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16Jan2018 Market Update: Dow Briefly Tops 26,000 Mark Then Slides, Crude And Gold Trend Down Fractionally, Upbeat Results From UnitedHealth And Citigroup

Written by Gary

Dow breaks above 26,000 for the first time and marks the fastest 1,000-point ascent. The DOW has eased fractionally from this morning high mark (SPY +0.2%) as earnings season got off to a strong start.


Here is the current market situation from CNN Money

North and South American markets are higher today with shares in Brazil leading the region. The Bovespa is up 0.42% while Mexico's IPC is up 0.36% and U.S.'s S&P 500 is up 0.15%.

Traders Corner - Health of the Market

What Is Moving the Markets

Here are the headlines moving the markets.

Dow briefly tops 26,000 mark

(Reuters) - The Dow eased slightly after hitting the 26,000 mark for the first time on Tuesday, as earnings season got off to a strong start following upbeat results from UnitedHealth and Citigroup.

Citigroup reports $18 billion loss on one-time tax items

(Reuters) - Citigroup Inc posted an $18-billion quarterly loss on Tuesday because of charges related to a new U.S. tax law, but its adjusted earnings beat Wall Street expectations and management signaled that the bank may soon lift financial performance targets.

Nestle sells U.S. candy to Ferrero amid health push

LONDON/MILAN (Reuters) - Swiss food group Nestle agreed to sell its U.S. confectionery business to Italy's Ferrero for $2.8 billion, it said on Tuesday, the first major sale from CEO Mark Schneider and a small step on its path towards healthier products.

Exclusive: Saudi Aramco snubs UBS and Bank of America for listing roles - sources

LONDON (Reuters) - Saudi Aramco has not invited UBS and Bank of America Merrill Lynch to pitch for senior advisory roles in its stock market listing because they have not lent money to the state oil giant in recent years, according to five finance sources.

Exclusive: U.S. lawmakers urge AT&T to cut commercial ties with Huawei - sources

WASHINGTON (Reuters) - U.S. lawmakers are urging AT&T Inc, the No. 2 wireless carrier, to cut commercial ties to Chinese phone maker Huawei Technologies Co Ltd and oppose plans by telecom operator China Mobile Ltd to enter the U.S. market because of national security concerns, two congressional aides said.

Britain investigates Carillion directors after collapse

LONDON/CAMBRIDGE, England (Reuters) - Britain ordered a fast-track inquiry into the role played by Carillion's directors in the failure of the construction and services group, as some of its thousands of small suppliers started to lay off workers on Tuesday.

German strikes spread to Daimler, union mulls escalation

BERLIN/FRANKFURT (Reuters) - Tens of thousands of German industrial workers downed tools on Tuesday in support of trade union IG Metall's demands for a 6 percent pay rise and a right to the first new cut in weekly working hours since the 1980s.

GM sees flat 2018 earnings, with pickups picking up in 2019

DETROIT (Reuters) - General Motors Co shares rose on Tuesday after the company said 2018 earnings will be largely flat compared with 2017 and forecast higher profits in 2019 when its revamped line of high-margin pickup trucks hits the U.S. market.

Maersk, IBM to launch blockchain-based platform for global trade

COPENHAGEN (Reuters) - The world's largest container shipping firm A.P. Moller-Maersk is teaming up with IBM to create an industry-wide trading platform it says can speed up trade and save billions of dollars.

David Einhorn Tells His Clients: "This Must Be Frustrating To You" - Full Greenlight Letter

In his latest quarterly letter to clients, Greenlight Capital's David Einhorn reported that the funds declined 1.6 percent in Q4, bringing the total 2017 return to 1.6%, far below the S&P's 21.8% and does something few hedge fund managers do: apologize to his clients, saying "this must be frustrating to you, our Partners. It is certainly frustrating to us."

As he often, Einhorn begins his letter with a sports reference, only instead of his preferred pastime, poker, this time he uses fantasy baseball:

David began playing fantasy baseball in 1985. In fantasy baseball you draft a "team" of individual players from different real-life major league teams at the beginning of the season and compete against teams picked by your friends. The player whose team does the best across a variety of statistical areas wins. In the pre-internet and even pre-ESPN Baseball Tonight days, you tracked players using newspaper box scores. Unless you saw the game, there was no other easy way to find out how your players did. To get a clue, you might get the scores from the local TV news. If you owned the best hitter on the Blue Jays and you saw the Blue Jays scored 10 runs, there was a good chance that the next day's box scores would bring good news for your team. A teenager could fall asleep to that kind of happy thought.

However, once in a while the morning box score would reveal that despite the Blue Jays scoring 10 runs, your slugger had an uneventful and useless 1 for 5 game. It's disappointing and feels worse than if your player had the same result in a game where the Blue Jays were shut out (unless you are also a Blue Jays fan). And, it doesn't matter if your player was swinging well and hitting the ball hard every time or whether his evening was marred by ugly strikeouts, pop-ups and double plays. 1 for 5 is 1 for 5. Fantasy baseball only counts the statistical results.

Why the analogy? Well, ...

The US Is Developing Two New Nuclear Weapons

As military suspicions between the US and Russia escalate to levels last seen during the Cold War, both countries are trying to bolster their defenses and their military readiness to hedge against a plethora of geopolitical risks, from nuclear war on the Korean peninsula to a direct military confrontation between China and the US, or possibly Russia and the US.

In September, Russian President Vladimir Putin was accused of provoking NATO by marshaling 10,000 Russian and Belarusian troops along Russia's western border with the Baltic states for their "Zapad" military exercises - something that prompted an outcry from NATO.

Putin has vigorously defended Russia's right to carry out military exercises and ballistic missile tests, arguing that both the US and NATO have been "accelerating build-up of infrastructure in Europe" in violation of the 1987 treaty on the elimination of intermediate-range and shorter-range missiles. In a similar vein, the US has accused Russia of violating the same treaty with missile tests of its own.

Meanwhile, as the US and its allies have accused Russia of meddling in Western elections, the number of NATO troops deployed near the Russian border has tripled in recent years as tensions have percolated.

With tensions at a fever pitch, the Wall Street Journal reported Tuesday that the Pentagon is developing two new nuclear missiles that would be capable of deployment from a nuclear submarine.

Bannon Subpoenaed By Mueller In Russia Probe

The bad news for Steve Bannon just keeps on coming.

Not long after Bannon was bounced from Breitbart following his feud with Trump over his comments in Michael Wolff's book, moments ago the NYT reports that Trump's former chief strategist was subpoenaed last week by the special counsel, Robert Mueller to testify before a grand jury as part of the investigation into possible links between Trump's associates and Russia.

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And the reason why stocks dipped modestly and the VIX bounced on the news, is that the subpoena marks the first time Mueller is known to have used a grand jury subpoena to seek information from a member of Mr. Trump's inner circle.

After excerpts from the book, "Fire and Fury: Inside the Trump White House," were published this month, Mr. Trump derided Mr. Bannon publicly and threatened to sue him for defamation. Mr. Bannon was soon ousted as the executive chairman of the hard-right website Breitbart News.

Mueller reportedly issued the subpoena after Mr. Bannon was quoted in a new book criticizing Mr. Trump, saying that Donald Trump Jr.'s 2016 meeting with Russians was "treasonous" and predicting that the special counsel investigation would ultimately center on money laundering.

According to the NYT, the subpoena could be a negotiating tactic:

Mr. Mueller is likely to allow Mr. Bannon to forgo the grand jury appearance if he agree ...

"Buy Puts Now": Morgan Stanley Issues A Warning As S&P Calls Hit All Time Highs

Pitching hedges when the market is in the middle of a blow off top is a tough sell. But, according to Chris Metli, executive director in Morgan Stanley's Inst. Equity Division, that's exactly what traders should be doing, for three reasons: 1) positioning, 2) pricing, and 3) potential catalysts, which "all suggest now is an attractive time to buy Feb puts as a hedge - and it is a rare event when all align."

Here is how one of the top Morgan Stanley cross-asset quants justifies his reasoning:

First this is not a call for the final top - positive sentiment and positioning can have momentum of their own and absent some kind of shock likely take the market higher. But the rally is getting more fragile - as MS Equity Strategist Mike Wilson notes in Weekly Warm-up: Euphoria! (Jan 16, 2018) "The bottom line is that we have entered the late cycle euphoria stage we predicted a year ago." and "it is more likely the S&P 500 will reach our bull case of 3,000 before it's over. We just want to make sure investors appreciate this is higher, not lower risk than the rally we experienced last year."

1. The rally is getting riskier because of positioning - investors have aggressively chased beta with both futures and options. Over the last two weeks investors have bought the 2nd largest amount of S&P 500 futures (as measured by MS Trade Pressure) since at least 2010, while at the same time net holdings of S&P 500 calls are the highest and the net holdings of S&P 500 puts are the lowest since at least 2010.

Trouble Ahead for the Treasury Market

Inflation, less central bank bond buying, an increase in supply—there are plenty of reasons for Treasury yields to go a lot higher this year.

The Dollar's Decline Has a Flipside for Markets

It isn't a happy new year for dollar bulls, with the currency starting 2018 by falling to a three-year low. The weak dollar has consequences elsewhere for central banks and markets—but isn't necessarily something to be feared.

Don't Fear a Biotech Correction

Patience from biotechnology investors may be needed this year, but it will be rewarded in the long run.

Next Avenue: Divorce after 50: What I wish I had known beforehand

People who went through a late-in-life divorce share six things they would tell their younger selves

Next Avenue: With the new tax law, you need to update your estate plan

This is an important time to schedule a meeting with your estate planner and ask these 5 questions.

The Technical Indicator: January breakout accelerates, S&P 500 clears 20-day volatility bands

Each big three U.S. benchmark has staged a massive breakout to start 2018, confirming its primary uptrend, writes Michael Ashbaugh.

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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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