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04Aug2017 Market Update: Wall Street Higher, DOW Sets New Record, US Rig Count Is Down 4 Rigs, WTI Remains In The Low 49 Handle

Written by Gary

US stock markets have fractionally remained in the green (SPY +0.2%) after the DOW set another new historical high (22,089.05). Small cap are flat and may end up in the red.


Here is the current market situation from CNN Money

North and South American markets are higher today with shares in Mexico leading the region. The IPC is up 0.16% while Brazil's Bovespa is up 0.13% and U.S.'s S&P 500 is up 0.13%.

Rig Count Overview & Summary Count

U.S. Rig Count is down 4 rigs from last week to 954, with oil rigs down 1 to 765 and gas rigs down 3 to 189.

U.S. Rig Count is up 490 rigs from last year's count of 464, with oil rigs up 384, gas rigs up 108, and miscellaneous rigs down 2 to 0.

The U.S. Offshore Rig Count is down 7 rigs from last week to 17 and unchanged year over year.

What Is Moving the Markets

Here are the headlines moving the markets.

Volkswagen executive pleads guilty in U.S. diesel emissions case

DETROIT (Reuters) - Volkswagen AG executive Oliver Schmidt pleaded guilty on Friday in U.S. District Court in Detroit in connection with a massive diesel emissions scandal that has cost the German automaker as much as $25 billion.

Strong U.S. jobs report bolsters case for further Fed tightening

WASHINGTON (Reuters) - U.S. employers hired more workers than expected in July and raised their wages, signs of labor market tightness that likely clears the way for the Federal Reserve to announce a plan to start shrinking its massive bond portfolio.

Dow on track to close higher for ninth straight day

(Reuters) - U.S. stocks pared gains to trade slightly up in early afternoon trading on Friday, with the Dow on track to close higher for the ninth straight day after data showed U.S. employers hired more workers than expected in July.

Wells Fargo to pay U.S. $108 million over veterans' loans

(Reuters) - Wells Fargo & Co will pay the U.S. government $108 million to settle a whistleblower lawsuit claiming it charged military veterans hidden fees to refinance their mortgages, and concealed the fees when applying for federal loan guarantees.

Toyota takes stake in Mazda, links up for $1.6 billion U.S. plant

TOKYO (Reuters) - Toyota Motor Corp said on Friday it planned to take a 5 percent share of smaller Japanese rival Mazda Motor Corp, as part of an alliance that will see the two build a $1.6 billion U.S. assembly plant and work together on electric vehicles.

OCC may penalize Wells Fargo over improper auto insurance charges: WSJ

NEW YORK (Reuters) - Wells Fargo & Co may face regulatory sanctions for having improperly charged customers for auto insurance they did not seek, the Wall Street Journal reported on Friday.

Payroll firm ADP seeks to fend off activist investor Ackman

(Reuters) - Automatic Data Processing Inc said on Friday it had rejected a call from William Ackman's activist hedge fund Pershing Square Capital Management LP for more time in his bid to gain control of the U.S. human resources outsourcing company.

Clariant, Huntsman investor backs merger, fears fight is a distraction

ZURICH (Reuters) - A big investor in Clariant and Huntsman backs the chemical companies' planned $20 billion merger, saying it would unlock synergies and lift profits more than any alternative from activists seeking to derail the deal.

Elliott discloses NXP stake, Qualcomm's $38 billion bid in its radar

(Reuters) - Activist investor Elliott Management Corp on Friday disclosed a 6 percent stake in chipmaker NXP Semiconductors NV , which is being bought by Qualcomm Inc for $38 billion, and indicated it could engage in talks to boost the offer price.

Krauthammer Warns Impeachment Would Be "A Catastrophic Mistake"

"I think [impeaching Trump] would be a catastrophic mistake," warned outspoken conservative, and Fox News contributor, Charles Krauthammer, noting that there's no evidence Trump has committed any crime.

.@krauthammer on Dems wanting @POTUS impeachment: "I think that would be a catastrophic mistake." #Tucker pic.twitter.com/lHLj6quOLO

— Fox News (@FoxNews) August 4, 2017

As The Hill reports, Krauthammer stressed that he doesn't defend Trump, but only thinks that impeachment is a mistake.

"Again, I think he's unfit," Krauthammer said, "but that's not the grounds for removal."

"I don't think he's very well fit for the presidency. But fitness is not a reason for impeachment and removal."

Crucially, Krauthammer notes, as demonstrated by last night's rally in West Virginia...

Trump's base is still firmly behind him and worries ...

Sessions Declares War On Leakers, Threatens Press With "Criminal Action"

President Donald Trump's strategy of publicly shaming Attorney General Jeff Sessions to force him to aggressively pursue the leakers who have been a persistent source of agitation for his administration appears to have worked. After announcing during a press conference last month that he wanted Sessions "to go full-bore" in his pursuit of leakers, the "beleaguered" attorney general appears to be doing exactly that.

During a live press briefing on Friday that was tantamount to a declaration of war, Sessions said the Department of Justice will be cracking down on leaks of classified information, and is considering subpoenaing journalists to force them to reveal their sources in the Trump administration.

Furthermore, the attorney general boasted that scrutiny of leakers is already a priority for the DOJ, claiming that the number of open leak investigations has tripled during the Trump administration. Under the new policy framework, the FBI will create a counterintelligence unit specifically to manage these cases, according to the Hill.

"We are taking a stand," Mr Sessions said. "This culture of leaking must stop," according to the Financial Times. < ...

The "Dusenberry Effect" In The U.S. Economy

Via Global Macro Monitor,

Just saw this chart on Zero Hedge yesterday, which takes me back to the days of graduate school and an unfinished Ph.D. dissertation.

One part of the "Dusenberry Effect" basically states that consumers do not give up their consumption patterns very easy even if their incomes decline.

They, in effect, "ratchet" down their living standard very slowly by first having a second wage earner enter the workforce as we saw in the 1970's when women began to enter the workforce en masse and then by taking on debt to finance their previous standard of living.

...[a] significant part of Duesenberry's relative income hypothesis is that it suggests that when income of individuals or households falls, their consumption expenditure does not fall much. This is often called a ratchet effect. This is because, according to Duesenberry, the people try to maintain their consumption at the highest level attained earlier. This is partly due to the demon­stration effect explained above. People do not want to show to their neighbours that they no longer afford to maintain their high standard of living.

Tesla Ignores Q2 Record Cash Burn And Slashes Its Model X And Model S Prices

So what do you do when you've just burned through a record $1.2 billion of cash in one quarter, expect to burn an additional $2 billion in capex in the second half of the year and haven't a prayer of generating positive earnings at any point in the near future? Well, you slash your product prices, of course.

Apparently this is exactly the strategy that Elon Musk has decided to pursue with his Model X after quietly slashing its price tag from $82,500 to a far more affordable $79,500 last night. Tesla explained the price cut via the following statement:

"When we launched Model X 75D, it had a low gross margin. As we've achieved efficiencies, we are able to lower the price and pass along more value to our customers."

But it wasn't just the base MSRP on the Model X that got a price cut, as electrek points out, Tesla also decided to cut prices on the their Model S and throw in their $5,000 premium package for free.

All dual Motor Model S vehicles also got a slight $1,500 price drop, but the Model S P100D and Model X P100D were the most affected by last night's changes.

Tesla updated the options of the vehicles to add more premium features as standards.

The "$5,000" Premium Package is now being absorbed into standard features for top versions of Tesla's vehicles. Here's the Premium package and the new standard features on a Model S P100D:

No Cure in Sight for Teva

Don't be fooled by the low valuation. Teva Pharmaceutical Industries is a dangerous stock to own.

Square: Don't Overpay for Payments Hype

Payments company Square turned in a solid quarter, but its shares are just too expensive.

A Ferrari SUV? Investors Should Hope So

Ferrari is speeding toward a fork in the road. It shouldn't hesitate to take the more ambitious path.

June 2017 Trade Balance Improved

Written by Steven Hansen

Trade data headlines show the trade balance improved from last month.

White House may use lie detectors to find leakers, but do they work?

In the era of fake news, few consumer-facing tools can accurately detect lies.

AMC shares bounce back from record lows

The cinema operator released earnings it had warned about earlier this week and unveiled plans for a $100 million share buyback program.

Oprah's windfall on Weight Watchers hits $340 million

With Weight Watchers soaring after a blowout earnings report, Oprah Winfrey could make about $340 million on her initial investment of $43 million.

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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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