It’s been a relatively quiet session, but there is still meaningful action including:

Resolve

Before the market opened, warnings from Macys (M) and American Airlines (AAL) drove equities lower. I was bracing for a multi-hundred-point drop in the Dow Jones Industrial Average. Stocks started the session under pressure but found footing early to rally higher.

Buyers Emerging

Yesterday, shares of Constellation Brands (STZ) were crushed, down 22 points or 8% for the session.  Downgrades and lower share price targets continue this morning, but Goldman thinks the selling is overdone and raised its rating to “buy” making Constellation one of the biggest winners today.

Seeking Value

Although safe haven sectors Real Estate and Utilities are best performing, there has been lots of buying in Material and Industrial names.

S&P 500 Index	0.00%
Communication Services (XLC)	-0.16%
Consumer Discretionary (XLY)	-0.49%
Consumer Staples (XLP)	+0.49%
Energy (XLE)	-0.33%
Financials (XLF)	-0.04%
Health Care (XLV)	-0.23%
Industrials (XLI)	+0.48%
Materials (XLB)	+0.35%
Real Estate (XLRE)	+1.18%
Technology (XLK)	-0.19%
Utilities (XLU)	+0.95%

 

Since that Christmas Eve drubbing, the investing pendulum has swung from panic selling to opportunistic buying, and the bias has shifted to the upside. 

This is good stuff, indeed.

Infectious stuff, indeed.

Meanwhile, the market is hanging on every word of Jay Powell being interviewed by his old boss, David Rubenstein of Carlyle.  Right now, he hasn’t said anything to harm the market.

Key observations:

Recession

• Normally comes from two sources.
  • Inflation is running so high the Federal Reserve hits the brakes.  This admission that the Fed has and can trigger recessions is intriguing coming from the Chairman of the Federal Reserve.   
  • The other source or trigger for recession comes from excessive leverage in the system boiling over.

China

• Country economy is weakening but has another year of solid growth.  Notably, there have been “rounds” of efforts to stimulate the Chinese economy.

Trade Battle

• There is not much visible evidence that higher tariffs and the trade battle have harmed the U.S. or Chinese economy.  Moreover, if we get fairer trade deals, it would be great for the world.  If not, it will eventually harm the global economy.

Recent Weakness

• In the beginning of fourth quarter, worries began about the growth of the economy, which was reflected in financial market uncertainty.  Ironically, Jay Powell didn’t mention his speech at the beginning of the fourth quarter (October 3, 2018); maybe that was the spark.  Just saying.

Greatest Worry

• Powell expressed confidence about the U.S. economy but says slowing global economic growth is his main “worry.”

 

 

 

 

 

 

 

 

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