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25Jan2018 Market Close: Wall Street Surrenders Gains After Trump Talks Up Dollar, DOW Closes At New Record High For 10th Time This Year, WTI Crude Lower, US Dollar Higher

Written by Gary

The DOW Jones Industrial Average hit a record high today although much of Wall Street relinquished earlier gains after President Donald Trump said he wants a strong dollar.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.

Exclusive: Viacom, CBS CEOs have discussed potential merger - sources

(Reuters) - Viacom Inc Chief Executive Bob Bakish and CBS Corp CEO Leslie Moonves have had an exploratory discussion about merging the two companies, sources familiar with the situation told Reuters on Thursday.

Wall St. surrenders gains after Trump talks up dollar

NEW YORK (Reuters) - The Dow Jones Industrial Average hit a record high on Thursday although much of Wall Street relinquished earlier gains after President Donald Trump said he wants a strong dollar.

U.S. new home sales post largest drop in 16 months; jobless claims up

WASHINGTON (Reuters) - Sales of new U.S. single-family homes fell more than expected in December, recording their biggest drop in nearly 1-1/2 years, likely as the boost from the replacement of flood-damaged houses in parts of the South affected by hurricanes faded.

Exclusive: J&J out of race for Pfizer's $20 billion consumer unit as deadline looms

LONDON/NEW YORK/FRANKFURT (Reuters) - Johnson & Johnson has pulled out of the race to buy Pfizer's consumer health business, leaving GlaxoSmithKline and Reckitt Benckiser among those preparing bids, according to sources familiar with the matter.

Bombardier expected to lose U.S. trade dispute: Canadian government source

MONTREAL (Reuters) - Planemaker Bombardier Inc is expected to lose a hotly contested U.S. trade dispute this week, a Canadian government source told Reuters on Thursday, likely inflaming tensions between the two countries during talks to modernize NAFTA.

Nestle, Atari settle lawsuit over Kit Kat campaign

(Reuters) - Nestle SA has settled a lawsuit in which Atari SA accused the Swiss food company of using the hit 1970s video game "Breakout" without permission to sell Kit Kat bars.

U.S. panel rejects Philip Morris claim iQOS device cuts disease risk

WASHINGTON (Reuters) - Philip Morris International Inc should not be allowed to claim that its iQOS electronic tobacco device can reduce the risk of tobacco-related diseases compared with cigarettes, an advisory panel to the U.S. Food and Drug Administration said on Thursday.

Keystone XL pipeline route change is not major issue: TransCanada CEO

(Reuters) - TransCanada Corp does not see a route change for the proposed Keystone XL oil pipeline to Nebraska as a major issue, and the company is confident that a key regulatory approval will stand, Chief Executive Russ Girling said on Thursday.

Caterpillar profit beats estimates on buoyant global demand

(Reuters) - Caterpillar Inc's profit trounced forecasts for the seventh straight quarter on Thursday as buoyant global demand from construction, mining and energy industries drove a 35-percent surge in equipment sales.

Trump Rescues Dollar From Mnuchin-Massacre, Yield Curve Crashes

Despite Mnuchin's and Trump's best efforts, dollar-owners ended the day like this...

Before we start on the markets shenanigans, two quick things:

First - South Korea's economy reported a contraction last night, its first since the financial crisis - as exports crashed...

And Second - US economic data has been notably disappointing this year (the worst start to a year since 2015)...

Not pretty:



Retail Sales Miss

Empire Fed Miss

Housing Starts Miss

Philly Fed Miss

UMich Confidence Miss

Richmond Fed Miss

Markit US PMI Miss

Existing Home Sales Miss

New Home Sales Miss

But then again, ...

Why We're Underestimating American Collapse

Authored by Umair Haque via Eand.co,

The Strange New Pathologies of the World's First Rich Failed State

You might say, having read some of my recent essays "Umair! Don't worry! Everything will be fine! It's not that bad!" I would look at you politely, and then say gently, "To tell you the truth, I don't think we're taking collapse nearly seriously enough."

Why? When we take a hard look at US collapse, we see a number of social pathologies on the rise. Not just any kind. Not even troubling, worrying, and dangerous ones. But strange and bizarre ones. Unique ones. Singular and gruesomely weird ones I've never really seen before, and outside of a dystopia written by Dickens and Orwell, nor have you, and neither has history. They suggest that whatever "numbers" we use to represent decline - shrinking real incomes, inequality, and so on - we are in fact grossly underestimating what pundits call the "human toll", but which sensible human beings like you and I should simply think of as the overwhelming despair, rage, and anxiety of living in a collapsing society.

Let me give you just five examples of what I'll call the social pathologies of collapse — strange, weird, and gruesome new diseases, not just ones we don't usually see in healthy societies, but ones that we have never really seen before in any modern society.

America has had 11 school shootings in the last 23 days. That's one every other day, more or less. That statistic is alarming enough — but it is just a number. Perspective asks us for comparison. So let me put that another way. America has had 11 school shootings in the last 23 days, which is more than anywhere else in the world, even Afghanistan or Iraq ...

Deutsche: The Fed Now Appears Powerless To Stop This "Unprecedented Bubble"

Has the Fed lost control of the market?

This question, first posed by Goldman last May, has received growing prominence in recent months, culminating with none other than Bill Dudley earlier this month, who pointed out the paradox of 5 consecutive rate hikes resulting in record easy financial conditions in his January 11, 2018 speech, one of his last as NY Fed Chair.

But if the Fed has indeed lost control of the market, that would mean that there is nothing the Fed can do until the market bubble bursts once the current melt-up finally rolls over?

That is quandary analyzed by Deutsche Bank in a recent report in which the bank observes that "an unprecedented bubble emerged during 2004-2006 when the Fed hiked rates 425bp" (as shown in the 3 charts below) and warns that "the current market environment is similar, in which monetary policy (hiking the policy rate) is likely to have a limited effect in restraining risk-taking."

Deutsche then lays out the three possible scenarios that could - in theory - stop, and maybe even reverse, the current asset bubble which are as follows:


  1. Monetary policies or communications designed to increase volatility,

Volatility Rising...

Authored by Sven Henrich via NorthmanTrader.com,

Volatility remains historically low, but have you noticed the rising tide? Volatility has been rising even as markets have been making new highs. We've seen this before in the mid 90's so it may not necessarily be a bad thing for markets. Or it may mean a lot.

After all the entire advance since the February 2016 lows has been accompanied by volatility compression. The $VIX has remained in its well defined descending wedge pattern which I have posted frequently on twitter:

Steven Mnuchin vs. Mario Draghi: The ECB Loses

Only a select few people can move foreign-exchange markets with a handful of words. U.S. Treasury Secretary Steven Mnuchin and ECB President Mario Draghi are two of them. Thursday they clashed, and the ECB clearly has a fight on its hands.

The Strong Case for Health-Care Spinoffs

Spinoffs and asset sales may benefit shareholders more than chasing growth in a frenzied health-care deals market

Activist Investors In It for the Long-Term---Just Kidding

Activist investors who broke up the $15 billion Clariant-Huntsman merger promised a long-term approach to creating value. Three months later, they've sold.

Capitol Report: What time is Trump's State of the Union address?

President Donald Trump is scheduled to give his first State of the Union address on Tuesday night, laying out his priorities for his second year in office and beyond. Here's what time it begins.

Key Words: U.S. has more truly destitute people than either Sierra Leone or Nepal, says Nobel economist Deaton

There are 5.3 million Americans who are absolutely poor by global standards, more than Sierra Leone or Nepal, said Nobel Prize-winning economist Angus Deaton, in a New York Times op-ed on Thursday.

Currencies: Dollar turns positive after Trump says it will strengthen with economy

The U.S. dollar turns positive following another day spent in negative territory, after President Donald Trump said the currency would strengthen in line with the U.S. economy during an interview with CNBC at the World Economic Forum in Davos.

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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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