All posts in "Market Update"

Yellen Rambles Dollar Scrambles


Yellen Rambles Dollar Scrambles


I’ve earned myself a few hours reprieve of playing Valencia tour guide and may even be able to hit the gym to work off a few of those greasy restaurant food calories. But it seems you guys were in dire need of a comment cleaner, so here’s a quick USD update after yesterday’s big central bank triathlon.


Judging by the Dollar’s tepid bounce I don’t seem to be alone in having been left a bit confused by chairwoman Yellen’s ramblings. What on the surface appeared to have been the FMOC’s declaration to finally terminate its decade long campaign of quantitative easing for the foreseeable future has however left many questions unanswered. For one the lingo used suggests that the Fed is now switching to a more hawkish stance, but it never misses an opportunity to sneak in its default disclaimer of possible negative surprises in the months ahead. Which pretty much can mean anything or may mean nothing based on who’s is in rotation to vote at the FOMC and who will eventually be chosen to take over for Mrs. Yellen sometime next year.

At any rate, what the market seems to be accepting as fact at the current time is the probability of a rate hike this December, which most likely is the one reason why the greenback has not fallen off the plate just yet. The formation on the monthly panel does support a bounce here followed by a short squeeze. But there seems to be very little bullish sentiment ready to actually kick things into gear. so I’m cautiously optimistic but would not put it past large currency vigilantes to take advantage of the current state of confusion and shake out a few more longs here.


Not surprisingly our USD/CAD campaign is in pretty good shape now but as you can see I for one was merely ticks away from being stopped out in all the confusion yesterday. My stop remains at break/even as this is one of the most promising looking USD campaigns right now and if there is a medium term future for the Dollar then I intend to ride it all the way.


The EUR/USD campaign of course has met its maker at about 1R in profits. Not bad for a pre-FOMC announcement trade and I won’t complain – money in the bank and bills always need to get paid.


The ZB is on my watch list and if I wasn’t busy playing tour guide this week I may have risked a small entry here. However it’s probably best to wait until next week in hopes of a more pronounced retest of the 100-day SMA.

One more goodie for my intrepid subs:

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Alright, that’s it for me – see y’all next week!

Published at Thu, 21 Sep 2017 13:39:04 +0000

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Fed’s Flow of Funds: Household Net Worth increased in Q2

Fed’s Flow of Funds: Household Net Worth increased in Q2

by Bill McBride on 9/21/2017 01:10:00 PM

The Federal Reserve released the Q2 2017 Flow of Funds report today: Flow of Funds.

According to the Fed, household net worth increased in Q2 2017 compared to Q1 2017:

The net worth of households and nonprofits rose to $96.2 trillion during the second quarter of 2017. The value of directly and indirectly held corporate equities increased $1.1 trillion and the value of real estate increased $0.6 trillion.

The Fed estimated that the value of household real estate increased to $23.8 trillion in Q2. The value of household real estate is now above the bubble peak in early 2006 – but not adjusted for inflation, and this also includes new construction.


Household Net Worth as Percent of GDPClick on graph for larger image.

The first graph shows Households and Nonprofit net worth as a percent of GDP.  Household net worth, as a percent of GDP, is higher than the peak in 2006 (housing bubble), and above the stock bubble peak.

This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations.

Household Percent EquityThis graph shows homeowner percent equity since 1952.

Household percent equity (as measured by the Fed) collapsed when house prices fell sharply in 2007 and 2008.

In Q2 2017, household percent equity (of household real estate) was at 58.4% – up from Q2, and the highest since Q1 2006. This was because of an increase in house prices in Q2 (the Fed uses CoreLogic).

Note: about 30.3% of owner occupied households had no mortgage debt as of April 2010. So the approximately 50+ million households with mortgages have far less than 58.4% equity – and about 2.8 million homeowners still have negative equity.

Household Real Estate Assets Percent GDPThe third graph shows household real estate assets and mortgage debt as a percent of GDP.

Mortgage debt increased by $64 billion in Q2.

Mortgage debt has declined by $1.23 trillion from the peak. Studies suggest most of the decline in debt has been because of foreclosures (or short sales), but some of the decline is from homeowners paying down debt (sometimes so they can refinance at better rates).

The value of real estate, as a percent of GDP, was up in Q2, and  is above the average of the last 30 years (excluding bubble).  However, mortgage debt as a percent of GDP, continues to decline.


Published at Tue, 19 Sep 2017 14:10:00 +0000

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Wall Street edges higher; U.S. Fed meeting in focus


Wall Street edges higher; U.S. Fed meeting in focus

(Reuters) – The three major U.S. stock indexes edged higher on Tuesday, logging closing records, with financial stocks providing the biggest boost a day ahead of the Federal Reserve’s concluding statement from its two-day policy meeting.

The U.S. central bank is expected to announce when it will begin paring its bond holdings, and while a September interest rate increase is not expected, investors will closely study Fed Chair Janet Yellen’s views on inflation for clues whether the Fed will raise rates in December.

“It seems the market is holding its breath and waiting for what the Fed has to say regarding the economy and any future interest rate hikes,” said Ryan Detrick, senior market strategist for LPL Financial.

“The market could throw a little bit of a fit if they push (balance sheet reduction) back. It could hurt financials and the overall market might not like the uncertainty,” he added.

Six of the 11 major S&P sectors closed higher, with the financial sector’s 0.8 percent gain providing the biggest boost. The sector has risen in seven of the last eight sessions, clocking a 6 percent rise in that time.

If the Fed reduces its balance sheet, investors are betting that would lift yields for longer-term treasuries, which could boost bank profits, Detrick said.

The Dow Jones Industrial Average .DJI rose 39.45 points, or 0.18 percent, to 22,370.8, clocking its sixth straight record close. The S&P 500 .SPX gained 2.78 points, or 0.11 percent, to 2,506.65, hitting its fifth record closing high in the last six sessions.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., September 6, 2017. REUTERS/Brendan McDermid

The Nasdaq Composite .IXIC added 6.68 points, or 0.1 percent, to 6,461.32, also squeaking out a record closing high, slightly above its Sept. 13 close.

The biggest percentage gain was the telecom services sector’s .SPLRCL 2.3 percent jump on merger and acquisition speculation.

The biggest U.S. telephone operators, Verizon (VZ.N) and AT&T (T.N), rose more than 2 percent, providing the second- and third-biggest individual stock boosts for the S&P. Shares of smaller wireless carrier T-Mobile (TMUS.O) rose 5.9 percent and Sprint (S.N) jumped 6.8 percent, following a report they were in active merger talks.

The healthcare index .SPXHC was one of the biggest laggards, with declines in insurers such as United Health (UNH.N), which fell 1.8 percent due to the latest efforts in Washington to overhaul Obamacare.

Best Buy (BBY.N) fell 8 percent after the No. 1 U.S. electronics retailer forecast fiscal 2021 adjusted earnings well below Wall Street estimates. The stock was one of the biggest drags on the consumer discretionary index .SPLRCD. Tesla (TSLA.O) fell 2.6 percent after Jefferies started coverage of the electric car maker’s stock with an “underperform” rating.

Advancing issues outnumbered declining ones on the NYSE by a 1.09-to-1 ratio; on Nasdaq, a 1.04-to-1 ratio favored advancers.

About 5.8 billion shares changed hands on U.S. exchanges. That compares with the 5.9 billion daily average for the past 20 trading days, according to Thomson Reuters data.

Additional reporting by Sruthi Shankar in Bengaluru, Caroline Valetkevitch in New York; Editing by Nick Zieminski and Dan Grebler

Our Standards:The Thomson Reuters Trust Principles.


Published at Tue, 19 Sep 2017 21:39:53 +0000

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Schedule for Week of Sept 17, 2017


Schedule for Week of Sept 17, 2017

by Bill McBride on 9/16/2017 08:09:00 AM

The key economic reports this week are August housing starts and existing home sales.

For manufacturing, the Philly Fed manufacturing survey will be released this week.

The FOMC meets this week and is expected to announce the reduction of the Fed’s balance sheet.

—– Monday, Sept 18th —–

10:00 AM: The September NAHB homebuilder survey. The consensus is for a reading of 65, down from 68 in August. Any number above 50 indicates that more builders view sales conditions as good than poor.
—– Tuesday, Sept 19th —–

Total Housing Starts and Single Family Housing Starts8:30 AM: Housing Starts for August. The consensus is for 1.173 million SAAR, up from the July rate of 1.155 million.This graph shows total and single unit starts since 1968.

The graph shows the huge collapse following the housing bubble, and then – after moving sideways for a couple of years – housing is now recovering.

—– Wednesday, Sept 20th —–

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.During the day: The AIA’s Architecture Billings Index for August (a leading indicator for commercial real estate).

Existing Home Sales10:00 AM: Existing Home Sales for August from the National Association of Realtors (NAR). The consensus is for 5.48 million SAAR, up from 5.44 million in July.

The graph shows existing home sales from 1994 through the report last month.

2:00 PM: FOMC Meeting Announcement. The FOMC is expected to announce the beginning of the process to reduce the Fed’s balance sheet at this meeting.

2:00 PM: FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants’ projections of the appropriate target federal funds rate along with the quarterly economic projections.

2:30 PM: Fed Chair Janet Yellen holds a press briefing following the FOMC announcement.

—– Thursday, Sept 21st —–

8:30 AM ET: The initial weekly unemployment claims report will be released. The consensus is for 303 thousand initial claims, up from 284 thousand the previous week.8:30 AM: the Philly Fed manufacturing survey for September. The consensus is for a reading of 18.0, down from 18.9.

9:00 AM ET: FHFA House Price Index for June 2017. This was originally a GSE only repeat sales, however there is also an expanded index.

12:00 PM: Q2 Flow of Funds Accounts of the United States from the Federal Reserve.

—– Friday, Sept 22nd —–

No major economic releases scheduled.


Published at Sat, 16 Sep 2017 12:09:00 +0000

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Mid September Momo Update


Mid September Momo Update


I’m seeing an increasing amount of bearish sentiment here in the comment section as well as across the financial media. Which of course is no big surprise given that we are smack middle in the most negative leaning market phase of the year. However just because a door is open does not necessarily mean the bear is going to walk through it. Let’s not forget that equity indices just painted new record highs all seasonal bias to the contrary.


Seasonal statistics are after all just an exercise in probability based on prior events. If they were immutable then trading would be extremely easy. Very well worth noting also is that the current week (#37) happens to be the third most profitable week of the year. Which then is immediately followed by the second most bearish week of the year.


No wonder September ranks #2 in terms of standard deviation, only beat by October. By the way, if you are interested in pulling exhaustive statistics on almost any Yahoo finance symbol then head over to our new Evil Speculator Seasonal Statistics page. It’s still in beta and thus freely available to everyone.


The VIX has now dropped back below my magic line at 11 and we are getting pretty close to exceeding the late 2006 into early 2007 period (almost 11 years ago – coincidence? probably). Investor confidence in this effervescent bull market remains unshaken and although we do see the occasional cracks any downside action is usually quickly reversed. Let’s talk about that a bit more:


Something that caught my attention today was the ratio between high and low beta stocks against the SPX. Traditionally we see high beta stocks lead along with the S&P, but get hit first and very hard when downside finally materializes. It’s what we would expect of course and if something else happens, like it did throughout most of 2017 then we ought to take notice. The cyan field marks a significant portion of the current advance and clearly high beta stocks are either lagging or are outdone by low beta stocks.


As you may have guessed already breadth was of course the very next chart I looked at. Which seems to be in a state of limbo right now as the ratio is pushing into elevated readings but is nowhere near where I would expect a more profound correction. Let’s also point out that the most recent upper threshold breach occurred early this year (after which we are seeing the strange high beta / low beta behavior) which was never followed by a truly meaningful correction.

So it occurred to me that we may be heading into a period resembling that of 2013 through late 2014. I posted this chart on several occasions in the past and my general hypothesis was that it carefully avoided extreme breadth levels for almost two years, thus resulting into a protracted advance higher.

Now let’s look at the VIX term structure for a bit more context on the medium term:


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Published at Thu, 14 Sep 2017 13:54:25 +0000

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Thursday: Unemployment Claims, CPI


Thursday: Unemployment Claims, CPI

by Bill McBride on 9/13/2017 06:26:00 PM

Goldman economists on inflation:

The next piece of inflation news is the August CPI report, to be released on Thursday. We expect a 0.20% increase on the core and a 0.36% increase on the headline. Two special factors—a rebound in hotel prices and a price increase by Verizon—account for about 0.05pp of our core forecast.

Looking further ahead with our bottom-up forecasting model, we expect core PCE to round to 1.5% by October, the last core PCE report before the December FOMC meeting, and to reach 1.6% by end-2017 and 1.9% by end-2018. The acceleration in our forecast is driven by (1) pass-through from energy prices and the dollar; (2) declining slack; and (3) the dropping out of earlier idiosyncratic declines that appear unlikely to be repeated next year.

• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 300 thousand initial claims, up from 298 thousand the previous week.

• Also at 8:30 AM, The Consumer Price Index for August from the BLS. The consensus is for a 0.4% increase in CPI, and a 0.2% increase in core CPI.

Published at Wed, 13 Sep 2017 22:26:00 +0000

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Nordstrom buyout; Apple aftermath; Toshiba’s sale


Nordstrom buyout; Apple aftermath; Toshiba’s sale


premarket stocks trading futures
Click chart for in-depth premarket data.

1. Nordstrom sale: Shares in Nordstrom(JWN) were surging by about 10% premarket following reports that the company could soon be taken private.

CNBC, citing unnamed sources, said that private equity firm Leonard Green & Partners could partner with the Nordstrom family on a buyout.

The Nordstrom family owns more than 30% of the retailer’s shares. Leonard Green & Partners would reportedly provide roughly $1 billion in equity to help finance the deal.

This comes as the retailer experiments with smaller stores and specialized customer services in an effort to compete with online outlets, including Amazon(AMZN, Tech30).

2. Apple aftermath: Investors will continue to focus on Apple(AAPL, Tech30) after the company unveiled its new iPhone X, iPhone 8 and iPhone 8 Plus on Tuesday.

Shares dipped a tad following the announcement. Futures suggested the stock could drop further when trading starts Wednesday.

The big question: Will consumers pay nearly $1,000 for a phone?

3. Toshiba deals with Bain: Beleaguered tech giant Toshiba(TOSYY) has signed a memorandum of understanding to negotiate a deal to sell its business unit — Toshiba Memory Corporation — to Bain Capital.

Bain Capital is working with a larger consortium on the deal.

Toshiba is trying to recover from billions of dollars in losses stemming from the collapse of Westinghouse Electric, its now bankrupt U.S. nuclear unit.

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4. Global market overview: Global stock markets are looking soft following two days of strong gains.

U.S. stock futures were dipping a bit, alongside many European markets.

Asian markets ended the day with mixed results.

The Dow Jones industrial average, S&P 500 and Nasdaq all gained 0.3% on Tuesday.

5. Earnings and economics:Cracker Barrel(CBRL) will announce earnings before the open on Wednesday.

New data shows the U.K. unemployment rate dropped to 4.3% in the second quarter, its lowest level in more than 40 years.

It’s not all good news: Prices are rising at a faster rate than British wages, meaning workers are feeling poorer.

Download CNN MoneyStream for up-to-the-minute market data and news

6. Coming this week:

Thursday — Bank of England rate decision
Friday — Samsung(SSNLF) releases Galaxy Note 8


Published at Wed, 13 Sep 2017 09:25:12 +0000

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Schedule for Week of Sept 10, 2017

By geralt from Pixabay

Schedule for Week of Sept 10, 2017

by Bill McBride on 9/09/2017 08:11:00 AM

The key economic reports this week are August retail sales and the Consumer Price Index (CPI).

For manufacturing, August industrial production, and the September New York Fed manufacturing survey, will be released this week.

—– Monday, Sept 11th —–

No major economic releases scheduled.
—– Tuesday, Sept 12th —–

6:00 AM ET: NFIB Small Business Optimism Index for August.Job Openings and Labor Turnover Survey10:00 AM: Job Openings and Labor Turnover Survey for July from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased in June to 6.163 million from 5.702 in May.  This was the highest number of job openings since this series started in December 2000.

The number of job openings (yellow) were up 11% year-over-year, and Quits were up 5% year-over-year.

—– Wednesday, Sept 13th —–

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.8:30 AM: The Producer Price Index for August from the BLS. The consensus is a 0.13% increase in PPI, and a 0.2% increase in core PPI.

—– Thursday, Sept 14th —–

8:30 AM ET: The initial weekly unemployment claims report will be released. The consensus is for 300 thousand initial claims, up from 298 thousand the previous week.8:30 AM: The Consumer Price Index for August from the BLS. The consensus is for a 0.4% increase in CPI, and a 0.2% increase in core CPI.

—– Friday, Sept 15th —–

Retail Sales 8:30 AM ET: Retail sales for August be released.  The consensus is for a 0.1% increase in retail sales.This graph shows retail sales since 1992 through July 2017.

8:30 AM: The New York Fed Empire State manufacturing survey for September. The consensus is for a reading of 19.0, down from 25.2.

Industrial Production9:15 AM: The Fed will release Industrial Production and Capacity Utilization for August.

This graph shows industrial production since 1967.

The consensus is for a 0.1% increase in Industrial Production, and for Capacity Utilization to increase to 76.8%.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for July.  The consensus is for a 0.2% increase in inventories.

10:00 AM: University of Michigan’s Consumer sentiment index (preliminary for September). The consensus is for a reading of 96.0, down from 96.8 in August.

10:00 AM: Regional and State Employment and Unemployment (Monthly) for August 2017


Published at Sat, 09 Sep 2017 12:11:00 +0000

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Update: Framing Lumber Prices Up Year-over-year


Update: Framing Lumber Prices Up Year-over-year

by Bill McBride on 9/07/2017 11:36:00 AM

Here is another update on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs – and prices are once again near the bubble highs.

The price increases in early 2013 were due to a surge in demand (more housing starts) and supply constraints (framing lumber suppliers were working to bring more capacity online).

Prices didn’t increase as much early in 2014 (more supply, smaller “surge” in demand).

In 2015, even with the pickup in U.S. housing starts, prices were down year-over-year.  Note: Multifamily starts do not use as much lumber as single family starts, and there was a surge in multi-family starts.  This decline in 2015 was also probably related to weakness in China.

Lumcber PricesClick on graph for larger image in graph gallery.

This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through early Sept 2017 (via NAHB), and 2) CME framing futures.

Prices in 2017 are up solidly year-over-year and might approach or exceed the housing bubble highs in the Spring of 2018.

Right now Random Lengths prices are up 15% from a year ago, and CME futures are up about 25% year-over-year.

There is a seasonal pattern for lumber prices. Prices frequently peak around May, and bottom around October or November – although there is quite a bit of seasonal variability.


Published at Thu, 07 Sep 2017 15:36:00 +0000

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Column: Report card on aging nations gives U.S. mixed grades


Column: Report card on aging nations gives U.S. mixed grades

CHICAGO (Reuters) – Which nations are doing the best job adapting to their aging populations?

Japan has the healthiest seniors. Spain gets top marks for supportive relatives and friends. In Norway, income inequality among older people is the lowest in the world.

How about the United States?

A new global aging index places it among the top five nations, alongside Norway, Sweden, the Netherlands and Japan. But our performance in most of the index categories suggests much work remains.

The Hartford Index, funded by The John A. Hartford Foundation, was developed by researchers at Columbia University and the University of Southern California. Previous studies comparing retirement across nations have focused mainly on economic and financial measures. But this one takes a wide view, examining data for 30 countries in five areas: productivity and engagement, well-being, equity, cohesion and security.

The categories are important to consider – they reflect the researchers’ consensus on the factors that contribute to a successful environment for aging.

“There are many elements beyond economic measures that are important,” said Dr. John Rowe, a professor at the Columbia University school of public health who led the research team.

The United States, despite ranking in the top five, receives decidedly mixed grades. It ranks No. 1 for “productivity and engagement,” which considers labor force participation rates, effective retirement ages and time spent volunteering.

We also get good marks for strong relationships among generations. But our rankings are mediocre-to-poor in categories measuring health, financial security and income inequality.


The index offers a lens into the future, Rowe says, because European countries are further along the aging curve. “After World War II the U.S. had a baby boom, but western Europe had a baby bust – fertility rates fell sharply because their economies were weak while countries worked to recover from the war,” he said. As a result, Europe aged ahead of the United States.

The U.S. Census Bureau reports that the U.S. 65-and-over population will nearly double over the next three decades, from 48 million to 88 million by 2050. But worldwide, the older population will more than double, to 1.6 billion by 2050 – and the U.S. population will stay younger than in other countries. The largest share of older people will be in Japan, South Korea, Hong Kong and Taiwan in 2050, according to the bureau.

The Hartford index performance on financial security is especially worrisome. The United States ranks 19th among 30 countries in this category, which looks primarily at income of the 65-plus population. It uses a straightforward measure called poverty risk – the share of a nation’s older population below a certain income threshold. For example, if a country’s median income is $40,000, a senior with income of $20,000 would be considered impoverished.

It also assesses food security – the proportion of older people who are able to buy the food they need. Top performers were Luxembourg, the Netherlands and Spain.

The index ranks the United States 16th for well-being – an important gauge of health, not just from the perspective of longevity, but healthy life expectancy, as calculated by the average number of years a person age 65 can expect to live without disability.

“What’s important is adding life to years, not years to life,” Rowe says. “Policies that are embedded in good health-care systems on prevention and geriatrically competent care will decrease disability rates.”

Top performers in this category, along with Japan, are Switzerland, Australia, Canada, New Zealand and France.

On equity, a measure of the gaps in well-being and economic security between the haves and have-nots, the United States ranks 21st, reflecting wider U.S. income inequality compared with other countries.

The United States scores better for cohesion, which aims to measure tension across generations, and social connectedness. We rank fifth in this category, reflecting the number of people who report having relatives or friends they can count on, the percent of people who say they trust their neighbors and intergenerational wealth transfers.

Most encouraging is the U.S. performance on productivity and engagement. Our workers are staying on the job longer and finding volunteer opportunities at higher rates than in many western European nations.

We could do even better in this category. Efforts to engage older Americans for a range of volunteer efforts are gaining ground (, but need greater support.

“We may be doing better than other countries on volunteering, but we haven’t done as well as we could,” says Rowe.

Editing by Lauren Young and Dan Grebler


Published at Thu, 07 Sep 2017 16:35:05 +0000

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Debt ceiling; ECB meeting; Barnes and Noble earnings


Debt ceiling; ECB meeting; Barnes and Noble earnings


premarket thursday
Click chart for more in-depth data.

1. Debt ceiling deal: President Trump has sided with Democrats to support a deal that would ensure passage of disaster relief funding as well as raising the debt ceiling and continuing to fund the government.

The measure will keep the government open through the end of December, setting up a hugely complicated year end crush of must-pass items.

But the immediate threat of breaching the debt ceiling would be lifted.

Investors reacted by sending yields on Treasury bonds maturing in October lower, which those maturing in December spiked.

2. ECB decision day: The European Central Bank’s governing council is meeting Thursday to decide on monetary policy.

The central bank may also discuss how it plans to wind down its stimulus program, which includes €60 billion ($72 billion) in bond purchases each month.

The euro, meanwhile, is having a killer year, strengthening 13% against the dollar. It was trading 0.2% higher on Thursday at just below $1.19.

3. Global market overview:U.S. stock futures were lower on Thursday.

European markets opened mixed, following a tough trading session in Asia.

The Dow Jones industrial average, the S&P 500 and the Nasdaq all closed 0.3% higher on Wednesday.

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4. Earnings and economics:Barnes & Noble(BKS) will release earnings before the opening bell.

The company’s sales have suffered in recent years as Amazon(AMZN, Tech30) lured shoppers away from brick and mortar stores.

The weekly U.S. crude inventories report is set to be released at 11 a.m. ET. It will give an indication of the impact storm Harvey had on the energy market.

Several key refineries and production facilities closed because of the storm, including the two largest in the country.

Another major hurricane — Irma — is now barreling down on Florida.

Download CNN MoneyStream for up-to-the-minute market data and news

5. Coming this week:

Thursday — ECB monetary policy meeting; Barnes & Noble results; Crude inventories report
Friday — Kroger reports earnings


Published at Thu, 07 Sep 2017 08:57:49 +0000

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End Of Summer MOMO Update


End Of Summer MOMO Update


Labor Day is behind us which pretty much marks the end of the summer season and, fortunately for us, the time when many traders and investors return from hibernation. Even here at the evil lair I’m seeing a distinct uptick in new subscriptions after Labor Day and fortunately many of them happen to be familiar faces. Welcome back!

If you haven’t been here for a few months then you may be happy to learn that the Mole has been working his butt off all summer and will be introducing new exciting additions to Evil Speculator over the coming weeks and months. But now, as promised yesterday, it is again time to take another gander at the market momo and volatility front.


Let’s kick things off with market breadth expressed here by the ratio between NYSE stocks trading > their 50 SMA vs the ones trading > their 200 SMA. I’m sure you’re getting the general idea here which revolves around the underlying health of a market. Are indices mainly advancing courtesy of a small number of strong leaders or does the entire market exhibit strength (or weakness)?

As you can see the signal gyrates around quite a bit and it actually took me a while to figure out the proper thresholds which seemed to have meaning. What I settled on in the end were the 1.0 and 0.7 threshold – the rules are explained on the chart so I won’t be regurgitating them again.

What’s a bit puzzling to me right now is that the signal did actually not drop below the 0.7 threshold during last month’s lows. Which means that we didn’t get a true buy signal here on the recovery higher and that in turn leaves a small chance that we are still actually in a larger long term correction. The only thing that disqualifies that scenario would be a) a push to new all time highs or b) a push > the 1.0 threshold on the chart above.


The SPXA50:SPXA200 ratio is obviously related to the previous chart but only factors in S&P 500 stocks. Frankly this is the most bearish momo chart I came across and as it’s not confirmed by any others just yet I’m going to withhold judgment. However should the SPX experience renewed weakness then this is may be a chart to watch, especially if the signal drops through the 0.65 mark again, which could lead us lower. But for now I’m taking it with a few grains of salt.

There’s another aspect to the current formation. Some of you may remember this chart from before and I have often used it as a handy prop when trying to show how ruthlessly efficient the relentless bull market between 2013 and 2014 advanced higher without ever triggering the upper threshold. So this bodes the question as to whether we may be inside yet another effervescent phase of this never ending generational bull market. Hey, if the bulls make it to 15 years then it’s officially one generation if I’m not mistaken.


The CPCE is issued by the CBOE and refers to the ratio of put and call options in their exchange. The way I’m using it is a bit unorthodox but it has worked pretty well for us over the years, especially when it comes to long reversals. Once again I’ve got a bit of a head scratcher here as it recently pushed > the upper 1.0 (bearish) threshold (by a mere hair) and then dropped back down immediately. I guess technically speaking that is a bearish reversal signal but let’s keep in mind that even the real confirmed ones have not worked that well in recent history.


On the long side however we seem to have ourselves a pretty nifty long signal here. That push > the lower Bollinger was the right moment to be long. Which of course is what we did if you recall.

Well, I’d love to give it all away but those servers and lap dances don’t pay for themselves. If you’re not a member then sign up right now as you definitely don’t want to miss out on my volatility charts!


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Published at Wed, 06 Sep 2017 14:46:43 +0000

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Trade Deficit at $43.7 Billion in July


Trade Deficit at $43.7 Billion in July

by Bill McBride on 9/06/2017 08:43:00 AM

From the Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $43.7 billion in July, up $0.1 billion from $43.5 billion in June, revised. July exports were $194.4 billion, $0.6 billion less than June exports. July imports were $238.1 billion, $0.4 billion less than June imports.

U.S. Trade Exports ImportsClick on graph for larger image.

Imports and exports decreased in June.

Exports are 18% above the pre-recession peak and up 5% compared to July 2016; imports are 3% above the pre-recession peak, and up 5% compared to June 2016.

In general, trade has been picking up.

The second graph shows the U.S. trade deficit, with and without petroleum.

U.S. Trade Deficit The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil imports averaged $43.20 in July, down from $44.68 in June, and up from $41.02 in July 2016.  The petroleum deficit had been declining for years – and is the major reason the overall deficit has mostly moved sideways since early 2012.

The trade deficit with China increased to $35.6 billion in July, from $30.3 billion in July 2016.

Published at Wed, 06 Sep 2017 12:43:00 +0000

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If world is drifting apart, it isn’t happening in economic growth: James Saft


If world is drifting apart, it isn’t happening in economic growth: James Saft

(Reuters) – If the world becoming less economically integrated, someone is going to have to explain why growth around the world is so remarkably consistent and tightly correlated.

It isn’t just that all 45 OECD countries are growing together for the first time since 2007, but that the level of growth around the world is as similar as its been in a long time. Growth levels among the Group of 10 wealthy nations are as tightly clustered – meaning rates of growth are similar – since at least 1991, and among 21 countries, large European Union countries’ growth figures are as tightly packed as they’ve been since at least 1997.

It also isn’t that growth is particularly rapid: the IMF is forecasting 3.5 percent, an improvement on last year’s 3.1 percent and well below the kinds of figures that usually prevailed in the last century. But wherever this tide is coming from, it is truly lifting all boats.

That’s remarkable for a number of reasons. There has been a widespread expectation that a period of de-globalization in which the world became less tightly knit would be part of the bitter fruit of the great financial crisis.

That idea is partly borne out by trade and financing statistics, as well as some striking political realities. The world’s most powerful man, Donald Trump, is an economic nationalist who at least talks the talk of capturing more of the pie rather than growing it through greater integration. At the same time, Britain, one of the principal leaders, for good or ill, of globalization over the past several hundred years is in the process of ham-handedly attempting to work out its divorce from the European Union.

Yet here we are, despite disparate demographic pressures and slowly rising U.S. interest rates, with virtually the entire planet in synchrony.

“The key theme in the financial world is the remarkably synchronous economic recovery across different regions and sectors, with muted inflationary pressures: not only are most parts of the world growing, but the dispersion in economic performances is remarkably low, compared to history,” Stephen Jen of hedge fund SLJ Capital wrote to clients.

Jen argues that this is in part the result of China’s new eminence.

“For the first time since China became big enough to be considered the ‘second sun in our solar system,’ its growth has been in synch with that of the U.S. If both the U.S. and China enjoy strong expansions, it would be difficult for any economy not to enjoy the growth beta,” he writes.


One of the supposedly discredited theories popular before the financial crisis was the idea of the “Great Moderation,” a new predictability in U.S. economic growth supposedly produced by better fiscal and monetary management. While the global economy did erupt violently in the last decade, a 2014 research piece from the Federal Reserve concluded that low economic volatility would become the norm, punctuated by periods of high volatility. (here)

It may be that the coordinated growth globally is the result of the relative uniformity of supportive monetary policies put into place and more or less maintained since the crisis. On that view it is possible that a change of gears by one important central bank or another might upset things, perhaps if the Fed actually carries through with normalizing interest rates.

It is also possible that synchronized monetary policy is supporting growth even as the process of de-globalization gathers steam. De-globalization isn’t just the result of destructive populist urges; part of the argument was that individual nations needed better control over the financial systems, which they backstopped with their taxes, but which were highly inter-related.

There is good evidence that globalization is slowing, if not reversing. Global trade is forecast to grow about 2.4 percent this year, well below overall economic growth. Between 1950 and 2008, global trade grew at three times the rate of the global economy, reflecting the post-war expansion and the eventual integration of China and the Soviet bloc.

Cross-border claims among banks, another good indicator of economic globalization, have oscillated at around zero percent growth for much of the post-crisis period, a stark contrast to their previous robust expansion.

Can the great moderation in globally synchronized growth last? For a time, yes, but as with the great moderation in the United States, volatility may in the end have been suppressed, and not extinguished, by policy.

(James Saft is a Reuters columnist. The opinions expressed are his own)

Editing by Dan Grebler

Our Standards:The Thomson Reuters Trust Principles.


Published at Tue, 05 Sep 2017 23:23:56 +0000

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Why the Bull Market May Last Until 2018


Why the Bull Market May Last Until 2018

By Mark Kolakowski | September 5, 2017 — 2:15 PM EDT

The bull market in stocks is still alive and kicking and is likely to extend into 2018. But the bull’s final charge won’t be pretty, according to Doug Ramsey, chief investment officer at Minneapolis-based Leuthold Group, as reported by Barron’s. Stocks are likely to face huge volatility as they stage one last rally before year-end and then stumble badly, falling at least 25% in 2018, he predicts. Investors should expect a correction in the next few months, a market drop of up to 10 percent, before the bull’s last-gasp rally and final plunge.

Leuthold publishes widely-read studies on the markets.

One Final Bull Run

“If a number of different valuation metrics were to return to their 60-year median, since the S&Ps inception in 1957, that would imply a drop in the S&P 500 to 1750, or about 25%,” Ramsey told Barron’s. A market technician, he notes that years ending in “7” tend to have a “strong downward bias” in the August to November period. He believes that a pullback of 6% to 8% in the S&P 500 Index (SPX) is already underway, and that the Russell 2000 Index could drop by 13% to 14%. After rebounding to new highs later in the fall, he expects the S&P 500 to close 2017 in the range of 2550 to 2600.

Betting on Technology

In recent weeks, Leuthold has reduced its maximum net equity exposure to 57%, Ramsey says in Barron’s August 26 story. His company, he indicates, has its biggest bets in technology, particularly semiconductor equipment, data processors, IT consulting, and electronic manufacturing services. However, his firm does not own the FANG stocks, which are Facebook Inc. (FB), Inc. (AMZN), Netflix Inc. (NFLX), and Google parent Alphabet Inc. (GOOGL). They do not believe that tech sector valuations are out of hand, even including the FANGs, and see a positive in the fact that the price to cash flow ratio for the S&P tech sector has been virtually unchanged over the past four years, at a value of about 15.

Bull Market Top in 2018

The great bull market will end sometime in 2018, Ramsey predicts, but he won’t speculate on when the top will be reached. Current negative indicators that he cites include a slowdown in the auto market, a cyclical peak that’s approaching in single-family housing, and a slowdown in annual nonfarm payroll employment growth, which normally precedes the onset of a recession within 12 months.

After experiencing negative real, inflation-adjusted, interest rates for eight of the last nine years, he expects that “the level at which rates begin to bite might be lower than commonly believed.” Thus, if yields on the 10-Year Treasury note rise to 3% or 3.5%, he believes that income-oriented investors might begin selling high-yielding stocks, whereas bond yields of 5.5% to 6% would have been necessary in the past to prompt a similar exit from equities.

Inescapable Investment Math

Based on market history going all the way back to 1880, a theoretic balanced portfolio that has been 60% in S&P 500 stocks and 40% in 10-Year U.S. Treasury Notes has produced an average annualized return of 8%, Ramsey says, noting that this is a common target for pension funds. In turn, that 8% breaks down into 4.1% from dividend and interest income, and 3.9% from capital appreciation, he adds. Today, however, “a record combined overvaluation” of both stocks and bonds mean that a 60/40 equity/debt portfolio is yielding only about 2.1% today. “That is inescapable investment math that challenges the bulls,” he asserts, forecasting that investors will struggle to generate an average annual return of 3% to 4% over the next ten years for such a balanced portfolio.

Meanwhile, billionaire investor Warren Buffett remains positive on the equity markets. He believes that stock valuations, though high by historical standards, are far more reasonable than those on bonds right now. (For more, see also: Buffett Says Aging Bull Market Best Place to Be.)


Published at Tue, 05 Sep 2017 18:15:00 +0000

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Stocks Edge Higher Despite Rising Risks


Stocks Edge Higher Despite Rising Risks

By Justin Kuepper | September 1, 2017 — 6:28 PM EDT

The major U.S. indexes moved higher over the past week, despite weak nonfarm payroll data on Friday morning. The Bureau of Labor Statistics reported 156,000 jobs added in August, which was lower than the 180,000 consensus forecast. While these figures were lower than expected, Wednesday’s favorable second quarter GDP revision was enough of a positive to offset any negativity, with a better-than-expected 3% annualized rate.

International markets saw mixed results over the past week. Japan’s Nikkei 225 rose 1.22%; Germany’s DAX 30 fell 0.21%; and Britain’s FTSE 100 rose 0.5%. In Europe, the market will be keeping a close eye on the European Central Bank’s upcoming monetary policy meeting, where measures to reduce stimulus could be announced. In Asia, investors will be keeping an eye on North Korean aggression, particularly with its recent missile launch over Japan. (See also: The 3 Biggest Risks Faced by International Investors.)

The SPDR S&P 500 ETF (ARCA: SPY) rose 1.34% over the past week. After breaking out from the 50-day moving average at $245.05, the index reached prior highs and trendlineresistance at around $247.50. Traders should watch for a breakout to R1 resistance at $250.32 or R2 resistance at $253.16 on the upside or a move lower to retest the 50-day moving average. Looking at technical indicators, the relative strength index (RSI) moved higher to 60.9, while the moving average convergence divergence (MACD) experienced a bullish crossover that could signal upside ahead.

Technical chart showing the performance of the SPDR S&P 500 ETF (SPY)

The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) rose 0.86% over the past week, making it the worst performing major index. After rebounding from the 50-day moving average at $216.54, the index moved toward the middle of its price channel. Traders should watch for a breakout to R1 resistance at $221.86 or R2 and upper trendline resistance at $224.21 or a move lower to the pivot point at $218.80. Looking at technical indicators, the RSI rose to 61.98, but the MACD could see a near-term bullish crossover. (For more, see: Top 3 ETFs That Track the Dow.)

Technical chart showing the performance of the SPDR Dow Jones Industrial Average ETF (DIA)

The PowerShares QQQ Trust (NASDAQ: QQQ) rose 2.83% over the past week, making it the best performing major index. After breaking out from the 50-day moving average at $142.12, the index moved toward its upper trendline resistance. Traders should watch for a breakout from R1 resistance at $148.21 to R2 resistance at $150.23 or a move lower to retest the pivot point at $144.20. Looking at technical indicators, the RSI moved higher to 62.98, but the MACD experienced a bullish crossover that could signal upside ahead.

Technical chart showing the performance of the PowerShares QQ Trust (QQQ)

The iShares Russell 2000 Index ETF (ARCA: IWM) rose 2.66% over the past week. After breaking out from the pivot point at $138.68, the index moved beyond the 50-day moving average to the middle of its price channel. Traders should watch for a breakout to R1 resistance at $143.25 or upper trendline resistance at $145.50. A failure to break out could lead to a retest of the pivot point at $138.68. Looking at technical indicators, the RSI moved higher to 60.64, but the MACD experienced a bullish crossover that could signal upside ahead. (See also: IWM: iShares Russell 2000 Index ETF.)

Technical chart showing the performance of the iShares Russell 2000 ETF (IWM)

The Bottom Line

The major indexes moved higher over the past week, and technical indicators predict more upside potential ahead. Next week, traders will be keeping an eye on several upcoming economic indicators, including factory orders on Sept. 5 as well as international trade data and jobless claims on Sept. 6. The market will also be monitoring developments involving North Korea and the U.S. debt ceiling debate. (For additional reading, check out: Trade Data Hints at a Shift in the Structure of the U.S. Economy.)

Note: Charts courtesy of As of the time of writing, the author had no holdings in the securities mentioned.


Published at Fri, 01 Sep 2017 22:28:00 +0000

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August Employment Revisions

Stock Market Photo
By jarmoluk from Pixabay

August Employment Revisions

by Bill McBride on 9/04/2017 11:13:00 AM

Last week, in my employment preview, I noted “My sense (mostly based on history) is that job gains will be below consensus in August.” Sure enough.

Here is a table of revisions for August since 2005.  Note that most of the revisions have been up.   This doesn’t mean that the August 2017 revision will be up, but it does seem likely.   I’m not sure why the BLS has underestimated job growth in August (possibly because of the timing of seasonal teacher hiring and the end of the summer jobs).

August Employment Report (000s)
Year Initial Revised Revision
2005 169 196 +27
2006 128 183 55
2007 -4 -20 -16
2008 -84 -267 -183
2009 -216 -213 3
2010 -54 -36 18
2011 0 110 110
2012 96 177 81
2013 169 261 92
2014 142 230 88
2015 173 157 -16
2016 151 176 25
2016 156

Note: In 2008, the BLS significantly under reported job losses. That wasn’t surprising since the initial models the BLS used missed turning points (something I wrote about in 2007). The BLS has since improved this model.


Published at Mon, 04 Sep 2017 15:13:00 +0000

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Gilead Rally Isn’t Fully Warranted: Morgan Stanley


Gilead Rally Isn’t Fully Warranted: Morgan Stanley

By Shoshanna Delventhal | August 31, 2017 — 4:34 PM EDT

As shares of biopharmaceutical company Gilead Sciences Inc. (GILD) continue to soar on news regarding the approval of a CAR-T treatment from Novartis AG (NVS) on Tuesday and Gilead’s acquisition of Kite Pharma Inc. (KITE) on Monday, one team of analysts finds the mixed reaction in pharma stocks rather puzzling.

Morgan Stanley’s Matthew Harrison and team indicate that while a bump in Foster City, Calif.-based Gilead’s shares following its $12 billion acquisition of Kite Pharma was expected due to investor speculation regarding increased strategic interest in the CAR-T space, the mixed reaction in stocks following Novartis’ approval may be unwarranted.

Shares Up on CAR-T Approval

Investors sent Juno Therapeutics Inc. (JUNO) falling on Tuesday, recovering 4.8% as of Thursday afternoon at $42.22 per share and reflecting a 37.3% rally this week. Gilead continues to surge after facing no pullback on Tuesday, up 2.3% on Thursday at $83.07 per share and reflecting a 12.5% jump this week. Biotechnology company Bluebird Bio Inc. (BLUE) has rallied more than 26% this week, up 10% on Thursday at $123.70 per share. (See also: Juno Stock Continues Breakout After Gilead Buys Kite.)

“Novartis outcomes-based pricing is a slight negative to the group, esp. for indications where responses are low (like DLBCL [diffuse large B-cell lymphoma]). Thus, it makes sense that JUNO saw some pressure in light of the sig. move higher this week and BLUE closed the gap with JUNO as BCMA response rates high,” wrote Harrison, speaking to B-cell maturation antigen response rates.

The analysts reiterated their perspective that initial DLBCL sales in 2018 will likely drive street sentiment for Gilead, Novartis and its peers. “We expect near-term volatility to continue as sentiment swings, but do not see greater clarity until 2018,” wrote the Morgan Stanley analysts. (See also: Why Gilead’s Acquisition of Kite Is Not Enough.)


Published at Thu, 31 Aug 2017 20:34:00 +0000

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Gasoline spikes to $2/gallon, crude slips as Harvey wreaks havoc on refiners


Gasoline spikes to $2/gallon, crude slips as Harvey wreaks havoc on refiners

SINGAPORE (Reuters) – Gasoline prices hit $2 a gallon for the first time since 2015 on Thursday as flooding from tropical storm Harvey knocked out almost a quarter of U.S. refineries, while crude oil prices fell again on the resulting drop in demand.

Harvey has battered the U.S. Gulf coast since last Friday, ripping through Texas and Louisiana at the heart of the U.S. petroleum industry. At least 4.4 million barrels per day (bpd) of refining capacity was offline, or almost a quarter of total U.S. capacity, based on company reports and Reuters estimates.

Fearing a gasoline supply squeeze, U.S. gasoline prices on Thursday jumped to $2 per gallon for the first time since July 2015.

Crude prices, by contrast, fell as the closure of so many U.S. refineries led to a slump in demand for the most important feedstock for the petroleum industry.

U.S. West Texas Intermediate (WTI) crude futures were trading at $45.91 per barrel at 0212 GMT, down 5 cents, or 0.1 percent, from their last close. International Brent crude was down 8 cents, or 0.2 percent, at $50.78 a barrel.

“The flooding from Hurricane Harvey shut the largest refinery in the U.S., pushing gasoline prices to a two-year high. In contrast, oil prices retreated,” ANZ bank said.

Goldman Sachs said it could take several months before all production could be brought back online.

“While no two natural disasters are similar, the precedent of Rita-Katrina would suggests that 10 percent of the … currently offline capacity could remain unavailable for several months,” the bank said.

Meteorologists said that Harvey could be the worst storm in U.S. history in terms of financial cost.

“The economy’s impact, by the time its total destruction is completed, will approach $160 billion,” said Joel N. Myers, president and chairman of meteorological firm AccuWeather.

Other estimates have put the economic losses from Harvey at under $100 billion.

And although Harvey keeps getting weaker, meteorologists say more floods are expected.

The National Hurricane Center (NHC) said in its latest update that flooding and heavy rain continued in eastern Texas and western Louisiana.

AccuWeather also said that “the worst flooding from Harvey is yet to come as rivers and bayous continue to rise in Texas with additional levees at risk for breaches and failures.”

Beyond Harvey, U.S. commercial crude oil stocks fell by 5.39 million barrels last week, to 457.77 million barrels, according to data released Wednesday by the U.S. Energy Information Administration.

That’s 14.5 percent down from record levels reached last March, and it is below 2016 levels.

This came on the back of record U.S. gasoline demand of 9.846 million bpd last week, and as U.S. refining utilization rates rose to 96.6 percent, the highest percentage since August of 2015.

However, the data was collected before Hurricane Harvey hit the Gulf Coast.

Reporting by Henning Gloystein; Editing by Richard Pullin


Published at Thu, 31 Aug 2017 02:18:06 +0000

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Upbeat U.S. growth revision drives Wall Street higher


Upbeat U.S. growth revision drives Wall Street higher

NEW YORK (Reuters) – U.S. stocks rose on Wednesday after stronger-than-expected U.S. economic growth outweighed concerns about escalating tensions between the United States and North Korea and uncertainty in the aftermath of Hurricane Harvey.

Gross domestic product was revised higher to show a 3.0 percent annual growth rate in the second quarter, due partly to robust consumer spending as well as strong business investment.

Adding to the positive sentiment, U.S. private-sector employers beat economists’ expectations as they hired 237,000 workers in August, marking the biggest monthly increase in five months.

“I have doubts how sustainable the macro economy is, but perceived fundamentals are still okay. GDP confirmed that,” said John Velis, macro strategist at State Street Global Markets in Boston.

“You can come up with plenty excuses to remain (invested) in the market.”

President Donald Trump said he wants to see the U.S. corporate tax rate drop to 15 percent but the White House offered no new tax plan, leaving the proposal in the hands of Congress. Tax reform was one of Trump’s main talking points during his campaign and expectations for its passage have been a main driver of stock gains since he won the presidency.

The Dow Jones Industrial Average .DJI rose 27.06 points, or 0.12 percent, to end at 21,892.43, the S&P 500 .SPX gained 11.29 points, or 0.46 percent, to 2,457.59 and the Nasdaq Composite .IXIC added 66.42 points, or 1.05 percent, to 6,368.31.

The Nasdaq closed within 1 percent of its record closing high set in late July.

Tensions between the United States and North Korea seemed to escalate after Trump dismissed any diplomatic negotiations via a tweet, saying “talking is not the answer,” a day after Pyongyang fired a ballistic missile that flew over Japan.

However, Defense Secretary Jim Mattis later said the United States still has diplomatic options.

H&R Block (HRB.N) fell 8.3 percent to $26.81 after the tax preparation service provider reported a bigger-than-expected loss.

Aerovironment (AVAV.O) rose 18.2 percent to $46.52 after the drone maker reported a smaller-than-expected loss and revenue that beat estimates.

Analog Devices (ADI.O) closed up 5.2 percent at $83.72 after the chipmaker’s quarterly earnings and forecast exceeded expectations.

Advancing issues outnumbered declining ones on the NYSE by a 1.66-to-1 ratio; on Nasdaq, a 1.69-to-1 ratio favored advancers.

Some 376 U.S.-traded issues posted new 52-week highs and there were 245 new lows. Highs were well below their average over the past year while lows were slightly above theirs.

About 5.12 billion shares changed hands in U.S. exchanges, below the 5.84 billion daily average over the last 20 sessions.

Reporting by Rodrigo Campos; Editing by James Dalgleish

Our Standards:The Thomson Reuters Trust Principles.


Published at Wed, 30 Aug 2017 20:29:55 +0000

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