>>> US Close Dow +0.21% S&P +0.18% Nasdaq +0.08% Russell +0.28%

Closing Market Summary: Stocks Close Higher for Fourth Consecutive Session

Equities finished higher for the fourth day in a row on Tuesday. The benchmark index challenged the 2,400 level, which is the mark it hit just before last Wednesday's dive, but couldn't surpass the milestone. The major averages settled near the middle the day's trading range with the S&P 500 and the Dow adding 0.2% apiece while the Nasdaq (+0.1%) settled just a tick below its peers.

The equity market benefited, yet again, from a continuation of the 'buy-the-dip' trade that kicked in following last Wednesday's 1.8% slide, which marked the largest one-day decline in eight months. Today, the upbeat sentiment resulted in a dip in both the CBOE Volatility Index (VIX 10.79, -0.14, -1.3%) and the bond market, both of which settled at fresh one-week lows. The benchmark 10-yr yield climbed three basis points to 2.29%, helping the U.S. Dollar Index (97.30, +0.42) add 0.4%.

In the stock market, ten of eleven sectors finished in positive territory with the financial group (+0.8%) leading the advance. Financials spent the opening hour of Tuesday's session underwater, but quickly regrouped to head two rallies (one in the morning and one in the afternoon). However, both efforts faded when the benchmark index hit the 2,400 mark. Still, the financial group settled, unchallenged, at the top of the day's leaderboard.

Like financials, the health care sector (+0.4%) outperformed. The sector relied on broad strength to mitigate Alexion Pharmaceuticals' (ALXN 104.64, -10.78) 9.3% plunge. The company faced heavy selling pressure after announcing that its CFO will resign from his position at the end of August. The utilities sector (+0.2%) finished just a tick ahead of the benchmark index after some afternoon profit taking erased the sector's solid morning performance.

On the downside, the consumer discretionary sector (-0.4%) settled at the bottom of the day's leaderboard. Retailers weighed on the sector, evidenced by the 1.7% decrease in the SPDR S&P Retail ETF (XRT 40.55, -0.76), after AutoZone (AZO 581.40, -78.09) and DSW (DSW 16.21, -1.44) missed earnings expectations. AZO also missed top-line estimates while DSW reported a 3.0% decrease in comparable store sales. The two companies settled lower by 11.8% and 8.2%, respectively.

Meanwhile, in the top-weighted technology sector (+0.1%), chipmakers weighed, pushing the PHLX Semiconductor Index lower by 0.4%. Xilinx (XLNX 63.97, -3.55) was hit the hardest, losing 5.3%, after XLNX shares were downgraded to 'Market Perform' from 'Outperform' at Wells Fargo. Mega-cap tech names like Apple (AAPL 153.80, -0.19) and Facebook (FB 148.07, -0.17) also lagged, losing 0.1% apiece.

The remaining sectors--industrials (+0.2%), energy (+0.2%), materials (+0.2%), consumer staples (+0.1%), telecom services (+0.1%), and real estate (+0.1%)--finished roughly in line with the broader market. However, the energy sector's performance is worth pointing out in light of the White House's proposed budget, which calls for selling half of the United States' Strategic Petroleum Reserve (SPR). Initially, WTI crude faced some overnight selling pressure. However, the commodity was able to recover, ending the session 0.7% higher at $51.48/bbl.

On the data front, investors received only one economic report--April New Home Sales--on Tuesday:

  • New Home Sales in April hit an annualized rate of 569,000, which was below the revised March rate of 642,000 (from 621,000), and less than the 605,000 that was expected by the consensus.
    • The key takeaway from the report is that upward revisions to prior months more than made up for the shortfall in April relative to the consensus estimate, which is to say the April report is not as disappointing as it appears to be at first blush.

Tomorrow, investors will receive several economic reports, including the weekly MBA Mortgage Applications Index at 7:00 ET, March FHFA Housing Price Index at 9:00 ET, April Existing Home Sales (consensus 5.65 million) at 10:00 ET, and the FOMC minutes for the May 2-3 meeting at 14:00 ET.

  • Nasdaq Composite +14.0% YTD
  • S&P 500 +7.1% YTD
  • Dow Jones Industrial Average +6.0% YTD
  • Russell 2000 +1.8% YTD

NY Mag : Trump Budget Based on $2 Trillion Math Error

Trump Budget Based on $2 Trillion Math Error

One of the ways Donald Trump’s budget claims to balance the budget over a decade, without cutting defense or retirement spending, is to assume a $2 trillion increase in revenue through economic growth. This is the magic of the still-to-be-designed Trump tax cuts. But wait — if you recall, the magic of the Trump tax cuts is also supposed to pay for the Trump tax cuts. So the $2 trillion is a double-counting error.

Trump has promised to enact “the biggest tax cut in history.” Trump’s administration has insisted, however, that the largest tax cut in history will not reduce revenue, because it will unleash growth. That is itself a wildly fanciful assumption. But that assumption has already become a baseline of the administration’s budget math. Trump’s budget assumes the historically yuge tax cuts will not lose any revenue for this reason — the added growth it will supposedly generate will make up for all the lost revenue.



Here’s how the White House attempted to explain all of this.

But then the budget assumes $2 trillion in higher revenue from growth in order to achieve balance after ten years. So the $2 trillion from higher growth is a double-count. It pays for the Trump cuts, and then it pays again for balancing the budget. Or, alternatively, Trump could be assuming that his tax cuts will not only pay for themselves but generate $2 trillion in higher revenue. But Trump has not claimed his tax cuts will recoup more than 100 percent of their lost revenue, so it’s simply an embarrassing mistake.

It seems difficult to imagine how this administration could figure out how to design and pass a tax cut that could pay for itself when Ronald Reagan and George W. Bush failed to come anywhere close to doing so. If there is a group of economic minds with the special genius to accomplish this historically unprecedented feat, it is probably not the fiscal minds who just made a $2 trillion basic arithmetic error.

Update: Asked about this absurd mistake, Mulvaney’s explanation does not inspire a great deal of confidence:


This is apparently the best defense they could come up with: eh, we’ll fix it later. It’s only the budget for the federal government of the United States of America.

FT : Chinese freight firms report falling rates hitting profits Premium

Chinese freight firms report falling rates hitting profits Premium
FTCR China Freight Index below 50 for fifth month as optimism fades



The FTCR China Freight Index dipped in May as companies became less positive about the month ahead. The headline index fell 0.5 points month-on-month to 46.3 and was below the 47.7 average for the past 12 months. May also marked the fifth straight month that the index has been below the 50 level that separates expansion from contraction. Although cost pressures eased, there was no improvement in freight rates, leading to companies reporting a sixth straight month of falling profits.



* Our measure of freight volumes pointed to a fifth straight month of falls in May.
* The FTCR China Freight Volume Index rose to 42.7 from 42.3 in April, below the 44.5 average for the previous 12 months but above last May’s 41.2.
* Just 11.3 per cent of respondents said volumes were higher than the previous month, the smallest proportion since January.


* The FTCR China Freight Outlook Index suggested respondents were less positive about the month ahead.
* Our Freight Outlook Index fell to 50.7 from 52.8 in April, but remained above 50 for the third straight month.


* Freight rates dropped for a fourth straight month, although our index remained unchanged from April.
* The FTCR China Freight Rate Index again stood at 48.8, just below the 49.6 average for the previous 12 months but 3.5 points higher year-on-year.
* The majority of respondents, 67.6 per cent, reported that freight rates were unchanged from the previous month.
* The spike in costs reported last month eased in May. 
* Our Freight Cost Index fell 6.3 points month-on-month to 53.8, below the average of 57.8 for the previous 12 months. 
* The proportion of respondents reporting a rise in costs slipped to 20.7 per cent from 32.4 per cent in April, while 13.1 per cent reported falling costs, the largest proportion since August last year (13.7 per cent).


* Our measure of freight company profitability suggested that profits fell for a sixth straight month in May, although at the slowest pace so far this year.
* The FTCR China Freight Profit Index rose 3.2 points month-on-month to 46.9, the highest level since December (49.8) and above the average of 45.4 for the previous 12 months.
* The index has recorded only one reading above 50 in the past two years (November 2016).

WSJ : Glencore Makes Takeover Approach to Bunge

Glencore Makes Takeover Approach to Bunge
Deal for grain trader would make Swiss mining giant a major player in U.S. agriculture market

Glencore GLNCY -2.21% PLC has made a takeover approach to grain trader Bunge Ltd. BG +16.03% , people familiar with the matter said, a move that would make the Swiss mining giant a major player in the U.S. agriculture market.

It isn’t clear where any discussions between the companies stand and there may not be a deal. If there is one, it would be substantial: Bunge had a market value Tuesday of nearly $10 billion; including debt, its so-called enterprise value was about $15 billion. After The Wall Street Journal reported on the approach, Bunge shares surged as much as 17% Tuesday afternoon.

Glencore is a mining and commodity-trading powerhouse with a market value of £42.3 billion ($55 billion). An acquisition of Bunge, one of the world’s largest traders and processors of commodities like soybeans and corn, would give Glencore a major presence in the U.S., a long-held goal of Chief Executive Ivan Glasenberg.

A deal would also be a sign that Glencore has recovered from a turbulent period two years ago when the company faced questions about its solvency.

With $42.9 billion in sales last year, Bunge is among the biggest and oldest of the grain-trading giants that control the flow of crops from farmers’ fields to food plants and livestock operations. It possesses an armada of grain terminals, processing plants and related assets throughout the Americas. Along with Archer Daniels Midland Co. , Cargill Inc. and Louis Dreyfus, Bunge is a member of the so-called “ABCD” club that dominates global agribusiness.

The White Plains, N.Y., company traces its roots to a Dutch firm founded in 1818. Its controlling families, the Bunges and Borns, moved the company to South America and eventually the U.S. as it grew to become the world’s largest processor of oilseeds like soybeans, Brazil’s largest exporter of agricultural commodities and a major marketer and processor of U.S. crops.

The company launched an initial public offering in 2001 and rode a commodity boom that ran from 2007 to 2013, but since then it has been hampered by a series of record-breaking harvests in the U.S. and South America that have put pressure on grain prices.

Bunge in February reported a 6% decline in net income for 2016 and in May cut its profit projection for the year. The global grain glut has left farmers in many of the world’s breadbaskets unwilling to sell crops at cut-rate prices, leaving companies like Bunge with less to trade and process. Meanwhile, some grain buyers, like food processors and meat companies, have been hesitant to purchase commodities in advance since prices are expected to stay low. Soren Schroder, Bunge’s CEO, said in May that the standoff has left the global grain-trading system “frozen.”

Mr. Schroder has said the grain business is ripe for consolidation, given the industry’s struggles to translate a historic flood of crops into consistent profit growth. “It is very clear that there are too many, too many trying to do the same thing with a small margin,” Mr. Schroder told investors at a recent event.

Bunge’s recent strategy has been to strike joint ventures and partnerships with smaller companies to run mills and processing plants more profitably. However, Mr. Schroder said recently that “if there was something bigger, we’re open to it.”

Glencore’s agriculture business posted $22 billion in revenue in 2016, compared with $66.3 billion for its metals and mining operations. It is one of the world’s biggest marketers of wheat, feed barley, canola and sunflower products and is a major exporter from Russia, the European Union, Canada and Australia, though it has little presence in the U.S. It has about 14,000 employees world-wide, with 274 storage and handling facilities in 17 countries, according to Glencore’s website.

Like most other Glencore businesses, the firm’s agriculture outfit trades heavily in the products it produces around the world. Marketing activities in 2016 accounted for 85% of the group’s revenues.

Glencore’s Mr. Glasenberg is a prolific deal maker. The former coal trader was part of a team that ousted founder Marc Rich in 1994. In 2002, Mr. Glasenberg became the company’s CEO and later took Glencore public.

In 2012, Glencore agreed to buy Canadian grain-marketing and distribution company Viterra Inc. for about $6 billion. The next year, Glencore merged with Xstrata PLC, a diversified mining giant. In 2014, Glencore approached Rio Tinto about a merger that could have created the world’s biggest publicly traded miner, but was rebuffed.

A world-wide slide in commodity prices forced Glencore to sell a 40% stake in its agricultural business to the Canada Pension Plan Investment Board last year, among a range of moves to raise money and reduce a heavy debt burden. That deal gave Glencore’s agricultural division its own board and put it on course for a potential IPO in about seven years. Glencore sold an additional 9.99% stake in the agricultural unit to British Columbia Investment Management Corp., another pension fund, for $625 million last June.

While Glencore’s agriculture business has grappled with the same challenges its larger peers have, the parent company has regained its footing. Since its share price plummeted in late 2015 due to investor fears over its debt, Glencore has returned to profit thanks to surging prices for copper, coal and zinc. The Swiss firm has sharply reduced its debt load and its shares have gotten back most or all of the earlier decline.

>>> Glencore Makes Takeover Approach to Bunge

Glencore Makes Takeover Approach to Bunge
Glencore has made a takeover approach to grain trader Bunge, people familiar with the matter said, a move that would make the Swiss mining giant a major player in the U.S. agriculture market.

It isn't clear where any discussions between the companies stand, and there may not be any deal. But if there is one, it would be substantial: Bunge had a market value Tuesday of nearly $10 billion; including debt, its so-called enterprise value was about $15 billion. Glencore is a mining and commodity-trading powerhouse with a market value of £42.3 billion ($55 billion).