22Jan2016 Market Close: US Averages Ended With First Weekly Gain, Crude Surges Higher Clearing Out Many Short Positions, Global News Remains Bearish

Written by Gary

US markets closed fractionally higher than when they opened this morning where the DOW closed up 211 points and the $NDX closed up 2.8%. Trading continued all session with a fractional up-trend for the small caps and crude settled in the low 32’s.

Todays S&P 500 Chart

U.S. stocks ended sharply higher Friday, scoring their first weekly gain of the new year, as oil futures surged and investors were encouraged by hints of potential central-bank stimulus in Europe and Japan after a tough week for global markets. The S&P 500 closed up 38… Full Story

The Market in Perspective

Here are the headlines moving the markets.
	New Takata air bag recall to cover 5 million U.S. vehicles (Reuters) – U.S. regulators on Friday announced a new recall of about 5 million vehicles with potentially defective Takata Corp air bags, covering some automakers not previously affected by one of the biggest auto safety recalls in U.S. history.
	Exclusive: FTC probes Turing over drug prices, Shkreli’s lawyer says NEW YORK (Reuters) – The U.S. Federal Trade Commission is investigating Turing Pharmaceuticals for possible antitrust violations in connection with the company’s decision to hike the price of a life-saving drug by more than 5,000 percent, a lawyer for former Chief Executive Officer Martin Shkreli wrote on Friday.
	VW probe finds manipulation was open secret in department: newspaper FRANKFURT (Reuters) – Volkswagen’s development of software to cheat diesel-emissions tests was an open secret in the company department striving to make its engines meet environmental standards, Germany’s Sueddeutsche Zeitung newspaper said on Friday, citing results from VW’s internal investigation.
	Goldman awards CEO Blankfein $23 million in pay for 2015 (Reuters) – Goldman Sachs Group Inc Chief Executive Officer Lloyd Blankfein received $23 million in salary and bonuses for 2015, according to a person familiar with the matter.
	Exclusive: AIG to pursue spin-off of mortgage insurance unit – sources (Reuters) – American International Group Inc has decided to pursue a spin-off of its mortgage insurance business, according to people familiar with the matter, in a move that would come as the U.S. insurer fends off activist Carl Icahn.Â
	Investors look to Fed, earnings for direction next week NEW YORK (Reuters) – Investors hoping equities can sustain their recent bounce next week will carefully watch the U.S. Federal Reserve’s mid-week policy meeting for signs the central bank may slow the path of interest rate hikes.
	Wall Street surges in end to volatile week (Reuters) – Wall Street surged on Friday and was on track for its first positive week of 2016 as a cold snap in the United States and Europe sent oil prices sharply higher.
	AmEx shares slump after forecast raises doubts about growth (Reuters) – American Express Co’s shares are on track for their worst day in more than six years as the company’s disappointing earnings forecast for the full year raised doubts about the viability of its business model.
	GE doubles down on restructuring to combat slow growth (Reuters) – General Electric Co said on Friday that it would double its 2016 budget for restructuring spending to fight the effects of low oil prices and slow global growth that pummeled its earnings last year.
	“China 2016 Is US 2008” Felix Zulauf Warns “The Outcome Of A Major Yuan Devaluation Would Be Disastrous” Submitted by Sandro Rosa and Mark Dittli via Finanz und Wirtschaft, According to macro strategist Felix Zulauf, founder and president of Zulauf Asset Management and Vicenda Asset Management in Zug, the almost seven-year-old bull market is over. China is to the current cycle what the US housing market was for the Global Financial Crisis in 2008. It will take years to correct the excesses that were built up in China. Mr. Zulauf, the markets had a terrible start into the new year. Is the almost seven-year old equity bull market over? Yes, the bull market came to an end last spring. A new bear market has begun. The coming downturn will be proportional to the excesses that were built up during the boom years. The bull market lasted for a very long time and was primarily fuelled by monetary excesses. And these excesses will now be corrected. And bear in mind, there is no longer any backstop for markets. What do you mean? In the past, investors could count on the Fed to bail them out – the Greenspan and Bernanke Put, if you will. Now, however, the US central bank – and it’s still the world’s most important central bank – is keen on raising interest rates. It wants to normalize monetary policy and to end quantitative easing. As a consequence, a sudden about-turn in the Fed’s policy is unlikely. How big a correction do you expect? A typical bear market in the US since the Second World War was about 23%. However, this time around I …
	Emerging Markets Running Scared with Capital Controls By EconMatters This has not been a good year for emerging markets. Since many of the emerging economies are commodity-reliant (mainly crude oil), the oil price plunge has also crashed their currencies, which prompted money fear and flight. WSJ quoted the Institute of International Finance that emerging markets suffered record net outflows of $732 billion in 2015, with China accounting for the bulk of that. The Russian ruble, Mexican peso and Colombian peso all hit record lows against the dollar. Overall, emerging-market currencies fell 3% in the first two weeks of 2016. Watch: Oil Markets Go Green (Video, Jan. 21,2016)
	A New Record: Goldman Stopped Out On 3 Of Its 6 “Top Trades For 2016” Just 3 Weeks Into The Year Back on November 19 of last year, we laid out Goldman’s Top 6 trades for 2016 (read the full list here) for the benefit of “those who can’t wait to take the other side of Goldman’s clients, and thus the same side of Goldman’s prop desk.” We also noted the 3 big risks which Goldman said could lead to its forecasts crashing and burning, namely “a further fall in commodity prices, in particular crude oil, a devaluation of the Chinese Yuan, and bond yields rising faster than we already anticipate.” We concluded by saying that “something tells us the best trades for 2016 will be to go short the Yuan, go short Oil, and short TSYs, while doing the opposite of the Top 6 trade recos. We will CIX this “basket” and revisit one year from now.” It looks like we won’t have to wait nearly that long. Recall that it was just last week, just 11 days into the year, when we reported that Goldman was already closed out of one of its top trades of the year, namely “Top Trade #6: Long large-cap US Banks relative to the overall S&P500 – Go long large-cap US Banks through the BKX Index relative to the S&P500, indexed at inception to 100, with a target at 110 and stop loss at 95.” This is what Goldman said: Close long large cap US banks through the BKX Index relative to the S&P500 on 11 Jan 2016, opened on 19 November 2015 at 100, with a potential loss of 5.4%. 11 days later we followed up how the remainder of Goldman’s top 6 trades are doing and to our amazement we find that Goldman is about to set a new record: barely three weeks int …
	The Dow Could Fall Another 5000 Points (And Still Not Be “Cheap”) Submitted by Brett Arends via MarketWatch.com, Hard to believe, but the Dow Jones Industrial Average could fall by another 1,000 to 5,000 points and still not be “cheap” compared with long-term stock-valuation measures. That’s the stark conclusion from an analysis comparing current stock prices to underlying measures such as per-share revenue, earnings and corporate net worth. And it suggests that even if we are now overdue for a short-term bounce or rally of some kind, buying heavily into the latest sell-off isn’t the kind of one-way bet that value investors crave. Stocks are certainly much cheaper than they were a few weeks ago. After the worst start to a new year in Wall Street history, the Dow Jones Industrial Average is down about 10% since Jan. 1. Small-company stocks are now deep in a bear market after falling more than 20% from last spring’s highs. But cheaper doesn’t necessarily mean cheap. Even after the sell-off, U.S. stocks are valued at around 1.4 times annual per-share revenue. FactSet says the average since 2001, when it began tracking the data, is 1.3 times revenue. So the Dow could fall another 7%, or over 1,000 points, and still be no lower than its modern-day average. And the picture …
	Stocks, Oil Rally on Stimulus Hopes U.S. stocks rose broadly on Friday, following other global markets, driven by gains in some of the hardest-hit sectors. Oil prices also rebounded, helping boost shares of energy companies.
	Investing in 2016: ‘The Only Winning Move is Not to Play the Game’ The world’s central banks can’t save us anymore. That was the message from some of the world’s most prominent investors at the World Economic Forum in Davos, Switzerland, on Friday.
	Economic Unease Puts Central Bankers Under Pressure Amid tumbling oil prices, unstable stock markets and slow growth in developing economies, central banks in the U.S., Europe and Japan face pressure to keep interest rates low or even expand easy-money policies.
	Even TV execs think there are too many good shows A survey of TV execs by The Hollywood Reporter found their biggest concern is that they are making more shows than they can afford.
	Bond Report: Treasury yields close at 1-week high as stocks turn higher Treasury yields closed Friday at their highest levels in a week, as a rebound in global equities following rising oil prices led investors to sell U.S. Treasurys in favor of riskier assets like stocks.
	The Wall Street Journal: Dole Foods facility in Ohio tied to multistate listeria outbreak: CDC The CDC had tied a listeria outbreak that’s resulted in one death and 12 hospitalizations to a Dole Foods facility in Ohio.