Weekend Wrap: Trade, Recession, Currency Fears Stoke Week-Ending Sell-Off

These days, it doesn't take much to spook markets.

That stands to reason, with all of the US major indices near all-time highs conjoined with a divisive political environment, global trade tensions, and a corrupted financial system run by central bankers bent on the globalization of currencies and nations.

Thus, on Friday, after Fed Chairman, Jay Powell, spoke to the assembled cognoscenti at Jackson Hole, Wyoming, and President Trump doubled down on his tariff mandate towards China, the runners, scalpers, and money-changers on Wall Street were so spooked that one might have assumed they'd seen the ghost of legendary China short-seller, Jim Chanos, stalking the trading floor, even though - as far as is known - Mr. Chanos is still alive and kicking the shorts out of the Chinese market.

Stocks had opened only marginally in the red on Friday and were improving into the eleven o'clock hour before suddenly reversing course, heading into the abyss, the Dow shedding more than 400 points in a matter of minutes.

With Wall Street struggling to regain some semblance of balance and propriety, stocks drifted lower, cratering in the final hour with the Dow Industrials down nearly 750 points before gaining back another hundred into the closing bell.

It was ugly. It was impressive. At the end of the day, it seemed completely appropriate.

The fuel for growth was fading fast and has been since well before Friday's melt-down. All of the fancy tricks the Fed and their central banking buddies had employed to goose equities skyward over the past decade were being exposed as fraudulent, artificial, unnecessary, and eventually harmful to the operation of what previously had been free markets.

Wall Street has lost confidence in the Fed's forward guidance, which, according to Mr. Powell, is decidedly negative. The Trump tariffs are a sideshow to the already-failing economies of the developed nations, slowing precipitously and taking down the emerging giants of China and India with them.

Over the weekend, while the leaders of the G7 powerhouse nations debate and will likely confirm that globalization is a crumbling edifice of one-percenter greed and that the world needs to be adjusted toward something that serves people other than just the mega-corporate interests and the skimming habits of the ultra-wealthy.

As has been of considerable mention here the past few days, negative interest-bearing sovereign debt instruments - those wildly popular $19 trillion worth of bonds - are ringing the death-knell of fiat currencies and central bank interference with the normal operation of capitalist design.

For now, the shock waves of fading confidence in the global Ponzi and counterfeit schemes of stock buybacks, quantitative easing, and negative interest rates is contained largely to the Wall Street crowd, but, it is spreading and the uproar will increase as stocks fall, ordinary people worry about their jobs and their futures, and the central bankers moan and cajole and mumble and stumble and fall.

Remnants of the global economic structure previously known as Bretton Woods are being shredded on a daily basis. A new world order is on the way, but any transition - like the one which dashed national currencies into one euro a few decades past - is going to be painful and consequential.

Sadly, when all the smoke is blown away and the dust settled, the planet will still largely be governed by the same morons and their predecessors who brought all of this upon us and their economic agents of destruction. The new currency regiment will be talked about as more fair, more balanced, more equitable, but those in the know will have already understood that it will be more of the same, damaging to the middle classes while barely scraping off a scintilla of the assets held by the rich and powerful.

Americans, Europeans, Japanese and all citizens are being shafted, and it's going to hurt.

The long-delayed reckoning from the global crisis of 2008 is about to be unleashed. Unless one holds hard assets such as precious metals, real estate, and/or income-producing assets like a productive business or needed service, one is likely to feel more pain than would otherwise be prescribed by the lords of finance.

At the Close, Friday, August 23, 2019:
Dow Jones Industrial Average: 25,628.90, -623.34 (-2.37%)
NASDAQ: 7,751.77, -239.62 (-3.00%)
S&P 500: 2,847.11, -75.84 (-2.59%)
NYSE Composite: 12,416.45, -272.01 (-2.14%)

For the Week:
Dow: -257.11 (-0.99%)
NASDAQ: -144.23 (-1.83%)
S&P 500: -41.57 (-1.44%)
NYSE Composite: -163.96 (-1.30%)
Dow Transports: -227.58 (-2.28%)

Weekend Wrap: Trump Tariffs, Fed Funds, Draghi and ECB Dominate Markets

The prior week was expected to produce shock waves in markets, but on the US stock exchanges, the reaction was rather muted.

While the Dow put in a loss for the week, the NASDAQ surged to new all-time highs and the S&P 500 finished the week nearly unchanged.

Most of the reactive trading happened elsewhere, in the forex, bond, and commodity markets, which witnessed major swings in the aftermath of a rate hike by the Federal Reserve and an announcement of the end of QE by Mario Draghi of the ECB. The latter seemed to cause more impact, as Draghi set a timetable for the end of monetary easing at the end of 2018.

All of the European bourses closed lower on Friday in response to Draghi's announcement.

The dual central bank announcements overshadowed President Trump's successful negotiation with North Korea. Trump's meeting with Kim Jong-un resulted in an agreement between the two countries for more normalized relations, setting a framework for denuclearization by the North Koreans and suspension of war games conducted jointly by South Korea and the US.

Also igniting markets was President Trump's refusal to sign off on the G7 memorandum, following a meeting with "friendly" nations in which Trump promised tariffs on all manner of imports from the likes of Italy, Germany, Japan, Canada, France and Great Britain. Before that news even died down, with the other G7 nations promising retaliatory tariffs, the President slapped another $50 billion in tariffs on China, with the Chinese responding with tariffs on US imports.

With so much news crowding into one week, it was not easy for investors to find a path of least resistance. Along with Europe, US stocks fell off sharply on Friday, but recovered most of the losses by the close of trading for the week.

After the Fed raised the federal funds rate by 25 basis points on Wednesday, the yield on the 10-year note briefly crossed the 3.00% line, closing at 2.98 on the 13th, but falling back to 2.93% by Friday, the 15th of June. More importantly, the spread between the five-year and the 10 dropped to just 12 basis points, as the five-year note finished the week at 2.81.

Spreads were compressed, with the 2s-10s at 38 basis points and 2s-30s at 50. The 5s-30s spread was 23 basis points. These are the lowest spreads recorded since 2007, just prior to the Great Financial Crisis.

The Euro got crushed in currency markets, while gold and silver - both of which had been rallying all week - were crushed during Friday's COMEX session, with silver taking the brunt of the selling, off four percent, from a high of 17.30 per troy ounce on Thursday to a low at 16.40 on Friday before recovering slightly to close at 16.54. Gold was over $1300 per ounce on Thursday, but was slammed to a six month low at $1275 on Friday.

For more detail on the explosive week in precious metals and beyond, Ed Steer's weekly commentary can be found at the GoldSeek site, here.

Doug Noland's weekly Credit Bubble Bulletin commentary, detailing the recent movements in credit and currencies is titled "The Great Fallacy".

Dow Jones Industrial Average June Scorecard:

Date	Close	Gain/Loss	Cum. G/L
6/1/18	24,635.21	+219.37	+219.37
6/4/18	24,813.69	+178.48	+397.85
6/5/18	24,799.98	-13.71	+384.14
6/6/18	25,146.39	+346.41	+730.55
6/7/18	25,241.41	+95.02	+825.57
6/8/18	25,316.53	+75.12	+900.69
6/11/18	25,322.31	+5.78	+906.47
6/12/18	25,320.73	-1.58	+904.89
6/13/18	25,201.20	-119.53	+785.36
6/14/18	25,175.31	-25.89	+759.47
6/15/18	25,090.48	-84.83	+674.64

At the Close, Friday, June 15, 2018:
Dow Jones Industrial Average: 25,090.48, -84.83 (-0.34%)
NASDAQ: 7,746.38, -14.66 (-0.19%)
S&P 500: 2,779.42, -3.07 (-0.11%)
NYSE Composite: 12,734.63, -37.32 (-0.29%)

For the Week:
Dow: -226.05 (-0.89%)
NASDAQ: +100.87 (+1.32%)
S&P 500: +0.63 (+0.02%)
NYSE Composite: -97.43 (-0.76%)

Dow Soars Past Rivals; Upcoming: Trump Talks, Fed Rate Decision (Weekend Wrap & Monday Briefing)

Ripping past rival indices, the Dow Jones Industrial Average scored its biggest point increase since January, adding 681 points while boosting its June increase to 900 points, also the best monthly gain since January.

Whether the bullish sentiment will prevail through the remaining 15 trading days of June may be addressed in the week ahead, one which will witness President Trump's negotiating skills at work when he meets with North Korea's Kim Jong-un in Singapore, an epic event that looks to end nearly seven decades of armed confrontation on the Korean peninsula.

Since taking the oath of office in January, 2016, Trump has made North Korea a significant priority, alternating between insulting tweets (calling Jong-un "Little Rocket Boy," for instance), displays of military force, and back-room preliminary negotiations through surrogates from China, Japan, South Korea and US diplomats.

Official negotiations begin Tuesday, 9:00 am Singapore time, which translates nicely to 9:00 pm Eastern Daylight Time, assuring that late-night political junkies will have their plates full for the better part of the week.

Also on the agenda for the upcoming week is the Tuesday-Wednesday FOMC policy rate meeting, in which the Federal Reserve will likely hike the federal funds rate another 25 basis points, an action which is likely to have great impact on stocks as well as bonds. After hiking rates earlier this year, Fed officials have gone to great lengths to keep their rate increase policy in front of investors and the general public, with various officials parroting the themes that the economy is strong and that now is the right time to increase lending rates.

As opposed to normal Fed operations being somewhat behind the curve, the current roster seeks to appear out in front of the economic realities, though critics maintain that all the Fed is doing is preparing for a looming recession, arming themselves with enough interest rate ammunition to staunch an eventual downturn.

If the Fed does as expected it will hike rates from 0.00 to 0.25 to 1.75% to 2%. This will be the second rate hike this year and the seventh move since the start of the tightening cycle which began in December 2015.

While the small increases have been well-spaced, it's assumed that the Fed will continue to increase rates every three months, meaning that they will hike again in September and once more in December.

The trouble with such an optimistic outlook is that an increase in their base rate to 2.25-2.50 by year-end would put increased pressure on the stock market, as treasury yields would likely rise to levels above and beyond those of many dividend-paying stocks, without the associated risk.

Another anticipated action this coming week is the response from G7 members following their weekend meeting in which President Trump insulted the leaders of other nations in person and via Twitter. Trump's claim that G7 countries like France, Canada, Germany, and Italy have long been taking advantage of the US via unfair trade practices. The US president has been slapping tariffs on friends and foes alike and the backlash in tit-for-tat tariffs has already been forwarded by Canada, with the EU nations likely to impose their own retaliatory trade taxes on US goods.

While the trade wars have been building, the financial media has routinely blamed the tension for declines in the stock market. However, as trade talk went ballistic in the past week, stocks continued their ascent without interruption, proving once again that snap analysis of stock market moves are nothing other than pure fakery by an inept, disingenuous media elite. Trading decisions are largely not the result of current events, but rather, are outward-looking, with longer-term event horizons than a few days or weeks.

The effects of trade interruptions, tariffs and retaliation are unlikely to be felt in any meaningful way for many months, making the premature effusions of guilt by presidential association by the financial and mainstream press a rather large canard.

So, the first full week of trading in June went spectacularly for stocks, with the NASDAQ breaking to new all-time highs on Wednesday, before profit-taking took it back down on Thursday. Friday's 10-point gain on the NAZ left it roughly 50 points off the new closing high.

As for the benchmark Dow Industrials, they are cumulatively 1300 points behind the January record high of 26,616.71. There is a great deal of ground to be made up in any effort to convince investors that the bull market will continue, while those of the bearish camp point to the range-bound cycle of the past three months following the cascading February fall.

June may turn out to be a watershed month for stock pickers, as tech stocks have regained much of their luster while financials have languished. Due to the somewhat incestuous nature of Wall Street trading, all boats may rise or fall in coming days as the second quarter draws to a close and fed managers square their books in anticipation of second quarter reports.

While the prior week may have been a banner for bulls, the week ahead promises to be full of surprises, intrigue and potential pitfalls for investors.

Dow Jones Industrial Average June Scorecard:

Date	Close	Gain/Loss	Cum. G/L
6/1/18	24,635.21	+219.37	+219.37
6/4/18	24,813.69	+178.48	+397.85
6/5/18	24,799.98	-13.71	+384.14
6/6/18	25,146.39	+346.41	+730.55
6/7/18	25,241.41	+95.02	+825.57
6/8/18	25,316.53	+75.12	+900.69

At the Close, Friday, June 8, 2018:
Dow Jones Industrial Average: 25,316.53, +75.12 (+0.30%)
NASDAQ: 7,645.51, +10.44 (+0.14%)
S&P 500: 2,779.03, +8.66 (+0.31%)
NYSE Composite: 12,832.07, +43.56 (+0.34%)

For the Week:
Dow: +681.22 (+2.77%)
NASDAQ: +91.18 (+1.21%)
S&P 500: +44.41 (1.62%)
NYSE Composite: +211.24 (+1.67%)

Stocks Post Gains As August Winds Down; Nomi Print On Central Bank Collusion

Investors put their money down as the major indices posted small gains heading into the end of the month. The NASDAQ was, in particular, on fire, posting the largest increase on the day, a more then one percent rise.

Non-farm payroll data for August will be released Friday morning in advance of the three-day Labor Day weekend, so that should color the final two days of the week, the last day of August and the first day of September.

As mentioned in prior posts, there's nothing stopping stocks from posting gains until congress comes back in September to begin debates on the debt ceiling, tax reform (that's funny, they always talk about tax reform and the tax code just keeps getting larger), and the federal budget (another fat boy).

To get an idea of just how far afield the world's central bankers have gone in trying to maintain a broken global financial system, Nomi Prins puts perfect spin on the topic, in her latest blog post, A Decade of G7 Central Bank Collusion... and Counting.

At the Close, 8/30/17:
Dow: 21,892.43, +27.06 (+0.12%)
NASDAQ: 6,368.31, +66.42 (+1.05%)
S&P 500: 2,457.59, +11.29 (+0.46%)
NYSE Composite: 11,805.07, +13.19 (+0.11%)