Morning Commentary
The headlines say it all. The Dow and S&P 500 are now down for 2018, and the NASDAQ is in the midst of plunging like it hasn’t in more than a decade.
It was a bizarre world session that saw stocks seesaw back and forth, as investors avoided getting hit with potentially bad news by taking solace in the names they knew intimately beyond the market. The thing is many of these names have already had bad news and not great guidance.
Still, there is something comforting during the heightened market turmoil with owning stocks in companies that have survived much tougher challenges in the past. Big winners during the session were founded a long time ago.
Three Weeks of Hell
The deep selling began on cue with less than an hour left in the session on Wednesday. This is a classic period of panic where selling rallies have replaced buying dips. Market movement at this point has less to do with fundamentals, and more to do with uncertainties out of the hands or the control of executives.
One big question is Fed policy. I’m convinced nothing has hurt stocks as much as comments from Federal Reserve Chairman Jerome ‘Jay’ Powell on October 3rd, saying the Fed was a “long way” from neutral on interest rates and suggesting a lot more hikes were in the offing.
Powell Plunge |
October 3 |
October 24 |
Change |
Dow Jones Industrial |
26,828 |
24,583 |
-8.4% |
S & P 500 |
2,925 |
2,656 |
-9.2% |
NASDAQ |
8,025 |
7,108 |
-11.4% |
Earnings After Close:
Microsoft (MSFT)
Visa (V)
The biggest problem, as named by CEOs this earnings period, is the strong dollar, not tariffs.
Company CEO Alfred Kelly says business trends “remain intact” when not factoring in the strong dollar. Consequently, the FY19 revenue expectations are in the low double digits. In constant currency, it was a very good quarter for the company, particularly in the United States.
Credit & Debit Volume |
Total (billion USD) |
Change (constant currency) |
Asia Pacific |
596 |
+10.1% |
Canada |
72 |
+9.3% |
CEMEA |
264 |
+17.0% |
LAC |
230 |
+15.9 |
US |
1,078 |
+11.7% |
Europe |
567 |
+4.8% |
Ford (F)
There are several storylines with Ford, whose problems began a couple of years ago, resulting in market share losses and perilous situations in the United States and around the world. While there is increased evidence we hit the peak in auto (written about by everyone last year, and at the start of 2018), Ford’s woes are company-specific, and as a result, up to 70,000 workers could lose their jobs through 2019.
In the United States, wholesale is at 1,358,000 units, resulting in market share declining to 6.3% from 6.8%.
Profit/Loss by Region (million USD)
Chinese operations swung to a loss of $480 million, mostly as a reflection of the slumping Chinese economy.
The stock held up after the close in part because it’s already been hammered this year, and for many years as well. The stock enjoyed a post-Great Recession bounce (in part because they didn’t take a government bailout), but it’s been tough sledding since peaking on July 29, 2013.
Ford
There’s going to be a lot of noise, and a lot of misreporting on these reports and others. You should care mostly because we need to be on the prowl for embedded issues that have been in place for too long and could linger significantly longer. On the other hand, the market is oversold, but emotions are running high and investors are looking for a savior.
Looking at that MSFT report, I suspect when buybacks return, they will play a big role. At these levels, I bet we could see investors return quickly.
By the way, there have been an avalanche of upgrades amid this spiral. The price of many stocks isn’t the issue, and some are going to recover large swaths of ground quickly when they rebound, but the smoke must clear.
Today’s Session
The futures have been in the green all morning as the markets try and stage a bit of a comeback after yesterday’s shellacking. There are several pieces of economic data out.
Initial claims, although up slightly, are still indicative of a very tight labor market. For the week ending October 20, claims were up 5,000 to 215,000 and the 4-week moving average was 211,750, unchanged from the prior week’s 211,750. Continuing claims was 1,636,000, a decrease of 5,000, and is the lowest level since August 4, 1973, when it was 1,633,000. The prior week was revised up 1,000 from 1,640,000 to 1,641,000. The 4-week moving average was 1,646,500, down 6,750, and is the lowest level since August 11, 1973, when it was 1,627,250.
Durable goods orders for September increased 0.8%, exceeding the expectation for a drop of 1.9%, and is up three out of the past four months. Transportation and defense helped propel the orders higher. Ex-defense, orders dropped 0.6%. A key metric, core capital goods orders fell 0.1%. Shipments were up 1.3%.
The trade gap widened in September despite the jump in exports. The preliminary U.S. goods trade deficit was $76.0 billion (excluding services). Exports were up 1.8% ($2.5 billion) and imports increased 1.5% ($3.1 billion). Wholesale inventories rose 0.3% for the month compared to 5.1% in the prior year period. Retail inventories were up 0.1% and were up 3.1% from the previous year.
Tweet |
3/28/2024 1:39 PM | Fruitful Quarter |
3/28/2024 9:50 AM | LISTEN TO THE MARKET |
3/27/2024 1:40 PM | Mostly Higher |
3/27/2024 9:32 AM | U-TURN? |
3/26/2024 1:08 PM | Everything Is Up |
3/26/2024 9:42 AM | TAPPED OUT (I HOPE YOU AT LEAST GOT A T-SHIRT) |
3/25/2024 1:33 PM | Not A Mutiny |
3/25/2024 9:35 AM | STAYING THE COURSE…BEYOND TECH |
3/22/2024 12:56 PM | Toll on Americans |
3/22/2024 9:38 AM | A TAD TIRED |
3/21/2024 1:55 PM | Building on Gains |
3/21/2024 9:30 AM | A COMFORTING FED |
3/20/2024 1:33 PM | Pivotal Moment |
3/20/2024 10:00 AM | HERE COMES THE FED |
3/19/2024 1:33 PM | Picking Up Steam |
3/19/2024 9:35 AM | RUMBLINGS IN THE BOND MARKET |
3/18/2024 1:48 PM | Mag 7 is Back |
3/18/2024 9:39 AM | THE PARTY IN SAN JOSE WILL BE LIT |
3/15/2024 1:38 PM | Realtors Settle |
3/15/2024 9:33 AM | AN UNEASY PAUSE |
3/14/2024 1:43 PM | Sticky Inflation |
3/14/2024 9:48 AM | GOING TO A GO-GO |
3/13/2024 2:16 PM | Taking a Breather |
3/13/2024 9:51 AM | ALL SO EPIC |
3/12/2024 1:42 PM | Marching Higher |
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