12Apr2016 Market Close: DOW Closes Up165 Points, WTI Settles In The Low 42’s And The US Dollar Has Slipped To The High 93’s

Energy shares lead Wall Street higher as earnings get into gear

(Reuters) – Wall Street gained on Tuesday, led by surging energy shares that were buttressed by rising oil prices, while Alcoa kicked off an expected tepid corporate earnings season.

U.S. posts $108 billion budget deficit in March

WASHINGTON (Reuters) – The U.S. government posted a $108 billion budget deficit in March, more than double the amount from the same period last year, the Treasury Department said on Tuesday.

Two Fed bank presidents backed rate hike ahead of last meeting

WASHINGTON (Reuters) – The heads of two regional Federal Reserve banks supported a rate hike ahead of the Fed’s March meeting as an improving economy added to sentiment to tighten monetary policy.

IMF cuts global growth outlook again, warns of political risks

WASHINGTON (Reuters) – The International Monetary Fund warned on Tuesday of the risk of political isolationism, notably Britain’s possible exit from the European Union, and growing economic inequality as it cut its global growth forecast for the fourth time in a year.

N.Y. Fed joins U.S. GDP forecasting game

NEW YORK (Reuters) – The New York Federal Reserve will launch a weekly gauge of the U.S. economy at a time when investors are concerned about slowing overseas demand and wild swings across financial markets.

Automakers urge insurance companies to remind U.S. drivers of recalls

WASHINGTON (Reuters) – Major carmakers want U.S. auto insurance companies to help persuade millions of American car owners to get recalled vehicles fixed.

Ford plans to move Michigan offices into two new modern campuses

DETROIT (Reuters) – Ford Motor Co said on Tuesday it will modernize and consolidate its sprawling Dearborn, Michigan, engineering and headquarters facilities over the next decade into two Silicon Valley-style campuses.

U.S. lawsuit against activist ValueAct puts mutual funds on alert

NEW YORK/BOSTON (Reuters) – The U.S. government’s lawsuit against ValueAct Capital targets one activist investor but could call into question routine practices across the $16 trillion mutual fund industry, according to attorneys and industry representatives.

VW plans bonus cuts after diesel scandal pressure: sources

BERLIN (Reuters) – Volkswagen may make significant cuts to bonuses for senior managers, people familiar with the matter said, in an attempt to resolve an internal dispute over executive pay following the diesel emissions scandal at the German carmaker.

What Has Kept Wall Street Up At Night In 2016: Here Are The Biggest “Tail Risks” Of The Past 4 Months

When BofA’s Michael Hartnett releases his monthly Fund Managers’ Survey, the one chart we always focus on is the one showing what the “smart money” investors, aka those polled clients who make up the survey (and the same ones who we reported earlier have been selling this bear market rally for the eleven consecutive weeks) are most worried about, or as they put it: what are the biggest “tail risks.”

Below we share a quick summary of the responses for every month of 2016, revealing what investors thought were the biggest tail risks in every month of 2016.

The first chart below shows that as recently as January, what kept everyone up at night by a substantial margin, with 45% putting it as their top fear, was a China Recession, followed by an EM debt crisis.

That changed dramatically just the next month, when the biggest fear in February had nothing to do with a Chinese recession or an EM Debt crisis, and everything to do with the dreaded “R” word right inside the gold ole’ US of A. In fact, four of last month’s top “tail risks” were brand news, and in addition to a US recession, these included energy debt defaults, quantitative failure and a topic we have been covering since mid-2015, China’s relentlessly encroaching capital controls.

Faltering Fundamentals Vs “The Fed Won’t Let The Market Crash”

Submitted by Lance Roberts via RealInvestmentAdvice.com,

As the trumpets sound to signal the start of earnings season, the battle between fundamentals and “hope” begins. Despite weakening earnings, which on an as reported basis are far worse than the rather manipulated “operating” levels currently suggest, the bulls have remained steadfast in their belief that prices are on a one-way trip higher.

What all investors should remember is that it is what happens at the “top line” of income statements that is a true reflection of the underlying economy. As I discussed in this past weekend’s missive which covered the “profit backdrop.”

“Economic growth is a function of consumption. If economic growth is weak, then consumption must therefore also be weak. If consumption is weak, then corporate revenues will also be weak. As shown below, declines in revenue have been a strong precursor to economic recessions. Of course, while accounting gimmicks and share buybacks can buoy profits temporarily, it is not sustainable and the eventual downturn is inevitable.”

…

“We Don’t Have A Wonderful Explanation What Is Going On” – Reverse Repo Usage Plunges To Program Lows

Moments ago the Fed’s RRP operation totaled only $18.7 bln, the lowest level of participation since December 19, 2013 when the maximum bid per counterparty was only $1 bln compared to $30 bid since September 2014. In other words, program participants took only $18.7 billion worth of Treasury securities from the Fed, just months after the Fed expanded the reverse repo program to account for potentially hundreds of billions in reverse repo demand after the Fed’s 25 bps rate hike.

Moreover, today’s operations included only 18 participants, which is just 2 more than the 16 seen on Friday, the lowest since December 16, 2013.

As Scott Skyrm pointed out a few days ago when we hit a comparable low, “the ironic part is that the program was originally billed as a liquidity draining tool that the Fed needed to raise rates.” Instead, paradoxically, volume at the RRP continues to decline since the tightening in December.

What is going on? For the answer we looked to repo experts Stone McCarthy, but unfortunately they too are stumped:

We don’t have a wonderful explanation for the diminished participation. We wonder whether seasonal redemptions associated with the April 15 tax date may be crimping the liquidity of funds simply reducing the volume of liquid balances that would otherwise be put to work in the RRP program.

For sure, the General Collateral RP rate continues to trade well above the 25 bps associated with the Fed’s program. For this reason, the counterparties may find doing RP with dealers to be relatively more attractive …

Facebook and Google: The $230Billion Question

Mobile-advertising growth has driven a stunning rise in the two companies’ market values. But investors may be taking a glass-overflowing view.

Pharma Guidance Is Bad, Timing Is Worse

Recent sales guidance from a handful of pharmaceutical companies comes at a particularly bad time.

Bank Earnings: Where to Look for Silver Linings

Banks have been hit with low rates and energy-sector defaults, but there are some factors within their control.

The Fed: Fed’s Lacker backs four rate hikes in 2016

Richmond Fed President Jeffrey Lacker on Tuesday said he thought it would appropriate for the central bank to raise rates four times this year.

Bond Report: Treasury yields retreat from 8-week low as oil futures soar

Treasury prices fell for a third session Tuesday, pushing yields higher to slowly rebound from an eight-week low reached last week.