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25Oct2017 Market Close: Wall Street's DOW And SP 500 Indexes Register Worst Day In Seven Weeks, US Business Spending On Equipment Robust, New Home Sales Surge

Written by Gary

US stocks ended moderately lower today (SPY -0.5%), with the Dow and SP 500 suffering their worst day in seven weeks, on a batch of disappointing quarterly earnings reports and a rise in bond yields.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Dow, S&P 500 register worst day in seven weeks

NEW YORK (Reuters) - U.S. stocks ended lower on Wednesday, with the Dow and S&P 500 suffering their worst day in seven weeks, on a batch of disappointing quarterly earnings reports and a rise in bond yields.

Exclusive: Pfizer to launch consumer health sale in November - sources

LONDON (Reuters) - Pfizer plans to kick off an auction process for its consumer healthcare business in November, paving the way for a potential $15 billion-plus sale of the headache pill to lip balm business, sources close to the matter told Reuters.

Ryan says Republican tax plan must speed through choppy waters: Reuters interview

WASHINGTON (Reuters) - U.S. House of Representatives Speaker Paul Ryan said on Wednesday that a sweeping Republican tax-cut plan is entering its toughest phase yet as lobbyists swarm Congress to try to protect valuable tax breaks.

U.S. business spending on equipment robust, new home sales surge

WASHINGTON (Reuters) - New orders for key U.S.-made capital goods increased more than expected in September and shipments rose for an eighth straight month, pointing to robust business spending that should help to mitigate the impact on the economy from the hurricanes.

Nike gives upbeat forecast at investor conference, shares rise

(Reuters) - Nike Inc said on Wednesday it expects earnings per share to grow in the mid-teens over the next five years, driven by online sales and new product categories, sending its shares up by about three percent.

Equifax, reeling from hack, still has no earnings report date

NEW YORK (Reuters) - Equifax Inc is running out of time to schedule its first quarterly results report since the massive breach that exposed sensitive data on 145.5 million people and erased more than $4 billion of the credit reporting firm's market value.

Uber and Barclays team up to compete in U.S. card rewards war

(Reuters) - Uber Technologies Inc and a unit of Barclays plc are teaming up to offer a rewards-enriched credit card in the United States through the ride-service company's mobile phone app.

Deutsche Bank to pay $220 million in U.S. Libor probe

(Reuters) - Deutsche Bank AG has agreed to pay $220 million to settle U.S. regulatory charges that it defrauded government and nonprofit entities by manipulating Libor and other benchmark interest rates.

Coke's North American sales rise fuels market share gains over Pepsi

(Reuters) - Coca-Cola Co topped profit and revenue estimates for the third quarter on a 3 percent rise in North American sales, gaining market share over arch rival PepsiCo Inc as it sold more Sprite, teas and coffees.

Stocks, Bonds, Dollar, & Credit Dump As VIX Jumps To 6-Week High

Well that escalated quickly...

"Not" a record high... Trannies were worst on the day (not off the lows) but Boeing, Goldman, IBM, and Caterpillar weighed on the Dow. NOTE - Dow bounced off unch from Monday.

All Implied Vols spiked today (S&P VIX topped 13 - above its 200DMA)...but then it had to finish with a big VIX puke...

But the pattern is the same across every major index... a complete decoupling between risk and price...

Financials took a dip this afternoon on Gary Cohn headlines (but all S&P sectors ended red)...

FANG stocks erased yesterday's bounce...

U.S. Deepwater Offshore Oil Industry Trainwreck Approaching

SRSrocco

By the SRSrocco Report,

The U.S. Deepwater Offshore Oil Industry is a trainwreck in the making. The low oil price continues to sack an industry which was booming just a few short years ago. The days of spending billions of dollars to find and produce some of the most technically challenging deep-water oil deposits may be coming to an end sooner then the market realizes.

Drilling activity in the Gulf of Mexico hit a peak in 2013 when the price of oil was over $100 a barrel. However, the current number of rigs drilling in the Gulf of Mexico has fallen to only 37% of what it was in 2013. This is undoubtedly bad news for an industry that fetches upward of $600,000 a day for leasing these massive ultra-deepwater rigs.

One of the largest offshore drilling rig companies in the world is Transocean, headquartered in Switzerland. They lease ultra-deepwater rigs all over the globe. When the industry was still strong in 2014, nearly half of Transocean's fleet of 27 ultra-deepwater rigs were leased in the Gulf of Mexico. Even though Transocean was quite busy that year, its ultra-deepwater rig utilization was 89% during the first half of 2014, down from an impressive 95% in 1H 2013.

The term utilization represents the total number of working rigs in the fleet. So, in 2013, Transocean had 95% of its rigs busy drilling oil wells. But if we look at the following chart, we can see the disaster that has taken place at Transocean since the oil price fell by more than 50%:

Tesla Starts A Whole New Round Of Mass Firings, This Time At SolarCity

Poor Elon Musk really, really can't catch a break. Just over the past couple of weeks he's been forced to push back his Model 3 delivery schedule due to some "production hell" issues (like not knowing how to weld...a fairly critical component of auto manufacturing), got one-upped by Daimler who beat him to the punch by revealing an all electric semi-truck earlier today (several weeks ahead of Elon), was sued by former employees who alleged a "hostile and racist work environment" in his Fremont plant...and the list goes on and on.

Now, according to a report from CNBC, Tesla's mass firings have spread to SolarCity, a company which Musk just purchased last year despite warnings from concerned shareholders that it would be nothing more than a distraction. While it's unclear how many people have been fired from each division, former employees estimate that some 1,200 people have been let go in total between the various Tesla entities.

Employee dismissals at Tesla are continuing, according to six former and current employees, and have spread from its motor division to SolarCity offices across the U.S.

Echoing reports from earlier this month, these SolarCity employees say they were surprised to be told they were fired for performance reasons, claiming Tesla had not conducted performance reviews since acquiring the solar energy business.

All the people spoke under condition of anonymity, citing fears of retaliation from Tesla.

Mutual Fund Cash Hits All Time Lows

With the market now deep in what BofA has called a "Icarus Rally" melt-up phase, it is not surprising that retail investor cash levels are among the lowest ever as Joe Sixpack scrambles - as he always did just before the market crashes - to buy everything that institutions have to sell (and as we showed last week, they have a lot to sell). Recall that in its Q2 earnings call, discount retail brokerage Schwab confirmed that retail cash levels are near the lowest ever:

Now, it's clear that clients are highly engaged in the markets, we have cash being aggressively invested into the equity market, as the market has climbed. By the end of the second quarter, cash levels for our clients had fallen to about 11.5% of assets overall, now, that's a level that we've only seen one time since the market began its recovery in the spring of 2009.

And while low and mid-level retail "traders" may be all in, what about high net worth/private clients? We presented the answer after last week's Morgan Stanley earnings call:

Question: Hey good morning. Maybe just on the Wealth Management side, you guys had very good growth, sequential growth in deposits. There's been some discussion in the industry about kind of a pricing pressure. Can you discuss where you saw the positive rates in Wealth Management business and how you're able to track, I think, ab ...

Get Ready for an Imperial China

Xi Jinping, China's most powerful leader in decades, has failed to anoint a clear successor in a sharp break from previous convention.

Express Scripts Only Looks Cheap

The pharmacy-benefits manager has a low valuation but that masks challenges including growth, regulation and competition.

How AMD Can Hurt Intel

Intel Corp. is so big that rival Advanced Micro Devices can hardly dent its business. But good news at AMD can make investors question their optimistic outlook for the chip giant.

Bond Report: 10-year Treasury yield touches 7-month high as anticipation over Fed pick grows

Treasurys continue to weaken, pushing the 10-year yield to a seven-month high as investors await President Donald Trump's pick to lead the Fed.

The Ratings Game: Chipotle's weak earnings could be 'the new normal'

Chipotle's earnings miss has analysts disagreeing about the prospects for the fast-casual chain.

Trump Today: Trump Today: President say he didn't 'specifically' authorize Niger mission that killed American troops

President Donald Trump said Wednesday he didn't "specifically" sign off on a military mission in Niger that killed four U.S. soldiers, called 401(k) plans important but suggested they could be used as a negotiating point in tax reform, and told reporters there is "great unity" in the Republican Party.

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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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