S&P 500 Pushes To All Time Highs On First Economic Contraction In Three Years

What do you do when GDP prints twice as bad as expected… buy stawks! And so it is that -1.0% GDP print for Q1 has been greeted with a buying drive in S&P 500 futures to lift it back near all-time record highs this morning. Gold, silver, and the USD are also rising.. and bond yields are rising very modestly.

 

S&P is up…

 

But the Nasdaq is leading…

 

Leaving the S&P 60 points rich to bonds…

 

And here’s why everyone’s bulled up…

 

Charts: Bloomberg




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A.M. Links: Edward Snowden Speaks, V.A. Hospital ‘An Organized Crime Syndicate,’ Pro-Russian Forces Shoot Down Ukrainian Army Helicopter

  • Edward Snowden sat down for a wide-ranging
    interview
    with NBC News. The U.S. government has “no idea what
    documents were taken,” he said. Meanwhile, Secretary of State John
    Kerry said Snowden
    should
    “man up and come back to the United States.”
  • According to a whistleblower who works at a Veterans Affairs
    hospital in Texas, the place
    is run
    like “an organized crime syndicate…. People up on top
    are suddenly afraid they may actually be prosecuted and they’re
    pressuring the little guys down below to cover it all up.” As the
    V.A. scandal grows, calls are getting louder for embattled Veterans
    Affairs chief Eric Shinseki
    to resign
    .
  • Pro-Russian forces near the eastern Ukraine town of Slaviansk

    shot down
    a Ukrainian army helicopter, killing 14.
  • The U.S. Court of Appeals for the 1st Circuit
    has recognized
    a First Amendment right to film the police in
    public.
  • Air pollution levels in London
    may be worse
    than those in Beijing.
  • A new study finds that 30
    percent
    of the human population is overweight.

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Twitter, and like us on Facebook. You
can also get the top stories mailed to you—sign up
here
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US Economy Shrank By 1% In The First Quarter: First Contraction Since 2011

Weather 1 – Quantitative Easing 0.

Spot on the chart below just how high the culmination of over $1 trillion in QE3 proceeds “pushed” the US economy.

Joking aside, while the realization that nobody can fight the Fed except a cold weather front, is quite profound, in the first quarter GDP “grew” by a revised -1.0%, down from the +0.1% first estimate, and well below the -0.5%  expected, confirming that while economists may suck as economists, they are absolutely horrible as weathermen. This was the worst print since the -1.3% recorded in Q1 2011.

Bottom line: for whatever reason, in Q1 the US economy contracted not only for the first time in three years, but at the fastest pace since Q1 of 2011. It probably snowed then too.

The breakdown by components is as follows:

Some highlights:

  • Personal consumption was largely unchanged at 2.09% from 2.04% in the first estimate and down from 2.22% in Q4. Considering the US consumer savings rate has tumbled to post crisis lows at the end of Q1, don’t expect much upside from this number.
  • Fixed investment also was largely unchanged, subtracting another 0.36% from growth, a little less than the -0.44% in the first estimate and well below the 0.43% contribution in Q4.
  • Net trade, or the combination of exports and imports, declined from
    -0.83% to -0.95%, far below the positive boost of 0.99% in Q4.
  • The biggest hit was in the change in private inventories, which tumbled from -0.57% in the first revision to a whopping -1.62%: the biggest contraction in the series since the revised -2.0% print recorded in Q4 2012.
  • Finally, government subtracted another -0.15% from Q1 growth, more than the -0.09% initially expected.

So there you have the priced to perfection New Normal growth (inclusive of “harsh weather”, which obviously has to be excluded for non-GAAP GDP purposes), which also now means that in the rest of the year quarterly GDP miraculously has to grow at just shy of 5% in the second half for the Fed to hit the “central tendency” target of 2.8%-3.0%.

And now we await for stocks to soar on this latest empirical proof that central planning does not work for anyone but the 1%.




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Initial Claims Drop Near Cycle Low “As Good As It Gets” Levels

The flip-flopping noise of the initial claims data continues as last week’s spike and miss is rebounded into this week’s beat and drop. At 300k – down 27k from last week – initial claims are at their lowest since May 2007 – practically as good as it gets. Continuing claims continue to fall – now at 2.63 million – to the lowest in the cycle and lowest since Nov 2007. Continuing claims are falling at the fatest pace since 2010.

 

Initial claims near cycle lows…

 

As continuing claims plunges to cycle lows at the fastest pace since 2010…

 

Chart: Bloomberg




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Our “Make It Look Good” Economy Has Failed

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

When rigged numbers are the basis of our success, we have failed.

The essence of the U.S. economy is make it look good: never mind quality or long-term consequences, just make it look good today, this week, this month, this quarter: make the pink slime look like meat, make the company look profitable, make the low-quality product look good enough to close the sale, make the unemployment rate low enough to justify re-electing the toadies currently in power, make the body count of bad guys look good, and on and on–just makes the numbers look good now, the future will take care of itself.
 
This is, of course, an attractive lie: the future is a direct consequence of present decisions and actions. It is remarkable how quickly we latch onto the notion that an endless parade of lies, manipulations and deceptions will magically produce a warm and fuzzy future of organic growth fostered by sound investments.
 
Alas, an economy that relies on an endless parade of lies, manipulations and deceptions has only one possible future: failure–abject, total, undeniable, devastating. Equally remarkable is the current conviction that absurd extremes in manipulation–the billions of dollars of corporate buybacks pushing stocks higher, the socialization of the U.S. mortgage market, where privately issued mortgages (unbacked by government guarantees) have virtually vanished, the ginned-up unemployment number (remove enough potential workers from the count and the unemployment rate is soon near-zero)–will magically lead to an economy that no longer needs extreme manipulations to sustain itself.
 
All these lies (if we are bold enough to call a lie a lie) and manipulations cannot possibly herald in an economy of honest reporting, market discovery of price and sound investments.
 
This is equivalent to doing nothing but eating junk food while playing martial-arts videogames for months on end and then expecting to beat Tony Jaa in a real-world sparring match. Only people who've lost touch with reality would think that getting fat and wheezy playing videogames while eating Happy Meals and Ho-Hos would create a future that required an entirely different set of decisions and disciplines.
 
America is completely out of touch with reality: gaming statistics and making credit free to financiers doesn't create jobs, any more than stuffing one's face with junk food and playing videogames prepares one to avoid getting beaten to a pulp in a real martial arts match.
 
The misguided individual who reckons that foisting make it look good cons will magically create productive investments soon discovers that cons, lies and manipulations are all one-way streets: a make it look good con has only one future: a bigger con, to cover up the disastrous consequences of the initial con.
The U.S. economy won't fail in the future: it has already failed. Just as the delusional coach-potato who stuffs himself with Happy Meals and Ho-Hos to prepare for a real-world sparring match failed at the first bite, so too have we failed with the first lie, the first gamed statistic, the first Federal Reserve manipulation, the first fudged "profit."
 
Liars often entertain the fantasy that the initial make it look good illusion can eventually be replaced with real numbers and real integrity: but that too is a lie, a lie the liar tells himself. A house of cards constructed of lies, manipulations, fudged numbers, ginned-up statistics and cleverly constructed deceptions cannot suddenly become a structure built on integrity, accountability and honest reporting of facts; it will always be fragile, for a single truth and a single unvarnished fact can bring down the entire contraption.
 
This is where our endless parade of lies, manipulations and deceptions has led us: to a future of more lies, manipulations and deceptions because untruth is a black hole; once our first manipulation pushes us past the event horizon, there is no way back to honesty, accountability and factual reporting.
 
Officially sanctioned lies, manipulations and deceptions erode trust in institutions and the bedrock belief that honesty, integrity, accountability, hard work and productive investments are the keys to advancement.
 
Once a people have been trained to swallow an endless parade of lies, manipulations and deceptions in order to get their share of the system's swag, they lose the ability to practice accountability, integrity and honesty. Their own complicity renders them incapable of trusting the system or anyone else playing the make it look good game.
 
Eventually they lose the ability to even recognize accountability, integrity and honesty, much less live them.
 
America's economy has already failed. It failed when our leaders turned to lies and manipulation to make it look good, and it failed when we bought the lies because it was so much less risky than demanding a factual accounting.
 

When rigged numbers are the basis of our success, we have failed.




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Watch As Ukraine Helicopter With 14 Troops On Board Is Shot Down

Events in Ukraine may have been moved to the backburner because not only are they not impacting US equities but have somehow managed to push Russian stocks to pre-sanction highs, but that does not mean that there is any de-escalation in the self-proclaimed eastern regions of Donetsk and Slavyansk where fighting between pro-Russian groups and Kiev army rages on. The latest incident took place a little over an hour ago when Pro-Russian rebels in eastern Ukraine shot down a military helicopter near Sloviansk, killing 14 people, the country’s outgoing president says.

This attack took place following a weekend of heavy fighting in Donetsk following a push against “terrorists” by the new president that left many rebel soldiers dead.

The helicopter was hit during heavy fighting between Sloviansk and Kramatorsk on Thursday after it had dropped off troops at a military base, reports said.

Insurgents shot down an Mi-8 transport chopper with a shoulder-fired missile amid heavy fighting in Slovyansk, 100 miles (160 kilometers) from the Russian border, Speaker Oleksandr Turchynov told lawmakers in parliament in Kiev today.

Below is a clip of the helicopter downing:

Meanwhile, as reported yesterday, Russia offered its services to provide humanitarian aid in the eastern part of the country. Ukraine promptly declined. From Bloomberg:

The Foreign Ministry in Moscow said yesterday that Russia is being asked for humanitarian aid by people in eastern Ukraine affected by the conflict. Russia wants Ukraine’s help delivering supplies across the border and expects “the fastest possible answer,” the ministry said on its website.

Ukraine said thanks, but no thanks.

“This is another element of propaganda,” Ukraine’s Foreign Ministry said. It may also be a “a hidden attempt to help Russian terrorists who are now in a difficult position,” the ministry said in an e-mailed statement today.

Putin, who has repeatedly denied aiding the insurgency, told Italian Prime Minister Matteo Renzi in a phone call on May 27 that Ukraine’s military operations must stop.

“Russia’s goal was and is to keep Ukraine so unstable that we accept everything that the Russians want,” Poroshenko said in an interview with German newspaper Bild that was published yesterday. “I have no doubt that Putin can end the fighting with his direct influence.”

Events like today’s helicopter downing will only further antagonize the two sides, leading to even more vocal demands for Russian intervention by eastern separatists until finally the Kremlin is “forced” to cave.

But perhaps the biggest irony in this latest and most serious escalation episode to date is that it comes days after EU ldears met in Brussels on May 27 and where France’s Francois Hollande said this:  “The possibility of de-escalation is here, finally,” French President Francois Hollande told reporters after the summit ended.

Guess not.




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Frontrunning: May 29

  • Snowden: ‘no relationship’ with Russian government (Reuters)
  • Bond Surge Worldwide Drives Index Yield to One-Year Low (BBG)
  • Shares flirt with record highs on ECB easing bets (Reuters)
  • Goldman Shuns Bonds Pimco’s Gross Favors in ‘New Neutral’  (BBG)
  • Dish to Become Largest Company to Accept Bitcoin (AP)
  • To Make a Killing on Wall Street, Start Meditating (BBG)
  • Snapchat CEO ‘Mortified’ by Leaked Stanford Fraternity E-Mails (BBG)
  • Apple to get Beats, music mogul Iovine for $3 billion (Reuters)
  • Fink Says Leveraged ETFs May ‘Blow Up’ Industry  (BBG)
  • Porn may be messing with your head (Reuters)
  • Iranian Hackers Stalked U.S. Officials, Report Says (BBG)
  • Egypt’s Sisi wins presidential election (Reuters)
  • Billionaire Forrest Sees Fortune in Australian Beef to China (BBG)
  • FBI’s Wanted List Sends Chinese Tech to First From Worst (BBG)

 

Overnight Media Digest

WSJ

* Apple Inc said on Wednesday it is buying Beats Electronics LLC for $3 billion to bolster a music business that has lost some of its mojo, as streaming-music services encroached on the downloads dominated by Apple’s iTunes service. (http://ift.tt/1hBsWF2)

* One of the General Motors Co engineers at the center of the controversy over the company’s handling of a deadly ignition switch defect has met with congressional investigators, indicating lawmakers are accelerating their probe, according to people familiar with the matter. (http://ift.tt/1gDjw0w)

* Valeant Pharmaceuticals International Inc, having so far been spurned by takeover target Allergan Inc, raised its offer to buy the Botox maker to $49.4 billion and sold the rights to some of its skin-care products in an attempt to smooth the antitrust review process if its unsolicited takeover bid is successful. (http://ift.tt/1hBsWF3)

* Hachette Book Group hit back at Amazon.com Inc on Wednesday, rebuffing the retailer’s suggestion that the two jointly compensate authors affected by a dispute between the companies. (http://ift.tt/1gDjw0x)

* Boeing Co said on Wednesday that U.S. air-safety regulators cleared its 787-8 Dreamliner to operate on a wider range of routes, with the jet able to handle longer oceanic and polar crossings as much as five-and-a-half-hours from a suitable landing field in the event of an emergency. (http://ift.tt/1hBsW85)

* Prominent proxy adviser Institutional Shareholder Services urged the ouster of most Target Corp board members for failing to manage risks and protect the company from a massive data breach at the end of last year, a warning to corporate boardrooms to take cybersecurity more seriously. (http://ift.tt/1gDjypq)

 

FT

Scottish engineering company Weir Group Plc said it would pursue other acquisitions after its bid for Finnish rival Metso Oyj was rejected by the heavy mining equipment leader.

Britain’s biggest drugmaker GlaxoSmithKline is facing protests from Chinese junior employees who claim that the group is refusing reimbursement for bribes they were ordered to pay by senior staff amid a formal criminal probe for bribery in China and four other countries.

Tesco Plc, one of the big four grocers in the UK, is set to report its worst quarter in decades amid rising pressure to slash prices in the face of competition from discount chains, the company’s joint brokers said.

Stryker Corp has denied any intention of making a bid for UK rival Smith & Nephew Plc after it emerged that the U.S. medical devices manufacturer was in early stages of preparing an offer.

One of London’s most prominent investment bankers, Ian Hannam, lost his appeal against a heavy fine for market abuse, in a case that has fuelled a high-level debate about the rules around deals and the disclosure of information.

 

NYT

* As renewable energy production has surged in recent years, opponents of government policies that have helped spur its growth have pushed to roll back those incentives and mandates in state after state. (http://ift.tt/1hBsWF6)

* Apple Inc is betting that Jimmy Iovine’s four decades in the recording industry, his knack for trend-spotting and his credibility with artists will help rejuvenate its music business. (http://ift.tt/1gDjyps)

* William Ackman of Pershing Square Capital Management plans to raise money for a closed-end fund that could list on the London Stock Exchange. (http://ift.tt/1hBsW86)

* Suspended General Motors Co engineer Raymond DeGiorgio, who is at the center of accusations that the company covered up a deadly defect, appeared distraught during lengthy questioning by Congressional investigators, according to people familiar with the session. (http://ift.tt/1gDjyFJ)

* Amazon.com Inc and Hachette Book Group took their cases to the public on Wednesday as a dispute over contract terms became clashing visions about the distribution of information in the digital age. (http://ift.tt/1hBsWF8)

 

Canada

THE GLOBE AND MAIL

* A promising Canadian stroke drug has received a rare waiver of consent that allows Toronto paramedics to use the drug on patients without their permission. (r.reuters.com/qaw69v)

* Canadians are “stupid” and post far too much information online, a former head of the national electronic spying agency says, leaving the country with “long ways to go” in protecting personal information in an Internet era. (r.reuters.com/waw69v)

Reports in the business section:

* Bank of Nova Scotia has settled on a plan to unload the majority of its stake in asset manager CI Financial , opting to sell shares directly to public investors by way of a bought deal. The bank is selling 72 million shares at C$31.60 each, amounting to a total deal size of about C$2.3 billion, making it one of the largest public offerings in Canada. (r.reuters.com/rew69v)

NATIONAL POST

* The Canadian government is in the process of hammering out a comprehensive new agreement on internal trade with the provinces, aimed at lowering barriers estimated to cost the country C$50 billion a year. (r.reuters.com/tew69v)

* Ontario Premier Kathleen Wynne is not ruling out teaming up with the New Democratic Party to form a government if the Progressive Conservatives win the most seats in the provincial election, but fall short of a majority. (r.reuters.com/cuw69v)

FINANCIAL POST

* Shares in PrairieSky Royalty Ltd, Canada’s largest initial public offering in more than a decade, start trading on the Toronto Stock Exchange on Thursday. It will be a C$1.46 billion debut closely watched by the company, a spinoff from Encana Corp, investors who bought the 52 million shares being offered, and by lead underwriters. (r.reuters.com/nuw69v)

* Canadian National Railway Co, Canada’s largest rail carrier, said on Wednesday that it was exceeding grain-shipment levels mandated earlier this year by the Canadian government despite a record crop that has squeezed available transportation and infrastructure. (r.reuters.com/quw69v)

 

China

CHINA SECURITIES JOURNAL

– China is supporting the establishment of crude oil futures and is looking to launch futures of the commodity this year, said Wang Yang, vice-president of the China Securities Regulatory Commision (CSRC).

SHANGHAI SECURITIES NEWS

– Bad loans at Chinese commercial banks rose to 646.1 billion yuan ($103.28 billion) at the end of the first quarter from 592.1 billion yuan at the start of the year, according to official data. This marked 10 straight quarters of rising bad loans.

CHINA DAILY

– Chinese teenagers are starting to smoke young, according to a new nationwide survey. Around 20 percent of kids between the ages 13-15 years have tried smoking, with 7 percent being frequent users, the Global Youth Tobacco Survey on China said.

– The Red Cross Society’s Beijing branch signed an agreement with the city’s public security bureau on Wednesday to strengthen cooperation on dealing with emergencies such as terrorist attacks.

SHANGHAI DAILY

– Shanghai will offer tax refunds to cruise tourists in specific venues to boost shopping, the city’s tourism authority said on Wednesday. The city expects 1.08 million cruise tourists this year, up 44 percent on 2013.

PEOPLE’S DAILY

– China’s economy is running smoothly and economic and structural adjustments are showing positive signs, the country’s premier Li Keqiang was quoted as saying in the paper which acts as a mouthpiece of the leadership.

 

Britain

The Telegraph

NATIONWIDE WARNS OF ‘UNINTENDED CONSEQUENCES’ OF CURBING MORTGAGES

(http://ift.tt/1gDjyFN)

Nationwide, Britain’s biggest building society, has warned that efforts to curb mortgage lending in an attempt to cool the London housing market could have “unintended consequences” for the rest of the country.

PENSIONS REFORM LOOPHOLE MAY COST OSBORNE 24 BLN STG

(http://ift.tt/1hBsWF9)

Treasury officials have been warned that the government could miss out on as much as £24billion because of the pensions freedoms announced by the chancellor in his budget, sources have said.

The Guardian

UNEMPLOYMENT RISING IN GERMANY AND FRANCE, FIGURES SHOW

(http://ift.tt/1gDjyFO)

Unemployment is rising in Europe’s two largest economies, with a shock jump in Germany and a new record high in France, according to the latest figures.

BANK OF ENGLAND GOVERNOR: CAPITALISM DOOMED IF ETHICS VANISH

(http://ift.tt/1hBsW8b)

Capitalism is at risk of destroying itself unless bankers realise they have an obligation to create a fairer society, the Bank of England governor has warned.

The Times

ECB PREPARES STIMULUS PLANS AS DEFLATIONARY PRESSURE RISES

(http://ift.tt/1gDjyFQ)

Mario Draghi, the ECB president, has dropped clear hints that some form of stimulus would be launched after the governing council meets on Thursday. Interest rate cuts, quantitative easing and a variation of the UK’s Funding for Lending scheme to help small businesses to access credit are being considered.

MITCHELLS & BUTLERS PLUCKS RIVAL ORCHID FOR 250 MLN STG

(http://ift.tt/1hBsW8c)

Mitchells & Butlers has entered exclusive talks to acquire the rival Orchid pub company for more than 250 million pounds after outbidding the private equity firms Colony Capital and Starwood Capital.

Sky News

BRITISH GAS CHIEFS POISED TO QUIT IN SHAKE-UP

(http://ift.tt/1gDjw0L)

The bosses of British Gas and its parent company are close to stepping down as part of a management shake-up at Britain’s biggest energy supplier.

LLOYDS STEPS TOWARDS FEMALE EXECUTIVE TARGET

(http://ift.tt/1hBsWFc)

The state-backed Lloyds Banking Group has taken a step toward meeting a self-imposed gender target for senior managers with the appointment of another top female executive.

 

Fly On The Wall 7:00 AM Market Snapshot

ECONOMIC REPORTS
Domestic economic reports scheduled today include:
Jobless claims for the Week of May 24 at 8:30–consensus 317K
Q1 GDP at 8:30–consensus down 0.5% for the quarter
Pending home sales for April at 10:00–consensus up 1.0% for the month

ANALYST RESEARCH

Upgrades

AngloGold (AU) upgraded to Overweight from Neutral at HSBC
Biogen (BIIB) upgraded to Overweight from Neutral at JPMorgan
CoreSite Realty (COR) upgraded to Hold from Sell at Cantor
D.R. Horton (DHI) upgraded to Outperform from Sector Perform at RBC Capital
Diamond Offshore (DO) upgraded to Equal Weight from Underweight at Morgan Stanley
Dollar Tree (DLTR) upgraded to Buy from Neutral at Sterne Agee
Harmony Gold (HMY) upgraded to Neutral from Underweight at HSBC
MercadoLibre (MELI) upgraded to Overweight from Neutral at JPMorgan
Palo Alto (PANW) upgraded to Outperform from Perform at Oppenheimer
Palo Alto (PANW) upgraded to Strong Buy from Outperform at Raymond James
Premier (PINC) upgraded to Buy from Neutral at Citigroup
Prospect Capital (PSEC) upgraded to Equal Weight from Underweight at Evercore
Twitter (TWTR) upgraded to Buy from Hold at Cantor
VMware (VMW) upgraded to Overweight from Neutral at Piper Jaffray
Vantiv (VNTV) upgraded to Outperform from Market Perform at Wells Fargo

Downgrades

Celgene (CELG) downgraded to Neutral from Overweight at JPMorgan
Credit Suisse (CS) downgraded to Neutral from Buy at BofA/Merrill
Digital Realty (DLR) downgraded to Hold from Buy at Cantor
Dollar General (DG) downgraded to Neutral from Buy at Sterne Agee
Energias de Portugal (EDPFY) downgraded to Sell from Neutral at Citigroup
HomeAway (AWAY) downgraded to Neutral from Overweight at JPMorgan
Manchester United (MANU) downgraded to Neutral from Overweight at JPMorgan
MedAssets (MDAS) downgraded to Neutral from Buy at Citigroup
New Jersey Resources (NJR) downgraded to Hold from Buy at Brean Capital

Initiations

Atmel (ATML) initiated with an Outperform at Imperial Capital
Chambers Street Properties (CSG) initiated with an Outperform at Wells Fargo
ExamWorks (EXAM) initiated with a Buy at Deutsche Bank
FairPoint (FRP) initiated with a Market Perform at Wells Fargo
Sabre (SABR) initiated with an Outperform at Bernstein
Stone Energy (SGY) initiated with a Buy at Brean Capital

COMPANY NEWS

Apple (AAPL) said it will acquire Beats Music, Beats electronics for $3B
BlackBerry (BRRY) CEO said he believes the company will be cash flow positive or breakeven end of fiscal year
AmSurg (AMSG) said it will acquire Sheridan Healthcare for $2.35B
Intercept Pharmaceuticals (ICPT) said the FDA granted fast track designation to obeticholic acid
Palo Alto Networks (PANW) reported better than expected Q3 results and announced a $175M settlement agreement with Juniper Networks (JNPR)
AT&T (T) and Uber announced a partnership to deliver Uber access to AT&T customers starting this summer

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Sanderson Farms (SAFM), ReneSola (SOL), Popeyes Louisiana Kitchen  (PLKI), Amerco (UHAL), Palo Alto (PANW), EnerSys (ENS)

Companies that missed consensus earnings expectations include:
Tech Data (TECD), Quality Systems (QSII), Costco (COST), MPLX (MPLX), Safe Bulkers (SB), Gordmans Stores (GMAN)

Companies that matched consensus earnings expectations include:
Descartes Systems (DSGX), Tilly’s (TLYS)

NEWSPAPERS/WEBSITES

Apple (AAPL) to continue Beat Music on Android (GOOG), Windows Phone (MSFT), TechCrunch says
BlackBerry (BBRY) CEO confident company will be saved, Bloomberg reports
BlackBerry (BBRY) CEO says company to focus again on enterprise roots, Re/code reports
Apple (AAPL) content chief sees best product lineup in 25 years, Re/code says
GM (GM) exec feels Google (GOOG) might be ‘serious threat,’ Bloomberg reports
BP (BP) approaches Supreme Court to shield Gulf spill payments, Reuters reports
3D Systems (DDD) stock looks overvalued, Barron’s says

SYNDICATE

BioCryst (BCRX) 10M share Secondary priced at $10.00
Booz Allen (BAH) announces sale of 10M shares for holders
Fabrinet (FN) announces secondary offering of 3.15M shares for holders
Parkway Properties (PKY) files to sell  up to $150M in common stock
RCS Capital (RCAP) announces proposed public offering of Class A Common Stock
Resonant (RESN) 2.25M share IPO priced at $6.00
Rexnord (RXN) 15M share Secondary priced at $25.50
Sophiris Bio (SPHS) files to sell 3.41M shares of common stock for holders
StoneMor Partners (STON) announce public offering of 2.6M common units
Vantiv (VNTV) announces secondary offering of 5.78M shares for holders




via Zero Hedge http://ift.tt/1mJIPhb Tyler Durden

Buying Of Bonds And Stocks Continues In Event-Free Overnight Session

The complete implosion in volume and vol, not to mention bond yields continues, and appears to have spilled over into events newsflow where overnight virtually nothing happened, or at least such is the algos’ complete disregard for any real time headlines that as bond yields dropped to fresh record lows in many countries and the US 10Y sliding to a 2.3% handle, confused US equity futures have recouped almost all their losses from yesterday despite a USDJPY carry trade which has once again dropped to the 101.5 level, and are set for new record highs. Perhaps they are just waiting for today’s downward revision in Q1 GDP to a negative print before blasting off on their way to Jeremy Grantham’s 2,200 bubble peak after which Bernanke’s Frankenstein market will finally, mercifully die.

Looking at overnight markets, 10yr UST yields are down another half a basis point in Japanese trading at around 2.43%. Other government bonds in Asia Pac are trading firmer today led by Australia (-9bp), New Zealand (-5bp) and Indonesia (-3bp). The gap tighter in US yields is creating a strong search for yield in Asian EM especially in credit as evidence by the strong performance of recent new deals and the strong demand in secondary. This is a continuation of the price action that we saw in LATAM late yesterday. EMFX bellwethers including the INR (+0.1%) and KRW (+0.05%) are trading firmer today, adding on to the solid gains posted yesterday. In Japan, the drop in retail sales in April was worse than expected (-4.4% vs -3.3% expected) following the sales hike of that month, but this is partly offset by the anecdotal evidence from retailers that suggest that sales have recovered well in May. The Nikkei is down slightly overnight (-0.05%) while the Hang Seng (+0.1%) and HSCEI (+0.6%) are on firmer footing.

Outside of rates, another focus in Asia is on the renminbi with USDCNH breaking out of its recent trading range, The CNH has managed to firm a little overnight but the start of this week has seen the currency depreciate about 0.5% against the USD, large in historical context and pushing it to its weakest level since Q3 2012. There have been a lot of reports in recent weeks that the PBoC is in the midst of tweaking reserve ratios and other targeted monetary levers to ease funding pressure on banks. And if we look at onshore money market rates, short term funding costs appear to be stable so far this month, although we enter into the traditionally volatile June period when short term rates have typically fluctuated. DB’s Chinese bank analysts also highlight in a report that China’s financial sector is coping well with the repayment peaks of trust products and higher risk corporate bonds expected in May and June, as most of them have repaid or rolled over, with the unresolved risks concentrated in the coal and mining sectors.

European shares remain mixed with the banks and utilities sectors underperforming and personal & household, oil & gas outperforming. The Spanish and Italian markets are the worst-performing larger bourses, the U.K. the best. The euro is stronger against the dollar. Japanese 10yr bond yields fall; Portuguese yields increase. Commodities gain, with nickel, zinc underperforming and soybeans outperforming. European newsflow remains light with parts of Europe on Ascension holiday and no tier 1 data to guide fixed income or equities markets. BoE’s Weale (neutral) said the BoE needs to start raising interest rates sooner rather than later if it wants to avoid sharp and painful increases in the future, and the BoE can wait a bit longer before first rate hike, but he is not sure how much longer.

Looking at the day ahead, it looks like the main focus will be on the 2nd estimate of US Q1 GDP.  Other data today are US jobless claims and pending home sales.

Market Wrap

  • S&P 500 futures up 0.1% to 1910.3
  • Stoxx 600 down 0% to 344.3
  • US 10Yr yield down 2bps to 2.42%
  • German 10Yr yield up 0bps to 1.34%
  • MSCI Asia Pacific up 0.2% to 142.2
  • Gold spot down 0.3% to $1254/oz

Bulletin headline summary from Bloomberg and RanSquawk

  • Fixed income and Equities markets (Euro Stoxx 50 -0.2%) remain subdued with Europe on holiday.
  • The USD index has begun to soften and drift back towards its 200DMA after yesterday’s sharp gains.
    Treasuries extend week’s gains amid expectations for additional ECB easing next week, month-end index rebalancing; 30Y yield headed for its 5th straight monthly decline, last seen in 2006.
  • Week’s auctions conclude with $29b 7Y notes, yield 2.010% in WI trading vs 2.317% April award; notes yesterday traded below 2.00% level for first time since November
  • Bill Gross is betting 5Y Treasuries will do well because markets overestimate how much the Fed will raise rates. Bond managers at Goldman, BlackRock and JPM say he’s wrong and the intermediate bonds he holds will suffer when the Fed lifts borrowing costs
  • Argentina and Paris Club creditors agreed on an arrangement to clear overdue debt payments over a five-year period, raising the prospect of international aid
  • Vladimir Putin signed a treaty with his counterparts from Kazakhstan and Belarus creating a trading bloc of more than 170m million people to challenge the U.S. and EU
  • Obama is offering a less-is-more doctrine to explain his foreign policy, a bow to the reality that after five and a half years in office his strategy remains a puzzle to much of the public
  • Yemen’s army has begun a U.S.-backed offensive to dislodge al-Qaeda militants whose growing numbers pose a threat to neighbors including Saudi Arabia
  • Pressure grew on U.S. Veterans Affairs Secretary Eric Shinseki to resign as an internal report found “systemic” scheduling problems that have stymied healthcare for veterans
  • Sovereign yields mostly lower. Nikkei little changed, Chinese indexes fall. European equity markets lower, U.S. stock futures gain. WTI crude little changed, gold and copper fall

US Economic Calendar

  • 8:30am: GDP Annualized q/q, 1Q (S), est. -0.5% (prior 0.1%)
    • Personal Consumption, 1Q (S), est. 3.1% (prior 3%)
    • GDP Price Index, 1Q (S), est. 1.3% (prior 1.3%)
    • Core PCE q/q, 1Q (S), est. 1.3% (prior 1.3%)
  • Initial Jobless Claims, May 24, est. 318k (prior 326k)
  • Continuing Claims, May 17, est. 2.650m (prior 2.653m)
  • 9:45am: Bloomberg Consumer Comfort, May 25 (prior 34.1)
  • 10:00am: Pending Home Sales m/m, Apr., est. 1% (prior 3.4%); Pending Home Sales y/y, Apr., est. -8.8% (prior -7.4%) Central Banks
  • 11:00am POMO: Fed to purchase $2.5b-$3.25b notes in 2019-2020  sector
  • 1:00pm: U.S. to sell $29b 7Y notes

ASIAN HEADLINES

JGBs traded higher by 15 ticks at 145.52 underpinned by spill-over buying in US/European fixed income markets and a weak post-sales tax retail sales. Nikkei (+0.7%) recovered from earlier losses weighed by yesterday’s weakness in US equities.

EU & UK HEADLINES

European newsflow remains light with parts of Europe on Ascension holiday and no tier 1 data to guide fixed income or equities markets.

BoE’s Weale (neutral) said the BoE needs to start raising interest rates sooner rather than later if it wants to avoid sharp and painful increases in the future, and the BoE can wait a bit longer before first rate hike, but he is not sure how much longer.

Final Barclays month end extensions show Pan-Euro Agg at +0.04y (Prelim +0.04y), Sterling-Agg at +0.06y (Prev. +0.02y)

US HEADLINES

US newsflow continues to remain light, with attention now turning to the secondary reading of US GDP, which is expected to be revised lower.

Final Barclays month end extensions show US Treasury at +0.12y (Prelim +0.13y)

EQUITIES

Amid muted European volumes, European indices trade relatively rangebound (-0.2%) while the FTSE 100 outperforms, with Smith & Nephew gaining as a result of continued M&A speculation with Stryker. Elsewhere, financials lag with Commerzbank (-3%) down after a broker move at Exane.

FX

GBP/USD was placed under pressure in early trade, weighed on by GBP/JPY which trades at a one-month low after breaking below the 50 and 100DMAs, with month-end related buying of EUR/GBP also putting pressure on GBP/USD. However both EUR/USD and GBP/USD managed to reverse earlier losses in recent trade amid a weakening in the USD index as it drifts lower towards its recently breached 200DMA and technical buying. AUD is stronger due to overnight CAPEX data from Australia which has pushed AUD/NZD to 5-month highs. Following the BoJ updating their JGB purchases earlier, Morgan Stanley say it’s JPY bullish, with crosses set to come under further pressure, noting that EUR/JPY is now confirming a break below its 200DMA and MS expect USD/JPY to follow.

* * *

DB’s Jim Reid concludes the overnight recap

After 2 weeks of consolidation, bonds resumed their march lower in yield yesterday with US yields hitting 11-month lows and the European complex flirting with all time lows in many markets. Indeed in our 2012 “A Journey into the Unknown” document we showed Dutch yields back to the year 1517. The all time low was 1.49% at the end of December 2012, however last night we closed at just below 1.60 (-5.4bps) and within touching distance of fresh 500 year lows. For France, where we have data back to 1746, we closed 6bps away from all-time lows at 1.72 last night. Germany is still 17bps away from the May 2013 lows but Spain is now at all time lows (data back to 1789) again and Italy is close to near 70 year lows. These are truly remarkable times. As we said when we published “A Journey into the Unknown”, the uniqueness of this situation with yields generally close to multi-century all time lows proves how uncertain the outlook remains. There really is no precedent for so many countries to have such low yields. None of us can know the full ramifications of this.

In simple terms there are 2 ways to look at this. Either bonds are the short trade of the millenium (literally) at these levels or that something very unusual is going on globally and will continue for some time. Our view remains slanted towards the latter although at these levels it really is hard to recommend being long if making a decent return is your aim. We think yields stay low for longer but that we might be near the bottom of the range at the moment.

Outside of Europe, yesterday’s 7bp rally in 10yr UST yields took many by surprise and there were various theories as to what caused it. Some say this was driven by the FT article suggesting that perhaps China was buying treasuries through Belgium. The article says that the reported amount of treasuries held in Belgium, possibly at Euroclear, has doubled from $180bn last October to a current level of $381bn and that potentially China could be behind that flow (Financial Times). Others attributed the rally to month-end buying flows and more short covering from one of the biggest wrong way trades of this year. We should also note that the growing yield differential between US and core European bonds has probably made the former more attractive. For example the differential between UST and Bund yields is around +110bp now, versus a three year average and median of +47bp and +31bp respectively. DB’s George Saravelos also highlights that there has been pent-up fixed income demand from 2013 which has coincided with fresh demand from EM inflows and China-specific intervention.

All these are plausible explanations for what we saw yesterday although we’d also highlight that there is increasing anticipation about what the ECB could unveil in terms of policy easing when they meet next Thursday. Yesterday we got one of the first comments from an ECB official since the central bank concluded its annual gathering in the mountains north west of Lisbon earlier this week. Media reports have said that the ECB is weighing up a package of easing options, and yesterday Executive Board member Yves Mersch confirmed that the policy meeting next week could yield a combination of easing measures to try and tackle the problem of low inflation and credit growth. When asked about the chance of a cut in the ECB’s three main policy rates, Mersch said he assumes the differential between the rates (i.e. the corridor) will be maintained because narrowing the corridor could harm interbank markets – so there is a very real possibility that we see negative deposit rates on this day next week. Partly in reaction to this, EURUSD (-0.3%) hit its lowest level since early February yesterday.

Perhaps the rally in rates was also prelude to today’s release of the second estimate of US Q1 GDP. There is market chatter that we could get a significant downward revision to the first estimate due to revised assessments of business investment, equipment spending and construction activity. Note that the advanced estimates showed that growth was just 0.1% in the first quarter but Bloomberg consensus is expecting this to be downgraded by 60bp, well into negative territory at -0.5%. DB’s Joe Lavorgna is at -0.8%.

Looking at overnight markets, 10yr UST yields are down another half a basis point in Japanese trading at around 2.436%. Other government bonds in Asia Pac are trading firmer today led by Australia (-9bp), New Zealand (-5bp) and Indonesia (-3bp). The gap tighter in US yields is creating a strong search for yield in Asian EM especially in credit as evidence by the strong performance of recent new deals and the strong demand in secondary. This is a continuation of the price action that we saw in LATAM late yesterday. EMFX bellwethers including the INR (+0.1%) and KRW (+0.05%) are trading firmer today, adding on to the solid gains posted yesterday. In Japan, the drop in retail sales in April was worse than expected (-4.4% vs -3.3% expected) following the sales hike of that month, but this is partly offset by the anecdotal evidence from retailers that suggest that sales have recovered well in May. The Nikkei is down slightly overnight (-0.05%) while the Hang Seng (+0.1%) and HSCEI (+0.6%) are on firmer footing.

Outside of rates, another focus in Asia is on the renminbi with USDCNH breaking out of its recent trading range, The CNH has managed to firm a little overnight but the start of this week has seen the currency depreciate about 0.5% against the USD, large in historical context and pushing it to its weakest level since Q3 2012. There have been a lot of reports in recent weeks that the PBoC is in the midst of tweaking reserve ratios and other targeted monetary levers to ease funding pressure on banks. And if we look at onshore money market rates, short term funding costs appear to be stable so far this month, although we enter into the traditionally volatile June period when short term rates have typically fluctuated. DB’s Chinese bank analysts also highlight in a report that China’s financial sector is coping well with the repayment peaks of trust products and higher risk corporate bonds expected in May and June, as most of them have repaid or rolled over, with the unresolved risks concentrated in the coal and mining sectors.

Looking at the day ahead, it looks like the main focus will be on the 2nd estimate of US Q1 GDP. Ahead of that we have the final estimate of Spanish GDP (0.4% expected). Other data today are US jobless claims and pending home sales.




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Andrew Napolitano Reviews Glenn Greenwald’s No Place to Hide

No Place to Hide, released this month, is
journalist Glenn Greenwald’s story of his nonstop two weeks of work
in May and June of 2013 with National Security Agency (NSA)
contractor-turned-whistleblower Edward Snowden. Greenwald was the
point person who coordinated the public release of the 1.7 million
pages of NSA documents that Snowden took with him in order to prove
definitively that the federal government is spying on all of us all
the time.

The book not only tells of Snowden’s initially frustrating
and anonymous efforts to reach out to Greenwald and his editors,
nor of the insatiable appetite of the NSA to learn everything about
everyone. It is also a morality tale, writes Andrew Napolitano,
about the personal courage required of Snowden and Greenwald and
his colleagues to expose government wrongdoing and to risk their
lives, liberties, and properties in doing so.

View this article.

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