Friday was another disastrous session for the stock market, which exhibited resolve for most of the day. The Dow was up 150 points before buyers vanished and sellers stepped up to the plate.

Selling quickly went from a trickle to an avalanche. 

Lots of reasons for anxiety, including recent signs from the bond market that keeps flashing a potential recession is around the corner. These developments wrecked financial stocks over the last two days.

Then there’s the Facebook fiasco -the biggest loser of the week saw things get worse after the House Energy and Commerce Committee officially requested company founder Mark Zuckerberg to make a trip to Capitol Hill to testify. 

Without leadership from financials or technology, the stock market became a rudderless ship.

American companies with a large exposure to China took it on the chin this week:

• Deere & Co (DE) -9%
• 3 M (MMM) -9%
• Caterpillar (CAT) -7%
• Apple (AAPL) -6%

So, we finished the week with the blue-chip Dow Jones Industrial Average in correction territory after the worst week since January 2016.

If you remember, that was the sell-off that came after Janet Yellen stood up to Wall Street and raised interest rates. That selloff got her mind right, and she played ball for the rest of her term.

I point this out because I think all the selling last week was manufactured by Wall Street to force President Trump to blink on the trade war. Note: the Dow Jones Industrial Average lost 1,200 points in only four hours of trading in the last two sessions, and almost 1,500 points in just six hours of trading within the final two hours of the last three sessions.

An Offer the White House Couldn’t Refuse to Ignore

In the absence of leaving a severed horse’s head in the White House bedroom, the titans of Wall Street are willing to sever the rally to send the same message.

The Titans of Wall Street Show Their Displeasure:

Wednesday, March 21, 2018

24,929 2:05PM

24,682 4:00PM

-247 points

Thursday, March 22, 2018

24,411 2:00PM

23,957 4:00PM

-454 points

Friday, March 23, 2018

24,105 1:50PM

23,533 4:00PM

-572 points

 

The Dow Jones Industrial Average broke an important support point, while the S&P 500 is right there at a critical point that could become a trapdoor.

I will update new parameters after the close today.

Fear Sells

Wall Street and the Media are going to stoke enormous fear this week, even as they print articles that should make everyone worried about China; not only are they forcing companies to manufacture there, and steal/take intellectual property, but they’re also now creeping into boardrooms to make major decisions.

Washington Post January 28, 2018:

American and European companies involved in joint ventures with state-owned Chinese firms have been asked in recent months to give internal Communist Party cells an explicit role in decision-making, executives and business groups say.  goo.gl/8ybhye

We are being ripped off in plain sight, and still, the elites warn against fighting back.

Fear Tactics: China Will Sell All Our Debt

China doesn’t own all of America’s debt, and it’s unlikely they would dump such debt as their own total debt level is 250% of their gross domestic product (GDP).  For the record, here are the top owners of America’s $21 trillion in debt:

• $5.6 trillion intra-governmental
• $2.5 trillion Federal Reserve
• $1.7 trillion mutual funds
• $1.2 trillion China
• $1.0 trillion Japan
• $663 billion U.S. banks
• $553 billion private pensions

Sector to Watch

Technology stocks are looking very attractive.  Ironically, they were down on Facebook’s follies; there’s also the Trade War, but many aren’t impacted because of highly intrusive demands or simply being blocked by China’s authorities:

• Facebook – Blocked
• Alphabet/Google – Blocked
• Netflix – Very limited access
• Amazon – Very limited access
• Apple- $18 billion sales but only number five market share

Epilogue

The Trump Administration is examining tariffs on $50 to $60 billion in Chinese imports, while China retaliates with potential tariffs of $3.1 billion on fruit, nuts, seamless steel, and some pork products. And yet, the stock market loses trillions in value from sell programs that kicked in every time the session seemed calm and a sell-off was averted.

Last week, Wall Street Titans were more upset than the Chinese Emperor.

Today’s Session

Lots of things going on this morning, including reports the US and China are in talks to ease trade tensions.  The media will frame it as averting a trade war. I will frame it as winning the trade war, or at least, mitigating significant losses.

The National Association for Business Economics hiked its fiscal outlook from its December estimates.

• GDP: 2.9% from 2.5% and 2.7% in 2019
• Unemployment: 3.8% from 3.9%
• Inflation: 2.2%
• Deficit: $775 billion (FY2018) and $1.025 trillion in 2019

I am looking for more entities to raise GDP estimates this year, as the focus returns to tax and regulatory cuts, and sharp improvements in consumer spending and business investment.

Comments

Christmas came early this year... Back the truck up! Ray Weldon on 3/26/2018 9:54:06 AM

As always, I appreciate your insight and dissecting of the media’s delivery and Wall Street’s one sided (short) view of US proactive actions. Bobby on 3/26/2018 12:52:33 PM

If I read your comments correctly, Charles. Wall Street is a fixed game. If the Financial Institutions can collude to force the hand of a duly elected President, what chance does the little guy have. Robert Gunyan on 3/26/2018 1:08:30 PM

little guy has amazing chance on the intermediate to long run...the day to day follies come with inherent risk for institutions as well and often we see them try to make amends quickly ....also it's also possible to make money off these manipulated swings although takes cool mindset Charles Payne on 3/26/2018 1:14:44 PM

Pleased you are bringing to light that China has tentacles in boardrooms. Also, your comments on Fox and Friends about Quarterly reporting vs longer term strategies was spot on. I experienced layoff from aerospace in 90s in part due to this. The SEC should write the rules to promote long term corporate strategies. Perhaps the boardrooms have swayed the SEC to serve their own interest at the expense of public interest. Your commentary is refreshing and has revived my hope for seeing corporations return to investing in R&D and steady growth. Thanks for that. John Barry on 3/29/2018 12:41:13 AM

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