OPEC Is Freaking Out About America's Shale Boom

Rob Wile | May 28, 2013, 11:22 AM | 7,991 |

America's shale boom is sending shockwaves through OPEC as the organization heads for its annual meeting Friday, The Wall Street Journal reports this morning.

The main concern is that a global supply glut will weigh down prices, which would be a big problem for petrostate budgets.

From the WSJ:

While Saudi Arabia can tolerate lower prices, "there will be some members, like Venezuela, Iran who will struggle at $90," said Amrita Sen, chief oil analyst at London-based Energy Aspects Ltd. The front month Brent contract for July settled at $102.62 a barrel Monday. Venezuela's oil minister said on Monday that he would push for a cut in OPEC production if oil falls below $100 a barrel.

We've previously shown how falling prices is a concern in the following graph of break-even oil prices for those countries' budgets.

Pacifica Partners

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There Was Some Shady Trading Going On Ahead Of Today's Consumer Confidence Data

This morning, Consumer Confidence numbers smashed expectations rising to a five year high.

But a quarter of a second before the number was out and euphoria set in, there was some shady trading going on in the SPDR S&P Sector ETF (SPY), the e-Mini (electronically traded futures), and in hundreds of stocks, according to Nanex, a market research firm.

From Nanex:

On May 28, 2013, about 1/4 second before the expected release of the Consumer Confidence number, trading exploded in SPY, the eM ini and hundreds of other stocks. Even more interesting, activity exploded just 1 millisecond earlier in the futures (traded in Chicago) than stocks (traded in NYC). The speed of light separates information between Chicago and NYC by at least 4 or 5 milliseconds. Which means this was more likely the result of a timed trading in both futures and stocks, rather than a arbitrage reaction between the two.

We found no other instances of early trading in the 11 previous monthly releases of the same Consumer Confidence data,

Nanex ultimately concluded that this was most likely a case of "banging the beehive" rather than someone having inside information, but that's really no reason to feel relieved.

"Banging the Beehive" is a term that traders use to describe what happens when a high frequency trader sends out a barrage of orders before right before a key event (like a report). This impacts price, and forces those who've already put their orders out to put out new orders to adjust. All of this creates volatility, which high frequency traders love.

The problem is that other traders don't love it. In fact, there's been so much "banging the beehive" before the weekly Natural Gas Storage Report that traders have been exiting the trade entirely.

Check out the chart of all this activity below, from Nanex:

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Gold Is Surging

Gold appears to be the big winner this morning.

Bonds are getting smashed following a big upside surprise to consumer confidence earlier. Despite that, though, the stock market has mostly sold off since the release as well.

Gold, on the other hand, rose from a low of $1372.10 an ounce to as much as $1401 before backing off to current levels around $1392.60, now up 0.4% on the day.

Other commodities are finally catching a bid as well – especially metals. Silver is now flat at $22.50 after trading down to $22.11. Platinum is up 1.1%, and palladium is 3.1% higher today.

Meanwhile, WTI crude oil is up 1.5%. Agricultural commodities are mixed.

The chart below shows the move in gold this morning.

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STOCKS RALLY, BONDS TUMBLE: Here's What You Need To Know (DIA, SPY, QQQ)

Sam Ro | May 28, 2013, 4:00 PM | 451 | The Dow was up by as much as 214 points this morning.  While it shed most of those gains, the stock market nevertheless closed in the black today, breaking a three-day losing streak.

First the scoreboard:

Dow: 15,409, +106.2 pts, +0.6%
S&P 500: 1,660, +10.4 pts, +0.6%
NASDAQ: 3,488, +29.7 pts, +0.8%

And now the top stories:

Investors and traders returned from their three-day weekends and hit the ground buying.  And there was some good economic news to help fuel the rally.The S&P Case-Shiller home price index jumped 10.9% year-over-year, beating expectations for a 10.2% rise.  This was the fast pace of price gains since April 2006.  Only New York City and Minneapolis saw prices fall during the period.  "Rising home prices will encourage more construction, as builders and buyers become more confident that the assets will increase in value," said Deutsche Bank's Joe LaVorgna. "This is the direct effect of rising home prices, and we are seeing this in the employment data"However, economist Robert Shiller noted that foreclosure sales volume has been falling, which may be creating the illusion price growth that isn't there.The Conference Board's May consumer confidence index blew away expectations, surging to 76.2 from April's reading of 69.0.  Economists were looking for a reading of 71.2.  The May reading was a five-year high. "The positive tone of this report was quite encouraging as it suggests that US households are looking well beyond the current economic setback caused by fiscal retrenchment in the form of higher personal taxes and falling government spending," said TD Securities' Millan Mulraine. "Instead, confidence is being buoyed by the steady progress in housing market activity and strengthening private sector fundamentals more generally."Two regional manufacturing surveys showed signs of improvement. At least, things appear to be getting less bad in the sector.  The Richmond Fed Manufacturing index climbed to -2 in May from -6 in April.  The Dallas Fed Manufacturing index improved to -10.6 from -15.6 a month ago, however the May reading was just shy of the -10.0 level economists were looking for.Bonds tumbled amid the strong econmoic news and the stock market rally. The sell-off caused the 10-year Treasury note yeild to surge to its highest levels of the year.Even with stocks rallying passed most forecasters expectations, some Wall Street strategists are keeping their once-bullish, now-bearish targets on the S&P 500 unchanged.  Citi's Tobias Levkovich has a 1,615 year-end target on the S&P 500. His proprietary Panic/Euphoria model is approaching euphoria, which means near-term expected returns are now unattractive.Don't Miss: These Skyscrapers Predicted History's Worst Financial Crises >Please Note: Business Insider will never share your information with any other companies. You also have the ability to unsubscribe from these newsletters at any time simply by following the unsubscribe link located at the bottom of each email

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Richmond Fed Manufacturing Index Climbs And Beats Expectations

Sam Ro | May 28, 2013, 9:43 AM | 581 |

The May results of the Richmond Fed Manufacturing survey are out.

The headline number improved to -2 from -6 in April.

Economists were looking for a reading of -4.

This comes as other manufacturing surveys signals a stall in May.

Here's a tally from UBS's Sam Coffin:

UBS

Here's what those numbers would look like on the ISM's scale.  A reading below 50 signals contraction:

UBS

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Consumers Are Thrilled, Economic Data Is Kicking Butt, And The Stock Market Is Going Wild

REUTERS/Eric Thayer

Everything's going great!

First of all the stock market.

After wobbling last week, the Dow is surging another 190 points today. HUGE.

Second, consumers are really happy. The latest Consumer Conference Board consumer confidence index just destroyed expectations.

And it's not just that consumer number, all kinds of US numbers are beating lately.

Richmond Fed manufacturing beat this morning.

Case-Shiller home prices beat this morning.

And last week we had beats on jobless claims, durable goods, and other numbers.

Yes there's the whole risk of the Fed "taper" out there, but it's hard to be negative unless you're just one of those folks who gets knee-jerk negative when other things are good.

For more on today's big Consumer Confidence beat, see here >

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CHART: Goldman's Bullish Vision Of The Stock Market's Future Is Really Something

Sam Ro | May 27, 2013, 11:02 AM | 3,240 |

Last week, Goldman Sachs' David Kostin became the most bullish forecaster on Wall Street, raising his year-end target on the S&P 500 to 1,750 and unveiling his 2015 target of 2,100.

Here's a chart of what that forecast looks like in the context of the dotcom and credit bubbles.  The trajectory almost seems irrationally bullish, but Kostin has his reasons.

Goldman Sachs

Assuming his earnings forecasts hold, which is a big assumption considering its low volatility and upward trajectory, valuations should hold relatively steady.

But they would nevertheless be on an upward trajectory.

"Our new P/E assumptions include a premium to our fair value models," wrote Kostin.

Goldman Sachs

In his note distributed last night, Kostin reiterated his list of 6 reasons for being so bullish.

Wide equity vs. bond yield gap.Stagnation ends.Recovery in labor and housing.Easy Fed Policy.Reasonable valuation.Better equity flows.

Kostin's fifth point is a key one for many people. We wrote more about his rationale last week.

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