#financial markets today
Stock Market Today: Market Bliss as Crude Oil Craters
The session was quiet, but there s a storm brewing
Aug 1, 2016, 5:43 pm EDT | By Anthony Mirhaydari. InvestorPlace Market Strategist
U.S. equities mostly moved lower on Monday amid relatively quiet trading. The super-tight trading range that s followed the historic post-Brexit rebound moved into its fourth week as volatility is smashed lower.
But this apparent calm belies the accelerating selloff underway in crude oil, which is down nearly 23% from its high after falling below the $40-a-barrel benchmark for the first time since April. You wouldn t know it by looking at the sideways skid in large-cap stocks, but oil has entered a new bear market driven by a return of oversupply worries.
In the end, the Dow Jones Industrial Average lost 0.2%, the S P 500 Index lost 0.1%, the Nasdaq Composite gained 0.4% and the Russell 2000 ended the day 0.1% lower. Further, Treasury bonds were weaker, the dollar was higher, gold gained 0.2% and oil fell 3.7%.
Energy stocks led the decliners with a 3.3% loss followed by telecom and materials. Technology stocks put in a strong showing, with FANG icon Amazon.com, Inc. (NASDAQ: AMZN ) up 1.2%. SolarCity Corp (NASDAQ: SCTY ) fell 7.4% as it reached a final deal to be acquired by Tesla Motors Inc (NASDAQ: TSLA ) in an all-stock deal with around $2.6 billion. Separately, Trina Solar Limited (ADR) (NYSE: TSL ) gained 25.2% after agreeing to be taken private in an all-cash deal worth $1.1 billion.
The decline in crude was encouraged by a Reuters report that OPEC output likely increased to a record in July and a Bloomberg article that hedge fund bets again energy have increased by the most since at least 2006. Data from Yardeni Research also shows a recent bounce in U.S. drilling rig counts.
As a reminder, recent concern has focused on swollen gasoline inventories, which have pinched refiner margins and slowed cracking activity, which in turn threatens to worsen the glut of crude.
The weakness in energy stocks appears to just be getting started as shares of stocks like Exxon Mobil Corporation (NYSE: XOM ) has badly disconnected from crude oil during the February-July rebound driven by hopes of an OPEC-Russia oil supply freeze deal.
XOM fell through last week s lows in what looks like a looming test of its 200-day moving average not touched since February. The company reported a top- and bottom-line miss last week, with earnings of 41 cents per share missing expectations for 64 cents on a 22% drop in revenue to $57.7 billion.
Valuations are ridiculous: Consider that XOM s current trailing twelve-month price-to-earnings ratio is nearly double what is considered fair value.
The decline boosted the Aug $94 XOM puts recommended to Edge Pro subscribers to a gain of 314% since recommended on July 21.
The oversupply is only going to get worse. Libya announced oil ports closed due to civil unrest are to resume exports, Iran is aggressively ramping output now that sanctions have been lifted, Saudi Arabia just cut the price of oil to Asian markets, and Russia s energy minister said he did not see a coordinated action on curtailing oil output with OPEC.
Also weighing on sentiment were hawkish comments from NY Fed President William Dudley that the futures market was too complacent about the risk of more than one quarter-point interest rate hike by the end of 2017. He reiterated that a hike was possible ahead of the presidential election in November.
All of this threatens the quietest few weeks in the stock market in decades. Yet even within this relative calm, there is evidence of weakness: After a record of nine straight up days the Dow is now down six days straight. That s the worst result since last August.
Anthony Mirhaydari is founder of theEdgeandEdge Proinvestment advisory newsletters. A two-week and four-week free trial offer has been extended to InvestorPlace readers.
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#today stock market
What Happened in the Stock Market Today
Source: Yahoo Finance.
Job growth slowed down last month, according to the latest official economic data. Employers added 151,000 jobs in August, below expectations and down significantly from the 275,000 jobs added in July. Still, the longer-term trend is stable. After accounting for revisions, the job market has now grown by an average of 232,000 per month over the past three months. That number will likely figure prominently in the Federal Reserve’s debate over whether or not to raise interest rates after its next meeting, which concludes on September 21 .
Meanwhile, earnings news sent a few stocks sharply lower even as broader indexes rose. These include Verifone (NYSE:PAY ) and Lululemon (NASDAQ:LULU ). which both posted double-digit losses on Friday.
Verifone’s revenue stumbles
Verifone was one of the market’s biggest losers, slumping 16% following disappointing quarterly results. The payments solutions specialist’s sales turned surprisingly negative, with revenue slipping 3% to $493 million. In contrast, CEO Paul Galant and his executive team had projected $515 million of sales. “Q3 was a challenging quarter for Verifone on revenues,” Galant said in a press release on Friday. The good news is that profitability held up, and cost cuts allowed the company to hit its earnings target. Verifone managed a 7% boost in EPS.
Image source: Getty Images.
However, there appear to be persistent challenges surrounding the rollout of the EMV payment platform that handles chip-enabled credit cards. These will continue into the current quarter, Verifone warned, and will be a drag on growth. As a result, full-year revenue will stop at $2 billion, rather than the $2.1 billion they forecast in late May. Projected earnings got a bigger downgrade and will now be roughly $1.65 per share, compared to the prior $1.85 outlook.
Executives are confident that the issues that tripped up sales growth come from a mix of “difficult but temporary local market” issues and a slower than expected introduction of the EMV system. Investors who agree with that assessment might be tempted to take a closer look at this stock, which is down almost 50% in the last twelve months.
Lululemon’s profitability growth
Lululemon’s stock took a step back from all-time highs, dropping 11% after announcing its quarterly earnings results. The retailer had plenty of good news for investors in this report. Comparable store sales growth was 3% — on par with the prior quarter’s result and right within management’s guidance. While it could have been higher, that’s an impressive pace given the weak selling environment for most apparel retailers these days .
Image source: Lululemon.
The company didn’t have to resort to price cuts to keep customer traffic humming along, either. Gross profit margin improved by two percentage points to reach 49% of sales. “The second quarter demonstrated strong results as we delivered sales and EPS at the high-end of our guidance and saw an important inflection in our gross margin,” CEO Laurent Potdevin said in a press release.
Lululemon raised its sales and profit outlook for the rest of the year, but perhaps not by as much as investors had hoped, given the run-up in the stock lately. Shareholders may have been holding out for stronger growth, but with profitably finally climbing after four years of declines, and with inventories down from the prior year, the company is in good shape headed into the key holiday shopping season.
Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Lululemon Athletica. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
#current stock prices
This stock market rally isn’t like the others
The rally in stocks to all-time highs has little to do with earnings – the most important driver of stock prices – according to Deutsche Bank.
According to Dominic Konstam and team, writing in a note Friday, the rally is about the declining equity risk premium, which is simply the excess return the stock market provides over a risk-free rate like bond returns.
The premium jumped after stocks plunged in the financial crisis, with investors demanding as much as 7% more from choosing stocks over bonds. It has now fallen closer to its historical norm of 2% as bond yields also fell, implying that the return investors require to be compensated for their risky investments in stocks has fallen.
The sovereign bond yields in many developed countries are at or near record lows. Yields on benchmark bonds in Germany and Japan plunged deeper into negative territory after the rush to government-debt markets sparked by the UK’s decision to leave the European Union.
As nominal yields have fallen, investors have rotated into higher-yielding assets, Konstam said.
“The current cycle stands out in that earnings have played almost no role in the SPX rally. In fact, earnings were a slight drag on equities and were only offset by an aggressive multiple expansion. More than 90 percent of the rally was attributed to a collapse in equity risk premium. In sharp contrast, the equity gains in the 1980s and 2000s were all about earnings growth, and in 1990s earnings still accounted for more than half of the rally.”
The equity risk premium is still some 2% higher than its historical average over the last 30 years – so it could fall further. This gives the S P 500 room to rise another 200 points, Deutsche Bank estimates.
But earnings and expectations for them remain the biggest driver of stock prices. And because the second-quarter earnings season could mark the fourth straight decline in year-over-year S P 500 earnings, that’s a near-term risk to the rally, according to Deutsche Bank.
SEE ALSO: The most important mover of stock prices is not the one driving this rally to all-time highs
The High Yield Bond Market Has Never Been This Decoupled From Reality #small #business
#bond market news
The High Yield Bond Market Has Never Been This Decoupled From Reality
Recovery rates in 2016 are extremely low.. for high-yield bonds, the recovery rate YTD is 10.3% (10.5% senior secured and 0.5% senior subordinate), which is well below the 25-year annual average of 41.4%. Final recovery rates in 2015 for high-yield bonds were 25.2%, compared with recoveries of 48.1%, 52.7%, 53.2%, 48.6%, and 41.0% in full-years 2014, 2013, 2012, 2011, and 2010, respectively. Notably, average recoveries for Energy and Metals/Mining bonds were 18.3% and 20.0%, respectively, which weighed down overall high-yield recovery rates. Excluding the troubled commodity sectors, high-yield recoveries were a more respectable 46.1% (32.1% Ex-Energy only ). As for loans, recovery rates for first-lien loans thus far in 2016 are 24.5%, compared with their 18-year annual average of 67.2%. Final 2015 1st lien recoveries were 48.2%, while average recoveries for Energy and Metals/Mining 1st lien loans were 44.1% and 38.4%, respectively.
The record collapse in recovery rates is shown below.
It is not just JPM who points out what we first noticed in January: in an interview with Goldman s Allison Nathan, credit guru Edward Altman reiterates that same warning, although he focuses on the 2015 recovery rate which already is more than two times higher than that seen in 2016 defaults:
Allison Nathan: What is your view on recovery rates?
Edward Altman: Our approach to recovery rates is not centered on sectors. What we ve looked at carefully over 25 years is the correlation between default rates and recovery rates. As you would expect, when the former rise to high or above-average levels, you always observe the latter dropping to below-average levels. This strong inverse relationship is as much a function of supply and demand as it is of company fundamentals. So if we are expecting a higher default rate in 2016 and even 2017, then we would expect a lower recovery rate. Already in 2015, the recovery rate dropped dramatically relative to 2014 even though the default rate was below average; we saw a 33-34% recovery rate versus the historical average of 45%, measured as the price just after default. This is primarily due to the heavy concentration of energy companies whose recovery rates depend on their ability to liquidate their assets at reasonable prices, which in turn depends on the price of oil. Low oil prices have pushed recovery rates in the energy sector below 25% and even into the single digits for some companies. And that s going to continue. So this year I expect recovery rates much below average, producing a double-whammy of high default rates and low recovery rates for credit investors.
Since then recovery rates have dropped even further. BUT high-yield bond prices have surged on the back of ECB, BOE buying and the knock-on effects of $200 billion per month of experimentation by the world s central-planners.
Simply put, the revelation of a default event exposes the vast gap between real asset values (upon liquidation or bankruptcy) and the artificially supported prices seen in bond markets .
In the 30 year life of the so-called junk bond market, the chasm between reality and central-planner-created markets has never been wider.
#stock market update
Stock Market Updates
It is with some discomfort that I am always pointing out potential tops in the U.S. stock market indexes. But, I must call them as I read them. The S P daily chart has made ZERO upward progress in 18 months. A possible complex H S top formation is under construction. Also note the appearance of a 7-week H S top pattern. I am willing to short this smaller H S pattern if given a well-defined risk point. I will give up on a bearish interpretation of the S Ps if a new high is made – but this does not mean I would have any interest in being long in new high territory.
The Nasdaq is tracing out a possible broadening top, although as I have pointed out in recent updates, the rally from the Feb 2016 low has exceeded the normal construction of a true broadening top. Outside of the Nifty (India), the Dow Utilities (dividend play) and the Japan Mothers Index, I have a hard time finding a futures market index I am willing to own.
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Definition of ‘Stock Market’
Definition: It is a place where shares of pubic listed companies are traded. The primary market is where companies float shares to the general public in an initial public offering (IPO) to raise capital.
Description: Once new securities have been sold in the primary market, they are traded in the secondary market—where one investor buys shares from another investor at the prevailing market price or at whatever price both the buyer and seller agree upon. The secondary market or the stock exchanges are regulated by the regulatory authority. In India, the secondary and primary markets are governed by the Security and Exchange Board of India (SEBI).
A stock exchange facilitates stock brokers to trade company stocks and other securities. A stock may be bought or sold only if it is listed on an exchange. Thus, it is the meeting place of the stock buyers and sellers. India’s premier stock exchanges are the Bombay Stock Exchange and the National Stock Exchange.
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80% Stock Market Crash To Strike in 2016, Economist Warns – The Sovereign Investor
80% Stock Market Crash To Strike in 2016, Economist Warns
Several noted economists and distinguished investors are warning of a stock market crash.
Jim Rogers, who founded the Quantum Fund with George Soros, went apocalyptic when he said, “A $68 trillion ‘Biblical’ collapse is poised to wipe out millions of Americans.”
Mark Faber, Dr. Doom himself, recently told CNBC that “investors are on the Titanic” and stocks are about to “endure a gut-wrenching drop that would rival the greatest crashes in stock market history.”
And the prophetic economist Andrew Smithers warns, “U.S. stocks are now about 80% overvalued.”
Smithers backs up his prediction using a ratio which proves that the only time in history stocks were this risky was 1929 and 1999. And we all know what happened next. Stocks fell by 89% and 50%, respectively.
Even the Royal Bank of Scotland says the markets are flashing stress alerts akin to the 2008 crisis. They told their clients to Sell Everything because in a crowded hall, the exit doors are small.
Blue chip stocks like Apple, Microsoft, and IBM will plunge.
But there is one distinct warning that should send chills down your spine … that of James Dale Davidson. Davidson is the famed economist who correctly predicted the collapse of 1999 and 2007.
Davidson now warns, “There are three key economic indicators screaming SELL. They don’t imply that a 50% collapse is looming it’s already at our doorstep.”
And if Davidson calls for a 50% market correction, one should pay heed.
Editor s Note: American seniors have been worried about our nation s ability to continue to pay out Social Security. Leaked Reports.
Indeed, his predictions have been so accurate, he’s been invited to shake hands and counsel the likes of former presidents Ronald Reagan and Bill Clinton — and he’s had the good fortune to befriend and convene with George Bush Sr. Steve Forbes, Donald Trump, Margaret Thatcher, Sir Roger Douglas and even Boris Yeltsin.
They know that when Davidson makes a prediction, he backs it up. True to form, in a new controversial video, Davidson uses 20 unquestionable charts to prove his point that a 50% stock market crash is here.
Most alarming of all, is what Davidson says will cause the collapse. It has nothing to do with the China meltdown, Wall Street speculation or even the presidential election. Instead, it is linked back to a little-known economic “curse” that our Founding Fathers warned our elected officials about … a curse that was recently triggered.
And although our future may seem bleak, as Davidson says, “There is no need to fall victim to the future. If you are on the right side of what’s ahead, you could seize opportunities that come along once, maybe twice, in a lifetime.”
Perhaps most importantly, in this new video presentation, Davidson reveals what he and his family are doing to prepare right now. (It’s unconventional and even controversial, but proven to work.)
While Davidson intended the video for a private audience only, original viewers leaked it out and now thousands view this video every day.
One anonymous viewer wrote: “Davidson uses clear evidence that spells out the looming collapse, and he does it in a simple language that anyone can understand.” (Indeed, Davidson uses a sandcastle, a $5 bill, and straightforward analogies to prove his points.)
With his permission, I reposted the video on a private website. Click here to watch it now
#daily stock market
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Ahead of Wall Street
Friday September 2, 2016
(This is Brian Hamilton filling in for Mark Vickery while he is on vacation)
Stock futures inched forward today, as all eyes will be on this morning s unemployment rate, and nonfarm payrolls data. The unemployment rate is expected to drop to 4.8% from 4.9%, and is seen as the last major hurdle for the Feds before they decide to raise rates or not during their September meeting.
Oil prices shot up overnight as Russian President Vladimir Putin stated that he would like for Russia and OPEC to make a deal regarding a production cap. President Putin went on to say that he would likely support a plan to crimp production at the G20 summit in China next week. Lastly, Putin said that Russia is prepared to sell a 19.5% stake in Rosneft PJSC, the country s largest listed oil producer, as early as the end of 2016.
In Europe, producer prices in the euro region rose by +0.1%, the lowest monthly reading since April. Also, the European Union started their two day meetings today; the major issues being discussed are the fallout from the Brexit, and global banks attempting to preserve their access to the single market.
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