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WTI Crude Nears $50 Then Tumbles After Bigger Than Expected Gasoline Build Offsets Production Cut

The July WTI contract neared $50 for the first time since early November ahead of this morning's DOE data, extending gains from last night's API-reported biggest draw since 2015 (which we warned seemed like catch up from a big build last week). DOE confirmed the big draw with a 4.22mm drop in inventories (less than API's 5.13 but more than 2mm expected) and further an even bigger draw at Cushing. Gasooline saw an unexpected build (+2.04mm vs -1.5mm exp) as Distillate inventories fell for the 6th week in a row. Production fell for the 18th week in a row, holding at Sept 2014 lows. Crude's reaction was chaotic, testing up over $49.60 and down to a $48 handle.


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In Today's Layoff News: Microsoft Fires 1,850; Intel Cuts 350; Shell Terminating 2,200

How do you know the Fed is justified in hiking again, the economy is recovering, and the market are zooming higher? One hint is the just announced thousands in layoffs in both the energy and tech sector, among which are Shell, which announced it would layoff 2,200 jobs; Microsoft reporting it would cut 1,850; and Intel terminating up to 350 jobs in Germany.


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US Services PMI Tumbles, Misses By Most On Record "Dealing Blow To Q2 Rebound Hopes"

After a brief dead cat bounce, the US services economy has tumbled back to 3-month (near 7 year) lows, missing expectations by the most on record. With the slowest pace of hiring since Dec 2014 (signalling a mere 128k rise in payrolls for May), business optimism plunged to record lows (since the survey began in Oct 2009). As Markit concludes, the May data "deals a blow to hopes that the US economy will rebound in the second quarter after the dismal start to the year."


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Are Investors Idiots?

Statistically, the likelihood of a crash coming on any given day is small. But that is a little like telling a turkey not to worry because the likelihood of Thanksgiving is only 1 out of 365.


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"Run For Cover If You’re Short" Gartman Pleads One Day After Saying "2,025 Is A Given"

"Anybody who's short - and there are a lot of smart people who are in fact heavily short - they have to run for cover, and I think it could get ugly.  In our account here, we quite literally were grasping for almost anything we could to reverse our position. Covering… or actually greatly reducing… our short position in the derivatives market was the first course of action.... We’ve learned over the years that when such things occur it is better to “shoot first and ask questions later."


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Feds Probing Potential Insider Trading By Senator Bob Corker

A real-estate firm that has been a favored investment of Sen. Bob Corker, R-Tenn. is under investigation by federal law-enforcement officials for alleged accounting fraud. The FBI and the SEC are focusing their examination of CBL & Associates Properties on whether officials at the Chattanooga, Tenn., company falsified information on financial statements to banks when applying for financing arrangements. The FBI and SEC are also inquiring into the trades of Bob Corker who has made millions of dollars in profits trading the company’s stock in recent years


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Emerging Markets Turmoil Signal Pain Ahead For US Stocks

Follow EM or not? That is the big question that BofAML asks as once again Emerging Market stocks are decoupling (lower) from an exuberant US equity market.


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Just Stop It!

The posse of fools in the Eccles Building is so petrified of a stock market hissy fit that it has more or less created a Wall Street doomsday machine.


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Tiffany Shares Slide After Biggest Sales Drop In 6 Quarters, EPS Miss, Guidance Cut

Tiffany reported its steepest sales drop in six quarters, missing analysts' estimates, as a strong dollar discouraged tourists from buying its high-end jewelry and ate into revenue from markets outside the United States. "We faced numerous challenges, including continued pressure from foreign tourist spending in Europe, the U.S. and Asia, particularly in Hong Kong."


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Switzerland Prepares To Vote On "Free Lunch" For Everyone

In early June the Swiss will be called upon to make a historic decision. Switzerland is the first country worldwide to put the idea of an Unconditional Basic Income (of $2,500 per month for every man, woman, and child for doing absolutely nothing) to a vote and the outcome of this referendum will set a strong precedent and establish a landmark in the evolution of this debate. The main argument of the supporters of this initiative is that it would support the people that will, or already do, lose their jobs to automation and technological progress; a defensive move against “the rise of the robots” as they put it. The promise of a free lunch is by no means a new thing in politics. Getting “something for nothing” is an age-old shiny trinket that has been dangled before the eyes of the public since time immemorial...but at the end of day, someone will have to pay for it.


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Frontrunning: May 25

  • Oil nudges $50 a barrel as investors bet on shrinking overhang (Reuters)
  • From hinterland to wonderland: China's 'teapot' refinery boomtowns (Reuters)
  • Peter Thiel Has Been Secretly Funding Hulk Hogan's Lawsuits Against Gawker (Forbes)
  • China Wants to Set Prices for the World's Commodities (BBG)
  • Big Banks Ladle On the Risk (WSJ)
  • China Said to Plan Asking U.S. on Timing of Fed Rate Hike (BBG)

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Gundlach Feels Like We Are Back In December, Says "Stocks Are Dead Money" After A Short Squeeze

Jeffrey Gundlach, the chief executive officer of DoubleLine Capital, said on Tuesday that the rally in U.S. stocks, which began on Monday, feels like a short squeeze and characterized U.S. stocks as "dead money." He added that  "all that matters is Yellen. She is still there. I feel like we are back in December again, where everyone thinks that there is a super secret that some Fed officials have this knowledge that the economy is really good."


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Global Stocks, Futures Rally, Ignore Sharp Yuan Devaluation On Hopes Fed Is Right This Time

The single biggest event overnight was the PBOC's devaluation of the Yuan to the lowest since March 2011, setting the fixing at 6.5693, the highest in over 5 years and in direct response to a stronger dollar, which however if one looks at the DXY remains well below the recent highs in the 100 range, suggesting for China this is only just beggining. However, the fact that there was not more volatility in onshore and offshore overnight FX also comforted the market that at the same time as its was devaluing the PBOC was also intervening in the FX market, thus providing some assurance it would not allow runaway "risk off" sentiment prevail, nor would it promote another blitz round of capital outflows, leading to another gradual levitation in overnight risk.


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US Spy Plane Disrupts Civilian Flights While Spying On Russia

By now we are accustomed to hearing about US spy planes flying recon missions that are either infringing or extremely close to infringing on the borders of other countries - especially Russian borders. A US defense attache has been summoned by Russia's Defense Ministry to explain why a US spy plane was not only flying close to Russia's border on Sunday, but dangerously close to civilian aircraft as well.


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