Stocks Reverse 265 Point Decline to Close Sharply Higher

In the old days I’d call a rally like this a ‘key reversal.’ Now, it’s just another day at the office.

Stocks, genuinely, wanted to die this morning. But, apparently, markets weren’t done going higher. Oil surged ahead; and then a few hours later, stocks decided to join the party.

If you’re a bull, this is precisely what you wanted. Investors added bricks to the wall of worry in the early hours. The media, myself included, threw gasoline on an already hot fire, suggesting the market was finished.

It was not.

Impressively, stocks ignored everything and surged higher, purging all of the marginal believers from its ranks. If you made a lot of money today, congratulations. You deserve all of the ambrosia the Gods have to offer, dealing with this treacherous, sordid, game of smoke and mirrors.

One thing to bear in mind and is worth repeating to your colleagues at to dinner table this evening: breadth stood at a very paltry and pedestrian 65% today. This measure means the gains were narrow, petulant, and fleeting.

This has little to do with stock prices, as both stocks have performed equally dreadful, giving birth to 30% losses over the past nine months.

However, assets have increased enough at RBC, likely due to onerous US regulatory conditions, to become the 5th largest bank in N. America, moving past the heralded Goldman.

Brent crude reversed losses and has since traded appreciably higher. The net result of poor inventory numbers was a short squeeze. As such, crude traded up and dragged the market with it.

The relationship between crude, the Nasdaq, and finally the all important risk assets, such as FCX’s stock price, demands to be noticed. They are one in the same, a phalanx trotting along the same road, but at different speeds.

All that said, breadth is still dreadful, TLT is still up, and gold is still pressing higher.

I’m very pleased to see stocks halve losses and people get another chance to sell and to buy some TLT. After all, I still have some SPY exposure and I’d be bereft of decency if I were to root on for the capitulation of my neighbor.

But this isn’t over yet. Stocks are slavishly following crude for a reason, not by chance. Back in 2008, stocks followed banks down and up, like a dog shadowing its owner. The same corollary is taking place now with energy related stocks, the underlying commodity and lastly the SPY.

A gathering storm is coming.

I am surprised this stock hasn’t derailed and plunged into single digits, like their peers FMSA, EMES and HCLP. However, today’s conference call and subsequent remarks are certainly helping their prospects to achieve this unwanted predicament.

Via Briefing.com

• Co said that in spite of all the turmoil caused by lower oil price, U.S. Silica became a safer, stronger and more competitive company in 2015
• Co maintained its strong balance sheet ending the year with almost $350 million in liquidity and generated operating cash in excess of our capital expenditures for the year
• Co also returned a ~$42 million directly to shareholders in 2015 by stock buybacks and dividends
• Co believes that its strong balance sheet will enable it to navigate the current environment, strengthen its market position and ultimately capitalize on the business opportunities its markets present while enabling U.S. Silica to emerge even stronger as a company when oil and gas markets recover
• Clearly, the main point here is, the co believes it will weather storm

• Weaker market conditions and an extremely competitive environment drove lower revenue in Oil and Gas for the quarter as rig count continued to decline and pricing pressure persisted
• As is typical, revenue also declined sequentially for its Industrial and Specialty Products segment in Q4 due to the seasonality of its larger end markets, such as glass and building products
• Sales volumes in oil and gas for the quarter declined just 4% sequentially to 1.55 million tons as co leveraged its low cost operating model and robust distribution network to drive volumes and expand our market position.
• Co’s industrial and speciality product segment had an excellent quarter, which enabled it to complete the best year in its 115 year history
• Contribution margin of $15.2 million grew 13% compared with the prior year and increased 26% on a per ton basis
• New higher margin products and favorable customer and product mix contributed to ISP earnings growth in the fourth quarter and for the full year.

• In the oil and gas segment, co expects the rig count is expected to decline 30-35% from here during 2016
• SLCA says it’s uncertain where rig count will bottom
• Excess rail cars continues to be a significant drag on earnings
• M&A is still in the mix withing their capital allocation plans. However, they will continue to remain cautious while looking
• Co does not see any additional rail cars coming into their fleet in 2016. They will also looking into leasing
• Co has about $5 mln in ‘lazy assets’ referring to its rail cars

• RBC Capital Mkts lowers their SLCA tgt to $16 from $18; they expect SLCA to underperform tomorrow after reporting 4Q EPS well below Street expectations driven by substantially lower O&G contribution margins. Customers continue to buy sand FOB plant vs. in basin — leaving the frac sand industry’s rail capacity significantly underutilized. Frac sand volumes are likely to outperform the well count on the downside but pricing and margins will remain challenged throughout the year.
• Cowen notes O&G volumes held flat sequentially (vs competitor down 14%), however CM/ton was lower than consensus. ISP volumes and margin also below consensus expectations, somewhat concerning as ISP has been an area of stability.

For the quarter, Silica reported a loss of 26 cents, which was 10 cents worse than already guided down estimates, and a stark 45% drop in revenues to $136 million. The market is calling supreme bullshit on any and all positive notes given by management.

It’s all very amusing to see these Federal Reserve employees, out and about, yammering about the virtues of raising rates. Without fail, each time they do this, the market drops, precipitously. By extension of this indelible fact and without question, the Federal Reserve is purposely trying to inflict monetary damage upon holders of equities.

From my vantage point, these dire circumstances superseded any seasonality strengths that I’ve been pointing towards– when discussing the specter of a rally. Without a shadow of a doubt, stocks wanted to trade up; and they would have if it weren’t for the Federal Reserve getting in the way, once again.

Under the backdrop of a looming crisis, both abroad and domestically, I am rescinding my calls for a large and protracted rally through April. I do, however, reserve the rights to change my mind again, should the atmosphere change. If there’s one thing that has helped me, more than anything else, it is my changeability when analyzing the market. I stridently reject the notion that opinions should be formed and adhered to, despite the facts on the ground moving from bad to worse.

The risks are clear, present and harbor grave dangers.

They are, as follows.

Commodity implosion

BREXIT fears

Federal Reserve devils

Bank exposure to bad debt

Presidential elections and the candidates who hate Wall Street

China and their chicanery

Russia and Syria

Slowing U.S. economy

FX turmoil

Good luck. Trade accordingly. God speed.

This is the most important stock in the bedraggled cyber security sector, an industry that exhibited extraordinary promise just a few years ago. Since their euphoric highs, they’ve been bombarded with one earnings shortfall after the next, with exception to Palo Alto Networks. They are the proverbial last man standing.

Wunderlich is boolish into the meatgrinder.

Via Briefing.com

Wunderlich is at Hold, $190 tgt on PANW ahead of the results as they expect co to report upside to consensus rev and EPS ests. They also expect co will maintain its prior FY16 guidance. This would represent an improvement when compared to the rest of the cyber-security comp group, which has largely guided toward heavier-than-expected investment for FY16. Checks indicate a strong close to 2Q should allow co to top consensus Rev/EPS ests of $318M/$0.39 coming in closer to $335M/$0.42. They also expect co will pass through the upside to its prior full-year guidance at the mid-point of $1.78B/$2.70.
PANW is scheduled to report Q2 results Feb. 25, after the close

PANW is down 27% for the year, thus far.

Whatever happened to BRIC? I hope FANG doesn’t go by the wayside, like this BRIC concept. I realize some of you want to believe the savage will one day drop the spear in exchange for a briefcase. Truth is, he’d just be a savage with a briefcase.

Moody’s cut Brazil’s credit rating to junk. The economy is undergoing its worst recession in a century. Petrobras is likely to reorganize its $150 billion debt burden. Naked, poor, forked, fucked, radish.

Brazil’s credit metrics have deteriorated “materially” in the past few months and will worsen over the next three years, according to the ratings company, which also cited the negative impact of political gridlock on the government’s efforts to close a budget deficit and undertake structural reforms. The cut — Brazil’s third in as many months from major ratings companies — adds pressure on Rousseff to win lawmakers’ support for measures to raise taxes and reduce spending as she fights off efforts to impeach her.

“Even though it wasn’t a surprise, it still sends a negative signal to investors,” said Arnaud Masset, an analyst at Swissquote Bank SA in Gland, Switzerland. “Unfortunately, Brazil’s outlook remains very cloudy as the market expects more from lawmakers than minor reforms.”

“Macroeconomic and fiscal developments over the next two to three years are expected to produce a materially weaker credit profile,” Moody’s said. “The negative outlook contemplates the risks of further deterioration to Brazil’s credit profile emanating from macroeconomic shocks, deeper political dysfunction or the need to support government-related entities.”

This is only the opening salvo in a sequence of events that is going to force you to write memoirs about this period in time. Get your popped corn ready.

In his very brief, but always great, 8:55am skit with triple chinned Joe Kernen, Jim Cramer begged viewers to remember how extraordinary cheap oil is for large segments of the economy, like airlines, eateries, and asshole retailers. He did, however, mention the deleterious effects it imposes on banks and basic resources.

Being the dick that I am, I ventured off into Exodus to count the market capitalization of these minor parts of our economy, the one’s affected by the commodity collapse (basic resources, financials and industrials).

It amounted to $11 trillion.

Joker.

Fed’s Lacker has joined Fed’s George, and apparently Fed’s Yellen, to form an axis of evil–hell bent on exacting the wholesale destruction of global trade, and especially the U.S. jobs market. Just last week, there were 1 or 2 Fed heads who sounded reasonable, highlighting the fact that the market has been in vapor-lock mode for the better part of 8 weeks–alluding to the idea of chilling the fuck out on interest rate hikes.

These fucking clowns.

But not Fed’s Lacker. He’s from Virginia, at the heart of the southern confederacy, and he wants to punish you yankee banker bastards for having it so damned good all these years gone by.

Lacker said estimates of the economy’s so-called natural real rate of interest, the rate when economists think there will be normal economic growth rates and stable inflation, is at or just above zero.

“This perspective would bolster the case for raising the federal funds rate target,” Lacker, who is not a voting member on the Fed’s rate-setting committee this year but participates in its discussions, said in prepared remarks for a university gathering in Baltimore.

Lacker’s speech followed comments by Kansas City Fed President Esther George on Tuesday that the Fed should consider raising rates at its March 15-16 meeting.

George and Lacker are among the Fed policymakers who most urge an active fight against future high inflation, or “hawks” in central banking parlance.

He furthered, a recession is not something worth taking seriously. As such, it would be wise to destabilize the US economy by prematurely hiking interest rates, into a maelstrom of capital cross-currents and looming oil debt reorganization, which may very well run well into the hundreds of billions of dollars.

The deflationary vortex is here. Board the ark (TLT). NASDAQ futures are down 51.

Fears of Great Britain leaving the conglomeration of broken shards called the EU are heightening this morning, which is pressing the pound sterling to 7 year lows. This is fear mongering at its best. If there’s one thing the world is exceptionally good at, it is this.

Options traders are paying the most to protect against price swings in six months’ time compared with historical volatility since Lehman Brothers Holdings Inc. collapsed during the 2008 credit crisis. Twenty-nine out of 34 economists in a Bloomberg survey said the pound will drop to $1.35 or below within a week if the U.K. votes to leave the European Union — levels last seen in 1985.

Broken elevator cable trading has resumed, world wide. S&P futures are lower by 16 handles. Over in Europe, investors are flummoxed with losses, scaling up to 2.7%, graciously accepted by the Empire of Spain.

Gold and bonds are rallying. Moreover, in Switzerland, negative bond yields persist in every duration, up to 20yrs, which will soon be dragged down under zero. Most importantly, rumors are already making way around trading desks that BREXIT will pave the way for a GREXIT, which will have a profound effect on EU banks. Once the warmer climes come, migration out of the middle east will swarm Europe, especially Greece. There will be considerable pressure applied to an already weak Greek economy, who might decide to make a clean break of it, especially after Great Britain broke precedent and left the EU, providing that should happen.

Portuguese-German spreads are at 318bps.