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11Aug2017 Market Close: Wall Street Snaps A Three Day Losing Streak, Small Caps Up 0.8 Percent, Crude Prices Trend Fractionally Upwards As The US Dollar Trends Down

Written by Gary

US major indexes ended in the green, but not are equal as the small caps skyrocketed to almost 1% higher while the DOW was only able to close up 14 points (SPY +0.2%).

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Wall Street rebounds on Fed bets but set for weekly loss

(Reuters) - The three major U.S. stocks indexes were on track to snap a three-day losing streak on Friday, as investors bet that tepid inflation data would stunt U.S. rate hikes, even as the United States and North Korea stepped up an aggressive war of words.

Exclusive: Saudi Arabia favours New York for Aramco listing despite risks - sources

DUBAI/RIYADH/LONDON (Reuters) - Saudi Arabia favours New York for the main foreign listing of state oil giant Aramco, even though some financial and legal advisers have recommended London as a less problematic and risky option, people familiar with the matter told Reuters.

Snap shares hit record low as user growth miss unnerves investors

(Reuters) - Snap Inc's shares fell more than 14 percent to hit a record low on Friday morning after messaging app Snapchat's daily active user growth missed expectations for the second quarter in a row.

GM blasts $1 billion deal between ignition switch plaintiffs, creditor trust

(Reuters) - Plaintiffs suing General Motors Co over faulty ignition switches and other alleged vehicle defects have reached a $1 billion settlement requiring the automaker to turn over that amount of stock, a lawyer for the plaintiffs said in a court hearing on Friday.

Audits show lax oversight by Wisconsin agency counting Foxconn jobs

CHICAGO (Reuters) - The Wisconsin agency tasked with holding Foxconn accountable for delivering up to 13,000 jobs in exchange for $1.5 billion in state payroll tax credits has a history of failing to verify job-creation claims and rewarding companies that fall short of quotas, according to state audits.

Modest rise in U.S. consumer prices may delay Fed rate hike

WASHINGTON (Reuters) - U.S. consumer prices rose slightly in July as higher food costs were partly offset by falling prices for a range of other goods, suggesting benign inflation that could persuade a cautious Federal Reserve to delay raising interest rates until December.

Amazon looks to new food technology for home delivery

SAN FRANCISCO (Reuters) - Amazon.com Inc is exploring a technology first developed for the U.S. military to produce tasty prepared meals that do not need refrigeration, as it looks for new ways to muscle into the $700 billion U.S. grocery business.

Cash-strapped SoundCloud gets new funds and top management

FRANKFURT (Reuters) - SoundCloud, the world's most popular streaming music app, but one that has struggled to find a profitable business model, said it received new funding on Friday, insulating it from potentially running out of cash this year.

Monte dei Paschi reports 3.1 billion euro loss as state steps in

MILAN (Reuters) - Monte dei Paschi di Siena reported a 3.1 billion euro ($3.7 billion) second-quarter loss after additional writedowns on the bad loans Italy's fourth biggest bank is selling as part of its bailout by the state.

Small Cap Rout Is Flashing Red Flag For US Economy

The post-election small cap bounce in US stocks has now been completely erased as it seems tax-reforms have now been entirely priced-out of markets. However, as BofAML notes, the demise of small cap stocks relative to the broad market augurs badly for forward-looking economic growth...

The Russell 2000 is now the worst performing major index this year, up just 1% YTD...

Via BofAML,

After outperforming large caps by over 10ppt in the one month following the US election, small caps have all but wiped out that outperformance over the subsequent eight months.

And while we remain bearish on small caps, and see far more reasons to be cautious, we view tax reform as the biggest risk to our bearish outlook now that it has essentially been priced out of the market.

Small cap earnings growth continues to lag

Small cap earnings growth has lagged that of large caps in each of the past four years, and that streak appears on track to continue, at least for the first half of 2017.

5 Best Off-Grid Currencies That Don't Require Electricity

Via The Daily Bell

When zombies attack or when the electric grid is taken down by an EMP or solar flare, trade must go on.

Currently, about 90% of U.S. dollars exist only digitally. Even if fiat cash remained valuable post-apocalypse, it would be pretty hard to come by.

Bitcoin and other cryptocurrencies are great, but still rely on electricity and the internet to function.

So what are the best off the grid currencies for a worst case scenario?

A currency stores the value of labor or goods that are otherwise hard to store, trade, and transport.

How To Prepare For Another Market Face-Pounding

Authored by MN Gordon via EconomicPrism.com,

"Markets make opinions," goes the old Wall Street adage. Indeed, this sounds like a nifty thing to say. But what does it really mean?

Perhaps this means that after a long period of rising stocks prices otherwise intelligent people conceive of clever explanations for why the good times will carry on. Moreover, if the market goes up for long enough, the opinions become so engrained they seek to explain why stock prices will go up forever.

After nine years of near uninterrupted stock market gains, new opinions are being offered to explain why the stock market will be bathed in sunshine indefinitely.

For example, the late-1990s term Goldilocks is again being used to describe why the slow growth, low unemployment, economy is good for stocks. Apparently, if an economy is not-too-cold, but not-too-hot, stocks can go up lots and lots.

What's more, these days everything is so perfect that Goldilocks is no longer a good enough descriptor. This was the conclusion that JPMorgan's Jan Loeys recently reached, no doubt after peering at a 5-year S&P 500 index chart:

"We nicknamed this world 'Better than Goldilocks' two weeks ago.

"With global growth breaking out from its 7-year range and inflation still surprisingly down, we are graduating from a not-too-hot, not-too-cold Goldilocks world to an even better one for risk assets. It will not last forever, but could easil ...

UBS Explains Why The Next Credit Unwind Will Be Unlike Anything We've Seen Before

Several weeks ago, Janet Yellen boldly declared "I don't believe we will see another crisis in our lifetime." For the rest of us who live in reality there is little doubt that the latest Fed-fueled credit bubble will eventually burst in epic fashion and once again lay waste to the personal balance sheets of millions of Americans. And while the timing of market collapses can never be predicted, UBS strategist Matthew Mish says there is one thing that is certain about the next credit unwind, it will be unlike anything we've seen before.

To summarize, Mish notes that unlike previous credit expansion cycles, this current one has been dominated not by traditional banks but rather by non-bank lending entities and government backed loans, especially in riskier subprime residential, auto and student loans. Moreover, unlike traditional lenders, Government debt tends to be much slower to react to things like rising delinquency rates...you know, because it's just taxpayer money so who cares.

First, non-bank lending (as a share of net loan growth) has accounted for about two thirds of the total expansion, akin to prior cycles. However, the non-bank share has been elevated in residential real estate (at 101%), but depressed in commercial real estate (30%) versus history. Second, the role of federal credit support has been very material, with a significant 45% of net loan growth this cycle coming from government (or government guaranteed) loans. In particular, government backed loans (as a share of the debt stock) now comprise a record 63% of residential and 29% of consumer loans, respectively, up 9% and 18% from 2010. In nominal terms, non-governme ...

The Price Still Isn't Right for Consumers

Low inflation is a gift to consumers, but not enough of one to get them to meaningfully boost their spending.

Restoration Hardware's Wild Ride to Nowhere

The motto for Restoration Hardware-owner RH is: "Where less is more and minimal is magnified." The same awkward phrase applies to RH's stock

The Price of Censorship for China's Internet Giants

By blocking foreign competition, China's censorship regime has groomed the country's internet firms into some of the world's biggest companies. Now Big Brother is turning against the behemoths.

10 foods you should make — NOT buy

These pricey foods are easy to rustle up at home.

Futures Movers: Oil gains for the day, falls for the week

Oil ends higher Friday, finding some support as the number of active U.S. oil rigs rose only slightly, but prices are still lower for the week after reports of a climb in July OPEC crude production, and as tensions tied to North Korea keep investors on edge.

How Trump uncertainty is casting a shadow on earnings season

The double-digit growth in S&P 500 earnings is masking underlying weakness in consumer spending as subdued wage growth and unfilled policy promises have hampered business investment.

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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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