Tuesday May 17 Daily Market Primer

Stocks rose in about 1% the US yesterday as Apple jumped on news of Warren Buffet’s Berkshire Hathaway buying one million, excuse me, one billion dollars of the stock in the first quarter, and energy shares rose on Goldman’s higher oil price forecast.   Stock prices in Asia also rose, but are more mixed in Europe with the Stoxx Europe 600 flat and slightly negative markets in France, Germany, and Italy.  This shows how headlines can move markets, since this position is less than 1% of Berkshire’s stock portfolio and a tiny .19% of Apple’s market cap.  Crude moved up to over $48, the highest price in several months.  The stock market is down about .4% at the open.

There is lots of buzz over the disclosure of Saudi US treasury securities, which at about $177 billion is much lower than many thought.  The bigger story is how the rest of the Saudi sovereign funds are invested, but we may never know.   BlackRock head Larry Fink is getting nervous on China (3^rd story), and I included some recent Chinese economic data from ISI which shows China is still spending to stimulate growth.  US CPI is heating up, with the headline number up.4% in April, and core up .2%, which is the largest monthly increase in more than three years.  Gasoline prices jumped 8.8% last month.  The year over year CPI increase is 1.1%  US housing starts rose 6.6%, and building permits 3.6%, both are considered strong numbers.

	LAST	CHANGE	% CHG
DJIA	17710.71	175.39	1.00%
Nasdaq	4775.46	57.78	1.22%
S&P 500	2066.66	20.05	0.98%
Russell 2000	1116.21	13.77	1.25%
Global Dow	2307.9	0.85	0.04%
Japan: Nikkei 225	16652.8	186.4	1.13%
Stoxx Europe 600	334.76	0.03	0.01%
UK: FTSE 100	6162.27	10.87	0.18%
Asia Dow	2607.55	24.76	0.96%
DJ Asia-Pacific TSM	1346.95	9.87	0.74%
Australia: S&P/ASX 200	5395.9	37	0.69%
China: Shanghai Composite	2843.68	-7.18	-0.25%
Hong Kong: Hang Seng	20118.8	234.85	1.18%
India: S&P BSE Sensex	25773.61	120.38	0.47%
Singapore: Straits Times	2781.11	45.05	1.65%
France: CAC 40	4292.85	-19.43	-0.45%
Germany: DAX	9895.18	-57.72	-0.58%
Italy: FTSE MIB	17531.21	-205.81	-1.16%
Spain: IBEX 35	8683.1	1	0.01%
UK: FTSE 100	6163.19	11.79	0.19%
U.S. 2 Year	0.811	-1/32
U.S. 5 Year	1.28	-2/32
U.S. 10 Year	1.76	-1/32
U.S. 30 Year	2.585	8/32
Crude Oil	48.02	0.3	0.63%
Brent Crude	48.95	-0.02	-0.04%
Natural Gas	2.2	0.023	1.06%
E-mini S&P 500	2058.25	-4.5	-0.22%
Reuters-Jefferies CRB	184.737	0.153	0.08%
S&P GSCI	368.46	3.18	0.87%
E-mini S&P 500	2058.5	-4.25	-0.21%

Here’s the news:

Saudi Treasury holdings revealed

Following a Freedom-of-Information Act request filed by Bloomberg News, the Treasury Department yesterday released a breakdown of Saudi Arabia's holdings of U.S. debt for the first time since 1974. According to the data, the Gulf oil producer held $116.8 billion of such instruments as of March, a total that to some extent leads to more questions than answers. Saudi Arabia has $587 billion of foreign reserves and the U.S. debt holdings only represent 20 percent of that, far below the two-thirds level international central banks typically hold in dollar-denominated assets. Also, hanging over this is the Saudi threat, reported by the New York Times in April, to sell $750 billion in dollar assets should Congress pass a bill allowing the monarchy to be held liable for the Sept. 11, 2001, terror attacks. 

Gold gets some love

Investors are diving into gold-mining stocks, with a Bloomberg index of 14 major gold miners doubling already this year. Billionaire George Soros cut his firm's investment in U.S. stocks by 37 percent while buying a $264 million stake in Barrick Gold Corp., the world's biggest bullion producer. The precious metal has climbed 20 percent this year, after three years of declines. Gold is so back in fashion

Fink's China warning

BlackRock Inc.’s Laurence D. Fink, who oversees the world’s largest money manager with $4.7 trillion of client assets, has warned that everyone should be worried about China's mounting debt pile. While he insists he is still bullish on China in the long term, current slowing growth and increasing debt are threats to the outlook. Last month George Soros warned that the country's debt-fueled economy was starting to resemble the U.S. in 2007 and 2008.

Oil holds gains

West Texas Intermediate was 15 cents a barrel higher at $47.86 in New York at 6:10 a.m. ET as the commodity held yesterday's gains ahead of tomorrow's inventories data that is expected to show a 3.5 million barrel drop. Production cuts due to wildfires in Canada and militant violence in Nigeria have helped the rally, but doubts persist over whether oil can meaningfully punch through the $50 level. 

Markets are higher

Global equity markets are higher this morning with Asian stocks getting a boost from energy producers overnight. The MSCI Asia Pacific Index added 0.8 percent with Chinese stocks the only laggards. In Europe the Stoxx 600 Index was 0.8 percent higher at 6:12 a.m. ET as the commodity rally boosted miners while Vodafone Group Plc advanced 2.5 percent after reporting better than expected profits. S&P 500 futures were 0.1 percent higher.

Tuesday's a primary day. Democratic presidential frontrunner Hillary Clinton will look to move closer to the party's nomination as voters go to the polls in Kentucky and Oregon. Clinton has a combined 2,240 pledged delegates and superdelegates, meanings she is just 143 shy of the nomination. On the Republican side, presumptive nominee Donald Trump looks to add to his delegate count in Oregon. He is 103 delegates shy of locking up the nomination.
UK inflation slowed for the first time since September. Consumer prices in the UK rose 0.3% year-over-year in April, down from the 0.5% gain in March. The reading marked the first time in eight months that UK prices slowed from their previous month. Stripping out the volatility from food and energy, prices climbed 1.2% versus a year ago, but that was shy of the 1.5% gain that was forecast. "Falls in air fares and prices for clothing, vehicles, and social housing rent were the main contributors to the decrease in the rate," the Office for National Statistics said. "These downward pressures were partially offset by rising prices for motor fuels and for certain recreational goods and cultural services, and by food prices, which were unchanged between March and April 2016, having fallen between the same two months a year ago." The British pound is up 0.6% at 1.4481.
Short seller Andrew Left helped bring down Valeant, but now he owns its stock. In October, Left accused Valeant of being a "pharmaceutical Enron." He recently told The Street's Real Money Blog, however, that he now owns stock in the company because, "I don't think they're going to make any decisions that are going to torpedo their company." Left acknowledged that he still owned some of the money puts, which is serving as a hedge to his position.
An activist investor wants Pandora to consider selling itself. Corvex Management announced an 8.3% stake in Pandora, and it thinks the company should consider selling itself, The Wall Street Journal reports. The Journal says a letter accompanying Corvex's regulatory filing said, "Despite its many strengths, the company has been unable to date to translate its great product into a great business with an attractive public market valuation." Shares of Pandora were up more than 3% on the news during Monday's after-hours session.
Agilent Technologies posted an earnings beat. The company announced adjusted earnings of $0.44 a share, topping the $0.39 that Wall Street was anticipated. Revenue rose 5.8% to $1.02 billion, ahead of the $983.5 million that was forecast by the Bloomberg consensus. Agilent sees full-year 2016 earnings per share of $1.88 to $1.92 on revenue of $4.16 billion to $4.18 billion, both ahead of expectations. Shares of Agilent were up close to 4% in after-hours trade.
Twitter is tweaking its character limit. No, the 140-character limit isn't changing. But the social-media company will no longer count web links or photos toward that count, Bloomberg's Sarah Frier reports. The changes could take place in the next couple of weeks.
Stock markets around the world are bid. Spain's IBEX (+0.8%) leads the gains in Europe after Hong Kong's Hang Seng (+1.2%) paced the advance in Asia. S&P 500 futures are little changed near 2,063.
Split Decision
The Supreme Court, unable to resolve the dispute between religious employers and the Obama administration over contraception coverage in the government’s health-care law, sent the matter back to lower courts to seek a compromise between the parties. The move prolongs the four-year fight over whether the groups must offer contraception coverage under the Affordable Care Act and highlights how Justice Antonin Scalia’s death has hobbled the court’s ability to resolve the most contentious cases. The justices returned the contraception issue to the lower courts to review whether recent movement in the parties’ positions had paved the way to possible compromise. Days after the justices first heard arguments in the case in March the court issued an extraordinary order seeking an agreement between the sides, but the April briefs filed in response to the request didn’t appear to put the parties much closer to a compromise.
Club Class
At a star-studded New York event in late April, LendingClub founder and Chief Executive Renaud Laplanche was lauded as a leader in “disruptive innovation.” Two weeks later he was told to resign, as the company’s board dug into the online lender’s sales practices. We chronicle the events leading to Mr. Laplanche’s exit, and the tough questions it raises for the fast-growing fintech industry. Since his resignation was announced last week, roughly half of LendingClub’s stock-market value has been erased, and investors and analysts say they have grown more cautious about the entire online-lending sector, which had been seen as a potential threat to established banks. Yesterday, LendingClub disclosed in a securities filing that it received a grand-jury subpoena from the Justice Department on May 9, the day the company announced Mr. Laplanche’s departure. In the filing, LendingClub said its internal review found the company had “control deficiencies.”
Run the World
Women and girls, not long ago an afterthought in distance running, now own it. They made up 57% of the 17 million U.S. race finishers in 2015. While many women run to win prize money or medals, millions more have taken to treadmills, sidewalks and running trails to achieve personal bests, socialize and improve overall health. Women have flocked to running more than other endurance sports and a surge in charitable organizations forming training groups and raising money through road races has largely been driven by women. Moms Run This Town, a training and social group, now has about 700 chapters, most of them in the U.S. One result of the rise of women’s running: recent years have brought an avalanche of apparel, from boutique designers to major manufacturers such as Under Armour and Adidas.

HSBC reduces IT jobs, plans 50,000 cuts worldwide

HSBC Holdings is cutting more than 800 IT jobs in the UK, where the bank aims to eliminate 8,000 jobs before 2018 to shrink its global workforce by 50,000. "HSBC's decision to ax so many IT jobs is as ruthless as it is reckless," said Unite's Dominic Hook. "As IT glitches across the banks continue to prove, it is ultimately the customers who will suffer the consequences." Reuters

8 portals register as SEC crowdfunding rules take effect

Eight companies have registered as funding portals with the Securities and Exchange Commission as equity-crowdfunding rules under the Jumpstart Our Business Startups Act go into effect. The rules let companies sell $1 million in equity during a 12-month period, imposes investment restrictions and mandates that a registered broker or portal conduct offerings.

ThinkAdvisor

Earnings reporting remains light. Home Depot and T.J. Maxx highlight the names reporting ahead of the opening bell.
US economic data picks up. CPI, housing starts, and building permits will all be released at 8:30 a.m. ET. Then, at 9:15 a.m. ET, industrial production and capacity utilization are announced. The US 10-year yield is unchanged at 1.76%.

Second Amendment Protects Right to Buy and Sell Guns, Court Rules

Facebook to Sell Video Ads on Behalf of Other Firms

The Real Fear Is When We All Fear Alike

SEC, Treasury Push for Centralized Reporting of Treasurys Trades

Investors bet your morning coffee is about to get more expensive.

Most powerful woman in France has a year to secure her legacy.

Banks are 'not paying attention' on cybercrime.

Shadow banks make diciest loans while Wall Street retains risk.

The British pound is morphing into an emerging market currency.

China Research: Apr Fiscal Data, Consumer Confidence; Mar TICS; Trackers (ISI)

The big U.S. economic data point today will be the CPI report, which comes out at 8:30 a.m. ET. While this report isn't the Fed's preferred measure of inflation, it's still worth paying close attention to, as directionally it can tell us a lot about whether inflation pressures are continuing to build in the economy. Going into 2016, there was a lot of speculation that this would be the year where inflation really starts to firm up. And though there's some evidence of that happening, last month last month saw a reversal in the trend. As for the Fed's next move, the market has firmly made up its mind that there will be no rate hike next month. A quick look at the WIRP function on the terminal shows just a 4 percent chance of a hike in June. Interestingly, the odds of a July hike are at 19.4 percent, suggesting a chance that the Fed could use June to set the stage for a July hike. In addition to inflation, definitely keep an eye on the labor data. The Bloomberg ECO U.S. Labor Market Surprise Index, a measure which captures whether U.S. labor market data is beating or missing expectations, has recently fallen into negative territory for the first time this year. This comes amid some mediocre Non-Farm Payrolls report, a surprise jump in initial claims, and an unemployment rate that hasn't improved in several months. If it looks like the labor market is actually starting to slow down (and it's too early to tell) then that will kick rate hike expectations even further back.

Source: Bloomberg, BI, WSJ, Evercore ISI, CFIA Fin. Newsbrief, Reuters