Thursday September 22 Daily Market Primer
US
stocks rose yesterday as the Fed meeting delivered the expected decision - staying the course,
with a strong signal toward rising rates once by the end of the year. The
market barely reacted after the announcement, but picked up strength later in
the day as investors expressed relief that the very low rate regime will last
at least until December. The dollar weakened and government bond
yields fell as lower for longer still rules the markets. The committee had a vigorous debate, with
three dissenting votes, which is very unusual. The Fed statement highlighted growing strength
of the US economy. The FOMC members are having a little
trouble reconciling the with the dot plots, which reflect their forecast of
future rate hikes, with their actions. Stock markets around the world are
rallying, reminding us (as if we needed it) that equity investors love low
interest rates.
|
LAST
|
CHANGE
|
% CHG
|
18293.7
|
163.74
|
0.90%
|
|
5295.18
|
53.83
|
1.03%
|
|
2163.12
|
23.36
|
1.09%
|
|
1245.04
|
16.71
|
1.36%
|
|
2473.79
|
27.37
|
1.12%
|
|
16807.62
|
315.47
|
1.91%
|
|
347.8
|
5.34
|
1.56%
|
|
6930.84
|
96.07
|
|
|
12.35
|
-0.95
|
-7.14%
|
|
5374.5
|
34.9
|
0.65%
|
|
3042.31
|
16.44
|
0.54%
|
|
23759.8
|
89.9
|
0.38%
|
|
28773.13
|
265.71
|
0.93%
|
|
2846.06
|
-4.68
|
-0.16%
|
|
4510.46
|
100.91
|
2.29%
|
|
10652.95
|
216.46
|
2.07%
|
|
16665.12
|
315.3
|
1.93%
|
|
8946.2
|
187.7
|
2.14%
|
|
0.205
|
0/32
|
||
0.766
|
0/32
|
||
1.177
|
1/32
|
||
1.639
|
4/32
|
||
2.351
|
16/32
|
||
-0.661
|
1/32
|
||
-0.062
|
21/32
|
||
46.24
|
0.9
|
1.99%
|
|
47.65
|
0.82
|
1.75%
|
|
3.133
|
0.001
|
0.03%
|
|
359.82
|
4.92
|
1.39%
|
|
2164.75
|
8.5
|
0.39%
|
The
VIX has been dropping for a few days and is now at 12, indicating low perceived
market volatility. Initial jobless claims came in this morning at
252K, 8K lower than the previous week and coincidently 8K lower than the
Bloomberg consensus number of 260K. This is another positive data point
for the labor market. While Yahoo was busy restructuring then
trying to sell their business, they were also getting hacked, according
to a breaking story on Re/Code http://bit.ly/Yahacked.
If you have a Yahoo email account you should definitely change your
password. Congressional hearings this week on the Wells Fargo fake
account scandal and pricing for lifesaving drug delivery device EpiPen are
not casting corporate America in a good light.
I’m
looking at the Eikon home page and not seeing much else to comment on, so
here’s the news:
Fed holds, for now
The probability of the next Federal Reserve rate hike
coming by the end of the year rose to over 60 percent following yesterday's
Federal Open Market Committee statement, which showed that three voting members dissented from the
majority view to hold interest rates unchanged. While the
committee recognized that the case for rising rates had strengthened,
it decided to hold of on a hike - for the time being. If there was some clarity
from the Fed, yesterday's Bank of Japan decision still has investors scratching
their heads, wondering exactly what the bank's target for the yield curve is.
Cooperman charges
Legendary investor Leon Cooperman has
been accused of insider trading by
the Securities and Exchange Commission in relation to securities issued by
Atlas Pipeline Partners and bought in 2010. Cooperman said
that neither he nor his fund engaged in unlawful conduct. The trades had
raised suspicions at the time, even from Cooperman's own son. Shares in companies
that list Cooperman's fund as major stockholders declined following the announcement of the
charges.
Markets rise
Overnight, the MSCI Asia Pacific Excluding Japan Index climbed 1 percent, for its sixth successive
day of gains. Japanese markets were closed for a holiday. In Europe, the Stoxx
600 Index was 1.3 percent higher at 6:07 a.m. ET, as strategists
upgrade their year-end forecasts for the gauge. S&P 500 futures added 0.2 percent.
Miner rally
Mining shares have been on something of a tear, with Anglo
American Plc and BHP Billiton Ltd. both adding more than 10 percent this week. Glencore
Plc's share price passed 200 pence in trading this morning,
and reached 205.60 by 6:14 a.m. ET, the highest level in over a year. The rally
in base metals such as copper, zinc, and coking coal have been driving much of the
gains. Gold remains range-bound.
Coming up...
Initial jobless claims are due at 8:30 a.m. ET, with
expectations for a broadly unchanged reading of 261,000. Economists predict a
rise to 5.45 million when existing home sales numbers come in at 10 a.m.
Following the Fed's statement yesterday, investors will be on the lookout for
any disappointing data that may derail the view that the economy continues to
strengthen.
The
Federal Reserve kept policy on hold. The Fed held its key interest rate unchanged
at a range of 0.25% to 0.50%, saying, "The Committee judges that the case
for an increase in the federal funds rate has strengthened but decided, for the
time being, to wait for further evidence of continued progress toward its
objectives."Wall Street wants the UK to delay Brexit for as long as possible. At a meeting in New York, Wall Street heads asked Prime Minister Theresa May for a "long lead time" of up to two years to prepare for a Brexit, the Financial Times reports.
Indonesia cut rates. Bank Indonesia lowered its benchmark interest rate 25 basis points to 5.00%, and Gov. Agus Martowardojo hinted at the possibility of further easing, saying, "We are monitoring, if all economic indicators are maintained, we are still in an easing condition, a loosening condition, and this loose condition will continue until the end of this year to early 2017."
Oil keeps rallying. West Texas Intermediate crude oil is up 1.1% at $45.83 a barrel, making for a fourth straight day of gains.
Hanjin Shipping got some good news. The board of Korean Air Lines, Hanjin's biggest shareholder, approved a 60 billion won ($53.96 million) loan to the shipper, sending shares higher by 28%.
UnitedHealth will stop covering some brand-name drugs. The largest US health insurer says it will stop coverage of Lantus, the main insulin drug sold by Sanofi SA, and Amgen's white-blood-cell-boosting drug Neupogen, Reuters reports.
Yahoo will confirm a historic hack. Recode's Kara Swisher reports that Yahoo sources tell her the company is preparing to publicly confirm the hack's existence, suggesting it is "widespread" and "serious." Back in August, Motherboard's Joseph Cox reported that 200 million apparent Yahoo user credentials were being sold on the dark web.
Hedge fund legend Leon Cooperman was charged with insider trading. According to the Securities and Exchange Commission, Cooperman used his status as one of Atlas Pipeline Partners' largest shareholders to "obtain confidential details" and then bought shares after agreeing not to use the information for trading purposes.
Stock markets around the world are higher. Australia's ASX (+0.7%) led the overnight gain, and Germany's DAX paces the advance in Europe. S&P 500 futures are up 7.25 points at 2,163.50.
US economic data flows. Initial jobless claims will
be released at 8:30 a.m. ET, and existing home sales will cross the wires at 10
a.m. ET. The US 10-year yield is down 1 basis point at 1.64%.
Fuel to the Cease-Fire
The U.S. pressed Russia on a new plan to end continued fighting in Syria, though the two superpowers are still at odds over who was responsible for an attack earlier in the week on an aid convoy that killed at least 12 people. At a special session on Syria at the United Nations, the U.S. proposed grounding all aircraft in northern Syria to allow humanitarian relief to reach the war-ravaged region. Both Syria and Russia would have to agree to the proposal, the details of which remain unclear. Suggestions for a collective monitoring unit to track and share cease-fire violations and a transition-of-power plan were also presented by others at the U.N. meeting.
The U.S. pressed Russia on a new plan to end continued fighting in Syria, though the two superpowers are still at odds over who was responsible for an attack earlier in the week on an aid convoy that killed at least 12 people. At a special session on Syria at the United Nations, the U.S. proposed grounding all aircraft in northern Syria to allow humanitarian relief to reach the war-ravaged region. Both Syria and Russia would have to agree to the proposal, the details of which remain unclear. Suggestions for a collective monitoring unit to track and share cease-fire violations and a transition-of-power plan were also presented by others at the U.N. meeting.
Grounding Hackers
Savvy cyberthieves have long used the cloak of the internet to target bank accounts of unsuspecting consumers. But with a rise in thefts of airline rewards, travelers should also be vigilant with their frequent-flier accounts so hard-earned miles and points don’t fall prey, writes our Middle Seat columnist Scott McCartney. Aiming to trade or sell travel rewards online, or redeem them for tickets or other perks, thieves stole from thousands of such accounts last year. Some security experts expect mileage theft to continue rising now that embedded chips have made credit card fraud harder. Airlines are responding with revised login procedures and possible security enhancements.
Savvy cyberthieves have long used the cloak of the internet to target bank accounts of unsuspecting consumers. But with a rise in thefts of airline rewards, travelers should also be vigilant with their frequent-flier accounts so hard-earned miles and points don’t fall prey, writes our Middle Seat columnist Scott McCartney. Aiming to trade or sell travel rewards online, or redeem them for tickets or other perks, thieves stole from thousands of such accounts last year. Some security experts expect mileage theft to continue rising now that embedded chips have made credit card fraud harder. Airlines are responding with revised login procedures and possible security enhancements.
Foreign central bank holdings of US
Treasurys dropped $27.5 billion last week, the largest decrease since January
2015. Analysts say the shift is a return to normal levels after a drive to safe
assets, rather than a fundamental change in appetite for US debt.
America is not the greatest country on earth. It is
number 28
Beware the Chinese companies that look like shadow banks.
Lost trillions are haunting Russia's budget keeper.
Get ready for freeways that ban human drivers.
Doubling up on Mars.
We've survived
this week's huge flurry of central banking action. There's plenty to read out
there about the meaning of the decisions from the Bank of Japan and the
Federal Reserve. But here's one simple observation: Two weeks ago the
story was rates rising at the long end and equity markets tumbling. Risk
Parity funds got smashed and had some of their worst days in awhile. Now
that's calmed down and reversed. Stocks surged in Japan and the U.S.
yesterday and yield curves flattened in both countries, with rates contained
for now. Long-everything strategies are doing well once again. So for the
moment - and who knows how long it will last - calm has been restored. |
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Source:
Bloomberg, BI, WSJ, CFAI Fin. Newsbrief
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