In a word... "mixed" Early ugliness gave way to another ramp job courtesy of USDJPY's 101.50 level holding - which managed to clamber the Dow to unchanged on the week and stabilize the S&P (after it bounced off its 50DMA). But... Nasdaq and Russell just could not get it together until the last few minutes thanks to a VIX slam, JPY ramp and 30Y dump. Yellen's testimony pushed some volatility through markets and perhaps provided the extra pressure on the small caps (after warning of valuations). The term structure steepened modestly with 30Y +1.5bps and the rest of the curve rallying 2-3bps (10Y unch). The USD rallied modestly off 19-month lows. Gold had its worst day in 3 weeks, breaking below 1300 and testing its 100DMA (tick for tick with silver on the day). Oil prices jumped back up to around $101 as Copper slipped back towards $3. And finally, we hesitate to mention it... today's market schizophrenia was enough to trigger a Hindenburg Omen.
It is unclear if the most recent crackdown on synthetic drugs was prompted by today's Yellen testimony, but according to AP, the US government - seemingly in desperate need to find new things to spend money on - has decided to take its vendetta with sellers of drugs, just synthetic drugs, personal, and starting this morning, "broadened its national crackdown on synthetic drug manufacturers, wholesalers and retailers as federal agents served hundreds of search and arrest warrants in at least 25 states.... The DEA has been cracking down on synthetic drugs, including so-called bath salts, spice and Molly."
In a few short minutes, Fed Chairmanwoman Janet Yellen will hold the first part of her two-day testimony in Congress before the Joint Economic Committee (followed by testimony before the Senate Budget Committee), in which she will regale members of congress with tales about harsh weather in the first quarter, and who snow managed to subtract over $50 billion from the US economy in Q1.
Perhaps the most important "news" of the day is that it is non-Tuesday. Yes, there was actual news news, like German factory orders dropping -2.8% on expectations of a 0.3% increase, French industrial production down -0.7% on expectations of a 0.3% increase (both misses driven by a soaring Euro which is now spitting distance away from the 1.40 ECB "redline"), the Nikkei tumbling 2.9% to just above 14000, the Shanghai Composite down 0.9%, SocGen Q1 profit plunging 13% and conveniently blaming it on Russia, speaking of Russia things continue to deteriorate even though Interfax reported that the country has received the first part, some $3.2 billion, of the promised IMF bailout - money which will be used to promptly pay Gazprom... and buy gold, a sudden conflict between China and Vietnam escalating over the placement of an offshore oil rig and so forth, but in the new normal, none of this matters.
In this brave New Normal world, a Chinese contraction is somehow expected to be offset by a rebound in Europe's worst economies, because following China's latest PMI miss, overnight we were told of beats in the Service PMI in Spain (56.5, vs Exp. 54.0, a 7 year high sending the Spanish 10 Year to fresh sub 3% lows), Italy at 51.1, vs Exp. 50.5, also pushing Italian yields to record lows, and France 50.4 (Exp. 50.3). We would speculate that macro events such as these, as fabricated as they may be, are relevant or even market-moving, but they aren't - all that matters is what the JPY and VIX traders at the NY Fed do in a low volume tape, usually in the last 30 minutes of the trading day. And since the trading day today happens to be a Tuesday, and nothing ever goes down on a Tuesday, the outcome is pretty much clear, and not even the absolutely abysmal Barclays earnings report has any chance of denting the latest rigged and manufactured low-volume levitation.
This time is different - check; Moral Hazard - check; Easy Money - check; Overblown growth stories - check; No valuation anchor - check; Conspicuous consumption - check; Ponzi finance - check... and, of course, Irrational exuberance: check!
This week, markets are likely to focus on US ISM Nonmanufacturing, services and composite PMIs in the Euro area (expect increases), ECB’s Monetary Policy Decision (expect no change in policy until further ahead), and Congressional testimony by Fed’s Yellen.
Court challenges to constitutionally dubious laws that have been introduced since the WTC attack, as well as to the highly questionable activities of the national security apparatus, have been regularly stopped in their tracks with the argument that the plaintiffs 'lacked standing'. In the case of the indefinite detention provision this argument is especially bizarre, since all those who will acquire 'standing' in the future will no longer have access to the courts – the very thing the plaintiffs tried to challenge. This seems hardly compatible with how a nation of laws is supposed to operate, but as Rothbard pointed out, the State will always find a way to transcend its limits.
Capture, corruption, irreparable harm--and little hope for change.
Of the economic reports and events in the week ahead, we identify four potential drivers and emphasize one--the ECB meeting.
It is May Day, which means half the world - the half where welfare contributions to one's standard of living are off the charts - celebrate labor, or rather the lack thereof, by taking a day off. Which means virtually all of Europe is closed, as are Eurex and Euronext futures, and most European markets expect the UK. In light of the non-existent volume, futures are relatively unchanged despite the latest Chinese Mfg PMI disappointment (50.4, below the 50.5, expected but just above the prior print of 50.3), and of course yesterday's US GDP debacle which helped push the DJIA to a record high. The good news is that with volume even more miserable than usual, the few momentum ignition algos that are operating will have a field day with the now standard low-volume levitation that happens like clockwork if the news is bad, and also happens just in case if the news is bad.
America’s massive prison system is creating a long list of unintended consequences, some of which will effect all of us in the coming years. To help explain just how bad things have gotten, we’ve compiled this list of the most stunning facts and statistics on the America’s prison system today.
During her testimomy to the House Financial Services Committee, SEC's Mary Jo White confidently proclaimed (despite her questioner doubting her beliefs):
US SEC CHAIR MARY JO WHITE RESPONDS TO MICHAEL LEWIS BOOK IN TESTIMONY, TELLS CONGRESS "THE MARKETS ARE NOT RIGGED"
"Investors should be protected from shisters," blasted the committee member, as he took White to task..
While the law has been something the US government and General Motors have been willing to 'bend' or break in the past (absolute priority 'shifts' in bankruptcy), we suspect this latest move by Mary Barra's new GM will do more PR damage. Simply put, as many suspected given Barra's testimony and comments in the past, Reuters reports that General Motors Co will ask a bankruptcy court to block any litigation of the alleged deaths associated with the ignition switch problem since they are related to the automaker's pre-2009 bankruptcy. Of course, as we noted here, the Feds are probing the company over whether they knowingly committed bankruptcy fraud.
The woman at the center of the IRS-Tea-Party-Targeting debacle is back in the limelight once again as the House Ways and Means Committee voted 23-14 to formally ask the Justice Department to investigate the ex-IRS official. As Fox notes, this appears to be an escalation by the Republicans to confront Lerner over her role in the agency's controversial practice of singling out conservative groups seeking tax-exempt status for extra scrutiny. On another front, a separate committee will vote Thursday on whether to hold her in contempt of Congress for twice refusing to testify on the scandal. Democrats called the move "unprecedented." The question, of course, is just how more 'da fifs' can she plead.