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01Aug2017 Market Update: Wall Street Higher, DOW Just Short Of 22 K, WTI Crude Falls Off 49 Dollar High Mark On Heavy Volume, U.S. Factory Activity Fell, Economy On A Moderate Growth Path

Written by Gary

Early afternoon US stock markets are fractionally higher in late afternoon trading (SPY +0.2%) with the DOW coming within rock-throwing distance of the 22,000 mark (21,990.96). ...


Here is the current market situation from CNN Money

North and South American markets are higher today with shares in Brazil leading the region. The Bovespa is up 0.80% while Mexico's IPC is up 0.54% and U.S.'s S&P 500 is up 0.21%.

... The DOW was helped by strong corporate earnings, from a near three-year high, consumer spending barely rose in the prior month, setting the in the third quarter.

What Is Moving the Markets

Here are the headlines moving the markets.

Dow at record on strong earnings; Apple earnings awaited

(Reuters) - U.S. stocks were higher in late morning trading on Tuesday, with the Dow coming within spitting distance of the 22,000 mark, helped by strong corporate earnings.

U.S. factory activity slows; consumer spending nudges up

WASHINGTON (Reuters) - A measure of U.S. factory activity fell from a near three-year high in July amid a drop in new orders and consumer spending barely rose in the prior month, setting the economy on a moderate growth path in the third quarter.

Bayer offers concessions to EU Commission for Monsanto deal

BRUSSELS (Reuters) - The European Commission said Germany's Bayer had submitted commitments aimed at easing competition concerns over its $66 billion takeover of U.S. agrochemicals group Monsanto , suggesting the company aims to avoid a lengthy review.

Apple doubles down on China as rivals pull ahead

SHANGHAI/BEIJING (Reuters) - Apple Inc is binding itself more closely to China as its share of the world's biggest smartphone market slips and it becomes more reliant on selling services which require government approval.

U.S. auto sales fall in July as carmakers slash rental fleet sales

DETROIT (Reuters) - U.S. carmakers said on Tuesday they continued to slash low-margin sales to daily rental fleets in July as General Motors Co , Ford Motor Co and Fiat Chrysler Automobiles struggled to curb a slide in retail sales during the month.

P&G hits back at Peltz, says investor not entitled to board seat

(Reuters) - Procter & Gamble blasted Nelson Peltz's efforts to join the consumer goods conglomerate's board, saying the investor was not entitled to a seat and that he was being wrongly advised by people who were not in tune with the company's operations.

Brazil regulator approves Mosaic purchase of Vale fertilizer unit

SAO PAULO (Reuters) - A Brazilian regulator has approved the acquisition of miner Vale's fertilizer unit by U.S.-based Mosaic without restrictions, according to a notice in the official government newspaper published Tuesday.

S&P 500 to exclude Snap after voting rights debate

NEW YORK (Reuters) - The S&P 500 will start excluding companies that issue multiple classes of shares, managers of the index said on Monday, a move that effectively bars Snap Inc after its decision to offer stock with no voting rights.

Thomson Reuters' second-quarter profit tops estimates

NEW YORK (Reuters) - Thomson Reuters Corp on Tuesday reported higher-than-expected second-quarter earnings, helped by demand for market data, and increased its full-year forecast for margins and adjusted earnings per share.

Investors Redeem Half Of Paul Tudor Jones' Main Fund In Past Year

The woes for hedge funds continued in the second quarter, and nowhere more so than among the macro fund community, which posted its worst first half since 2013, losing 0.7% , and according to Hedge Fund Research have returned just 1% annually in the past five years, in an investing world which no longer makes much sense courtesy of central bank intervention. Most impacted by this revulsion against the active investing community has been none other than Paul Tudor Jones, whose investors are increasingly deserting him according to Bloomberg, which reports today that clients yanked 15% of their assets from his main BVI fund in the second quarter, leaving AUM at just $3.6 billion, roughly half from a year ago.

Jones, whose BVI Global Fund is down 1.9% through July 21, has been taking aggressive steps to revive his firm, including reducing fees and headcount. As revenue at Tudor declined, Jones last month sold the firm's 43-acre Greenwich, Connecticut, headquarters' property. Tudor then said it plans to move to a location in lower Fairfield County that's more convenient to New York City, where the firm has offices. It is probably also cheaper. One year ago, Jones also dismissed 15% of his employees. He has told clients he will manage a larger chunk of their money and has encouraged his portfolio managers to take more risk. Jones has also leaned on quantitative tools to help with trading, including introducing technology that replicates the bets of his best managers.

Finally, Tudor has this year reduced its management fee to between 1.75% and 2.25% while taking a 20% cut in profits, after decades of being one of the most expensive hedge funds. The firm had once charged management fees as high as 4% for some clients, and a performance fee of as much as 27% for others, Bloomberg reports.

Alas, so far t ...

House Judiciary Member Calls For Mueller Resignation Over Conflict, "Clear Violation Of Federal Code"

House Judiciary Committee member, Representative Trent Franks (R-AZ), is calling on Robert Mueller, special counsel for the Department of Justice's Russia investigation, to resign over an alleged "conflict of interest" resulting from a personal relationship with James Comey who is a person of interest in the investigation. Per the Washington Examiner:

"Bob Mueller is in clear violation of federal code and must resign to maintain the integrity of the investigation into alleged Russian ties," Franks said. "Those who worked under them have attested he and Jim Comey possess a close friendship, and they have delivered on-the-record statements effusing praise of one another."

"No one knows Mr. Mueller's true intentions, but neither can anyone dispute that he now clearly appears to be a partisan arbiter of justice. Accordingly, the law is also explicitly clear: he must step down based on this conflict of interest," Franks said.

"Already, this investigation has become suspect - reports have revealed at least four members of Mueller's team on the Russia probe donated to support Hillary Clinton for President, as President Trump pointed out. These obviously deliberate partisan hirings do not help convey impartiality," Franks said. "Until Mueller resigns, he will be in clear violation of the law, a reality that fundamentally undermines his role as Special Counsel and attending ability to execute the law."

Mueller

Comey served ...

There Are Two Problems With Trump's Tweet About Record Corporate Profits

Earlier today, in an attempt to deflect from the relentless scandals that plague his administration, Trump tried to pivot attention to either the stock market, highlighting the record high 22,000 print in the Dow Jones, while also pointing out that "Corporations have NEVER made as much money as they are making now."

"Corporations have NEVER made as much money as they are making now." Thank you Stuart Varney @foxandfriends Jobs are starting to roar,watch!

— Donald J. Trump (@realDonaldTrump) August 1, 2017

There are two problems with this tweet.

First, it's wrong. While on a non-GAAP basis, which excludes the impact of "one-time, non-recurring" items, and pretty much anything else management does not want counted - with the explicit blessing of the biggest moneys in the room known as the FASB - which allows companies to ignore countless above the line expense and cost items, adjusted "profits" may indeed be at an all time high, but those "profits" are a monetary mirage, meant only to justify the record high level in the S&P ever applying (ever greater) P/E multiples.

Meanwhile, what is going on in the real economy - where companies are taxed on their real profits as disclosed to the IRS - is that real profits - which the BEA defines as "Corporate Profits After Tax with Inventory Valuation Adjustment (IVA) and Capital Consumption Adjustment (CCAdj)" - have not only stagnated for the past 5 years, as the latest NIPA GDP number reveal...

Oil Just Plunged To A $48 Handle After Survey Suggests OPEC Output Jumped In July

Extending losses from Goldman's overnight report noting the minimal impact of Venezuelan sanctions, WTI crude just crashed below $49 on heavy volume after Bloomberg reports that a survey suggests that OPEC's July oil output rose by 210K to 32.87mmb/d, led by growth in Libya who upped production by 180Kb/d to the highest since June 2013.

The recovery of crude production from Libya is undermining OPEC's efforts to curb its output as the African nation pumps unabated.

Total crude production from the Organization of Petroleum Exporting Countries in July rose 210,000 barrels a day from June to reach 32.87 million barrels a day, according to a Bloomberg News survey of analysts, oil companies and ship-tracking data.

Libya -- which along with Nigeria is exempt from making cuts as it seeks to restore output lost to internal strife -- led those gains, adding 180,000 barrels a day. Production rose to 1.02 million barrels a day, the highest level since June 2013, according to data compiled by Bloomberg.

Not exactly confirming the "market is rebalancing" narrative...

The S&P 500 desperately tried to ignore crude's early weakness but this recent move is dragging stocks lower...

The $50-level is "a psychological level. People are really beginning to realize that the market probab ...

Auto Lender's Risks Larger Than They Appear

Subprime lender Credit Acceptance Corp. doesn't offer many details on how its loans are performing.

Big Oil Bites the Low-Price Bullet

Investors need to make sure companies can keep paying their generous dividends.

How Risky Loans Are Kept Afloat in Alphabet Soup

Corporate borrowers are relying on credit products from pre-crisis days known as collateralized loan obligations, or CLOs, more than they realize.

July 2017 Manufacturing Survey Growth Again Mixed

Written by Steven Hansen

The ISM Manufacturing survey declined but remained in expansion. The key internals correlated and remained in expansion. The Markit PMI manufacturing Index, also released today, is in positive territory and modestly improved.

June 2017 Headline Construction Spending Growth Down?

Written by Steven Hansen

The headlines say construction spending was down and below expectations. Our view is worse than the headlines..

Saudi Arabia takes aim at U.S. oil stockpiles

OPEC is reducing global supply, lifting prices, says Thomas H. Kee Jr.

The Margin: Donald Trump deserved an apology from a high-profile critic, and he almost got one

Donald Trump came under fire last week when a video circulated showing what appeared to be him ignoring a wheelchair-bound child's attempt at a handshake. Not much of a stretch, really, considering Trump's history of mocking the disabled. But the unedited version would tell a completely different story.

Bond Report: Treasury yields retreat after lackluster inflation, other economic reports

Treasurys prices rise, pushing yields lower, on Tuesday as a lackluster round of economic reports bolsters buying in government bonds.

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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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