Wednesday January 11 Daily Market Primer

• ·         S&P was flat, NASDAQ at an all time high, Dow down slightly
• ·         Saudi’s cut supply
• ·         First President-Elect press conference is today
• ·         VW close to a settlement
• ·         Bill and Jeff talk about bonds

The S&P 500 was “unched”, trader talk for unchanged, which is pretty rare, as the NASDAQ rose to another record, and the Dow, which has had the biggest post election rally, fell slightly.  Airlines and banks rose and energy stocks fell as oil prices have declined over the last few days.   However, WTI is back up to $52 per barrel today, on reports out overnight that indicate that Saudi Arabia cut oil exports to key customers for February delivery.  Most overseas stock markets rose Wednesday, and S&P futures are flat.

	LAST	CHANGE	% CHANGE
DJIA	19,855.53	-31.85	-0.16%
Nasdaq	5,551.82	20.00	0.36%
S&P 500	2,268.90	0.00	0.00%
Russell 2000	1,370.90	13.41	0.99%
Global Dow	2,577.95	-2.76	-0.11%
Stoxx Europe 600	364.86	0.79	0.22%
Nikkei 225	19,364.67	63.23	0.33%
UK: FTSE 100	7,294.89	19.42	0.27%
CBOE Volatility	11.65	0.16	1.39%
Australia: S&P/ASX 200	5,771.50	10.80	0.19%
China: Shanghai Composite	3,136.75	-24.92	-0.79%
Hong Kong: Hang Seng	22,935.35	190.50	0.84%
Europe Dow	1,586.99	-8.06	0.90%
India: S&P BSE Sensex	27,140.41	240.85	-0.51%
France: CAC 40	4,890.67	2.44	0.05%
Germany: DAX	11,619.01	35.71	0.31%
Italy: FTSE MIB	19,451.32	27.13	0.14%
Spain: IBEX 35	9,424.30	-27.70	-0.29%
U.S. 3 Month	0.525	0/32
U.S. 2 Year	1.202	-1/32
U.S. 5 Year	1.887	-1/32
U.S. 10 Year	2.386	-5/32
U.S. 30 Year	2.979	-11/32
Germany 2 Year	-0.729	-1/32
Germany 10 Year	0.284	-0/32
Crude Oil	52.17	0.21	0.40%
Brent Crude	55.16	0.22	0.40%
Natural Gas	3.211	0.098	3.15%
S&P GSCI	391.36	1.64	0.42%
E-mini S&P 500	2264.25	-0.75	-0.03%

Pres-Elect Trump is giving his first news conference today at 11:00 Eastern, which is sure to be made more interesting by the breaking news last night that Mr. Trump was briefed last week that Russia has damaging information about him.   The headlines are lit up this morning with strong denials from Mr. Trump, and this is sure to fuel the fake news debate.  More pain for the Turkish lira, which continues to fall in the face of a chaotic political situation.   In case you are wondering, Turkey is 1.2% of the MSCI Emerging Markets Index.   Bill Gross and Jeff Gundlach were both calling an end to the bond bull market yesterday, with Bill saying the tipping point is US ten year hitting 2.6%, and Jeff saying 3.0% during  his annual year-ahead webcast http://bit.ly/BillVsJeff. 

Volkswagen may be close to a settlement with the US Justice Department for $4.3 billion, which would be a key step in moving past the emissions cheating scandal.  A US VW executive was arrested yesterday as he tried to board a plane for Germany.  The British government does not expect to win its court case to pull the trigger on Brexit without parliamentary debate and is preparing a bill for approval.

Here’s the news: Lira drag

The Turkish lira fell to another new record low this morning, and was trading at 3.8456 to the dollar as of 5:15 a.m. ET. Investors see an interest-rate hike from the central bank as both needed to stop the decline, and unlikely, which is making the currency an easy short. The wider MSCI EM Currency Index dropped, with Egypt's pound the next worst performer, retreating 0.5 percent against the U.S. dollar, for the second day of losses.

Big oil

Should prices remain above $50 a barrel in 2017, oil majors are set to reap the rewards from investments made before the rout in crude, according to analysts at Sanford C. Bernstein. West Texas Intermediate, which hit a one-month low yesterday, was trading at $51.24 a barrel by 5:18 a.m. ET after Saudi Arabia was said to curb exports to Asia as part of the OPEC production-cut deal.

Bond bull market end

Investors are looking for the end of the 30-year bull market in bonds. They're just not in agreement on when that will be. Bill Gross said that a yield of more than 2.6 percent on 10-year U.S. Treasuries would mark the end of the run. Meanwhile, DoubleLine Capital's Jeffrey Gundlach thinks the threshold that would signal the end of the three-decade rally is a yield that tops 3 percent. The instrument was yielding 2.390 percent this morning, well below the post-election peak of 2.5967 percent.

Markets rise

Overnight, the MSCI Asia Pacific Index added 0.4 percent, while Japan's Topix index closed 0.5 percent higher. In Europe, the Stoxx 600 Index had gained 0.2 percent by 5:25 a.m. ET with London's FTSE 100 Index on course to continue its record-breaking start to the year. S&P 500 futures were broadly unchanged.

Trump denial President-elect Donald Trump is due to give his first press conference since July at 11 a.m. ET today, with the event likely to be overshadowed by news that he was briefed by intelligence officials about reports that Russia has compromising information about him. The Kremlin this morning denied those reports, with Dmitry Peskov, a spokesman for President Vladimir Putin, describing them as "pulp fiction." Trump took to Twitter to issue his own denial, describing the events as a "witch hunt." The World Bank says global growth will pick up slightly in 2017. The World Bank has lowered its 2017 global growth forecast to 2.7% from its June outlook of 2.8%, but that would still be ahead of the 2.3% growth that was experienced in 2016. US oil output is expected to rise in 2017 and 2018. A report released by the US Energy Information Administration on Tuesday showed US crude-oil production was expected to increase by 110,00 barrels a day in 2017 to 9 million and by another 300,000 barrels a day in 2018. West Texas Intermediate crude oil is higher by 0.8% at $51.20 a barrel. The Turkish lira tumbles to another record low. The currency is down 2% at 3.8657 per dollar, running its 2017 loss to about 9% just eight trading days into the new year. The lira slumped 17% in 2016. Francois Fillon is ahead in the French polls. The conservative former prime minister holds a 64%-to-36% edge over far-right leader Marine Le Pen and a 52%-to-48% lead over independent Emmanuel Macron. The runoff is scheduled for May. Italy's 5-Star Movement has reentered its alliance with UKIP. The antiestablishment party was rejected in its bid to form an alliance with pro-European Union Liberals, and it has reentered its alliance with the UK's UKIP party, Reuters says. The US has charged 3 FX traders with currency rigging. Traders Richard Usher, who worked at Royal Bank of Scotland and JPMorgan; Rohan Ramchandani, an-ex Citi banker; and Christopher Ashton, a former employee of Barclays, were charged with "conspiring to fix prices and rig bids for US dollars and euros exchanged in the FX spot market," the Department of Justice said in a statement. Jeff Gundlach says the bond bull market is dead if the 10-year hits 3.00%. During the presentation of his 2017 outlook, Gundlach said a move to 3.00% and above would have "a real impact on market liquidity in corporate bonds and junk bonds." Part of the New York Stock Exchange is going electronic. Floor trading on the New York Stock Exchange's NYSE MKT exchange, which lists about 250 small-cap names, will soon be fully automated thanks to new technology, Reuters reports, citing a regulatory filing. Stock markets around the world are higher. Hong Kong's Hang Seng (+0.8%) paced the gains in Asia, and Germany's DAX (+0.3%) is out front in Europe. The S&P 500 is set to open little changed near 2,268. Earnings reports trickle out. KB Homes will report after markets close.

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How low can the lira go? The beleaguered Turkish currency has lost as much as 10 percent of its value in as many trading days, leaving all others trailing in its wake. While the dollar's strength, rising rates in developed markets and the recovery in energy prices don't help, its problems really begin at home. Politicians have been falling over themselves to rule out monetary action as a route to stem the rout, encouraging bets on further declines. Only yesterday the economy minister said in an interview with Bloomberg News that he thought an interest-rate hike would hurt the economy "permanently," calling depreciation something it can stomach. When yesterday the central bank stepped in to adjust the reserve ratios on local banks' foreign-currency deposits, the lira paused for a breather before resuming its precipitous decline. "Is that all you got?," was the obvious implication. With President Recep Tayyip Erdogan having made his aversion to interest-rate hikes well known, Rabobank calls it "a currency crisis in the making."

Source: Bloomberg, BI, WSJ, CFAI Fin. Newsbrief, Reuters, ThinkAdvisor, MLex