11Jan2016 Market Close: DOW Closes Higher, Low Caps Down Modestly, WTI Crude Remains At 12 Year Lows

Written by Gary

The Dow and S&P 500 ended a volatile session slightly higher today, recovering from recent sharp selling, but a drop in biotechs and energy shares weighed on the market along with caution ahead of earnings season. The Dow rallied in the final hour of trading, closing in positive territory and capping a day of wide swings.

Todays S&P 500 Chart

The Market in Perspective

Here are the headlines moving the markets.
	Detroit’s auto industry is changed, but not as Washington planned DETROIT (Reuters) – When U.S. President Barack Obama visits Detroit’s annual auto show on Jan. 20, exactly one year before he leaves office, he is expected to tout how much the industry has changed since he orchestrated a federally funded rescue in 2009. Â
	Exclusive: Hedge funds stars join losers’ club for first time NEW YORK (Reuters) – An elite group of hedge fund managers must have awakened on Jan. 1 with an unusual type of hangover: their first annual loss.
	Starboard urges Macy’s to strike real-estate deals (Reuters) – Hedge fund Starboard Value LP urged department store chain Macy’s Inc to enter into joint ventures for its stores, including its flagship Herald Square store in New York, to realize greater value from its real estate assets.
	VW may buy back some cars in emissions scandal: CEO on CNBC FRANKFURT (Reuters) – German automaker Volkswagen may end up buying back some cars affected by the emissions scandal, its chief executive told CNBC in an interview.
	China’s yuan spikes higher, but stocks tumble SHANGHAI (Reuters) – China guided its yuan currency higher on Monday, and offshore it surged against the dollar, spurred by what traders called aggressive intervention by Beijing, although Chinese stocks tumbled again as doubts persisted over policymakers’ intent.
	Not likely enough new data for first quarter rate hike: Fed’s Lockhart ATLANTA (Reuters) – There may not be enough fresh data on inflation to support a second U.S. interest rate increase in January or March, Atlanta Federal Reserve Bank President Dennis Lockhart said on Monday in comments that help give shape to the Fed’s possible rate path.
	Investor group offers to buy American Apparel for $300 million (Reuters) – Bankrupt teen apparel retailer American Apparel Inc received a $300 million bid on Monday from a group of investors who are backing the return of the company’s controversial founder, Dov Charney.
	Drugmaker Shire buys Baxalta for $32 billion after six-month pursuit LONDON (Reuters) – Drugmaker Shire Plc clinched its six-month pursuit of Baxalta International Inc on Monday with an agreed $32 billion cash and stock offer, catapulting it to a leading position in treating rare diseases.
	“Loss Of Faith” Escalates As Markets Enter Reality “Discovery Phase” Submitted by Howard Kunstler via Kunstler.com, It looks like 2016 will be the year that humanfolk learn that the stuff they value was not worth as much as they thought it was. It will be a harrowing process because a great many humans are abandoning ownership of things that are rapidly losing value – e.g. stocks on the Shanghai exchange – and stuffing whatever “money” they can recover into the US dollar, the assets and usufructs of which are also going through a very painful reality value adjustment. Of course this calls into question foremost exactly what money is, and the answer is: basically a narrative construct. In other words, a story explaining why we behave the way we do around certain things. Some parts of the story have a closer relationship with reality than other parts. The part about the US dollar has a rather weak connection. When various authorities – the BLS, the Federal Reserve, The New York Times – state that the US economy is “strong,” we can translate that to mean giant companies listed on the stock exchanges are able to put up a Potemkin faÃ§ade of soundness. For instance, Amazon.com. The company continues to seem like a good idea. And it reinforces that idea in the collective imagination by sending a lot of low-priced goods to your door, (all bought on credit cards), which rings your (nearly) instant gratification bell. This has prompted investors to gobble up Amazon stock. It’s well-established by now that the “brick-and-mortar” retail operations are majorly sucking wind. Meaning, fewer people are driving to the Target store and venues like it to buy stuff. Supposedly, they are buying stuff at Amazon instead …
	According To SocGen The Problem Is Not “China”, It’s This Earlier today, when Bank of America said that “panic is building” in the market and asked, rhetorically, “how bad could it get”, it listed what it thought are the five core pillars in the bailed out bank’s wall of worry: slowing US and global economic growth (US 4Q GDP tracking 1%) collapsing commodity prices (oil prices averaged -42% y/y in 4Q) renewed fears about China (Shanghai Composite -38% since last June) heightened geopolitical tensions (Middle East, North Korea, etc.) the first transition to Fed policy tightening (in a decade). We were very surprised that one thing missing, perhaps the most important thing, was fundamentals. And, as SocGen’s Andrew Lapthorne conveniently points out, as he has been pounding the table on this issue for years, it is fundamentals – stretched to ridiculous levels – that are finally being appreciated by the market, and the result is the dramatic repricing we have seen. As Lapthorne says, whilst the focus has been on China, where the CSI 300 fell 10% last week and at time of writing is off another 5%, “China and its accompanying devaluation is just another domino to fall, in what has been a long process of investor realisation that all is not well in the global economy. For us the real problem remains the lack of growth, a problem QE sought to disguise, but did not solve through higher asset prices.” So having deferred growth for years and years, hoping central bankers would magically conjure it out of thin air eventually, suddenly the market is realizing it the most important component to justify valuations isn’t coming, “and now after four long years without any profits growth, the risk is that MSCI World mean-reverts to its original 2011 …
	“Nothing Is Risk-Free In This System Of Chaos” Submitted by Tim Price via SovereignMan.com, In the field of mathematics, chaos theory studies the behavior of systems that are highly sensitive to initial conditions. The idea in chaos is that, like life itself, where you start today has tremendous influence on what happens next. In chaos, even very tiny changes to initial conditions can lead to wildly divergent outcomes further down the line. Again, think about life: how different would your outcome be if you’d been born in the next town over? Or to different parents? The film ‘Jurassic Park’, adapted from Michael Crighton’s novel, brought chaos theory into the popular realm. A wealthy scientist, John Hammond (played by Richard Attenborough), uses DNA derived from fossilized mosquitoes to recreate dinosaurs on a remote island. But once brought back to life, won’t they breed? No, says Hammond. Because all the dinosaurs on the island are engineered to be female, by way of chromosome control. Dr. Ian Malcolm, a chaos expert played by Jeff Goldblum, has been brought along to assess the project. His assessment is skeptical to the point of hostility: “[T]he kind of control you’re attempting is not possible. If there’s one thing the history of evolution has taught us, it’s that life will not be contained. Life breaks free. It expands to new territories. It crashes through barriers. Painfully, maybe even… dangerously… “I’m simply saying that life… finds a way.” Life -nature- d …
	U.S. Oil Prices Flirt With $31 a Barrel U.S. oil prices briefly dropped below $31 a barrel Monday as a persistent global glut of crude continues to weigh on the market.
	Stocks Regain Ground The Dow industrials rallied in the final hour of trading, closing in positive territory and capping a day of wide swings.
	Shire’s Baxalta Deal: Confidence Knocked Shire’s $32 billion deal to buy Baxalta prompted a sharp drop in its stock. Shire needs to prove that, in its impatience to do deals, it hasn’t lost its touch.
	After The First Rate Hike from the San Francisco Fed — this post authored by John C. Williams, president and chief executive officer of the Federal Reserve Bank of San Francisco The Federal Reserve has started the process of raising interest rates, in line with ongoing improvement in U.S. economic conditions. The path for subsequent interest rate increases, however, is likely to be shallow compared with past tightening cycles. This reflects in part growing evidence that the new normal for interest rates is lower than in the past.
	The Wall Street Journal: Tina Fey, Amy Poehler drew larger Golden Globe audience than Ricky Gervais Sunday night’s Golden Globe Awards on NBC drew 18.5 million total viewers, a 4.2% decline from last year’s audience of 19.3 million.
	Financial News: Cloudy economic outlook for 2016 gets clearer and brighter over longer term The U.S. has begun to raise interest rates and called off its œQE activity, actions that ought to be followed before long in the EU and Japan.