Yesterday’s session reminded me of the old saying “it was like pulling teeth.”  On one hand, the market wouldn’t stay down. On the other hand, the upside moves couldn’t gain traction, as the lack of conviction from either side was apparent.  Investors are waiting and waiting for the right signals, including more earnings reports.  

It was encouraging to see the broader indices move higher without Technology in the leadership role.  Conversely, I’m very impressed with the action in the Industrial sector.   A couple of my favorite names (United Rental- URI and JB Hunt-JBHT) posted financial results and opened lower only to reverse and power much higher, which is a clear sign of future confidence in the domestic economy.

Health care continues to rebound after a year of pressure from political saber rattling and the avalanche of legal troubles.   Sans those questions and anxieties, this could still be the cheapest sector in the market.   Of course, pressure to lower drug prices and the potential of the entire medical industry being blown to bits by a Warren presidency are dark clouds.

(For the record, I think at this moment she would win the democrat nod but not the White House.)

S&P 500 Index	+0.28%
Communication Services (XLC)	+0.59%
Consumer Discretionary (XLY)	+0.26%
Consumer Staples (XLP)	+0.46%
Energy (XLE)	+0.07%
Financials (XLF)	+0.07%
Health Care (XLV)	+0.74%
Industrials (XLI)	+0.49%
Materials (XLB)	+0.26%
Real Estate (XLRE)	+0.66%
Technology (XLK)		-0.20%
Utilities (XLU)	+0.25%

Manufacturers See a Deal

The Philly Fed Manufacturing report came in slightly below consensus, but inside the data is a development that I think is bigger than the headline miss – it looks like manufacturing sees a deal on the China trade front.

All the major categories, including general activity, new orders and work week, are sharply lower this month, and conversely, sharply higher looking six months out.

Right now manufacturers are lowering work weeks because they don’t want to lose high skilled talent, as it would cost a lot more to train new workers in the future.

Philly Fed Manufacturing Report	Current		Future
	October	September	October	September
General Activity	5.6	12.0	33.8	20.8
New Orders	26.2	24.8	39.9	35.2
Shipments	18.9	26.4	42.9	41.3
Work Week	10.8	13.0	12.5	5.3

You don’t have to be a chartist to see the sharp and very rare divergence in between how manufacturers feel now versus their optimism about the future.  My interpretation is many are seeing a true trade deal being signed, sealed and delivered in the next six months.

China’s Stumbling Economy

China’s third quarter GDP number was released last night and landed with a thud.  The official 6.0% (wink-wink) rate of growth is the lowest in almost 28 years.

Officials state that 90% of the downside pressure came from the trade war.  Otherwise, the print would have been 6.5%.  The news makes a deal more likely even if the public bluster suggests this news was no big deal.

Today’s Session

Most of the big-name earnings releases have beaten the street, which makes it surprising the futures aren’t higher.  Some of that might have to do with anxiety over today’s Fed speakers offering the last glimpse into a potential rate decision (after today the Fed goes into blackout).

KO

• Earnings $0.56 vs $0.56 estimate
• Revenue $9.51b vs 9.42b estimate

Organic sales growth 5% vs 4.1% estimate

• North America +3%
• Asia +3%
• EMEA +4%

Reaffirmed FY19 guidance, organic revenues ~5%, EPS growth -1% to +1%. CAPEX $2.2 billion vs $2.4 billion prior guidance and $2.24b consensus

AXP

• Earnings $2.08 vs $2.02 estimate
• Revenue $10.99B vs $10.94B

Reaffirmed guidance Adjusted EPS $7.85-$8.35 vs $8.10 estimate

SLB

• Earnings $0.43 vs $0.40 estimate
• Revenue $8.54B vs $8.5B

In connection with the preparation of its third quarter financial statements, Schlumberger (SLB) recorded a $12.7 billion pretax charge primarily relating to the impairment of goodwill, intangible assets, and fixed assets.

SYF

• Earnings $1.60 VS $1.13 estimate
• Net interest income $4.4 billion beats by $970M

Purchase volume grew 5% to $38.4 billion; and average active accounts grew 2% to 76.7 million

KSU

• Earnings $1.94 vs $1.79
• Revenues $747.7M vs $734.39M

Comments

There is nothing in China's present make-up that suggest hey will be going for a deal any time soon... They are an extremist (negatively) economic player, there priority is holding on to power and expansionism... This is just a battle, and China's history is one where they are willing to accept massive losses... So do not hold your breathe waiting for them to capitulate... Andrew B Newallo on 10/18/2019 10:58:13 AM

Charles, thank you, you are always on the mark, we agree with URI, & J.B. Hunt, & BA as a hold for 10yrs or longer. Thank you again Charles PAYNE for upbeat, insightful, your style keeps FBN #1 CHEERS for another 12 yrs. You keep the news FACTS based . We commend the first all female spacewalk (go USA).,& DEMS say president Trump keeps women below a glass ceiling, the women together fixed and repaired a part, while Spacewalking together, this has to be a HISTORY making issue, but doubtful any PROPAGANDA news will associate the date under president Trump's ADMINISTRATION show any credit for it happening under his return to space program , leadership and space force policy. Please Charles PAYNE & FBN, PLEASE investigate What HAPPENED to Elijah Cummings? Why ALL the DEMS secrecy in his DEATH, and What caused it at 68 yrs old? NOTHING ABOUT IT? He disappeared from Congress for a few days, then reports of his DEATH?. But NOTHING on details, being 1 of 3 chairman trying to imagine, create, make up, (pull a Adam Shittf from LIES), to act as EVIDENCE of a reason to impeachment of president Trump. Or a reason for investigating for an impeachment without ANY CHARGES, NOT any held vote on it, denying REPUBLICANS any access, LITTERALLY. Also DENYING president Trump his rights, or face his accusers, question Adam Shittf , as to lieing, & why he met ,and constructed another fake witness TESTIMONY, etc. Did HRC meet with Elijah Cummings before he died? Or BRENNAN, CLAPPER, Comey, something happen , but it is NOT being reported, as media is FULLY focused on OMISSION OF FACTS, ,nothing positive of President Trump Accomplishments. Thank you Charles PAYNE & FBN . We hope the people of BALTIMORE will be saddened for their loss, but hopefull for THEIR cities future. Ed on 10/18/2019 1:01:03 PM

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