S&P edges lower in volatile trade but Dow outperforms

By Angela Moon

NEW YORK (Reuters) - Stocks were mostly lower by late morning trade on Monday in a volatile session as investors booked profits from a brief gain earlier that followed lukewarm manufacturing data.
The S&P 500 fluctuated between losses and gains during most of the morning, but the blue chips were outperforming the market - of the 30 stocks on the Dow, 25 were trading higher, including Merck & Co (MRK.N) and Intel Corp (INTC.O).
"The near-term psychology of the equity market appears to be inconsistent and inconclusive," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management in Minneapolis, adding that trading is likely to become more volatile.
"Today's (ISM) numbers were basically in line with expectations, and will serve as a reason for the Fed to continue to move towards tapering, (but only) in the latter part of the third quarter or fourth quarter. But a consolidation period is inevitable at these levels."
U.S. manufacturing activity contracted in May for the first time in six months as new orders slipped and there was less demand for exports, an industry report showed on Monday.
Trading has been volatile for the past week, with intraday swings of 1 percent up or down, on concerns that the Fed may reduce its monetary stimulus earlier than expected.
The Dow Jones industrial average (.DJI) was up 39.62 points, or 0.26 percent, at 15,155.19. The Standard & Poor's 500 Index (.SPX) was down 3.54 points, or 0.22 percent, at 1,627.20. The Nasdaq Composite Index (.IXIC) was down 16.44 points, or 0.48 percent, at 3,439.47.
A popular options gauge that measures the level of anxiety in the market also showed a jump. The CBOE Volatility index VIX (.VIX) was up more than 2 percent at 16.64.
"Equity option market sentiment has turned from bullish to cautious, with VIX, skew, vol-of-vol (volatility of volatility), and correlations all experiencing notable gains over the past two weeks," said Mandy Xu, equity derivatives strategist at Credit Suisse.
In a week of heavy data, the most important will be the May nonfarm payrolls report, scheduled for Friday. Reuters' survey of analysts shows an expected 170,000 jobs added, slightly higher than the previous 165,000. The Fed's Beige Book survey of regional conditions is on tap for Wednesday.
In company news, Merck shares rose 5 percent to $49 after the company's drug designed to unmask tumor cells and mobilize the immune system into fighting cancer helped shrink tumors in 38 percent of patients with advanced melanoma in an early-stage study.

But F5 Networks Inc (FFIV.O) fell more than 5 percent to $78.44 after Morgan Stanley downgraded the network gear maker to "equal weight" from "overweight".

(Reporting by Angela Moon; Editing by Nick Zieminski)

Real Economy Avoids Risk-Taking as Wall Street Embraces It

Has the intrepid American entrepreneur turned timid? Is the courageous, risk-embracing business pioneer becoming like the cowboy: a popular icon of a bygone time rather than a reflection of what America has become?

We might not be quite there. But there is a broad array of evidence, much of it hashed out in a long Wall Street Journal feature, that American workers and companies have grown more risk-averse in recent years.
Companies are less eager to expand payrolls to grow; the rate of small-business creation has ebbed; investment in startups is sluggish; workers are less likely to leave a job for a better opportunity; families aren’t as willing to move to a part of the country with more vibrant economic prospects. If these trends persist, it will restrain the pace of long-term economic growth.
Is this pattern simply the normal evolution of a mature economy with an aging population that recently went through the deepest and most-frightening recession in decades?
With Baby Boomers straddling retirement age and plenty of slack remaining in the labor and manufacturing sectors, the economy might simply not invite as many new-business launches or brave career moves – even as we lionize Elon Musk’s fearless development of electric-car maker Tesla Motors Inc. (TSLA).
The data on growing economic risk aversion, of course, is somewhat counter to the impression left by the boom in Silicon Valley, the New York digital media and the flourishing of the “app economy.”
As Yahoo! Finance Editor-in-Chief Aaron Task notes in the attached video, young 20-something workers do not expect to work securely at one big company for their whole careers. They seem eager to find their own way, often stitching together freelance work and testing out new cities for work opportunities. Perhaps, if the fitful economic recovery gains traction and speed over another couple of years, younger workers and entrepreneurs will emerge as a broader force again – the way the tough economy of the 1970s incubated the personal-computer and Internet revolution.
The public has also become less enthusiastic about money. Even though consumer confidence has rebounded to its highest level in five years, it remains near levels that used to be associated with recessions back in the 1980s.
This long-term downtrend in confidence seems linked to the peaking of the growth rate in the labor-force in the mid-1980s. The generally uninspiring velocity of the last three economic recoveries also appears related to these demographic tides.
In a telling irony, though, this picture of a risk-averse economy emerged at the same time the Bank for International Settlements issued a warning that the aggressive easy-money policies of world central banks has stoked a dangerous level of risk-taking – by investors and banks.
"Abundant liquidity and low volatility fostered an environment favoring risk-taking and carry trade activity," said the BIS, an organization that acts as the central node for global central banks.
This, too, could be an outgrowth of a high-tech world economy with developed-country populations aging, excess stores of savings in search of return, and global trade and capital flows allowing money to dart among markets at the speed of light.
Yet, as Task notes, lots of risk-taking in financial markets and growing risk-aversion in the real economy is probably the reverse of what policy makers and the rest of us would probably want to see.
Tell Us What You Think!
Got a topic you’d like covered? Have a guest you’d like to see interviewed? Send an email to: thedailyticker@yahoo.com.

Housing Recovery Is a Sham Says the Guardian’s Heidi Moore

Home prices have risen at the fastest rate in seven years. Sales of previously owned homes in April hit their highest level in more than three years. The housing market has finally turned the corner, right?

Not necessarily says Heidi Moore, U.S. finance and economics editor at the Guardian. The so-called housing recovery may be “dubious,” she writes in a recent column: “What looks like a housing recovery to the rest of us, but is, in fact, something of a trap.”
Moore joined Dan Gross, an editor and columnist at Newsweek/Daily Beast and author of “Better, Stronger, Faster: The Myth of American Decline…and the Rise of the New Economy” and The Daily Ticker's Aaron Task to discuss the state of the U.S. housing market.
Moore says banks and investors are propping up the recovery, not real buyers. Banks now own a large percentage of available homes for sale because of foreclosures and are controlling the supply to artificially increase prices, she argues.
[Click here to check mortgage rates in your area]
But “doesn’t that make the rise in the volume of home sales all the more impressive?” Gross asks. Banks are less reluctant to approve mortgage requests unless borrowers have high credit scores and cash for a down payment. Tighter lending requirements have also forced Americans to responsibly pay down debt. Now, more individuals are “in position to go out and buy these houses at higher prices, at higher rates, with more money down,” Gross notes. “To me that is a positive.”
Related: Homeowners Will Get Hurt Again: Fmr. Inspector General of Bank Bailout
Yes, more Americans have become smarter about their finances, but that doesn’t make them richer, Moore points out. Real wages adjusted for inflation have been falling for the last three years.
“It’s not people buying these houses,” she says. It’s investors, people who want to flip it. It’s the people who have ready cash. Right now it’s a big boys game in housing.”
Tell Us What You Think!
Got a topic you’d like covered? Have a guest you’d like to see interviewed? Send an email to: thedailyticker@yahoo.com.
You can also look us up on Twitter and Facebook.
More from the Daily Ticker:
Wake Up Bacon Fans: Get Used to the Idea of Chinese Companies Buying Pork Producer
Sell in May and Go Away' and Other Sayings Best Ignored
There Is No Stock Market Bubble: New Yorker’s James Surowiecki

China factory activity shrinks, adds to growth fears

By Xiaoyi Shao and Jonathan Standing

BEIJING (Reuters) - China's factory activity shrank for the first time in seven months in May and growth in the services sector cooled, evidence that the world's second-largest economy is losing further momentum in the second quarter.
The HSBC/Markit Purchasing Managers' Index (PMI) for May dropped to 49.2, the lowest level since October 2012 and down from 50.4 in April, as domestic and overseas demand fell.
The figure was slightly lower than a preliminary reading of 49.6 released on May 23. Fifty divides expansion from contraction compared with the month before.
China's economic growth surprised financial markets by weakening in the first quarter and that trend may not have changed, said Zhiwei Zhang, chief China economist at Nomura in Hong Kong.
"We think China's economic growth will probably continue to slide," he said. "Our forecast of GDP growth in Q2 is to slow to 7.5 percent from 7.7 percent in Q1."
The MSCI's broadest index of Asia-Pacific shares outside Japan <.miapj0000pus> gave up as much as 0.2 percent to hit its lowest level in nearly seven weeks after the data, while Australian shares (.AXJO) dipped before stabilizing.
Hong Kong (.HSI) and Shanghai shares both lost some gains to stand up 0.4 percent and 0.1 percent, respectively.
"The downward revision of the final HSBC China Manufacturing PMI suggests a marginal weakening of manufacturing activities towards the end of May, thanks to deteriorating domestic demand conditions," said Qu Hongbin, chief China economist at HSBC.
In the HSBC manufacturing PMI, compiled by UK-based Markit Group Ltd, the sub-index for total new orders dipped to 48.7, the first time it has retreated below 50 since last September and the new export orders sub index was below 50 for the second consecutive month.
The indexes suggested falling demand from both domestic and overseas firms.
China's official manufacturing PMI, released on Saturday, rose but remained close to 50. It ticked up to 50.8 in May from April's 50.6, although it also pointed to falling orders from export markets.
The Chinese government's official PMI for the non-manufacturing sector, released earlier on Monday, also pointed to a loss of growth. It fell to 54.3 in May from 54.5 in April, the lowest since September last year.
MOMENTUM ELUSIVE
The figures add to evidence China's economy is struggling for momentum, buffeted by weak exports demand and overcapacity in some industrial sectors.
The government is also attempting to rein in credit growth, a lot of which is not finding its way into productive investment but into speculative areas such as property.
The IMF and OECD last week cut their forecasts for 2013 economic growth to 7.75 percent and 7.8 percent, respectively.
China's annual economic growth slowed to 7.7 percent in the first quarter from 7.9 percent in the previous quarter. The full-year annual growth of 7.8 percent in 2012 was the weakest since 1999.
The IMF's cut brings it into line with recent revisions by private institutions, including Bank of America-Merrill Lynch, which pared its forecast this month to 7.6 percent from 8 percent, and Standard Chartered, which cut its estimate to 7.7 percent from 8.3 percent.
ING last month reduced its prediction to 7.8 percent from 9 percent.
Despite the slowdown, most economists believe Beijing will refrain from big-bang stimulus as long as the labor market holds up, since employment is crucial for social stability. Both the official PMI and the HSBC PMI show employment is falling.
The government has set a 2013 growth target of 7.5 percent, a level Beijing deems sufficient for job creation while providing room to deliver reforms to the economy to reduce its reliance on exports.
While some economists believe that Beijing may miss its 7.5 percent growth target this year, China's leaders appear to be comfortable for now with a moderation in economic growth.
Premier Li Keqiang said last month the country has limited room to rely on government spending or policy stimulus to spur its growth.
The official PMIs focus on bigger and state-owned firms, while the HSBC/Markit series covers more smaller private enterprises.
"Big manufacturers are supported by state-led investment while smaller firms are more exposed to the volatile export market," said You Hongye, an economist at China Essence Securities in Beijing.

"We still cannot see any signs of recovery but the chances of any sharp slowdown are also small."

(Additional reporting by Kevin Yao; Editing by Neil Fullick)

Asia In The Red: Nikkei Drop Continues – Down 2.5%, -350 Points. European Futures Crashing!

Looks like it might be another bad day for Japan.
http://www.indexq.org/
http://e.nikkei.com/e/fr/marketlive.aspx
“Asian stocks fell, extending last month’s loss, amid speculation a strengthening U.S. economy will prompt the Federal Reserve to reduce monetary stimulus. The Australian dollar, gold and copper climbed, while oil declined.”
http://www.bloomberg.com/news/2013-06-02/asian-stock-futures-decline-as-fed-stimulus-concern-increases.html
All European futures down:
http://www.bloomberg.com/markets/stocks/futures/
Japanese Stocks Down Over 2% At Open; Nikkei 16% Off Highs


Charts: Bloomberg
http://www.zerohedge.com/news/2013-06-02/japanese-stocks-down-over-2-open-nikkei-16-highs

CHINA’S MANUFACTURING SECTOR IS CONTRACTING
China’s unofficial HSBC manufacturing PMI report is out and its disappointing.

The headline number fell to 49.2 from 50.4 a month ago.  This was worse than economists’ expectation fo 49.6.
A reading below 50 signals contraction.

Markit
http://www.businessinsider.com/china-may-hsbc-manufacturing-pmi-2013-6

Gold Trader: “Stock Market May Crash 10-20% In Next 5-10 Days, Will Create Setup For Bubble Phase In Gold”

Bull Market Thinking – by Tekoa Da Silva
I had the chance on Friday to reconnect with technical gold trader Gary Savage, publisher of the “Smart Money Tracker” daily gold market commentary and trading service, which has outperformed most of the world’s hedge funds in 2011 and 2012.
It was a powerful conversation as Gary indicated the S&P 500 is at its most overbought level in nearly 40 years, and may crash 10%-20% within a few trading days as a result. Following this crash, Gary expects a massive central bank monetary intervention to create the “launch pad” for an explosive move higher in gold and gold equities, ushering in the final bubble stage of the bull market.  
“We’re at a very important crossroads here,” Gary explained at the beginning of the interview. “The S&P 500 [broke] through 1640…and I expect we’re going to have some kind of crash, or semi-crash over the next 5-10 days…The selling is probably going to get huge…and it [may] take everything [down] with it.”
When asked why he’s expecting a crash of such magnitude to occur, Gary replied, “If you look at [a] long-term market chart…you can see that at the recent peak, [it] was stretched further above the 200 day moving average then it’s ever been in the last 30 or 40 years. So the forces of regression are going to be extremely powerful…We’re probably going to [cut] right through the 200 day moving average and [it] may make the 2011 correction look small [in comparison].”
This fragile equities market plays a key role in determining gold’s next move according to Gary, in that, “When it breaks, the Fed is going to freak out, [and] they’re going to double, triple, and quadruple down on QE to try and pump stocks back up, [and] that liquidity…[is] going to find something else…I don’t believe it’s going to pump up a double parabola in stocks…[It's] going to look for something that’s undervalued…and that right now is commodities in general, more specifically—gold.” 
As to the consequences of gold being driven down so far when compared to this blow-off in equities, Gary stated that, “Regression to the mean not only works on the upside, but also on the downside, and gold is in the mirror position of the stock market—it’s stretched extremely far below the 200 day moving average. So when [the] regression occurs, it’s going to be an extremely violent move back towards the 200 day moving average, and like I said, I think what will trigger this [move in gold], will be the stock market crash, the Fed, and the central banks’ response to [the] unraveling…[it's] what I imagine would happen before the bubble phase begins.“
When asked about the small signals investors should look for in gold and gold equities to identify an early start to the bubble move, Gary said, “At some point the selling exhausts…and [when] the liquidity starts to flow into that area…value investors [start] coming in, and then you start to get these 5%-6% days, and [the] next thing you know you’ve got an 11% week, and then the momentum starts to shiftand then you get a buying panic into the area where people are making money…So I think we have a [perfect] setup for the bubble phase in gold.”
As a final comment Gary advised further patience in holding gold equities, saying, “They may temporarily follow [the market] down, but they’re going to rebound out of that extremely violently, and leave the stock market in the dust.“
——
This was another powerful interview with one of the world’s most successful gold traders, and is required listening for investors looking to profitably trade this gold bull market.
To listen to the interview, click the following link and/or save to to your desktop:
>>Interview with Gary Savage (MP3)
To learn more about Gary and follow/support his work, visit: Smart Money Tracker
Enjoy the interview? Please support the site by sharing this URL page link with friends, family, and your favorite chat forum.
Thanks,
Tekoa Da Silva,
Bull Market Thinking

Thousands return to Taksim Square as Turkish PM dubs protesters ‘marauders’ (PHOTOS)

Previous updates here

Published time: June 02, 2013 15:57
Edited time: June 02, 2013 16:36

Thousands of protesters have flocked back to Istanbul’s Taksim Square after voluntarily cleaning up the aftermath of clashes and vandalism. Turkish PM Erdogan meanwhile stressed he will not give in to pressure, calling the protesters “marauders.”
Thousands of people are heading to Taksim Square from all directions, joining the already tens-of-thousands-strong crowd with flags and banners. Chanting and singing in unison can be heard, with slogans like “This is our Taksim, this is our Istanbul!” ringing in the air. 
The demonstration marks the third day of the protests in Turkey, which started as a peaceful sit-in against the re-development plans in Gezi Park, but turned into nationwide riots after the police brutally cracked down on protesters.

While the mass protests were marred by violent clashes with the police, in which two people were reportedly killed and over 1,000 injured, as well as scenes of vandalism with cars turned over and buildings and vehicles covered in graffiti, there was some marked display of public support for the protesters and that of collective responsibility too.

Those demonstrators who remained in the streets overnight, after the police had backed down and allowed the protests to continue, had cleaned Gezi Park and the surrounding areas piled with empty teargas canisters and rubble.

FULL STORY: http://rt.com/news/taksim-protest-erdogan-marauders-133/