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13Feb2018 Midday Update: Wall Street Struggling For Direction To The Positive Side, A Burgeoning Market Correction Remains A Possibility, Several Days Of Sideways Trading In The Future

Written by Gary

US equities markets crept into the green during early afternoon trading (SPY +0.2%, but just barely. The DOW is just up over 40 points and we expect the markets to run out of steam.


Here is the current market situation from CNN Money

North and South American markets are mixed today. The S&P 500 is up 0.20% while the IPC gains 0.14%. The Bovespa is off 2.26%.

What Is Moving the Markets

Here are the headlines moving the markets.

Wall Street dips ahead of inflation data

(Reuters) - U.S. stock indexes fell on Tuesday, undoing two strong days of gains that have settled some investor nerves ahead of a crucial reading on inflation.

'Whistleblower' alleges manipulation of Cboe volatility index

NEW YORK/BENGALURU (Reuters) - Wall Street's most widely followed gauge of future stock market volatility is being manipulated, causing billions of dollars in losses a year to unwary investors, a law firm representing an "anonymous whistleblower" alleged in a letter to U.S. financial regulators and released on Monday.

Blue Apron puts EBITDA breakeven on table for late 2018, shares rise

NEW YORK (Reuters) - Blue Apron Holdings Inc said on Tuesday it could break even on a key measure of profitability earlier than Wall Street analysts had expected, fueling a brief surge in the meal-kit maker's shares.

Broadcom reduces Qualcomm board nominees before March 6 showdown

(Reuters) - Broadcom Ltd on Tuesday cut the number of board seats it was trying to win at Qualcomm Inc to six from 11, and reiterated that its offer for the company was only good until the conclusion of a March 6 shareholder meeting at the chipmaker.

Apple CEO downplays special dividend at shareholder meeting

(Reuters) - Apple Inc Chief Executive Tim Cook downplayed a suggestion that the company might issue a special dividend to shareholders with some of the $285 billion in cash that the company is now able to bring back from overseas.

Airlines turn to technology to solve overbooking puzzle

LONDON/BERLIN (Reuters) - Being offered cash at the gate to take a later flight because of overbooking may become a rarity if technology being examined by major airlines such as British Airways , JetBlue and Qantas catches on.

Deason sues Xerox to block deal with Fujifilm

(Reuters) - Xerox Corp shareholder Darwin Deason asked courts on Tuesday to block the company's merger with Japan's Fujifilm Holdings , claiming board members at the U.S. photocopier maker had failed in their duty to shareholders.

Goldman was caught 'wrongfooted' in trading but outlook better: CEO

NEW YORK (Reuters) - Goldman Sachs Group Inc's trading division was caught "wrongfooted" last year, bracing for a return of volatility that did not materialize in financial markets, Chief Executive Officer Lloyd Blankfein said on Tuesday.

Blackstone names real estate chief Gray president in succession move

NEW YORK (Reuters) - Blackstone Group LP said on Tuesday that Jonathan Gray, who turned the buyout firm into the world's biggest real estate investor as head of its property business, will take over from Tony James as president, setting him up as successor to Chief Executive Stephen Schwarzman.

Israeli Police Recommend Netanyahu Be Indicted For Bribery

After a 14-month-long investigation, Israeli police have reportedly recommended that Prime Minister Benjamin Netanyahu be indicted on charges of bribery and breach of trust.

As The Jerusalem Post reports, police say they have found enough evidence to recommend the state's prosecution to indict Netanyahu in Case 1000, the "gifts affair" and Case 2000, the "Yediot Aharanot Affair."

In Case 1000, the "gifts affair," it is alleged that Netanyahu improperly accepted expensive gifts from different businessmen.

In Case 2000, the "Yediot Aharonot affair," Netanyahu allegedly negotiated with publisher Arnon "Noni" Mozes for favorable coverage of himself in Yediot Aharonot in exchange for support of a bill to weaken Israel Hayom, the largest circulation Hebrew-language paper and Yediot's biggest competitor.

At this stage, the prosecution and Attorney-General Avichai Mandelblit will examine the evidence that police collected throughout the investigations, and will later decide whether to actually indict the prime minister or not.

Netanyahu will not be required at this point to resign from ...

John Kelly's "Cover-Up" Is Unraveling: Axios

Just as we anticipated not two hours ago, it appears White House Chief of Staff John Kelly is on the verge of an unceremonious exit from the White House after FBI Director Christopher Wray publicly contradicted Kelly's account of when he learned about former White House aide Rob Porter's history of spousal abuse.

Axios reports that Chief of Staff John Kelly's White House enemies are ready to use FBI Director Chris Wray's testimony as a weapon to drive a knife right into his back (figuratively speaking, of course).

Kelly and his allies insist they knew nothing about the domestic violence until the Daily Mail published a story about it involving two of Porter's ex-wives, who decided to come forward and go public with their stories.

Kelly

Kelly initially defended Porter, before suggesting that Porter misled Kelly to get the positive statement. (Porter denies this and tells associates he gave Kelly a full picture of what would be in the story, though he denied the allegations of more serious abuse).

Kelly said ...

Exposing ETF-Induced Market Socialism

Grizzle.com's Chris Woods fears that so-called 'wage growth' has unsettled the 'Goldilocks' market era.

The stock market's biggest correction since Feb 2016 was - according to the common narrative - triggered by one strong wage number.

This has raised concerns that the era of 'goldilocks' may be ending where growth has been neither 'too hot' nor 'too cold', allowing interest rates to remain at the ultra-low levels that have prevailed since the financial crisis.

But Woods warns of the increasing homogeneity of modern markets (in addition to the dominance of algo-driven momo-trading machines): If a strong wage print has been the trigger for falling share prices, there has also been evidence in the past week of machine-driven selling accentuating the decline.

One interesting point about the sell-off is the way volatility has surged in an American stock market which has become dominated in recent years by machine-driven "algo" trading and related passive investment strategies or pseudo passive strategies otherwise known as "smart beta".

Such passive investment strategies, also known as "indexation", involve investors buying indices as opposed to individual stocks, a trend further encouraged by the explosive growth in recent years of exchange traded funds (ETFs). Net issuance of US domestic-equity ETFs has risen from US$38.5bn in 2010 to US$186bn in 2017, while assets of domestic-equity ETFs have surged by an annualised 23% over the same period to US$1.98tn at the end of 2017.

Goldman's Abby Joseph Cohen Turns Bearish, Blames Trump

In January, Goldman Sachs' Global Markets Institute President Abby Joseph Cohen exuberantly told Bloomberg Quint that despite global equity indices hitting one record high after another, markets are not stretched to the point of danger.

They are certainly not as cheap as they were though, cautioned Cohen while adding that cheap valuations provide a cushion which may not exist anymore.

Lurking behind headlines of indices surging are concerns about low volatility, which many say cannot last forever. Cohen is one of them. Volatility has been too low not just in the equity markets but also in the fixed income markets, said Cohen.

I am more concerned about the complacency in bond markets than in the equity markets.

In the bond markets, we've had interest rates around the world that we think are just too low relative to inflation and growth. We do believe interest rates will likely be moving higher...We believe investors are not prepared for that.

They have enjoyed not just low volatility but also rises in bond prices as interest rates have gone down and stayed down. If rates go up, there will be some pain in the fixed income markets.

Now, a month later, and 10% lower in stocks, and with volatility coming back as she warned amid a bond bloodbath, the infamous permabull from The DotCom era has changed her tune dramatically on stocks - for a new reason...

Cohen now says stocks have been "priced for perfection" and "there are issues" in the intermediate- an ...

The Next Big Number Keeping Markets on Edge

Throughout last year, investors worried about a phantom menace that could upset markets: higher U.S. inflation. They were wrong, to their own pleasant surprise. Now they could be right, which creates its own complications.

Time to Put Alibaba's Ant Under the Microscope

Ant Financial has a big share of China's huge mobile payments market. That doesn't mean investors should swallow talk of a lofty valuation as it gears up for a possible IPO.

The Wayfair Riddle

The furniture retailer's business has serious flaws. But the stock keeps soaring.

Federal Reserve Chairman Jerome H. Powell Ceremonially Sworn-in

Written by Steven Hansen

Today, Federal Reserve Chairman Jerome H. Powell participated in a ceremonial swearing-in event, and part of his remarks at the swearing in appear to support the continuation of the policies of his predecessors:

We are in the process of gradually normalizing both interest rate policy and our balance sheet with a view to extending the recovery and sustaining the pursuit of our objectives.

Market Extra: Why investors shouldn't panic over falling bond prices

In a rising interest rates environment accompanied by stock-market volatility, bond funds typically take a hit as well, but the phenomenon is temporary and should not be a cause for abandoning them, according to financial advisers

Capitol Report: Why this investment pro thinks Wall Street's inflation fears are overblown

The sudden panic on Wall Street over inflation that triggered a stock-market meltdown is exaggerated and likely to ease up, according to a prominent investment strategist. "This is a classic inflation scare."

Here's the most expensive city to buy a house — and it's not even close

San Jose was once again the most expensive in the U.S. in 2017, with a median price for a single-family home of $1.27 million, according to data from the National Association of Realtors released Tuesday.

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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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