WTI had coiled up today, closing lower, ahead of tonight's API data. After last week's API build and small DOE draw, hope was high that the trend of larger draws would continue and it did with API reporting a larger than expected crude draw (-7.839mm vs -2.2mm exp). However, a susprise build in gasoline inventories took the shine off and the machines could not decide whether to buy or sell.
API
Via MauldinEconomics.com,
Once again I start with a warning: A recession is eventually coming and a financial crisis with it. There is a real potential for it to come soon, although serious tax reform could delay it.
But sooner or later, the pressures of too much government debt and too many government promises, plus growth that is continually grinding slower, will break out into a recession.
There is always another recession.
Disney served a big surprise moments ago when it reported reported Q3 revenue of $14.24 bn that missed the average analyst estimate, $14.42, even as Q3 EPS of $1.58, above the $1.55 expected. That was not the surprise: what was is that Bob Iger's entertainment giant just made what was until recently a simmering war with Netflix, hot when the firm announced it would end its streaming act with Netflix, pulling its new release movies starting in calendar 2019, and instead it would launch it own ESPN direct-to-customer video streaming service in 2018.
With Q2 earnings season rapidly approaching its end, Bank of America points out a curious observation: stocks that beat earnings expectations are not getting "rewarded" with higher prices. This is the first time this has been observed in 17 years - the last time the market seemed oblivious to corporate upside was in 2Q 2000... just before the Tech Bubble burst. As BofA warns, "this could be a warning sign that equity market expectations and positioning more than reflect the good results."
Corporate leverage has never been higher, and policy uncertainty is extremely elevated... so it makes 'perfect' new normal sense that high-yield credit spreads have collapsed to multi-year tights. However, as Goldman Sachs notes, the extreme dislocations are starting to show some cracks (as HY ETF option skews suggest investors quietly positioning for wider spreads).