U.S. stocks sank, with the Dow Jones Industrial Average capping its biggest weekly drop in three years, as oil continued to slide and Chinese industrial data raised concern over a global economic slowdown. ...
The S&P 500 lost 1.6 percent to 2,002.33 at 4 p.m. in New York, extending losses in the final hour to cap a weekly drop of 3.5 percent. The Dow sank 315.51 points, or 1.8 percent, to 17,280.83. The Dow slid 3.8 percent for the week, its biggest decline since November 2011.
“Clearly the oil situation is driving things,” Randy Warren, who manages more than $100 million at Exton, Pennsylvania-based Warren Financial Service and Associates Inc., said in a phone interview. “At first it was just oversupply of oil. But now it’s that, plus fear of a world economy that’s growing too slow. Those fears are definitely outweighing the positive signs we’re seeing domestically...
More than $1 trillion was erased from the value of global equities this week as oil prices tumbled, raising concern over the strength of the global economy. Oil extended losses today amid speculation that OPEC’s biggest members will defend market share against U.S. shale producers. The International Energy Agency cut its forecast for global oil demand for the fourth time in five months.
The Chicago Board Options Exchange Volatility Index, a measure of the cost of options on the S&P 500 known as the VIX (VIX), jumped 78 percent this week, its biggest weekly rally in more than four years.
Stocks around the world fell today after November Chinese factory production growth slowed more than estimated. Data showing a 7.2 percent gain from the year before missed the 7.5 percent median estimate in a Bloomberg News survey. The Stoxx Europe 600 Index plunged 2.6 percent today and 5.8 percent over five days, its worst week in three years. ...
A separate report showed wholesale prices fell more than forecast in November, led by the biggest drop in energy costs in more than a year, signaling inflation pressures remain weak even as the world’s largest economy is expanding. The 0.2 percent decrease in the producer-price index followed a 0.2 percent advance in the prior month, the Labor Department data showed.
Fed PolicyOil at a five-year low and slowing overseas markets will subdue prices in the production chain that feed into the cost of living. Persistently weak inflation has allowed Federal Reserve policy makers, who are scheduled to meet next week, room to keep interest rates near zero after ending monthly asset purchases in October as the economy strengthens.
“With falling oil prices and the stronger dollar, pipeline pressures are minimal,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, said before the report. “There’s no real threat of higher inflation. The Fed has a lot more leeway.”
All 10 major groups in the S&P 500 declined today, with raw-material, energy and financial companies dropping more than 2 percent.
2--Strong dollar hits US corporate profits, FT
The dollar, which climbed nearly 8 per cent against the euro and yen in the quarter to September 30, has proved an added hitch for companies dependent on foreign sales, particularly as economic growth in Europe and Asia disappoints.
“The top and bottom line are heavily impacted by foreign exchange,” said Wolfgang Koester, chief executive of FiREapps. “This problem of currency exposure is not just 220 currency pairs — the dollar between each country, etc — but rather to a much higher power as companies move currencies between different countries.”
3--US Dollar Index 2014: Three Reasons Why A Strong Dollar Could Hurt US Economy, IBT
A Stronger Dollar Hurts U.S. Manufacturing
Dollar Strength Weighs On Corporate Profits
Fewer Foreign Tourists
4---Duck and Cover, David Stockman
This time the carnage could be much worse because the most recent tsunami of central bank credit was orders of magnitude larger and more virulent than during the run-up to the Lehman event or the dotcom implosion.
Moreover, the central banks are now out of dry powder—– impaled on the zero-bound. That means any resort to a massive new round of money printing can not be disguised as an effort to “stimulate” the macro-economy by temporarily driving interest rates to “extraordinarily” low levels. They are already there.
Instead, a Bernanke style balance sheet explosion like that which stopped the financial meltdown in the fall and winter of 2008-2009 will be seen for exactly what it is—-an exercise in pure monetary desperation and quackery.
So duck and cover. This storm could be a monster.
5---Russia’s Proposed Interbank System Threatens Global Economy , wolf street
.... a Russian interbank system would also be an important part of the framework for an alternative global economic and financial system that rejects U.S. rules. Indeed, Russia has already joined the New Development Bank, an alternative to the International Monetary Fund and the World Bank.
The participating countries (Russia, South Africa, China, India and Brazil) comprise more than 3 billion people, 41.4% of the world’s population, and account for more than 25% of global GDP. It’s not hard to imagine them constituting an alternative trading bloc similar to the old Soviet-aligned countries of the Cold War.
6--Falling oil signals broader demand shock to global economy, NYT
“People are scared that the drop in oil demand is the first leg down for the global economy that had been led by the growth in the emerging markets,” said Nancy T. Schmitt, president of Taum Sauk Investments. “That growth has evaporated. The demand has gone away, and we are seeing it first with oil prices.”
7--Derivatives law precedes global bust and bail ins, Fiscal Times
That goes beyond letting big banks gamble on derivatives inside their taxpayer-insured depository institutions, or allowing wealthy donors to flood party committees with contributions. Yes, these pieces are egregious — so much so that, in the case of the campaign finance provision, nobody will even cop to having written it; we know that Citigroup wrote the derivatives provision.
Preventing the riskiest derivatives from being pushed away from big banks and into separately capitalized entities simply gives derivatives traders a taxpayer-funded backstop, and a subsidy from creditors. Saying that it’s no big deal doesn’t square with how furiously banks have sought the change. And claiming the CRomnibus makes up for this by increasing the budget of the chief derivatives regulator, the Commodity Futures Trading Commission, makes no sense: It hardly matters that the CFTC will now have more money to do things it is prohibited from doing. Moreover, allowing deregulatory measures to be hidden inside spending bills sets an awful precedent for the future. So Warren and her confreres were right to fight this
8--Americans still losing confidence in basic US institutions, WSOP
9--The derivatives giveaway: Citigroup Wrote the Wall Street Giveaway The House Just Approved MJ
The bill, drafted almost entirely by Citigroup, would allow banks to do more high-risk trading with taxpayer-backed money.
10--"The Most Egregious Sections Of Law I've Encountered During My Time As A Representative", zero hedge
11--Obama Asks Congress For Unlimed War Authority, moon of Alabama
12--WSWS---The language in this section, permitting banks to use federally insured deposits to gamble in the swaps and derivative markets, was literally drafted by the banks. According to an analysis by the New York Times, 70 of the 85 lines in that section of the bill come directly from Citibank, which spearheaded the lobbying by Wall Street on this issue.
The four largest Wall Street banks conduct 93 percent of all US derivatives trading, so the measure is a brazen demonstration of the subservience of Congress to the big banks. According to the Washington Post, Jamie Dimon, CEO of JP Morgan Chase, another of the big four banks, personally telephoned individual congressmen to urge them to vote for the amendment to Dodd-Frank.