It was another session of tough sledding as only two S&P sectors finished in the green on Monday, and only four are higher year-to-date. Investors nibbled at several down swoons but focused on fewer names; they have lost faith in the value or fundamental valuation propositions.

Without a doubt, the continued weakness in Financials (XLF) is a serious red flag for the entire market.  Interestingly, broad market worries about more rate hikes that were supposed to be the catalyst for banks. However, even after strong earnings results from Goldman Sachs (GS) and Morgan Stanley (MS), they looked terrible.

Ironically, one story that was released yesterday suggested Goldman Sachs will begin to focus on banking customers with checking accounts, credit cards, and mortgages. It sounds like they want to be a bank.  

Sector Performance	Day	YTD
Information Technology	+0.8%	+10.6%
Consumer Discretionary	+0.4%	+8.7%
Consumer Services	-0.8%	-6.6%
Industrials	-0.3%	-2.0%
Utilities	-0.6%	+6.3%
Consumer Staples	-0.8%	-1.9%
Health Care	-0.8%	+11.9%
Materials	-0.8%	-11.1%
Energy	-1.1%	+1.1%
Real Estate	-1.4%	-4.8%
Financials	-2.1%	-3.3%
S&P 500	-0.4%	+3.1%

Speaking of interest rates, it turns out President Trump is not the only chief executive concerned about a rogue Federal Reserve. According to the Conference Board CEO Confidence report, interest rates are at the top of the list, well-above tariffs, which are manageable in ways that the Fed’s miscues are not.

This as we await the first cut on the Third Quarter (3Q18) Gross Domestic Product (GDP), which the Atlanta Fed is currently modeling at 3.9%. That might be considered a Goldilocks number after the quarter began with hints of a 5.0% GDP. This would be the right mix of steady growth, but it might not rattle the Federal Reserve.

Of course, worrying about how long a Goldilocks economy will last is a high-end problem. Before we get to the GDP on Friday, investors need to know that this is the week where the big names deliver.  And big tech is at the plate with its heaviest hitters.

Tech Murderers Row:

• (MSFT) Microsoft
• (GOOG) Google
• (AMZN) Amazon
• (INTC) Intel Corp
• (V) Visa

Foreign Affairs

Today, we expect Turkey to release grisly photos and perhaps the audio and video recording of the murder of Jamal Khashoggi. Already, Canada has said it will suspend weapons sales (I’m not sure if it’s more of a virtue signal than an economic sacrifice) and, Germany is mulling over a similar decision.

There will be pressure on President Trump to take dramatic action against Saudi Arabia, and I think this administration will. Meanwhile, we will listen intently to the Lockheed Martin (LMT) conference call after the company post results this morning.

Caravan

The Central American caravan, while an economic issue, is also one of those events that build momentum into a potential final showdown. I think it’s a great chance to argue for more centers to handle asylum-seekers, and to find a compromise to build the wall and deal with the Dreamers. 

The Question of the Day

President Trump says he will curb or stop aid to the countries the migrants have originated from. My question of the day - should President Trump stop sending money without more cooperation?

Honduras	Guatemala	El Salvador
837.9	1406.5	887.4

Today’s Session

The markets are under big pressure this morning as initial reactions to earnings is to sell good news and abandon ship on bad news.

The Dow Jones Industrial futures have been under pressure all morning and collapsed after the back to back release of financial results from 3M (MMM) and Caterpillar (CAT).

MMM

Management at MMM is blaming the strong dollar for coming up short, but most of the company’s business segments experienced declining top line growth.

That said, the biggest takeaway is currency issues resulted in a loss of $0.05 rather than the expected gain of $0.10.  That fifteen-cent swing would have been a sizable earnings beat otherwise.

MMM Segment Revenue	US Dollar	FX Translation
Industrial	+2.2%	-2.1%
Safety and graphics	+7.0%	-2.2%
Health care	-2.8%	-1.7%
Electronics	-4.8%	-1.0%
Consumer	-3.4%	-1.4%

CAT

The company posted its best third quarter ever as revenues of $13.51 billion came in above consensus of $13.28 and earnings of $2.86 beat the street by a penny.   Operating margin surged to 15.8% from 8.7%.  The shares plunged on the news in part to management’s comments on higher cost, but this selling looks excessive.   We will listen to the call.

CAT  Segment Revenue	Change	CAT  Industry Revenue	Change
North America	+24%	Construction	+16%
Latin America	+10%	Resources	+35%
EAME	+6%	Energy	+15%
Asia	+28%	Financial	+9%

Other notable results

LMT

Lockheed Martin (LMT) posted profit and sales that were well ahead of what analysts expected. The firm reported a 17% rise in quarterly profit, while net sales surged a strong 16%.

In addition, the company guided its outlook higher; the firm expects sales for FY18 of about $53 billion, compared with previous guidance of $51.6 billion to $53.10 billion and sales in 2019 to rise 5% to 6% above its 2018 outlook. The stock is traded and out of the green in premarket hours amid the broad market selloff and is currently in the green.

LMT Segment Revenue	Change
Aeronautics	+20%
Missiles and Fire Control	+16%
Rotary and Missions Systems	+14%
Space Systems	+11%

MCD

McDonald’s reported earnings of $2.10 per share, which beat consensus by $0.11 and were 19.31% above a year ago.  Revenues declined 6.7% (however it beat consensus by $80.00 million) due to the negative impact of the company’s strategic re-franchising initiative.   

Global comparable-store sales rose 4.2% and comparable-store sales in the U.S. were up 2.4%. The growth was attributed to menu price increases and higher average checks.  MCD saw strength in U.K., Italy, France, Australia, and Japan.  Some of the growth can be attributed to the modernizing of restaurants around the world.    MCD’s is up 4.0%.

Comparable-store sales	Change
International Lead Markets	+5.4%
High Growth	+4.6%
Foundational	+6.0%

Verizon (VZ) also reported earnings that beat this morning, and it is one of the two Dow components that are up on the day.

Technical View

Even non-technicians probably felt the market would have to re-test the low put in on October 11, (which also held on July 23), so the key number on a closing basis is 25,052.

 

Comments

If our hard earned tax dollars are going to line corrupt leaders pockets, then end the aid. Cheryl on 10/23/2018 8:07:03 AM

Keep up the good work Charles I talked to one of your guys awhile back tells me your mom was a good lady and it shows in you're adit use on Fox keep up the good work Jim mungai on 10/23/2018 10:00:47 AM

I do not know how or how much we give to those countries but there should be clear stipulations to make sure the money is spent to help their people be educated and safe from crime in their country. I don't think our aid should be handed over to another government without our direct supervision. Howard Kirschner on 10/23/2018 10:05:48 AM

He absolutely should cut aid al ambrose on 10/23/2018 10:11:59 AM

No doubt in my mind about that. I also believe that President Trump has to close the border to stop this nonsense. Go Trump! Robert Clanton on 10/23/2018 10:14:10 AM

We should stop all aid to any country that doesn’t prove that 100% of that money goes to aiding the people and not lining the pockets of corrupt leaders of those countries receiving aid from the US. Jason on 10/23/2018 10:19:10 AM

In my opinion cutting off the aid the number trying to come will likely increase. Unfortunately giving the aid to various governments isn't getting to where it needs to go so it ends up not helping. Maybe we should redirect the aid. Bypass whatever governments. Brian Bigelow on 10/23/2018 10:27:59 AM

We are not getting back enough for what we are spending. Clearly the money is not help those who feel they need to flee. Doug Eatough on 10/23/2018 10:29:49 AM

Charles, president Trump should cut off ALL AIDE TO THOSE COUNTRIES.USE THE MONEY TO GET USA VETERANS OFF THE STREETS AND MEDICARE HELP, AS WELL AS USA CITIZENS. AS FOR THE MOBLIE MOB EACH SHOULD BE ARRESTED ,AND PUT TO CHARGES FINES THEY WORK OFF LIKE INMATES IN PRISON WAGES. OR BE SHIPPED BACK AT THOSE COUNTRIES EXPENSE. EACH ASYLUM SEEKER PASSED THRU 4COUNTRIES INCLUDING MEXICO.IF THEY TRUTHFULLY WANTED ASYLUM START IN WHICH EVER COUNTRY THEY ARE IN. APPLY USA EMBASSSY, GET VIDEO JUDGE DATE,TO SEE IF THE CAN QUALIFY FOR USA CITIZENSHIP. ITS IT'S PURE GREED AT USA COSTS, THAT WE ALREADY HAVE BROKEN. APPLY WITH SKILLS ,MERITS, YES WE NEED THOSE IMMIGRANTS, PROVE TRANSFERRABLE SKILLS NEEDED.ELSE WE SHOULD START A BOMBING RANGE ALONG BORDER FOR MILITARY BASES TO USE AS FIRING RANGES. J on 10/23/2018 10:33:39 AM

Immigration has turned into a mob scene at our borders - Central America is soon to be empty except for it's corrupt leadership living it up on USA's tax money sent to help the same people that are crossing our borders. Double whammy on the tax payer! Are we being invaded? Yes. Patricia Heng on 10/23/2018 10:58:44 AM

Yes US should STOP giving $ to those countries. I don’t understand why we give them money in the first place. There’s enough people in the US that need money Shirley Moroni-King on 10/23/2018 11:07:36 AM

Aid should never have been given to any country. It is corruption that has populace in poverty... Who would believe that the corrupt governments would do any thing else but mis-appropriate all that funding... Andrew B Newallo on 10/23/2018 11:23:31 AM

President Trump has been right on so many issues -- his call on this one will be spot on too. Even without the details, it's safe to say the Golden Rule applies. It's all about the ethic of reciprocity; and from a negotiating point of view, he who holds the gold makes the rules. Steve P on 10/23/2018 11:31:50 AM

Regarding your question as to whether we should stop giving money to countries from which thousands of their citizens are migrating to the US illegally or asking for sanctuary, my answer is yes, if they are not trying to stop it. Any money we give to these countries should be used for the purpose of helping the US achieve its goals, either directly or indirectly. Our government is operating in the "red" as it is, so I don't think we can afford to give our scarce taxpayer money away because it "feels good." Also, like others have said, any money we provide to foreign countries should be audit-able so we know that it's not going into the bank account of corrupt political leaders. George Elliott on 10/23/2018 11:35:06 AM

More info on this caravan from Glenn Beck who has done some research on it. I found it on Facebook. I don't think it's been posted to Utube yet. https://www.facebook.com/GlennBeck/videos/1806377119399620/ George Elliott on 10/23/2018 11:44:32 AM

Yes, stop sending tax money to these loser countries. Gary Brandin on 10/23/2018 12:08:11 PM

After a weeks warning shut the southern border until this mess is resolved. Yes, drastic and much pain as well as cost but it is time. Maybe pay for this with the money we would have given as aid. tomn3386 on 10/23/2018 12:45:56 PM

Yes, President Trump should definitely stop aid to these countries. Grace Kaehler on 10/23/2018 1:44:50 PM

Stop aid to countries that do not work with us. Send the military to the border and in fact setup bases all along the border!! dipak on 10/23/2018 1:57:51 PM

Yes I think President Trump should withhold money from the countries that do not cooperate with stopping the flow of illegal people trying to come to the USA illegally. Wanda Grag on 10/23/2018 2:07:26 PM

Yes, I'm tired of the US being the world's policeman, financier, and benefactor while protestors disparage and spit on us. It's time there are repercussions for being a bad world citizen and ungrateful. Scott Heck on 10/23/2018 2:49:40 PM

I think we should review all of our financial aid, make sure the citizens of the recipient countries know from where our aid is coming, leverage aid for our political advantage, and reduce or cease aid to Central American countries. Joseph P. Blake, Jr., Esq. on 10/23/2018 3:31:33 PM

Absolutely aid should stop to these countries. We have millions of homeless and hungry in this country. We can use that money to help AMERICANS and build the wall! Karen Townsley on 10/23/2018 3:56:16 PM

Yes, no chance any good for USA comes from these lousy countries. Mitchell Schiff on 10/23/2018 4:51:19 PM

Giving money can cause resentment, even hatred by the recipient, as it highlights their inability to manage their own affairs. Instead of tossing money at them, contribute to specific results-oriented projects where they are required to take the laboring oar, and then see the good results of their own efforts. Patricia Flynn on 10/23/2018 5:57:25 PM

Of course, it's not going to happen. Too many future Democratic voters. Eric Wagoner on 10/23/2018 6:52:43 PM

Yes, it is time to terminate support to "free loaders" James E. Herriott on 10/23/2018 6:54:08 PM

The money goes straight into the pockets of the politically connected. Otherwise these people would NOT be fleeing poverty. Mansions sitting next to hovels is a message to us to stop sending money. Sy on 10/24/2018 1:01:42 AM

We think the borders should be closed, nobody coming from Mexico, so Mexico will learn to help us when they have to help us Velia Lunsford on 10/24/2018 9:32:44 PM

The President's first job is to protect the citizens.He is doing just that.Hit them in the wallet. Thomas Myers on 10/28/2018 8:27:46 PM

WE ALREADY HAVE US CITIZENS LIVING ON THE STREETS IN MY TOWN !!! IF WE DON'T HAVE THE MONEY TO HELP THEM , THEN WHERE ARE WE GOING TO GET THE FUNDING TO HELP THE ILLEGALS, IT SEEMS TO ME , WE ARE ONLY ADDING TO THE PROBLEMS THAT WE CANNOT SOLVE!! robert g duranleau on 10/30/2018 2:55:12 PM

at one time paying countries was useful ,it bought goodwill,gave us trade ,port usage and held back communism ,in todays world things have changed,it fiances corruption and ideals we do not accept.cut those payments jerry mccombs on 10/31/2018 11:27:30 AM

Yes. The president should stop aid to countries that do not help us in any way, and those that hinder us. And he should also stop funding the UN. Rachel on 10/31/2018 3:47:22 PM

Cut aid appropriate to their effort. Cliff Blackstock on 11/6/2018 6:49:37 AM

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