.S. stocks were sharply lower on Thursday after disappointing labor market data clashed with the possibility of a more hawkish Federal Reserve, while rising tensions in the Korean peninsula providing additional pressure.

Microsoft plans to cut 'thousands' of jobs: source

(Reuters) - Microsoft Corp plans to cut "thousands" of jobs, with a majority of them outside the United States, a person familiar with the matter told Reuters.

U.S. private payrolls growth slows; jobless claims rise

WASHINGTON (Reuters) - U.S. private employers hired fewer workers than expected in June and applications for unemployment benefits last week increased for a third straight week, pointing to some loss of momentum in job growth as the labor market nears full employment.

Tesla shares drift lower as Model S fails to ace some safety tests

(Reuters) - Shares of Tesla Inc fell for the third straight day on Thursday, after its Model S sedan failed to get the top score in some tests conducted by a U.S. safety group and a larger rival secured supplies to power its electric vehicle program.

$1 billion headache for Airbus as Qatar cancels four jets

PARIS (Reuters) - Qatar Airways has axed orders for four A350s because of delivery delays, Airbus said on Thursday, handing the European planemaker a new headache over what to do with jets worth $1.2 billion at list prices as it tries to close a sales gap with rival Boeing.

Buffett's Berkshire Hathaway nears deal for bankrupt Oncor: sources

(Reuters) - The energy unit of Warren Buffett's Berkshire Hathaway Inc is nearing a deal to acquire Oncor Electric Delivery Company LLC, which would allow the utility to exit a three-year-long bankruptcy, according to people familiar with the matter.

Blue Apron options to list on CBOE exchanges on Monday: CBOE

NEW YORK (Reuters) - Options contracts on Blue Apron Holdings Inc , the first U.S. meal-kit company to go public, will debut on CBOE Holdings Inc's exchanges on Monday, a CBOE spokeswoman said on Thursday.

JPMorgan CEO meets Irish prime minister on post-Brexit growth

DUBLIN (Reuters) - JPMorgan Chase & Co Chief Executive Jamie Dimon met Irish Prime Minister Leo Varadkar in Dublin on Thursday to discuss expansion in the Irish capital two months after the U.S. investment bank bought an office building in the city with room for 1,000 staff.

7 Myths Of Investing

Authored by Lance Roberts via RealInvestmentAdvice.com,

Over the years, I have regularly addressed the psychological and emotional pitfalls which ultimately lead individual investors to poor outcomes. The internet is regularly littered with a stream of articles promoting the ideas of "dollar cost averaging," "buy and hold" investing, and "passive indexing" as the solution to achieving your financial dreams.

However, as I addressed in the "Illusion Of Declining Debt To Income," if this was truly the case, then why is the majority of Americans so financially poor?

Fed-Survey-2013-AssetsbyPercentile-091014

But here are some stats from a recent Motley Fool survey:

"Imagine how the 50th percentile of those ages 35 - 44 has a household net worth of just $35,000 - and that figure includes everything they own, any equity in their homes, and their retirement savings to boot.

That's sad considering those ages 35 and older have had probably been out in the workforce for at least ten years at this point.

And even the 50th percentile of those ages 65+ aren't doing much better; they've got a median net worth of around $171,135, and quite possibly decades of retirement ahead of them.

&nb ...

"They're Selling Everything" - Bonds, Stocks, Oil, Gold, & Dollar All Tumble

"Probably nothing..."

ECB Minutes spoiled the bond party... when does it become a full blown tantrum...

Bund puking rippled... via risk-parity deleveraging - through European stocks, European bonds (not helped by ugly auctions in France, Spain), US Treasuries and into US stocks... And then dismal 'hard' data (and positively surprising 'soft' data) didn't help as oil's bounce on inventories provided some brief hope... but even that didn't last once the market saw the craziness in Hamburg.

Shit's getting real in Risk-Parity Unwind land...

Not a pretty day for stocks... Small Caps worst day in 2 months

Or bonds...

"What If": Citi Models A World Where The Fed Hikes All The Way To 3%

It is becoming increasingly apparent that the Fed, now data-independent, has just one mandate: keep hiking interest rates until markets break.

That is the conclusion of Citi's Jeremy Hale, who writes that the FOMC minutes pointed to a view that financial conditions had eased despite the previous Fed hikes because equities had rallied and corporate bond yields declined. Specifically, the minutes note that: "equity prices were high when judged against standard valuation measures." As a result, the Citi cross-asset strategist believes that "Central Banks are buying in to the BIS thesis that they need to control not just price, but asset price, inflation. In other words, markets may be inflated by easy money."

In yet other words, those fringe financial blogs you've been reading for years were right all along. And, Citi adds, "it also means we might expect Central Banks to remain biased towards tightening until/ unless asset markets turn lower." Slowly markets are starting to get the message.

What happens then?

To answer that question, Citi has created a hypothetical scenario to assess how various assets may move if the Fed gets its way and takes FF all the way to 3%. According to Citi, this would take real yields to 200bp where they were when the FF rate last held this heady level. Additionally, he expects to see the beta on JPY and EUR real yields as ~20% and 40% respectively. In FX, real yield differentials would likely take $/JPY towards 140 and EUR/$ to 1.05 (and gold to <$800). EM asset markets, which have ignored rising US real yield for now, would not be able to ignore a move that large, and shorting EM $ credit remains the best hedge in Citi's view.

Some additional details. As Citi starts off, in the past nominal yields rose during each Fed QE: "QE did ...

'Vice' Index Shows U.S. Slowdown Ahead

Authored by Andrew Zaitlin via MoneyBallEconomics.com,

Slower Spending Growth In Q3

When Vice spending momentum began to slow in February, I blamed near-term noise. I thought it might be tied to February's tax refund deferral.

And when it slowed again in March, I blamed Easter.

But vice spending growth continues to slow. In fact, in the latest month, it points to contraction in 3Q or early 4Q.

And we're already seeing that slowdown in the latest Retail data. May retail spending downshifted significantly. It dropped from 5.6% year-over-year (yr/yr) growth in January to 3.8% yr/yr growth in May (the lowest of the year).

Recent Macro Data Confirms the Downshift

People spend what they earn.

As income growth slowed, so have Personal Consumption Expenditures (PCE). And this is after gas price inflation has moderated.

Trump Is Right: China Could Press North Korea More on Trade

In addition to banning coal imports from North Korea, China could tighten the trade screws on its neighbor a lot more if it wanted to.

Who Dictates Global Bond Yields? Europe for Now

Bond investors, look to Europe. The delicate dance of expectations between the European Central Bank and government-bond markets is the biggest driver of yields right now.

CEO-Worker Pay Ratio Generates Outrage---and Some Insight

A controversial new metric on executive pay is on Congress's chopping block. Shareholders should want it to survive, even if it only provides a sliver of insight into the companies they own.

June 2017 ISM and Markit Services Improve

Written by Steven Hansen

The ISM non-manufacturing (aka ISM Services) index continues its growth cycle and improved. Markit PMI Services Index also improved showing modest expansion.

The Moneyologist: This man must choose between his ailing mother and a job in another state

They both signed a power of attorney form he found on the internet.

Market Snapshot: U.S. stocks close sharply lower on extended selloff in tech sector

U.S. stocks close lower Thursday as investors continue to rotate out of battered technology names.

In One Chart: German bonds may offer the clearest warning that the stock market's bull run is sputtering

German bunds are trying to deliver a message to stock-market investors: Achtung!

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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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