It was another rollicky session for the market on Monday, as the Dow Jones Industrial Average spent most of the session crossing the unchanged line. I was impressed that successive rallies took out the highs from the previous rally attempt. However, the markets sold off as news was crossing the wire that the Saudi royal family was readying a report owning up to their security forces committing the atrocious murder of Jamal Khashoggi.

Apparently, the report will say the murder wasn’t the intention of those that green-lighted the operation but rather committed by overzealous operators who went rogue.

Widows & Orphans

Even at the highs of the session, investors were largely focused on safe havens sectors that used to be called “widows and orphans.”  Consumer Staples consists of large companies without any pricing power. However, household names with steady cash flows joined Real Estate and Utilities that rallied higher on the day.

Industrials were higher on strength in defense contractors, airlines, and rail operators. After the close, J.B. Hunt Transport Services (JBHT) posted financial results that largely beat the Street, but the operating margins for the two largest business units were lower.

S&P 500 Index	-0.59%
Communication Services (XLC)	-0.39%
Consumer Discretionary (XLY)	-0.23%
Consumer Staples (XLP)	+0.61%
Energy (XLE)	-0.84%
Financials (XLF)	-0.45%
Health Care (XLV)	-0.69%
Industrials (XLI)	+0.19%
Materials (XLB)	-0.33%
Real Estate (XLRE)	+0.62%
Technology (XLK)	-1.64%
Utilities (XLU)	+0.47%

The big loser of the session was Technology. It’s remarkable that the degree of selling in these tech names, which seemed unstoppable just a month earlier. There was no doubt these stocks would give some back at some point, but this was a real free fall. From a long-term macro point of view, the party is just getting started in new tech:

• Cloud
• IOT
• Big Data
• AR/VR
• Autonomous Cars
• Robots
• Learning Machines

Earnings Trends

We are following earnings consensus trends closely, and some are beginning to pull back, although most are still significantly higher than estimates three months ago. Ironically, Apple (AAPL) is still seeing improvements in its earnings consensus, but took it on the chin more than the rest of tech yesterday.

Big Tech Earnings Trends	Current	Week Ago	90-Days Ago
Facebook	$8.30	$8.32	$9.27
Apple	$13.72	$13.71	$13.25
Amazon	$25.32	$25.34	$20.22
Netflix	$4.36	$4.36	$4.65
Alphabet	$47.92	$48.01	$47.43
Microsoft	$4.93	$4.93	$4.61
NVidia	$7.99	$8.03	$7.87

After the close, Adobe (ADBE) updated its financials with revenue and earnings slightly below consensus but there was strong growth in all of their businesses (FY19 revenue +20% against consensus +19.3%).

• Digital Media +20%
• Digital Experience +20%

The addressable market is expected to edge to $108 billion in 2021 from $83 billion in 2020. 

Technical Hurdle

For technology and the NASDAQ, the key is getting back above the 200-day moving average on the chart, which means a close above 7506.

NASDAQ Composite

The S&P 500 has also tripped below its 200-day moving average after Friday’s rebound attempt fell short. The key number today is 2767. 

S&P 500

Today's Session

Earnings reports this morning are helping to lift the markets higher.  Goldman Sachs (GS), Morgan Stanley (MS), and Johnson and Johnson (JNJ) beat and are indicating higher. BlackRock (BLK) beat on earnings, but their sales missed and the stock is down by 4%.

Let's see if the market can build on the positive momentum into the open and on the day.

Comments

Hell yes. Charles those of us with glaucoma, &fighting cancer &chronic severe pain all benefit from CBD &CBO medical mj, not to mention pro athletes football head injuries, too many to list. Plus All the persons with non violent crime sentences or disqualified from jobs due to UA NOT PASSING, due to stupid law against medical MJ. All those people that went to jail for something that is legal in over 20states in USA already...so many taxpayers could be working, getting insurance, and adding a skill they aleady know.. Not to me ton it's a 200 billion dollar business that will just continue to GROW. Ed on 10/16/2018 10:05:40 AM

no---Alaska was the test state for years in the 1980's---they found younger and younger users over time. THC collects in fatty cells. John Cowger on 10/16/2018 10:33:26 AM

I'm concerned the killing of the reporter by the Saudis and the repercussions are going to greatly effect stocks negatively, am I overreacting? Andy mcleod on 10/16/2018 10:57:05 AM

The horse is out of the barn, and it's only a matter of time before the rest of the United States stops dragging their feet, as a new investor the question for me is how to capitalize on the market? This affects so many different areas of the market and it's hard to determine which areas to invest and when? scott a kates on 10/17/2018 9:22:15 AM

No to marijuana legalization. Miss you Charles at 6:00pm. Pat on 10/17/2018 6:34:43 PM

Yes madkins on 10/20/2018 8:59:19 PM

NO, NO & NO! DAVID L. BRUNDAGE on 10/22/2018 9:22:09 AM

Charles, its medical needs, taxes &jobs, even for former prisoners nonviolent criminals that served or reduced drug crimes,possession. Hey many as already know how to grow &trim,weight it& sell it. Now the skin is the government..lol seriously it is a multitude win ,multiple jobs, less crime no cartel money( just gov.which dems are worse).plus medical needs for vets,pain r relief not opioids, and damn good things can bring people together. Thanks Charles PAYNE & FBN. J on 10/22/2018 10:46:12 AM

yes heidi s calvin on 10/22/2018 1:19:51 PM

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