I will be conquered; I will not capitulate.

- Samuel Johnson

Considered the greatest man of letters in English history, Samuel Johnson published 'A Dictionary of the English Language' in 1755. Despite his great knowledge of the human language, even Johnson would have grappled with the right words to describe yesterday's stock market session. Even though on his deathbed Johnson refused to capitulate, investors were throwing in the towel as fast as they could. The gyrations saw a 600 point swing by 10:00am and rebounds from down 370 and 470 points. Towards the end of the session, the NASDAQ entered the plus column, and while it failed to hold, the Russell 2000 finished up 1%.

The one percent felt like 100%.

The ride is just beginning as the market gets to add corporate earnings into the mix, including Netflix which had mixed results, but failed in the all-important ability: to increase net subscriber growth. The thing now is how much of a comeuppance is the news and reaction in the stock to management’s decision to increase the monthly membership fee by $1 to $8.99 for new customers? There’s no increase for those already on the service for 2 more years. It doesn't matter for those holding the stock.

EBay missed on revenue and earnings, but PayPal was solid.

American Express missed, but before we call it an indictment on the US economy, know that its American card services income was up 14% while its international service was unchanged. Below is a table of some of the key companies that reported yesterday after the close and this morning.

Company	Ticker	EPS (Actual)	EPS (Est)	Rev (Actual $M)	Rev (Est $M)
Netflix*	NFLX	0.96	0.91	$1,223.00	$1,408.79
American Express**	AXP	1.40	1.36	$8,329.00	$8,346.64
eBay	EBAY	0.68	0.67	$4,353.00	$4,364.68
Las Vegas Sands*	LVS	0.83	0.85	$3,533.12	$3,689.19
United Rentals	URI	2.20	2.12	$1,544.00	$1,513.03
Baker Hughes	BHI	1.02	1.13	$6,250.00	$6,290.30
Delta Air Lines*	DAL	1.20	1.18	$11,178.00	$11,119.00
Goldman Sachs**	GS	4.57	3.22	$8,390.00	$7,831.66
Mattel	MAT	1.01	1.03	$2,021.40	$2,197.03
Philip Morris	PM	1.39	1.34	$7,856.00	$7,616.22
United Healthcare**	UNH	1.63	1.52	$32,759.00	$32,791.45
Winnebago Industries*	WGO	0.48	0.47	$245.90	$243.02

                                                             ** = Dow Component;   * = Open WSS Idea

Home Sweet Home

The most curious action yesterday came from homebuilders and everything associated with real estate.  Lumber Liquidators had a huge session, but homebuilders like Ryland popped, and Zillow never wavered even when the entire market was engulfed in flames. There was good news on mortgage applications at the open with refinancing up 11% even as purchase apps dipped 1% for the prior week and 4% from a year earlier.

Rates on conforming loans were at their lowest point since June 2013.

After the bell, United Rental posted a very impressive earnings release creating a construction boom.  The company isn't a pure proxy for housing since it deals with commercial, but the news is encouraging nonetheless.

An Anecdotal Look

Speaking of encouraging, that might be the best word that could be said for the Fed Beige Book littered with "moderate" and "mixed" to describe the pace of the economy, better than the choice words to describe this stock market. Hey Sam, I'm with you, but it's an ugly ride.

Federal Reserve Beige Book – October 2014
Atlanta	Boston	Chicago	Cleveland
Growing at modest pace, outlook at large firms optimistic, retail sales improving, auto sales up, hospitality showed strong activity, residential real estate pricing ahead of last year, commercial real estate improving, manufacturing expanding, payrolls up	Mixed economic data, manufacturers cite weakness, retail sales flat to slightly positive, tourism robust, consulting and advertising quite positive, commercial real estate flat residential down, firms not really hiring, price pressures minimal	Growth remained moderate, business outlook optimistic for rest of year, consumer spending up, manufacturing production up and real estate up modestly, credit and cost conditions little changed, corn & soybean prices declined	Moderate expansion, manufacturing activity strong, demand for non-residential construction up, retail spend up over last year, coal production and shale activity little changed, freight volume robust, loans stable, credit higher, payrolls showed mild increase, prices for energy and ag declined
New York	Richmond	Kansas City	St. Louis
Economy slowed to modest pace, cost pressures widespread, prices rising at subdued pace, labor market improving except in manufacturing, merchandise mixed but on balance, tourism stronger, housing steady to stronger, loan demand leveled, delinquency rates down	Modest improvement, manufacturing stronger with new orders growing, inventories of finished goods higher, retail sales rose on pace, tourism robust, business lending unchanged, residential real estate improving at a slow pace, ag on time with some pricing up, labor market in demand	Moderate growth, optimistic on future activity, consumer spending up moderately and expectations for future sales positive, manufacturing grew, energy expanding, transports and high tech firms slow growing, prices growing modestly, certain labor shortages	Economy expanded at moderate pace, planned activity in manufacturing and services largely positive, retail sales positive, residential real estate market weak, commercial real estate mixed but construction has increased, lending activity increased
Dallas	Minneapolis	Philadelphia	San Francisco
Moderate growth, manufacturers reported increases in demand, retail and auto sales expanded, nonfinancial services and real estate activity remained solid, energy growing, ag conditions improving, upward price pressures eased slightly, employment held steading, outlook remains optimistic	Economic growth moderate, increased activity in consumer spending, tourism, commercial real estate, services, manufacturing and energy. Ag mixed, mining flat, construction and residential real estate decreased, labor market tightening, wages modest, prices subdued	Modest growth, few shifts in growth rates, service sectors growing, retailers growing slightly, manufacturing modest growth, commercial and residential real estate slightly overall growth, loan volumes up, credit quality improving, anticipates moderate growth over 6 next months	Moderate improvement, price and wage inflation modest, retail sales grew slightly, demand for business and consumer services increased, manufacturing activity picked up, ag conditions mixed, real estate advanced but residential real estate varied, loan demand increased moderately

Today’s Session

 Equity futures actually began the early morning in positive territory, but the financial media got to yapping about Ebola and down stocks have come. There was a pause as economic data and key earnings releases came out... They were all great, yet down the market is going again. Initial jobless claims came in at 264,000 - the lowest level in 14 years. This doesn't translate into jobs overnight, but at some point, circumstances will see new jobs and higher wages.

I thought the Goldman number was fantastic, but the stock is lower. This will be a rollercoaster - if we're lucky.

The real issues of European deflation and slowing global economy is still the biggest real threat to the economy and stock market longer term, so the good news is that's being handicapped, even if it's not what's being talked about.

Today, we have to see yesterday's lows hold, and that would mean significant pain early in the session.

Comments

Maybe the market will become accustomed to the daily Ebola news as it did with the daily Ukraine news. Jay on 10/16/2014 12:02:40 PM

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