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04Jan2018 Pre-Market Commentary: Dow Futures Rise 94 Points, Gold Steadies On Profit-taking, Palladium Hits Record High, US Initial Weekly Jobless Claims Rise 3,000 To 250,000

Written by Gary

US stock market index futures are higher after ADP jobs data easily tops estimates (SPY +0.3%) assuring new historic highs today. WTI crude has hit $62 a barrel for the first time in three years spurring new shale drilling.


Here is the current market situation from CNN Money

European markets are broadly higher today with shares in France leading the region. The CAC 40 is up 1.40% while Germany's DAX is up 1.22% and London's FTSE 100 is up 0.18%.

Looking at the last three columns (below), the first one (Actual), is what was reported this morning. The second column (Forecast) is what analysts had forecast and the third column is the previous report. Full calendar HERE.

What Is Moving the Markets

Here are the headlines moving the markets.

Dow eyes 25,000 on signs of strong global growth

(Reuters) - The Dow Jones Industrial Average was set to breach the 25,000 mark for the first time on Thursday as upbeat economic data from around the world boosted sentiment.

Oil at highest since 2015, as Iran unrest spooks market

LONDON (Reuters) - Oil rose further above $68 a barrel on Thursday to the highest since May 2015, supported by unrest in Iran that has raised concerns about supply risks, cold weather in the United States which is boosting demand and OPEC-led output cuts.

U.S. private sector adds 250,000 jobs in December, biggest rise since March

(Reuters) - U.S. private employers added 250,000 jobs in December, marking the biggest monthly increase since March, a report by ADP Research Institute showed on Thursday.

JPMorgan, Goldman Sachs come top of banker pay league in Britain

LONDON (Reuters) - JPMorgan and Goldman Sachs paid their top bankers in Britain an average of $1.5 million each in 2016, compared with $1 million for local rivals HSBC and Barclays , data released by the banks last year shows.

Walgreens quarterly profit falls 22 percent

(Reuters) - Drugstore chain Walgreens Boots Alliance Inc on Thursday reported a 22.1 percent fall in quarterly profit, partly hurt by an impairment charge related to its investment in Chinese wholesale partner Guangzhou Pharmaceuticals [GZPHA.UL].

Tesla falls on Model 3 production delay, but analysts upbeat

(Reuters) - Tesla Inc shares fell 3.5 percent in premarket trading on Thursday, setting the company up to lose nearly $1.9 billion in market value after it pushed back a production target for its much-anticipated Model 3 sedan yet again.

AT&T to launch 5G in U.S. by late 2018

(Reuters) - AT&T Inc , the No. 2 U.S. wireless carrier, said it would launch fifth-generation (5G) mobile network service in a dozen cities in the United States by late 2018, after international wireless standards for the network were finalised last month.

Higher Berlin court to rule on challenge to Niki insolvency

FRANKFURT (Reuters) - A Berlin court on Thursday rebuffed a legal challenge to the insolvency filing of airline Niki, which could derail the sale of the Air Berlin unit to Britain's IAG , and referred the case to a higher court for a ruling.

German tax office targets Chinese online retailers: Handelsblatt

FRANKFURT/BERLIN (Reuters) - German tax investigators have seized goods and accounts of about 100 Chinese online retailers selling products via Amazon.com Inc in Germany and failing to pay sales taxes, daily Handelsblatt reported on Thursday, citing industry sources.

Zandi Warns Of "Overheating" As ADP Payrolls Surge In December

According to ADP, US firms added 250k jobs in December - above the highest estimate of 220k and the highest print since March 2017.

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Service proving jobs dominated, adding 222.4k and Goods-producing jobs 27.8k - this is the biggest surge in service-producing jobs since June 2016...

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And small and medium sized business gained most...

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"We've seen yet another month where the labor market has shown no signs of slowing," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "Throughout the year there was significant growth in services except for an overall loss of jobs in the shrinking information sector. Looking at company size, small businesses finished out 2017 on a high note adding more than double their monthly average for the past six months."

Mark Zandi, chief economist of Moody's Analytics, said, "The job market ended the year strongly. Robust Christmas sales prompted retailers and delivery services to add to their payrolls.

Morgan Stanley Wealth Sells All Junk Bond Holdings, Warns Of Recession Risk

According to Morgan Stanley Wealth Management, it is too late to buy junk bonds in this market cycle, which is why one of the otherwise most bullish banks is cutting its high-yield bond holdings to zero, Mike Wilson, the CIO of Morgan Stanley Wealth writes in his 2018 outlook.

While tax cuts are expected to inject fresh momentum into high-flying stocks, the boost may be short-lived and mask balance-sheet weaknesses, Wilson wrote in his Wednesday note as discussed by Bloomberg. Wilson also believes - as do we - that all the Trump tax reform will do is accelerate the next downturn by "bringing forth the excesses we typically see before a recession."

"While the tax cuts just enacted in the U.S. may lead to better growth in the short term, they may also bring forth the excesses we typically see before a recession — which is something credit markets figure out before equities." As a result "we recently took our remaining high yield positions to zero as we prepare for deterioration in lower-quality earnings in the U.S. led by lower operating margins."

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With Wilson expecting operating margins to peak due to lower tax rates, rather than from rising sales and profitability, he now recommends selling yield and buying short-term fixed income.

And while the Morgan Stanley CIO does not except a recession in 2018 despite a mature market where making money becomes more difficult, as the cyclical peak approaches he warns that "investors should prepare ...

"Legal Action Is Imminent" : Trump Slaps Bannon With Cease-And-Desist

President Trump's lawyers slapped former White House Chief Strategist Stephen Bannon with a cease and desist letter Wednesday night demanding he refrain from further disparaging the President and his family, reports ABC News.

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In a statement issued today, Trump attorney Charles Harder issued a statement that "legal notice was issued today to Stephen K. Bannon," adding "his actions of communicating with author Michael Wolff regarding an upcoming book give rise to numerous legal claims including defamation by libel and slander, and breach of his written confidentiality and non-disparagement agreement with our clients. Legal action is imminent."

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As ABC reports, in the letter to Bannon, Harder, writes,

"You [Bannon] have breached the Agreement by, among other things, communicating with author Michael Wolff about Mr. Trump, his family members, and the Company, disclosing Confidential Information to Mr. Wolff, and making disparaging statements and in some cases outright defamatory statements to Mr. Wolff about Mr. Trump, his family members, and the Company, knowing that they would be include ...

San Francisco Jolted Awake By Magnitude 4.4 Earthquake

Bay Area residents were jolted awake early Thursday morning when a 4.4 magnitude earthquake centered on the Hayward fault near the UC-Berkeley struck, according to the U.S. Geological Survey.

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The USGS initially registered it as a 4.7 magnitude quake, downgraded it quickly to a 4.5 and then at 3:28 a.m. downgraded it again to a 4.4

The quake struck at struck at 2:39 a.m. and was felt throughout the East Bay, North Bay and San Francisco. The USGS website said people reported feeling the quake 40 miles (64 kilometers) south in San Jose.

While many were jolted out of their beds, there was no preliminary reports of damage. Predictably, residents immediately took to social media to describe their emotional state:

Holy shit was that an Earthquake?

— Adam Singer (@AdamSinger) January 4, 2018

Everyone calm down- that was just Berkeley collapsing under the weight of its own self-importance. #earthquake

— ‚ĚĆuertespin (@Deaderspin) January 4, 2018

Bitcoin Isn't a Currency, It's a Commodity---Price It That Way

Bitcoin enthusiasts call it a currency, but it has a lot in common with gold. And if bitcoin is a digital precious metal, investors should start pricing it that way, by watching the fundamentals.

Tesla's Model 3 Story Is Getting Old

The company's news on delivery of its Model 3 sedans in the fourth quarter badly missed the mark and continued a history of company forecasts poor enough to be construed as misleading.

Dominion Pounces on Scana's Nuclear Woes

Dominion Energy's bid for Scana comes partly at the expense of ratepayers and shareholders stung by a nuclear plant debacle.

November 2017 Leading Index Review: Growth Rates Mixed

Written by Steven Hansen

This post is a review of all major leading indicators follows - and their trends are generally indicating stronger growth.

Economic Report: Jobless claims up 3,000 to 250,000 in last week of 2017

Initial U.S. jobless claims rose 3,000 to 250,000 in the week ended Dec. 30, the Labor Department said Thursday.

North Korea comes close to bombing one of its own cities by accident: report

A failed ballistic missile test crashed into a city near the country's capital Pyongyang in April, narrowly avoiding a "catastrophic accident" in a populated area, according to a report in The Diplomat.

Need to Know: These fatal flaws lurk at the heart of the bitcoin craze, says Mr. Money Mustache

It feels like a "lost his mind" morning, with the Trump-Bannon brouhaha, the crypto craze and the seemingly unsinkable Dow all getting attention. Today's call is a downbeat take on bitcoin from popular personal finance blogger Mr. Money Mustache.

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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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