03Aug2017 Market Update: Wall Street Trading Higher, DOW Sets New Record, Unemployment Benefits Fell Last Week, Fed On Course To To Start Reducing Its Massive Bond Portfolio

Here is the current market situation from CNN Money

North and South American markets are mixed. The IPC is higher by 0.06%, while the Bovespa is leading the S&P 500 lower. They are down 0.51% and 0.19% respectively.

S&P, Nasdaq slip as tech weighs; Dow hits record

(Reuters) – The S&P 500 and the Nasdaq lost ground on Thursday as tech stocks slipped, while the Dow moved above the 22,000 mark to hit a new record.

Exclusive: Goldman Sachs buys into Aramco $10 billion loan as it seeks IPO role – sources

DUBAI (Reuters) – Goldman Sachs has bought a slice of Saudi Aramco’s $10 billion credit facility as it seeks a role in the historic listing of the oil company, sources familiar with the matter told Reuters.

Senate reauthorizes FDA to collect fees from drugmakers

(Reuters) – The U.S. Senate on Thursday passed a bill allowing the Food and Drug Administration to continue collecting fees from drug companies to review new product applications.

U.S. labor market tightening; services sector growth slowing

WASHINGTON (Reuters) – The number of Americans filing for unemployment benefits fell last week, pointing to a tightening labor market that likely keeps the Federal Reserve on course to announce plans next month to start reducing its massive bond portfolio.

Tesla surges as Wall Street bets on Model 3

SAN FRANCISCO (Reuters) – Tesla Inc jumped 6 percent on Thursday as its quarterly report fueled bets that its new Model 3 sedan will propel the luxury electric carmaker into the mainstream.

Toyota to take 5 percent stake in Mazda: Nikkei

(Reuters) – Toyota Motor Corp would take a roughly 5 percent stake in Mazda Motor Corp to establish a U.S. auto plant and develop key electric vehicle technologies, the Nikkei reported.

Bats takes a swing at NYSE and Nasdaq in closing auctions spat

NEW YORK (Reuters) – Bats, the CBOE Holdings Inc-owned exchange operator, lambasted the New York Stock Exchange and Nasdaq Inc over their criticism of a Bats plan to compete for end-of-day stock orders, calling it disingenuous in a letter to regulators.

Health insurer Aetna profit rises as Obamacare business shrinks

(Reuters) – Aetna Inc reported a higher-than-expected quarterly profit on Thursday as member health costs were lower than anticipated and it benefited from exiting most of its Obamacare individual insurance markets this year.

Amazon’s Hollywood spending soars, returns unclear

SAN FRANCISCO (Reuters) – Amazon.com Inc is quickly ramping up the billions of dollars a year it spends on creating and licensing TV shows and films, signaling the retailer plans to be in show business for the long haul.

Apple Now Owns $51.5 Billion In Treasurys, More Than Mexico, Turkey Or Norway

Every quarter, Apple manages to impress with its gargantuan cash hoard, which in Q2 rose to $262 billion (which however is $153 billion net of debt), a new all time high as shown in the chart below.

While it is widely known that of this $262 billion, the vast majority, or $246 billion is held offshore, what is less appreciated is that Apple’s actual cash is just $18.6 billion. The rest is held in various securities, both short- and long-term, something we first reported back in September when we introduced readers to Braeburn Capital, the firm that actually manages Apple’s quarter trillion in asset holdings.

In the five years that have passed since then, Apple’s holdings have grown. Substantially. And, as the company reported in its latest 10Q, as of June 30, AAPL now owns enough assets to not only put even the world’s largest hedge fund, Bridgewater to shame, but some of the world’s largest holders of Treasurys. Of its total $243 billion in Short and Long-Term securities, Apple owned a whopping $51.5 billion in Treasurys, split between $20.1 billion in T-Bills and $31.3 billion in Treasury Bonds.

While Apple’s TSY holdings have fluctuated over the years, with a notable decline around September 2014, they have since grown to an all time high, up from $50.9 billion last quarter and $40.5 billion as of its last fiscal year end:

Earnings Beat “Fist Pumps” Very Muted This Quarter

Via Global Macro Monitor,

Stephen Gandel of Bloomberg out with a good piece this morning on:

…shares of companies that have reported both better-than-expected profits and sales for the second quarter have barely budged this earnings season.

It’s the least fist-bumping investors have done for great quarters in 17 years. – Bloomberg

Is this the beginning of a catch up trade?

Stocks rose during the recent earnings recesssion through P/E multiple expansion and this just may be the market allowing fundamentals to catch up with prices. Nah, that’s too rational.

Too much catching up to do as noted by Howard Marks comments below.

The S&P 500 is selling at 25 times trailing-twelve-month earnings, compared to a long-term median of 15.

The Shiller Cyclically Adjusted PE Ratio stands at almost 30 versus a historic median of 16. This multiple was exceeded only in 1929 and 2000 – both clearly bubbles.

While the “p” in p/e ratios is high today, the “e” has probably been inflated by cost cutting, stock buybacks, and merger and acquisition activity. Thus today’s reported valuations, while high, may actually be understated relat …

India’s Economy Crashes After “Mind-Bogglingly Inane” Tax System Strikes Back

With just a hint of schadenfreude, we note that, following our discussion of “how to destroy an economy”, India’s Composite PMI collapsed to 46.0 in July – its lowest on record (well below the kneejerk lows after demonetization in November) as the “mind-bogglingly inane” new tax system and demonetization efforts continue to crush the poor and feed the wealthy.

As Goldman Sachs notes India’s Nikkei Markit services PMI contracted in July after reaching a 8-month high in June, following a decline of manufacturing PMI on Tuesday. The fall was led by a significant decline in new business, suggesting a worsened business sentiment after the GST implementation on July 1.

Main points:

India’s Nikkei Markit services PMI contracted to 45.9 (the lowest reading since September 2013). Combined with the manufacturing PMI reported on Tuesday, the July composite PMI fell to 46.0, the lowest reading since March 2009.

Among subcomponents, the new business index fell the most to 45.2 (from 53.3 in June), reflecting disruptions caused by the GST.

As the press release from Markit Economics mentioned, “Most of the contraction was attributed to the implementation of the goods & services tax and the confusion it caused”.

The employment index for services fell to 48.9 (from 51.8 in June).

That said, the index for business expectations rose to a 11-month high to 62.3, suggesting optimism from services providers about the future once they have more clarity about the new tax system.

The output price index rose to 54.6 (from 51.0 in June), whi …

Thank the Foreigners for Dow 22000

Americans cheering the U.S. stock market’s latest milestone should pause to thank the rest of the world for making it possible.

Cash Gets More Precious at Tesla

Tesla shareholders are betting on a profitable future. They would do well to spare a thought for the present.

New CEO Needs to Solve AIG’s Old Problems

Insurer wants to boost growth but needs to address high losses in commercial insurance first.

June 2017 Manufacturing New Orders Improve (But It Was Totally Aircraft Which Caused the Increase)

Written by Steven Hansen

US Census says manufacturing new orders improved. Out analysis agrees.

Market Snapshot: Dow aims for record, but energy slump weighs on broader stock market

The Dow industrials on Thursday gathers momentum deeper in to record territory, but the broader market traded modestly lower following a less-than-stellar round of economic data and a slump in the energy sector.

Dow 22,000 means the worst is yet to come

Stock investors are unprepared for recession or a bear market, writes Tim Mullaney.

Futures Movers: Oil prices turn lower as investors look ahead to OPEC meeting

Oil futures give up early gains and trade lower Thursday afternoon, as buying appetite faded and as investors awaited a highly anticipated OPEC meeting next week.