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Finance NetNet


  Saturday, 5 Sep 2015 | 12:00 PM ET

From stripes to chips: How banks battle card fraud

Posted By: Linda Dimyan

It seems like there's a cyber-hack story in the headlines every other day. But while merchants—and even the Internal Revenue Service—crack down on digital breaches, thieves are targeting another source of power: automatic teller machines.

That is spurring a broad movement to more secure methods of payment.

Crooks are stealing credit and debit card data from U.S. ATMs at the highest rate in 20 years, according to recent data from credit scoring firm FICO, and they don't seem to be slowing down.

Year over year, card skimming, in which thieves swipe user data, at bank-owned ATMs is up a dramatic 174 percent. At non-bank ATMs, compromises are up 317 percent. These numbers represent successful incidents.

Thieves who end up gaining cardholder information then create counterfeit plastic, with the potential to steal every penny out of a victim's bank account.

»Read more
  Tuesday, 1 Sep 2015 | 2:16 PM ET

Volatile market crosses into a 'different world'

Posted By: Jeff Cox

A market priced for perfection will start to wilt when investors realize things aren't particularly perfect.

Such is the lesson on Wall Street, which saw another huge selloff Tuesday that seemed to lack a significant catalyst.

Sure, there was the overnight economic news out of China, where a key manufacturing index fell to a three-year low. But everyone knew and expected that the reading wasn't going to be particularly inspiring.

A market looking to sell, however, is going to sell, and that's particularly true when stocks are at least fairly valued and in many cases overvalued. Prior to the August selloff, which saw major averages dip 6 percent and fall into correction territory, the equity indexes had been priced to reflect a belief that the U.S. economy would grow around 3 percent, the global economy also was fine and the Federal Reserve would find a way to remain accommodative.

With those and other assumptions challenged, the market finds itself teetering precariously between a fairly routine selloff in the context of a broader bull, and one looking to price in the vacillating probabilities of a global recession.

»Read more
  Monday, 31 Aug 2015 | 12:23 PM ET

September shaping up as Fed's worst nightmare

Posted By: Jeff Cox

For months, Federal Reserve officials have been urging investors to shift their focus from the timing of rate hikes to the path the central bank expects to take toward normalcy.

In effect, they've been trying to quell speculation over whether they vote to move in September, that it really doesn't matter when the rate-hiking cycle begins because it's going to happen slowly no matter what.

That's wrong.

The date for liftoff will matter tremendously, particularly if the central bank's Open Market Committee decides to move in a month that's likely to be a highly volatile one for financial markets. And if we've learned one thing from this supposedly data-dependent Fed, the most important data point of all is how markets react.

September is setting up as a difficult month for a variety of reasons: Expected continued volatility in stocks, weak corporate sales figures and an economy likely to give back at least some of the gains it achieved in the second quarter.

Throw in some fairly daunting historical trends and it probably adds up to a Fed that stays on hold still longer in the midst of an unprecedented nearly seven-year run of zero interest rates.

»Read more
  Monday, 31 Aug 2015 | 3:46 PM ET

Bullish day traders could signal bad stock omen

Posted By: Jacob Pramuk

Day traders took a decidedly bullish stance last week, but the optimism could point to more short-term turmoil for stocks.

Equities traders put 6.8 percent of assets into U.S. leveraged long exchange-traded funds in the past week, while pulling 7.9 percent of assets out of leveraged short funds, according to a Monday report from investment research firm TrimTabs. The weekly inflows were the biggest this year, and outflows were the largest in seven weeks.

The volatile funds move with or against an indicator like the S&P 500, and are designed to rise or fall two to three times as much as their benchmark. Flows last week, when stocks plummeted early on only to mount a sharp reversal, could signal more volatility in the near term, according to TrimTabs.

"Traders of leveraged ETFs, most of whom are day traders and retail investors, have turned extremely bullish on stocks, which is a negative sign from a contrarian perspective," TrimTabs said in the report.

»Read more
  Friday, 28 Aug 2015 | 2:07 PM ET

Investors have been making a mad dash to cash

Posted By: Jeff Cox

This has been the scariest week in stock market history, at least by one significant measure.

Though the market's certainly seen larger downturns, and in fact is on pace to end the week in positive territory, it's never witnessed investors flee for the exits in the manner they did since the first correction in four years briefly but violently came raining down on Wall Street.

In all, equity-based funds saw $29.5 billion in outflow for a week that featured gut-churning moves in the market, according to Bank of America Merrill Lynch and EPFR. The period included a 588-point loss in the Dow Jones industrial average on Monday, followed by another 205-point loss Tuesday that included a more than 600-point reversal, and then sharp gains Wednesday and Thursday.

During Tuesday's flip-flop alone, equity fund investors cashed in $19 billion of the $10.5 trillion or so of global equity funds under management. That was the second-largest daily redemption since at least 2007, according to BofAML.

In such times, it's typical for investors to gravitate from stocks to bonds. However, that hasn't been happening.

»Read more
  Thursday, 27 Aug 2015 | 2:11 PM ET

China's 'QT' is the real global economic threat

Posted By: Jeff Cox

Investors have been agonizing over how big a threat China poses to the global economy, but they may be looking in the wrong place.

China's stock market has tumbled following stratospheric gains that peaked in June, while economic data indicate that the nation is likely to fall short of its 7 percent growth expectation.

What matters more than either metric, though, is China's plan for retooling its economy, from one focused on industrial and housing growth atop piles of debt to consumer-based gains in consumption and investments in the stock market.

How they go about achieving that strategy, in part by reducing the amount of foreign debt purchases, is what could have more impact than anything else.

"There is a strong case to be made that it is neither the selloff in Chinese stocks nor weakness in the currency that matters the most," George Saravelos, forex strategist at Deutsche Bank, said in a note to clients. "Instead, it is what is happening to China's FX reserves and what this means for global liquidity."

In 2003, China began a "reserve accumulation" program that amounted to the equivalent of $4 trillion, which exceeds even the $3.7 trillion or so in a similar quantitative easing program the Federal Reserve initiated in 2008 and ended in October 2014.

During China's massive QE run, it increased its U.S. Treasury holdings by a factor of 10—from $120.7 billion in 2003 to $1.27 trillion in June 2015, according to the latest U.S. Treasury data. All that buying pushed it past Japan in the global lead for holders of American debt, while keeping U.S. yields low and producing, except for the financial crisis, a flat yield curve.

»Read more
  Wednesday, 26 Aug 2015 | 12:33 PM ET

Seven reasons why the market has gone totally nuts

Posted By: Jeff Cox

There have been so many factors influencing the market's twists and turns now that it's easy to lose count.

Let's, however, take a look at seven that seem to be the most prevalent influences of the rapid-fire price action lately.

1. Price discovery

The notion that the marketplace actually can find a rational price, absent the influence of meddling central bankers, seems almost quaint. But we could be in the beginning stages of true price discovery as the Federal Reserve keeps the monetary printing presses shut down and prepares, at some point, to normalize interest rates.

Following the market correction that put the S&P 500 12.5 percent off its 52-week high, the index's price-earnings ratio has fallen into line with historical norms near 16. In short, the market may finally have come to grips with the notion that in an economy struggling to grow more than 2 percent, a multiple of 18 is a little expensive.

Couple that with a market that hasn't corrected in nearly four years, and you've got some key ingredients for volatility.

"What I think we're seeing is a typical late-stage bull market in which there are precious few shock absorbers for the market to withstand even a modest negative impact," said Scott Clemons, chief investment strategist at Brown Brothers Harriman. "When something happens, the market reaction is going to be magnified."

2. The Fed

Fed actions seem like low-hanging fruit at this point, but the logic is hard to dispute.

The S&P 500 had gained more than 7 percent from Jan. 1, 2014, until Oct. 29, which was the day the U.S. central bank ended the third round of quantitative easing, a monthly bond-buying program that swelled the Fed's balance sheet to $4.5 trillion and jacked up the stock market index by nearly 200 percent.

Since the end of QE3? The market's down about 4 percent. Pretty simple, maybe too simple, but hard to ignore.

3. China

China's economy is in flux, and central planners are desperately trying to use policy to soothe market fears that the nation is heading into a deep and prolonged slowdown.

In keeping with point No. 1 here, China spooked a fragile market that might, at less lofty valuations, have been able to withstand a growth shock to the world's second-largest economy.

"Recent developments in China simply catalyzed a much-needed and overdue valuation correction in the U.S. stock market," S&P Capital IQ analysts Michael G. Thompson and Robert A. Kaiser said in a note. "To be sure, investors need to be concerned with market liquidity issues, anticipated corporate earnings growth and China's economy, but the market correction witnessed this past week was a necessary valuation correction that simply needed a catalyst."

What China leads to on a longer-term basis is hard to gauge, though some perspective is probably in order.

"The real broader view here is this is a natural correction in a broader bull market, not indicative of a broader recession," Liz Ann Sonders, chief investment strategist at Charles Schwab, said in an interview. "In terms of the averages, we've had much sharper corrections inside the market at the industry level, the individual company level. You can't just look at what the averages are telling you."

»Read more
  Tuesday, 25 Aug 2015 | 3:23 PM ET

Much of Wall St still believes in Sept rate hike

Posted By: Jeff Cox

If it's true that the market hates uncertainty, than the Federal Reserve is on its way to becoming public enemy No. 1.

Wall Street can't seem to make up its collective mind about when the U.S. central bank is going to start raising interest rates, with strategists and economists stuck on September and traders focused on a later date, possibly not until 2016.

The latest salvos in the intensifying debate came from Citigroup and JPMorgan Chase, both of which opined Tuesday that the first rate hike in nine years likely will come next month.

"Notwithstanding the declining probability for a September move priced in the fed funds market, signs of market containment and lack of prolonged global systemic fallout implies the September timetable for a Fed liftoff remains," William Lee, head of North America economics at Citigroup, said in a note to clients.

»Read more
  Tuesday, 25 Aug 2015 | 1:43 PM ET

Did stocks hit bottom? Your 8-point checklist

Posted By: Jacob Pramuk

Markets sensed relief Tuesday after a string of brutal sessions, but stocks could tumble again before truly bottoming out, according to one strategist.

Major U.S. averages spiked Tuesday morning in the wake of a three-day drubbing in which the Dow Jones industrial average lost nearly 1,500 points. But based on some key indicators, whipsaw trading could persist before stocks touch their lows, said Nicholas Colas, chief market strategist at Convergex.

"Our indicators show that U.S. equity markets are still in for more volatility in the days ahead," Colas wrote in a note Tuesday.

Read MoreHistory may point to a sharp market bounce

He outlined conditions that eight metrics may have to meet before stocks find "a near-term bottom."

  • Crude oil prices

U.S. benchmark WTI crude would need to avoid new lows for "at least a week," Colas contended. It plunged more than 5 percent Monday to settle at $38.24 a barrel.

"With a close at $38, oil is well below the $40 level we think divides market sentiment on a growing versus contracting global economy," Colas said.

The commodity rallied more than 3 percent in trading Tuesday, nearing $39.50 per barrel.

»Read more
  Tuesday, 25 Aug 2015 | 2:43 PM ET

That currency hedge craze is getting hammered

Posted By: Jeff Cox

One of the year's most popular trades is losing steam in a hurry as the currency landscape suddenly looks a lot different.

Currency hedging had been the hottest thing going, with exchange-traded funds focusing on expected developments around the world attracting billions in investor cash.

But as dynamics change, the anticipation that the U.S. dollar would continue to strengthen against its global peers is in doubt, and so are the accompanying trade positions.

For instance, the euro has lost as much as 13 percent against the dollar in 2015 as forex traders bet that the European Central Bank would be easing its monetary policy as the Federal Reserve was taking actions to strengthen the greenback.

»Read more

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