American Express

It appears the early (pre-market) strength in US equities provided just the right amount of stop-hunting room for longs to cover and sellers to re-appear as the S&P 500 tested up towards record highs (and unch year-to-date). US equities ran away from their JPY-related proxy briefly but have collapsed back down to it now as perhaps the tell was a push higher in VIX right from the open. VIX rose over 13% briefly - its highest in a week - as US equities (notably the Dow with no support from Visa or American Express to save its skin) tumbled. Treasuries have ben rallying since 0600ET - about the same time gold and silver were slammed. Precious metals are rallying admirably off the lows as stocks tumble (and the USD is unch on the day now)

Visa and American Express are up over 4.5% each today (the latter more earlier) to new record highs (on a day when Facebook, Google, and Apple are plumbing the day's lows). The combined effect of the Visa and American Express gains are over 67 Dow points... the Dow is up 65.8 points on the day...

• NSA phone data control may come to end (AP)
• China to rescue France: Peugeot Said to Weigh $1.4 Billion From Dongfeng, France (BBG)
• China to rescue Davos: Davos Teaches China to Ski as New Rich Lured to Slopes (BBG)
• Hollande’s Tryst and the End of Marriage (BBG)
• Iran has $100 billion abroad, can draw $4.2 billion (Reuters)
• Target Hackers Wrote Partly in Russian, Displayed High Skill, Report Finds (WSJ)
• Nintendo Sees Loss on Dismal Wii U Sales (WSJ)
• Goldman's low-cost Utah bet buoys its bottom-line (Reuters)
• Royal Dutch Shell Issues Profit Warnin: Oil Major Hit by Higher Exploration Costs and Lower Oil and Gas Volumes (WSJ)
• EU Weighs Ban on Proprietary Trading at Some Banks From 2018 (BBG) - so no holding of breaths?
• Sacramento Kings to Accept Bitcoin (WSJ)

Weak results from Intel, American Express and Capital One, not to mention Goldman and Citi? No problem: there's is overnight USDJPY levitation for that, which has pushed S&P futures firmly into the green after early overnight weakness: because while the components of the market may have such trivial indicators as multiples and earnings, the USDJPY to which the Emini is tethered has unlimited upside. And now that the market is back into "good news is good, bad news is better" mode, today's avalanche of macro data which includes December housing starts and building permits, industrial production, UofMichigan consumer confidence and JOLTs job openings, not to mention the up to $3 billion POMO, should make sure the week closes off in style: after all can't have the tapped out consumer enter the weekend looking at a red number on their E-trade account: they might just not spend as much (money they don't have).

The positive momentum in equities slowed in Asian trading with losses seen on the Nikkei (-0.4%), and HSCEI , the SCHOMP unchanged and EM indices such as the Nifty (-
0.1%). In Australia, a disappointing December employment report saw a 23k fall in jobs for the month against consensus expectations of rise of 10k. The 10yr Australian government bond has rallied 5bp and the front end is outperforming as a number of investors expect the RBA to continue its easing bias over 2014. AUDUSD has sold off -1.1% to a three year low of 0.881. The ASX200 closed up 1.2% however, boosted by mining-giant Rio Tinto (+2%) who reported better than anticipated Q4 production. Amid recent fears of a Chinese growth deceleration, Rio Tinto reported record levels of production of iron-ore, coal and bauxite. In FX, USDJPY is finding further support in Asia, adding 0.1% to yesterday’s 0.38% gain to trade not too far from the 105 level. Which is also why the S&P futures are trading modestly lower: without a major breakout in the Yen carry, there can't be a sustained ramp in the US stock market which is driven entirely by the value of the Yen, which in turn is a reflection of the expectations of future BOJ easing.

• House Unveils $1.01 Trillion Measure to Fund Government (BBG)
• Credit Suisse Tells Junior Bankers to Take Saturdays Off (BBG)
• Spot the odd word out: ECB Sees Bad-Debt Rules as Threat to Credible Bank Review (BBG)
• Insert laugh track here: Spain GDP grows at fastest pace in almost six years (FT)
• Scandinavian Debt Crisis Waiting to Happen Puzzles Krugman (BBG)
• Fed Said to Release Plan to Limit Banks’ Commodities Activities (BBG)
• Thai Protesters Extend Blockade After Rejecting Poll Talks (BBG)
• China provinces set lower growth goals for 2014 (BBG)

• Traders Seek an Edge With High-Tech Snooping (WSJ)
• Gold Drops Below $1,200 an Ounce for First Time Since June (Bloomberg)
• SAC Manager Guilty as Insider Focus Turns to Martoma (Bloomberg)
• Why Ukraine spurned the EU and embraced Russia (Reuters)
• Target confirms major card data theft during Thanksgiving (Reuters)
• Zuckerberg is no suckerberg: Company to Sell 27 Million Class A Shares While CEO Will Offer 41.4 Million (WSJ)
• Facebook, Zuckerberg, banks must face IPO lawsuit (Reuters)
• Swiss Christmas Trees Feel Chill as Franc Helps Rivals (BBG)
• Iran, six powers to resume nuclear talks after snag (Reuters)
• Dolphins Suffering From Lung Disease Due to Gulf Oil Spill, Study Says (WSJ)

There are multiple signs of a top forming. And even stock bulls are sitting on cash. What's next?

The kabuki theater that passes for governance in Washington D.C. reveals the profound level of ignorance shrouding this Empire of Debt in its prolonged death throes. Ignorance of facts; ignorance of math; ignorance of history; ignorance of reality; and ignorance of how ignorant we’ve become as a nation, have set us up for an epic fall. It’s almost as if we relish wallowing in our ignorance like a fat lazy sow in a mud hole. The lords of the manor are able to retain their power, control and huge ill-gotten riches because the government educated serfs are too ignorant to recognize the self-evident contradictions in the propaganda they are inundated with by state controlled media on a daily basis.

• Congress Vote Ends Impasse to Be Revisited in January (BBG); Congress Passes Debt, Budget Deal (WSJ)
• House GOP extracts no concessions (Politico)
• Washington becomes the biggest risk to the U.S. economy (Reuters)
• Debt Deal Seen Boosting U.S. Consumers as Holidays Approach (BBG) - only thing missing: disposable income
• Federal Employees Head Back to Work (WSJ)
• Regulator Suggested Shift for Dimon at J.P. Morgan Unit (WSJ)
• Twitter hires Google ad exec ahead of IPO (CNET)
• Teens can now post publicly, but posts are friends-only by default (WaPo)
• Germany Moves to Finalize Coalition Deal (WSJ)
• Draghi Turns Judge on EU Banks as ECB Studies Accounts (BBG)
• UK nuclear deal with China a ‘new dawn’ (FT)

If there is anything the market has shown in the past 16 days of government shutdown, which is set to reopen this morning in grandiose fashion following last night's 10 pm'th hour vote in the House, is that it no longer needs Washington not only to function but to ramp higher. All it needs is the Fed, which in turn needs an unlimited debt issuance capacity by the US Treasury which it can monetize indefinitely, which is why the debt ceiling was always the far more pressing issue. In other words, the good news is that the can has been kicked, and now the government workers (who will need about a week to get up to speed), can resume releasing various government data showing just how much 5 years of now-open ended QE have impaired the US economy, and why as a result, even more years of unlimited QE are in stock (because in a Keynesian world, what caused the problem is obviously what will fix it). The bad news: the whole charade will be repeated in three months. More importantly, with futures no longer having the hopium bogey on the horizon, namely the always last minute debt deal, they have finally sold off on the back of a weaker USD. It is unclear if the reason for this has more to do with climbing the wall of shorters which is now gone at least until February when the soap opera returns, or what for now, has been an absolutely abysmal Q3 earnings season. Luckily, in a centrally-planned world, plunging stocks is bullish for stocks, as it means even more Fed intervention, and so on ad inf.

It's gotten beyond silly: with less than a day to go until the first X-Date, beyond which if Jack Lew is correct (he isn't) all hell will break loose if the US doesn't have a debt deal in place, stocks couldn't care less, Bills continue to sell off, carry traders only care how big the central banks' balance sheets are, all news are generally shunned and yet stocks have soared 600 DJIA points on Harry Reid's relentless optimism a deal will get done, even though so far none has. Today, as we observed on Monday, we expect more of the same: stocks and futures will ignore the reality that the midnight hour will come and go with no deal in place, but will continue to explode higher as Harry Reid's latest set of "optimism" headlines hits the tape in low volume trading. We expect the first big hope rally around POMO time, then shortly after Senate comes back in Session, around noon. Then for good measure, another one just before market close. Why not: it's not like the "market" even pretend to be one anymore. Keep an eye on today's 4-Week bill auction before noon. It should be a far bigger doozy than yesterday's longer-dated bills.

Planned job cuts in the third quarter rose 25% from a year ago. With September jobs cuts up 19% from last year, it represented the fourth month in a row in which job cuts were higher than the same month last year. Despite the current trend, employers are on pace to cut roughly the same number of jobs that were cut last year. We already have declining real wages. Small businesses are geting wiped out by taxes, regulations, and Obamacare. These mega-corporations are firing thousands. Retail and restaurant sales are plunging. Consumers are scared straight and are reducing credit card debt. Government spending in states and localities is declining because they are required to balance their budgets. The Boomers are old, with no savings. They can no longer live in a delusionary credit bubble. Sounds like a reason to buy stocks.

When we think of the once-mythical American Express black card, we tend to conjure images of the most fabulously wealthy people in the world plunking one down on the counter to pay for items that cost more than most Americans earn in a year – or possibly even in a decade. The American Express "black" is actually the American Express Centurion Black card and that image is not a terribly far cry from reality...

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• U.S. envoy leaves Cairo after talks declared over (Reuters)
• Credit-Crisis Oracle Rajan to Head India’s Central Bank (BBG)
• Bank of England Changes Policy Tack (WSJ)