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01Aug2017 Market Close: Dow At New Record, Oil Tumbles To Low 49 Handle, Bonds Rally And Gold Hits 7-Week High

Written by Gary

The Dow Jones Industrial Average hit a record high on Tuesday and approached the 22,000 mark, powered by Goldman Sachs (NYSE:GS), JPMorgan Chase and other banks. The S&P 500 (SPX) gained 0.25% to 2,476.47 and the Nasdaq Composite (IXIC) added 0.19% to 6,360.47. The S&P financial index (SPSY) led with a gain of 0.77%. JPMorgan Chase (N:JPM) rose 1.3% and Citigroup (N:C) added 1.49%. WTI crude settled down 2% at $49.16 after dropping below $49.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Wall Street closes higher with boost from banks

NEW YORK (Reuters) - U.S. stocks closed higher on Tuesday and the Dow Jones Industrial Average racked up a fifth straight record high powered by Goldman Sachs, JPMorgan Chase and other banks.

U.S. spending, factory data point to moderate economic growth

WASHINGTON (Reuters) - A gauge of U.S. factory activity slid from a near three-year high in July amid a slowdown in new orders and consumer spending barely rose in the prior month, setting the stage for a moderate economic expansion 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 the overall pace of U.S. car and light truck sales fell for the fifth straight month.

Discovery gains female advertising audience with Scripps deal

NEW YORK (Reuters) - Discovery Communications Inc, whose nature and science TV channels attract mostly male viewers, will reach more women and diversify its advertising revenue through its acquisition of Scripps Networks Interactive Inc, advertisers said on Tuesday.

Investor Einhorn sees cash burn at Tesla, sticks with short bet

BOSTON (Reuters) - Billionaire investor David Einhorn, who has been hurt by his bet against Tesla Inc, said on Tuesday that the electric car maker is over-valued and that the company is not adequately capitalized.

Sprint hints at deal prospects, shares surge

NEW YORK (Reuters) - Sprint Corp shares jumped more than 10 percent on Tuesday after its chief executive said an announcement on merger talks should come in the "near future" and the company reported a quarterly profit for the first time in three years.

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.

Crude Crashes, Bonds Bid, & Trannies Turmoil But VIX Vanquished To 9 Handle Again

With oil crashing, 'hard' economic data slumping, political chaos ahead of the debt ceiling debacle, and The Fed about to embark on something no central bank has ever done (let alone done successfully), it should be no surprise that earnings expectations are being ramped exponentially higher and The Dow (thanks in large part to Boeing recently) has exploded near 22,000 today for the first time ever making yet another new record high...

Despite a mixed picture in soft survey data about the US manufacturing sector this morning, 'hard' economic data continues to collapse - even against severely downgraded expectations - this is the weakest for US Hard Data since March 2015

The Dow outperformed (again) as Trannies got trounced... (Small Caps and Nasdaq remain red on the week)...

Every effort was made early on to ramp The Dow to 22,000 - crushing VIX to a 9 handle once again... but it failed...

Trannies tumbled once again - to the lowest levels since May 27th - this time ...

Gold Surges To Six-Week Highs Despite Biggest Fund Outflows In 4 Years

Gold prices just hit $1280. That is the highest since The Fed raised rates in June and follows the best month since February.

However, as the precious metal surged 6% in July, ETF investors abandoned the barbarous relic by the most since May 2013.

As it seems the ETF is seeing notable liquidations... perhaps reducing the implied leverage against physical holdings?

As we see physical gold holdings within the ETFs being drawn down as prices surge...

Something changed.

Netflix Is Spending Twice As Much As Amazon On Content

When it comes to Netflix and its stratospheric (forward) valuation, the thesis is simple: the company is (so far) the undisputed leader in the arena of internet streaming. As the LA Times summarizes, the global streaming giant today boasts impressive stats: 104 million subscribers worldwide, up 25% from last year and almost quadruple from five years ago. Its series and movies account for more than a third of all prime-time download Internet traffic in North America. Its more than 50 original shows garnered 91 Emmy Award nominations this year, second only to premium cable service HBO.

However, as Howard Marks observed skeptically in his latest memo, this explosive growth has had to be funded, and in the case of Netflix, it has been through debt. In the last year, the long-term debt level has more than doubled to $4.84 billion. Four years ago, the level was at just half a billion dollars. It is here that flashing red flags have started to emerge for Netflix, which has accumulated a whopping $20.54 billion in long-term debt and obligations in its effort to produce more original content.

This is what Marks said last week:

In early May, Netflix issued 1.3 billion of Eurobonds, the lowest-cost debt it ever issued. The interest rate was 3.625%, the covenants were few, and the rating was single-B. Netflix's GAAP earnings run about $200 million per quarter, but according to Grant's Interest Rat ...

Greenspan Fears Imminent Stagflationary Slump, Warns The Bubble Is In Bonds Not Stocks

Former Fed chair Alan Greenspan blasphemously warned a year ago of an "imminent crisis":

"This is the worst period, I recall since I've been in public service. There's nothing like it, including the crisis - remember October 19th, 1987, when the Dow went down by a record amount 23 percent? That I thought was the bottom of all potential problems. This has a corrosive effect that will not go away. I'd love to find something positive to say."

Adding that fundamentally it is not so much an issue of immigration, or even economics, but unsustainable welfare spending, or as Greenspan puts it, "entitlements."

The issue is essentially that entitlements are legal issues. They have nothing to do with economics. You reach a certain age or you are ill or something of that nature and you are entitled to certain expenditures out of the budget without any reference to how it's going to be funded. Where the productivity levels are now, we are lucky to get something even close to two percent annual growth rate. That annual growth rate of two percent is not adequate to finance the existing needs.

I don't know how it's going to resolve, but there's going to be a crisis.

This is one of the great problems of democracy. It goes back to the founding fathers. How do you handle a situation like this? And it's very troublesome, but eventually you get things like Margaret Thatcher showing up in Britain. Their situation is far worse than ours. And what she did ...

Indexers Push Back Against Wall Street

Give a small cheer to the index nerds at S&P. Their decision to ban companies that have different classes of stock is a rare instance of Wall Street protecting investors.

The Calm Before the iPhone Boosts Wireless Industry

Judging by second-quarter earnings of wireless companies, it might appear like the industry has turned a corner after a couple of dismal years. The truth is, the industry benefited from an Apple-induced calm as customers waited for the new iPhone before dumping their carriers.

Big Oil Bites the Low-Price Bullet

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

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). ...

Daimler And Bosch Have Created An Automated Parking Garage

Daimler and Bosch have created an automated parking garage that parks cars for you without using a valet. The drawback is that the system won't work with just any car.

J.C. Penney partners with 'Project Runway' for exclusive merchandise, TV appearance

J.C. Penney has partnered with "Project Runway" for initiatives that include TV appearances and exclusive merchandise.

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

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

FireEye beats on earnings and raises forecast, sending stock up 6%

FireEye's rebound on Wall Street received some support Tuesday, as the company reported quarterly financial results that beat expectations and raised its projections for the rest of the year.

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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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