24May2017 Market Close: Wall Street Closed Fractionally Higher, DOW Up 75 Points, US Dollar Slips Fractionally

Fed ties rate hike to economic rebound, sees balance sheet cuts in 2017

WASHINGTON (Reuters) – Federal Reserve policymakers agreed they should hold off on raising interest rates until it was clear a recent U.S. economic slowdown was temporary, though most said a hike was coming soon, minutes from their last policy meeting showed on Wednesday.

S&P 500 closes at record following Fed minutes

NEW YORK (Reuters) – U.S. stocks ended up slightly on Wednesday, with the S&P 500 hitting a record high close, after minutes of the Federal Reserve’s latest meeting showed policymakers view a rate hike coming soon.

Moody’s downgrades China, warns of fading financial strength as debt mounts

SHANGHAI/BEIJING (Reuters) – Moody’s Investors Service downgraded China’s credit ratings on Wednesday for the first time in nearly 30 years, saying it expects the financial strength of the economy will erode in coming years as growth slows and debt continues to rise.

Exclusive: Facebook signs BuzzFeed, Vox, others for original video shows – sources

NEW YORK (Reuters) – Facebook Inc has signed deals with millennial-focused news and entertainment creators Vox Media, BuzzFeed, ATTN, Group Nine Media and others to make shows for its upcoming video service, which will feature long and short-form content with ad breaks, according to several sources familiar with the situation.

New Ford CEO eligible for $13.4 million in annual compensation

(Reuters) – Ford Motor Co said on Wednesday that new Chief Executive James Hackett is eligible for at least $13.4 million in total annual compensation.

GM to cut jobs in international HQ in Singapore: source

(Reuters) – General Motors Co will slash headcount in its international headquarters in Singapore as part of its efforts to reduce exposure to unprofitable and unpromising markets.

Home sales fall as tight supply boosts prices

WASHINGTON (Reuters) – U.S. home resales fell from a more than 10-year high in April, weighed down by a chronic shortage of houses on the market that is keeping prices elevated and sidelining prospective buyers.

U.S. interest rates may pose risk to Trump budget’s optimistic assumptions

WASHINGTON (Reuters) – If President Donald Trump’s budget does touch off an economic boom that pushes growth up to 3 percent a year as it assumes, the government’s borrowing is likely to cost much more than has been factored into the administration’s fiscal proposals.

OPEC, non-OPEC set for new oil cut, eye longer duration

VIENNA (Reuters) – OPEC and non-member oil producers are set to extend output cuts on Thursday, possibly by as long as 12 months, to help clear a global stocks overhang and prop up crude prices.

Troops Deployed In London As Manhunt For “Islamist Bombmaker” Continues

As Prime Minister Theresa May promised, troops have been deployed to guard “key locations,” including the Palace of Westminster, several embassies and “other sensitive sites,” in London and other British cities, the Evening Standard reported.

The mass deployment follows Monday’s attack at Manchester Arena, which killed 22 kids attending an Ariana Grande concert, as well as the 23-year old attacker. It was the worst terror attack in the U.K. since 2005.

The Financial Times reports that nearly 4,000 military personnel have been deployed across Britain to help police with counter-terror efforts after May raised the threat level to “critical” on Tuesday as authorities scramble to apprehend any accomplices that may have aided Salman Abedi, the chief suspect in the bombing who was known to police prior to Monday’s attack.

“There are fears an Islamist bombmaker may be on the loose because of the sophistication of the device used in the Manchester attack on Monday,” the Evening Standard noted.

The FT also noted that the attack occurred at a time when police chiefs across Britain have warned about difficulties recruiting the extra 1,500 police the U.K. government promised following the attacks in Paris and Brussels.

Counter-Terrorism forces …

Brazil Deploys Troops To Protect Government Buildings As Protesters Set Ministries On Fire

Update from Reuters, which reports that Temer has deployed troops to protect government buildings::

BRAZIL DEFENSE MINISTER JUNGMANN SAYS PRESIDENT TEMER HAS ORDERED ARMY TROOPS TO PROTECT GOVT BUILDINGS FROM PROTESTERS

* * *

Amid massive protests demanding the ouster of Brazilian President Michel Temer, local riot police used tear gas and concussion grenades against groups of violent protesters in the Brazilian capital, where according to GloboNews protesters set fire to several ministry buildings on Wednesday afternoon, as tens of thousands gathered outside Congress.

ERRATA: The protesters set on fire the Brazilian “IRS” federal buildings in Brasília the capital of Brazil and the Ministry of Agriculture pic.twitter.com/NZRHvFfQGC

— Silver Surfer (@AlexLFz) May 24, 2017

#Brazil #Brasilia Protesters have set fire to the finance ministry. pic.twitter.com/BELC17UWIU

— Genvisec Infomap (@GenvisecInfomap) May 24, 2017

Protesters chanting “Out with Temer!” marched to the presidential palace to demand an end to austerity reforms, AFP reports adding …

Trump Reveals Location Of 2 Nuclear Subs To Duterte

In a story published Wednesday, the New York Times alleged that President Trump revealed to Filipino President Rodrigo Duterte the location of two U.S. nuclear submarines lurking in the waters off the Korean peninsula, ready to counter any acts of aggression by North Korean leader Kim Jong Un.

Here’s what Trump allegedly said, according to a transcript of the call, which was circulated to reporters by the Americas wing of the Philippines embassy. The contents of the document were later confirmed by “a senior White House official.” Per NYT:

“We have a lot of firepower over there,” Mr. Trump noted. “We have two submarines – the best in the world. We have two nuclear submarines, not that we want to use them at all.”

The NYT is once again bashing Trump for his “loose lips,” even though Trump’s comments were clearly meant to assuage concerns expressed by Duterte, who told Trump that he believes North Korean leader Kim Jong Un is “unstable” and a danger to the entire region.

“He told Trump that “as long as those rocket and warheads are in the hands of Kim Jong Un we will never be safe as there’s no telling what will happen next.”

FOMC Minutes Signal Rate-Hike “Soon”, Economic Weakness Probably “Transitory” But Need “Evidence”

Having top-ticked US economic data with its March rate-hike, all eyes are on the May minutes to confirm the total lack of data-dependence now present at The Fed. The main focus of the minutes was on the ‘normalization’ of the balance sheet (since June hike odds are at 100%), which was confirmed with details of the plan revealed. Economic weakness in Q1 was shrugged off as “transitory” – although with the provision that evidence is needed – and tightening as well as balance sheet rolloff is appropriate “soon”, likely signaling that a June rate hike is on despite the recent economic slowdown. Fed also warns of asset valuations.

Key Minutes Headlines:

*MOST FED OFFICIALS SAW TIGHTENING LIKELY APPROPRIATE `SOON’

*FED BALANCE-SHEET PLAN WOULD RAISE ROLLOFF CAPS EVERY 3 MONTHS

*FOMC VOTERS: PRUDENT TO AWAIT EVIDENCE SLOWDOWN IS TRANSITORY

The Minutes had something for everyone, starting with the “dovish cop”, and the focus on the triple reiteration of “weakness” in the FOMC minutes, and furthermore the warning that Q1 GDP weakness was not due to seasonality:

The staff judged that the weakness in first-quarter real GDP was probably not attributable to residual seasonality and that it instead reflected transitorily soft consumer expenditures and inventory investment.

Another risk factor: the Fed expected PCE inflation to pick up more the spring “which would be more consistent with ongoing gains in employment.” It did not happen…

Importantly, PCE growth was expected to pick up to a stronger pace in the spring

China’s Downgrade: It’s Not Just About the Government

Moody’s decision to cut China’s credit rating could make it more costly for Chinese companies and banks to issue bonds.

Drone Wars Shoot Down Profits

Consumer drone sales are taking off, but profits for most in the business have been grounded.

Fannie and Freddie Endgame Takes Shape

A consensus is starting to emerge between lawmakers and the Trump administration on how to reform the U.S. housing finance market.

03 May 2017 FOMC Meeting Minutes: When Will The Ducks Line Up For A Fed Rate Increase?

— this post authored by Steven Hansen

The 03 May 2017 meeting statement presented the actions taken. This post covers the economic discussion during this FOMC meeting between the members (minutes were released today). There was considerable discussion on when to raise the federal funds rate again:

… Several participants, however, pointed to conditions under which the Committee might need to consider a somewhat more rapid removal of monetary accommodation–for instance, if the unemployment rate fell appreciably further than currently projected, if wages increased more rapidly than expected, or if highly stimulative fiscal policy changes were to be enacted. In contrast, a couple of others judged that the Committee could withdraw monetary accommodation even more gradually than reflected in the medians of forecasts in the March Summary of Economic Projections, noting that slack might remain in the labor market or that inflation was not very sensitive to declines in the unemployment rate below its estimated longer-run normal level. …..

Market Extra: U.S. Steel tug of war: Fundamental upgrade versus technical ‘death cross’

U.S. Steel’s stock rallies as investors weigh an upgrade at Credit Suisse against a looming bearish ‘death cross’ technical pattern.

Ford’s move to replace longtime CEO is a credit negative, says Moody’s

News was a surprise and came without any seemingly major missteps at the company, says Moody’s.

This is how Best Buy gets so many of its customers to come into its stores

Best Buy customers often take advantage of the buy-online-pickup-in-store option for a variety of reasons