Equity Markets

A Veteran Trader Slams The Fed: "Savers Are The Patsies For Share Buybacks"

There will always be some "crisis" or excuse to do nothing. But the fact remains that the U.S. economy is not at zero interest rate health. Monetary policy is broken with the status quo. Unlimited and constant central bank participation in the markets is ultimately destructive, encourages dangerous risk taking (just buy every dip, nothing can go wrong,) and has become too much of an aphrodisiac for policy makers. Savers are being told you are the patsies for share buybacks.

Violent Government Buying Spree Sends Chinese Stocks Soaring At Close Of Trading; Yellen On Deck

On a day when market participants will care about only one thing - how hawkish (or dovish) the FOMC sounds at 2:00 pm (no Yellen press conference today) - Chinese stocks provided the usual dramatic sideshow and traded unchanged or modestly negative for most of the day despite the latest $100 billion injection, the close of trading on Wednesday was a mirror image of what happened in the last hour on Monday, as various Chinese "plunge-protection" mechanism went into a furious buying frenzy and government-backed funds rushed to buy anything that trades in the last 60 minutes of trading in what may be the most glaring example of banging the close yet.

Biotech Slide Sends Nasdaq, Small Caps Reeling

It all looked so awesome in the pre-open... thanks to the overnight PPT. But as soon as US equity markets opened, the selling began as Biotechs were hammered lower sending Small Caps plunging and Nasdaq into the red...

Futures Soar On Hope Central Planners Are Back In Control, China Rollercoaster Ends In The Red

For the first half an hour after China opened, things looked bleak: after opening down 5%, the Shanghai Composite staged a quick relief rally, then tumbled again. And then, just around 10pm Eastern, we saw a coordinated central bank intervention stepping in to give the flailing PBOC a helping hand, driven by the BOJ but also involving NY Fed members, that sent the USDJPY soaring which in turn dragged ES and most risk assets up with it. And while Shanghai did end up closing down -1.7%, with Shenzhen 2.2% lower at the close, the final outcome was far better than what could have been, with the result being that S&P futures have gone back to doing their thing, and have wiped out all of yesterday's losses in the levitating, zero volume, overnight session which has long become a favorite setting for central banks buying E-Minis.

The Irony Of Market Manipulation

Having gazed ominously at the extreme monetary policy smoke-and-mirrors intervention in bond markets, and previously explained that "the stock market is to important to leave to the vagaries of an actual market." While the rest of the world's central banks' direct (BoJ) and indirect (Fed, ECB) manipulation of equity markets, nobody bats an eyelid; but when PBOC steps on market volatility's throat (like a bull in a China bear store), people start complaining... finally. There is no difference - none! And no lesser Asian expert than Stephen Roach warns that we should be afraid, very afraid as he states, the great irony of manipulation, he explains, is that "the more we depend on markets, the less we trust them."

The Stock Market's Ugly Truth - Only 6 Stocks Matter

When we first exposed the shockingly dire lack of breadth in US equity markets, it was shrugged off by the mainstream media as yet another 'worry' in the wall to climb. It seems, however, that facts inevitably force their way to the surface and so both Bloomberg (more than 100% of this year’s increase in the S&P 500 Index is attributable to two sectors, health-care and retail. That’s the tightest clustering for an advancing year since at least 2000) and The Wall Street Journal (Amazon, Google, Apple, Facebook, Gilead and Walt Disney Co. account for more than all of the $199 billion in market-capitalization gains in the S&P 500) have been forced to expose the ugly truth about US equities... it is not a stock market - it's a market of 6 tail-chasing momentum stocks.

There Is No Exit: Why China's Plunge Protection Is Here To Stay

Update: CHINA TO CONTINUE STABILIZING MARKET, SENTIMENT, PREVENT RISKS, CSRC SAYS

As Beijing pledges to remain supportive amid a harrowing decline in Chinese stocks, China may find itself with no exit strategy for its plunge protection program. As BofAML notes, "An 'indefinite' holding period is certainly possible – it’s how the government had dealt with the last round of bad debts in the banking system, i.e., by shifting them to bad banks and never crystalizing the losses. But even under such a scenario, there may be unintended consequences."

Global Stocks, US Equity Futures Slide Following China Crash

It all started in China, where as we noted previously, the Shanghai Composite plunged by 8.5% in closing hour, suffering its biggest one day drop since February 2007 and the second biggest in history. The Hang Seng, while spared the worst of the drubbing, was also down 3.1%. There were numerous theories about the risk off catalyst, including fears the PPT was gradually being withdrawn, a decline in industrial profits, as well as an influx in IPOs which drained liquidity from the market. At the same time, Nikkei 225 (-0.95%) and ASX 200 (-0.16%) traded in negative territory underpinned by softness in commodity prices.

Howard Marks Interviewed: "There’s No Free Market Today"

"If investors want complete safety, they can't get much income, and if they aim for high income, they can't completely avoid risk. It’s much more challenging today with rates being suppressed by governments. This is one of the negative consequences of centrally administered economic decisions. People talk about the wisdom of the free market – of the invisible hand – but there’s no free market in money today. Interest rates are not natural."

Commodity Clobbering Continues As Amazon Lifts Futures

After yesterday's latest drop in stocks driven by "old economy" companies such as CAT, which sent the Dow Jones back to red for the year and the S&P fractionally unchanged, today has been a glaring example of the "new" vs "old" economy contrast, with futures propped up thanks to strong tech company earnings after the close, chief among which Amazon, which gained $40 billion in after hours trading and has now surpassed Walmart as the largest US retailer. As a result Brent crude is little changed near 2-wk low after disappointing Chinese manufacturing data fueled demand concerns, adding to bearish sentiment in an oversupplied mkt. WTI up ~26c, trimming losses after yday falling to lowest since March 31 to close in bear mkt. Both Brent and WTI are set for 4th consecutive week of declines; this is the longest losing streak for Brent since Jan., for WTI since March.

What's The Real Reason The Fed Is Raising Rates? (Hint: It's Not Employment)

Sometime this fall, the Federal Reserve will begin a new tightening cycle. Publicly, Federal Reserve officials appear to be confident that the American labor market may be overheating or that inflation may be on the way in. Is this the case? In looking at Employment, Industrial Production, Consumer Prices, Capacity Utilization, Retail Sales, and the West Texas Intermediate price of oil, there's no evidence that the Fed should raise rates. What is the Fed worried about? Probably, and almost exclusively, it's financial asset price appreciation.

Futures Drift Higher, Dollar Slides In Quiet Session

A slow week devoid of virtually any macro news - last night the biggest weekly geopolitical event concluded as expected, when Greece voted to pass the bailout bill which "the government does not believe in" just so the ECB's ELA support for Greek depositors can continue - is slowly coming to a close, as is the busiest week of the second quarter earnings season which so far has been largely disappointing despite aggressive consensus estimate cuts, especially for some of the marquee names, and unlike Q1 when a quarterly drop in EPS was avoided in the last minute, this time we won't be so lucky, and the only question is on what side of -3.5% Y/Y change in EPS will the quarter end.

Fool Me Once...

Once again, US equity markets are algorithmically surging as Treasury bonds are aggressively bid. It didn't end well yesterday, and we suspect won't today either...

Apple, Microsoft Plunge Drags Global Markets Lower, Oil Resumes Slide

While this week has been, and continues to be, devoid of macro updates, yesterday's flurry of mostly disappointing earnings releases both before and after the open, including some of the biggest DJIA companies as well as the current and previously biggest and most important companies in the world, AAPL and MSFT, both of which came crashing down following earnings and forecasts that were well short of market expectations, came as a jolt to a market that was artificially priced by central bank liquidity and HFT momo algos beyond perfection. Add to that yesterday's downward revision to historical industrial production which confirmed the US economy is a step away from recession, as well as last night's Crude API inventory build which is once again pressuring WTI lower and on the verge of a 49 handle, and perhaps the biggest question is why are futures not much lower.