E-Mini S&P 500: Quadruple witching!

Today was Quadruple Witching as the stock index futures, stock index options, stock options and single stock futures all expire at the same time. Usually mergers and acquisitions are boon for the markets, but today’s created a slump in the foods industry. Amazon is purchasing Whole Foods for $13.7 billion cash upon approval of the shareholders and regulators. Whole Foods benefited by the deal but other grocery chain stores did not fare as well. Supervalu Inc. (SVU) was down -13.03 % to $3.28. Supervalu Inc. holds acquisitions of Jewel/Osco, Albertsons, Bristol Farms and Shaw’s to name a few. The Kroger Co. (KR) was down -9.61 % to 22.20. The data has been less than perfect, tech stocks were disappointing and there has been no evidence of Trump’s tax cuts for the consumer! The Fed seems to see the economy improving thru the better employment reports simply anticipating higher wages and further consumer spending. They took a bit of a hawkish stance. The Fed raised its benchmark overnight rate target by 25 basis points. The Fed, in recent years has professed a desire for transparency and clarity in their actions so that they do not shock the market. We are approaching the 2 % inflation target slowly and full employment. The policy makers seem to think that they may phase out their holdings of both Treasuries and mortgage backed securities. All agree that full employment is there yet the 2 % inflation target still remains slightly out of reach. They agree that government spending may result in economic growth but consumer confidence strength is vital to growth as well. The Consumer Spending for April was 0.4 % thus warranting a pullback on accommodation. Any weakness is regarded as “transitory”. The Fed had previously mentioned that they do not see a great improvement in the unemployment rate. They still forecast 4.5 % to 4.4 % next year while January’s was 4.8 % and the last report was 4.3 %.. Yellen considers the current monetary policy as moderately accommodative. Fed Chair Janet Yellen is in Office until January 2018 and vows to stay her term until whereby the new administration may make changes or appoint a new chair.

Investors want to see US President Trump make good on his promises of a tax cut along with infrastructure spending. The data is showing growth at every turn to take the stock indexes higher. US President Trump posted a plea to the US Senate to loosen rules and obtain approval on Healthcare and Tax Cuts. His campaign promises may be more difficult to get thru legislation than previously thought. Global uncertainty is still a factor, but investors may overlook it in favor of the domestic picture. The last Real GDP of May 26th was 1.2 % while the previous reading was .07 %. The GDP Price Index was 2.2 % while the previous reading was 2.3 %. Real Consumer Spending was 0.6 % while the previous reading was 0.3 %. The last Nonfarm Payrolls was a mere 138,000 new jobs created in the month of May while the previous month had 211,000. The Unemployment Rate was down to 4.3 % from the previous 4.4 %. The Private Payrolls was 147,000 while the previous reading was 194,000. The Average Hourly Earnings were 0.2 % while the previous reading was 0.3 %. The Average Workweek was 34.4 hours unchanged. Today’s Housing Starts were 1.092 million while the previous reading was 1.172 million. The Housing Permits were 1.1689 million while the previous reading was 1.229 million. Consumer Sentiment for June (p) 2017 was 94.5 while the previous reading was also 97.1. US President Donald Trump’s budget plans have been as expected! The plans for increased military spending and infrastructure proposals appeased the market with stability meeting expectations. Healthcare and nutrition assistance programs were with proposed cuts as anticipated. The President hopes to cut $3.6 trillion worth of government spending within the next ten years. Part of his austerity program may include decreasing foreign aid to Central America and Mexico. Recently, we have witnessed a huge arms deal with Saudi Arabia to boost our huge defense companies. The US voted for a business man to turn the economic tide within the country with a budget proposal which is a “taxpayer first” plan. The campaign promises may come to fruition after all! The market is in a temporary technical bullish mode unless it penetrates $2416.25. The range today for the (September) E-Mini S&P 500 was $2436.75 to $2420.25 an inside to higher day. Monday’s range could be an inside to higher to outside day around $2445.50 to $2424.50. The VIX was 10.67 down -2.11 %. The S&P 500 Earnings and Estimates of the companies as of June 15th were 503 reported and 371 beat expectations while 95 missed expectations and 37 met expectations. 320 beat sales expectations.

The EIA report showed the Crude Oil Stocks a draw -1.66 million barrels. The Motor Gas Stocks were a build of +2.09 million barrels. The American Petroleum Institute shows Crude Oil Stockpiles up +2.75 million barrels. The Motor Gas Stocks were up +1.80 million barrels. There are worries that the Qatar situation may harm the efforts of OPEC on the cuts. The US Strategic Petroleum Reserve in Louisiana and Texas may hold about 688 million barrels of Crude Oil. US President Trump has suggested that the US sell off about half of the product keeping in mind the US shale boom and the lighter dependency on imported energies. Saudi Arabia’s Minister of Energy agrees that an extension of cuts thru 2018 should help trim the stockpiles that have accumulated. Most OPEC countries believe that the cuts are necessary. Iraq seems to be the one country still overproducing during the time of the cuts. Oil producers from Russia and Saudi Arabia did mention that they will continue the cuts into 2018 as they vow to ensure oil supplies fall back to the five year trend line average. The demand estimate on Crude Oil from OPEC for 2017 is projected at an average of 31.9 million barrels per day. In a Bloomberg interview, US President Trump is said to have expressed that he is open to increasing the US gasoline tax to help fund his infrastructure projects. The Russian Energy Ministry spoke of worldwide total oil production cuts in both OPEC and Non-OPEC countries during March were 1.7 million barrels per day. Russian Deputy Prime Minister Dvorkovich disclosed to Russian media the government may be keeping production steady at the current levels.

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