Showing posts with label Boeing. Show all posts
Showing posts with label Boeing. Show all posts

Friday, March 20, 2020

Stocks Bounce As News Suggests Possible, Readily-Available COVID-19 Treatments May Be Effective

Considering the extreme levels of volatility lately, Thursday's trading was relatively calm. Though the VIX remained elevated, it came down from over 80 to near 70 as the day commenced.

Stocks initially were lower, but found solid footing and ramped higher by mid-morning, the NASDAQ leading the way with speculators eyeing stocks that had cratered over the past three weeks, and began establishing positions at levels they considered to be bargains.

The S&P, Dow, and NYSE composite followed gamely but trailed the red-hot NASDAQ by more than a percentage point throughout the session. It was the first in many days that stocks had not ventured more than three percent in either direction for the last nine sessions, so some might argue that volatility is cooling, though still near record levels.

Moving 900 points from the morning lows to the close, the Dow's move was impressive, considering it has been absolutely damaged the prior session with Boeing (BA) leading the way down on Wednesday with a loss of some 25%. The aircraft manufacturer was down a mere four percent on Thursday, and is sporting a positive sign in pre-market trading Friday.

Thursday's unemployment claims numbers were 281,000, up by 71,000 over the prior week, but were for the week ending March 14, so much of the coronavirus-related data had not been tabulated, but will appear next Thursday.

Goldman Sachs’ Jan Hatzius wrote in a note to clients on Thursday night, “state-level anecdotes point to an unprecedented surge in layoffs this week.” The analyst claims that figures for the week ending March 21 will show initial claims rising to roughly 2¼ million, which would be the largest increase in initial jobless claims and the highest level on record. That's not unlikely, as major cities - San Francisco and New York in particular - are at or near lockdown levels of activity with many workers furloughed or otherwise idled by warnings or edicts from city and state officials.

Philly Fed’s manufacturing activity index crashed to an eight-year low of -12.7 in March from a three-year high of 36.7 in February. This follows the NY Fed’s Empire State Manufacturing index, which also dropped at a record pace to an 11-year low.

In a research report published on Thursday, Bank of America economists predicted the U.S. economy would lose 3.5 million jobs and GDP plummeting at a 12% pace in the second quarter, also probable figures given the severity of the reaction to COVID-19.

What's keeping Wall Street open for business and possibly ending the week with a positive tone are actions taken by the Fed which are too numerous to list, but include opening swap lines to other central banks, injecting billions of dollars via repo and QE, and wide open credit lines to primary dealers.

Also, President Trump's mention of a possible treatments for the virus in his now-daily news briefing, has been getting a great deal of attention. Specifically, the president mentioned a number of possible drugs that showed promise in tests, including Gilead Sciences' remdesivir (Money Daily mentioned Gilead's product back in January as a promising treatment and the stock has responded with a run from 63 to 78 since then) and chloroquine, an inexpensive drug long used to treat malaria, which is widely available and has proven to be an effective anti-viral in clinical trials done recently in China and France.

Thus, while COVID-19 is still making its way through the population, potential treatments are promising and - in the case of chloroquine - readily available in mass quantities at extremely low cost (less than 10 cents per pill in some countries). Also emerging is data from South Korea, Italy, the United States, and elsewhere that show the vast majority of cases that result in death are people over the age of 60 with underlying health conditions such as heart conditions, diabetes, or otherwise compromised immune systems.

That's the kind of news Wall Street traders can get behind, because, if successful treatments become widely available, people could be back at work within weeks, rather than months. While various governments - including California, which late Thursday announced a state-wide stay-at-home recommendation - are trying to limit transmission via social distancing and "soft" quarantines, communities that develop "herd immunity" quickest will be fastest to recover, meaning that the virus spreads readily and renders most of the population immune.

As the opening bell approaches, stock futures have lost some of their momentum, but still point to a positive opening Friday, which also happens to be a quadruple witching day. defines quadruple witching as "...a date on which stock index futures, stock index options, stock options, and single stock futures expire simultaneously. While stock options contracts and index options expire on the third Friday of every month, all four asset classes expire simultaneously on the third Friday of March, June, September, and December."

These dates are normally volatile, but should fit snugly into the current trading regime.

At the Close, Thursday, March 19, 2020:
Dow Jones Industrial Average: 20,087.19, +188.29 (+0.95%)
NASDAQ: 7,150.58, +160.74 (+2.30%)
S&P 500: 2,409.39, +11.29 (+0.47%)
NYSE: 9,461.30, +76.71 (+0.82%)

Wednesday, March 18, 2020

Stocks Gain Tuesday, Busy Fed Monetizes Stocks Amid Spreading COVID-19 Virus: Boeing Wants $60 Billion

On the heels of Monday's knee-knocking losses, Tuesday's trade to the upside was somewhat predictable, in that a dead cat bounce usually follows massive losses, so the major indices continued along their path of one step forward, two (or three, four, or five) steps back.

There has not been back-to-back gains on the majors since a four-day stretch from February 4-7, as stocks rose relentlessly to new highs, the general top coming on February 12, in itself a surprising date, since the coronavirus was already in the process of devastating China and its economy, already having disrupted the global supply chain. How could investors have been so short-sighted? Greed has a certain blinding element to it, as does the opposite market reaction, fear, which has taken firm hold in the US markets and around the world.

Tuesday's events surrounding the viral outbreak were more of the standard fare of shutdowns, closures, government-imposed rules, as Europe closed its borders, every nation inside the EU locking down, as did the city of San Francisco, soon to be followed, most likely, by a similar "shelter in place" order in New York City, hinted at by Mayor Bill DeBlasio, shutting down all commerce for the foreseeable future.

The global case count has no exceeded that of mainland China and continues to outpace it. China's figures are still suspect, as they claim to have all but conquered the virus, the number of new cases since February 18 having grown by only 7,000, leveling off in the 81,000 range, a minuscule percentage of China's 1.4 billion population. However, China did lock down more than half of the country, especially in the province of Hubei, he original epicenter. There's probably never going to be any way to verify China's figures, since they announced Tuesday that reporters from The New York Times, The Wall Street Journal and The Washington Post would have their media credentials revoked, essentially barring them from reporting on anything.

With the March FOMC meeting underway, the Fed was very busy, boosting QE, extending credit for commercial paper to businesses large and small, and, after the market closed, re-instituting a loan facility to primary dealers from the 2008-09 crisis.

Officially called the Primary Dealer Credit Facility, or PMDF, the program will supply primary dealers of equities and other financial instruments loans of up to 90 days for at least the next six months, essentially monetizing stocks by allowing the 24 primary dealers to use stocks as collateral for short-term funding.

Also making headlines were Secretary Steven Mnuchin and President Trump, who were touting a plan to send $1000 checks to most Americans, specifically singling out millionaires, who, according to their statements, would not receive any handouts.

Boeing (BA), besieged by their own errors, is asking for a $60 billion bailout from the federal government. Boeing stock has fallen from a high of 440.62 to 124.14 currently, but the aerospace and airplane manufacturer should not be afforded such generosity, given that the company has been derelict in its corporate money management. Over the past 12 years, Boeing has repurchased at least $40 billion of its own shares, so, if it is in need of capital, it should just sell those stocks in the open market.

Boeing's stock buyback scheme worked to enrich shareholders and top executives as the share price soared as available stock was taken out of circulation and dividends were increased. Instead of reinvesting their profits, Boeing executives showered themselves with lavish bonuses and stock options. Now that a rainy day has arrived, they come begging for money from US taxpayers.

The same is true of major airlines, who spent almost all of their free cash flow on stock buybacks since the Great Financial Crisis of 2008-09. It's a travesty beyond compare.

While stocks held their own private party, other parts of the economic landscape obviously didn't share in the celebratory mood. Crude oil was sent to fresh lows, WTI crude cratering to $26.95 on Tuesday, and falling even more, to $26.04, in early Wednesday trading.

Gold and silver have been ravaged for days, though gold rallied sharply on Tuesday while silver fell to new lows, sending the gold-silver ratio to unimaginable heights. The last spot silver price in New York was $12.56 per ounce. Gold settled Tuesday at $1527.90, leaving the ratio at 121.65, an unbelievable figure, far and away the highest level in the 5,000 years of gold and silver being used as money.

As investment grade (IG) spreads have blown out to crisis levels, the treasury curve steepened dramatically on Tuesday, as the short end was bought and longer-dated maturities were sold. The total spread from 1-month bills out to 30-year bonds increased from 109 basis points on Monday to 151 Tuesday, the 30-year yield spiking 29 basis points to 1.64%, the 10-year note yielding 1.02%, also 29 basis points higher. At the short end, the 1-month bill yields 0.12%, falling from 0.25% on the day.

Thus, with millions of Americans at home for the next two weeks, with no sports, little work, and high anxiety, high finance drama continues to play out daily in the markets, which, for better or worse, remain unfettered and open for business.

The world is witnessing a financial calamity in real time.

At the Close, Tuesday, March 17, 2020:
Dow Jones Industrial Average: 21,237.38, +1,048.86 (+5.20%)
NASDAQ: 7,334.78, +430.19 (+6.23%)
S&P 500: 2,529.19, +143.06 (+6.00%)
NYSE: 10,063.36, +495.83 (+5.18%)

Sunday, January 26, 2020

WEEKEND WRAP: Coronavirus Affecting Markets; Turbulent Week Ahead; Oil Already Whacked

Last week, as the the wealthy and infamous gathered for the annual World Economic Forum (WEF) in Davos, Switzerland, markets were focusing on more compelling domestic and international issues, primarily, the impeachment trial of President Donald J. Trump and the outbreak of the deadly coronavirus which has spread outward from its source in mainland China, now reaching around the world, particularly in the Northern Hemisphere, where nearly all the developed nations are anchored.

While the impeachment hearings were less impactful, being that the first few days of the trial consisted of one session for rule-making and three days of Democrat managers from the House of Representatives reiterating their tired claims from months of investigations stemming from a single phone call, the spread of a killer virus caught everybody's attention.

The number of deaths officially reported by the Chinese government grew from 16 on Wednesday to 23 to 41 to 56 by Sunday. As the week progressed, the number of reported cases grew considerably - by Sunday, nearly 2,000 in China alone - along with the number of countries discovering outbreaks. By Sunday morning, instances of reported cases had been registered in France, South Korea, Japan, Nepal, Thailand, Singapore, Vietnam, Taiwan, Australia, and the United States.

Similar to the SARS (severe acute respiratory syndrome) outbreak, which killed more than 750 people in 2002-2003, the threat is that this particular virus is spreading at a much faster rate as transmissibility is increasing.

By Monday morning, the toll will likely exceed 90, but there's widespread speculation that China has been and continues to understate not only the number of cases reported, but also the death toll.

This is the kind of thing some students of the dark science of economics might consider a "black swan," an unusual event or occurrence with a low probability that nobody sees coming. Already, the coronavirus outbreak has affected markets, but none more profoundly than oil. With travel bans in effect already in some Chinese cities and many presumably taking precautions to avoid crowds and people who may be infected, the world's second-largest user of oil and distillates is bound to experience a sharp demand decline that will affect prices globally.

WTI crude fell, over the course of the week, from $58.58 per barrel to $54.19, a decline of 7.5%. Brent dropped from an opening at $65.65 on Monday to $59.85 by week's end, losing nearly nine percent.

Stocks were also hit, as increasingly dire stories continued to mount over the course of the week, limiting upside on all exchanges, and squelching rallies on Tuesday, and especially in the US on Friday, when the Chinese government announced the rising death toll and cancellation of many Lunar New Year festivities, the biggest holiday in the country.

China, already on the brink of an extended financial downturn, saw severe damage to equity markets.

If the coronavirus continues to spread to other countries and becomes a pandemic, declines on the major indices (the Dow was down for the fourth straight day as of Friday) could turn what appeared as a minor fluctuation into an avalanche. Limiting movement, be it out of fear or by government dictates, would seriously hamper economic activity anyway, and, if the contagion becomes global in nature, which it appears to be doing, the effect may be long-lasting.

So, that's how normal operating markets turn into dungeons of doom. There is no silver lining, other than, you guessed it, silver and gold, both of which turned in the opposite direction from stocks, both tumbling on Tuesday but gaining the remainder of the week. Gold finished at $1571.60 per ounce; silver closed out the week at $18.10 per ounce. There is likely to be a further, faster advance in precious metals should the virus continue to spread.

With an FOMC meeting up next week (January 28-29) bonds saw high demand, moving interest rates on treasuries to their lowest levels since October, 2019. The 10-year-note closed out the week at 1.70% yield, with the 30-year bond closing at 2.14%.

Also upcoming in the week ahead, a slew of earnings reports, many of them notable as most will be for the fourth quarter of 2019 and the full year.

On Monday, homebuilder D.R. Horton (DHI) and telecom Sprint (S) get the earnings parade started. A loaded Tuesday has Lockheed Martin (LMT), 3M (MMM), Phizer (PFE), United Technologies (UTX), Nucor (NUE), and PulteGroup (PHM). Apple (APPL) and eBay (EBAY) report after the close.

On Wednesday, Dow components Boeing (BA), AT&T (T), and McDonald's (MCD) present, along with Mastercard (MA), General Electric (GE), and Dow Chemical (DOW). Tesla (TSLA), Microsoft (MSFT), Facebook (F), and PayPal (PYPL) report after the close. Thursday's offerings include some titans. Coca-Cola (K), UPS (UPS), and Verizon (VZ) report prior to the opening bell. Amazon (AMZN) and Visa (V) are up after the close.

Prior to Friday's market open, ExxonMobil (XOM), Chevron (CVX), and Caterpillar (CAT) close out the earnings deluge.

It's going to be a busy week with plenty of engaging, diverging stories. In case that's not enough, the impeachment trial could conceivably wrap up by Friday, possibly sooner, the Super Bowl is Sunday, February 2nd, and the first presidential primary, the Iowa caucus, convenes on Monday, February 3rd.

If the coronavirus continues to spread, it's not likely to slow down, so this coming week could be an opportunity to take profits and/or shed losers before markets get any ideas about tanking. Depending on how severe the virus becomes, how quickly and how far it spreads, appropriate defensive actions may be entertained.

With stocks close to all-time highs, there's hardly a case to be made for buying at this point, which, in itself may provide good enough reason for some spirited selling.

At the Close, Friday, January 24, 2020:
Dow Jones Industrial Average: 28,989.73, -170.36 (-0.58%)
NASDAQ: 9,314.91, -87.57 (-0.93%)
S&P 500: 3,295.47, -30.07 (-0.90%)
NYSE: 13,978.47, -123.57 (-0.88%)

For the Week:
Dow: -358.37 (-1.12%)
NASDAQ: -74.03 (-0.79%)
S&P 500: -343.15 (-1.03%)
NYSE: -123.57 (-0.8*%)

Wednesday, September 19, 2018

Traders Shrug, Stocks Rip Higher

Bear market in Emerging Markets? No problem.

Upcoming Fed rate hike? Why worry?

Trade war with China? Nah.

The general attitude on Tuesday - following a somewhat dismal start to the week - seemed to be the old "buy the dip" mantra that boosted stocks high for most of the last ten years in the extended bull market.

As long as nothing major appears to disrupt the global money flow, traders in New York seem to be content buying stocks at just about any price, any multiple, any day, any time.

Tuesday's trading was a textbook example of momentum trading on the absence of news, good, bad, or otherwise. Stocks got off to a solid start and added to their gains throughout the session, with the markets in lockstep for a change.

The Dow was led higher by a wide swatch of companies, from Boeing (BA) to Nike (NKE), to Pfizer (PFE), Intel (INTC), and Home Depot (HD), all of which gained more than one percent on the day. 25 of 30 Dow components were winners, with just five losing ground.

Blue chips closed at their best level since the end of January, eclipsing the losses incurred in February and March, which are now fading into the deep recesses of trading memory. The Dow Jones Industrial Average is less than 400 points from making a new all-time high. Such a move would negate the Dow Theory bear market signal issued in April, as the Dow Transportation Index has already broken above its previous high.

Dow Jones Industrial Average September Scorecard:

Date Close Gain/Loss Cum. G/L
9/4/18 25,952.48 -12.34 -12.34
9/5/18 25,974.99 +22.51 +10.17
9/6/18 25,995.87 +20.88 +31.05
9/7/18 25,916.54 -79.33 -48.28
9/10/18 25,857.07 -59.47 -107.75
9/11/18 25,971.06 +113.99 +6.24
9/12/18 25,998.92 +27.86 +34.10
9/13/18 26,145.99 +147.07 +181.17
9/14/18 26,154.67 +8.68 +189.85
9/17/18 26,062.12 -92.55 +97.30
9/18/18 26,246.96 +184.84 +282.14

At the Close, Tuesday, September 18, 2018:
Dow Jones Industrial Average: 26,246.96, +184.84 (+0.71%)
NASDAQ: 7,956.11, +60.32 (+0.76%)
S&P 500: 2,904.31, +15.51 (+0.54%)
NYSE Composite: 13,091.98, +60.07 (+0.46%)

Monday, September 10, 2018

Dow Losses Widen, Deepen; Top Four Components Slashed

Stocks flopped around like fish out of water Monday, as investors found nothing on which to hang a positive spin or trade. The Dow gave up early 100+ point gains to finish lower for the second straight session and the fifth time in the last seven.

The NASDAQ put up a better fight, but still could not find adequate footing to stage any meaningful rally. Stocks are unrealistically valued as the business cycle - despite commentary and central bank intervention suggesting that it has been abolished - heads into the latter stages and nears overcapacity.

It is, after all, September, and there's plenty on the minds of individuals and investors, not the least of which being odious debt levels in corporate, government and individual accounts. With interest rates on the rise and winter approaching, concern may be more toward preservation of capital than appreciation of such. Risk is rising for obvious reasons and the global economy is groaning from severe stresses placed upon it by a rising dollar, which has become the go-to currency and the US the trading capitol of the world.

More than a few economists and analysts had predicted a second half slowdown, so, after gains in July and August, September may be the market's Waterloo, forcing the hands of even the most ardent bulls. This week also marks the ten-year anniversary of the fall of Lehman Brothers, as well as another reminder of the 9-11 tragedy of 2001, tomorrow.

Somber as the mood may be, American hearts and minds are forever looking ahead, so a slow week or even a down month is unlikely to unhinge the usual giddiness of the bulls. It's been nearly 10 years since the market retreated in a serious manner, but current conditions don't augur well for a sudden collapse. Rather, a bumpy road lower may be the preferred path as the signs of decay over the past week are beginning to make more of an impact.

The Dow can't seem to handle prosperity over 26,000. It has closed above that level a handful of times (three, to be exact) in the last week of August, but beat a hasty retreat once it was revealed to be overbought.

Monday's losers were an odd assortment of UnitedHealth Group (UNH) 259.73, -8.55 (-3.19%); Boeing 341.86, -7.42 (-2.12%); Traveler's 127.60, -2.49 (-1.91%); and, Apple (AAPL) 218.33, -2.97 (-1.34%). These are diverse businesses, the only possible connection being finance, though that's dubious, at best. Adding in Goldman Sachs (GS) 231.91, -2.00 (-0.86%), the other common thread is that Boeing is the most expensive stock on the index, UNH second, GS third, and Apple, fourth. The Travelers (TRV) is a distant 13th-most expensive, the selling in those shares possibly tied to potential losses from Hurricane Florence, which is taking dead aim at the coastal communities of the Carolinas and due to make landfall later this week (likely Thursday morning).

On a positive and somewhat perplexing note, the Dow Jones Transportation Index closed at a new record high, picking up 206 points to finish at 11,554.08. This is not ordinary trading, with the Dow down, the NASDAQ up, along with a record on the transports. Either traders are playing momentum-chasing games or something unseen is occurring out of sight from regular investors. The odd trading patterns that have persisted since the sudden February fallout are bizarre and without explanation. Adding in the commodity shakedown, markets are sending mixed signals which only those with fingers firmly on triggers can apparently comprehend.

On world indices, the Far East continued lower, Europe didn't decline, but gains were marginal, and South American markets returned to their downward trend with gusto.

With a slow start to the week, it's difficult to image a good result as the grind toward the September 25-26 FOMC commences.

Dow Jones Industrial Average September Scorecard:

Date Close Gain/Loss Cum. G/L
9/4/18 25,952.48 -12.34 -12.34
9/5/18 25,974.99 +22.51 +10.17
9/6/18 25,995.87 +20.88 +31.05
9/7/18 25,916.54 -79.33 -48.28
9/10/18 25,857.07 -59.47 -107.75

At The Close, Monday, September 10, 2018:
Dow Jones Industrial Average: 25,857.07, -59.47 (-0.23%)
NASDAQ: 7,924.16, +21.62 (+0.27%)
S&P 500: 2,877.13, +5.45 (+0.19%)
NYSE Composite: 12,929.01, +17.89 (+0.14%)

Thursday, June 7, 2018

How the Dow Divisor Helped Industrials Blast Through 25,000

The Dow Jones Industrial Average isn't really an average at all.

If it were, one would take the price of each of the 30 components and divide the sum by 30. That would yield the average price. Since that number would barely move the needle on a day-to-day or minute-by-minute basis, something more was needed to satisfy the voracious appetite of investors. Ergo, the Dow Divisor.

The Dow Divisor is 0.14523396877348. Since it's a fraction of a point, the divisor doesn't actually divide anything. Rather, it's a multiplier, which serves to enhance the gains of the higher-priced stocks and minimize the losses of lower-priced shares. That explains why declines on the Dow are serious events. It's rigged to go higher regardless of volume.

One can clearly see - using such a valuation (weighted) method - why tin-hat theories abound about market manipulation. The Dow leads the market, not only in the US, but around the world. A big move on the Dow triggers the herd instinct to buy other stocks.

Boeing (BA) was the biggest percentage gainer on the day, adding 11.46 points to 371.56. But, thanks to the divisor, Boeing contributed nearly 79 points to the overall Dow gain, despite less than 4.5 million shares changing hands.

By contrast, General Electric was the big loser, dropping 1.16%. But, since GE is the lowest-priced stock on the index, by far, at 13.64, the point loss was a mediocre 0.16. The magic of the divisor meant GE's loss to the overall index was a measly 1.10 points, despite the fact that more than 62 million shares were traded, more than the total number of shares in the three next most-widely traded stocks, Pfizer (PFE), Microsoft (MSFT), and Intel (INTC) combined.

Only four Dow stocks traded lower on the day. In addition to GE, Wal-Mart, Pfizer, and The Travelers finished down, though modestly. Also contributing to the day's massive spike were 3M (MMM), Goldman Sachs (GS), and United Health (UNH), each trading above 200 per share. Their combined advance of 10.77 points were good for another 74 Dow points, despite the fact that they were three of the four least-traded stocks on the exchange (Pfizer was the second least-traded).

So, four low volume stocks were good for 150 points on the Dow. The other 22 gainers were cannon fodder against the bear case as the Dow Industrials outpaced the other indices by a wide margin. The day's gain resulted in the highest closing price on the Dow since March 13.

Happy Dow divisor days!

A couple of good reads on the Dow divisor can be found here and here.

Dow Jones Industrial Average June Scorecard:

Date Close Gain/Loss Cum. G/L
6/1/18 24,635.21 +219.37 +219.37
6/4/18 24,813.69 +178.48 +397.85
6/5/18 24,799.98 -13.71 +384.14
6/6/18 25,146.39 +346.41 +730.55

At the Close, Wednesday, June 6, 2018:
Dow Jones Industrial Average: 25,146.39, +346.41 (+1.40%)
NASDAQ: 7,689.24, +51.38 (+0.67%)
S&P 500: 2,772.35, +23.55 (+0.86%)
NYSE Composite: 12,778.23, +119.53 (+0.94%)

Sunday, June 3, 2018

Weekend Wrap: May Ends Dull, Jobs Data Sends Stocks Higher 1st of June

The see-sawing of the markets continued for another week ending in bifurcated manner, with the Dow and NYSE Composite suffering losses while the S&P and NASDAQ posted gains.

In particular, the Dow has seen 12 weeks with positive results, versus 10 weeks of losses, resulting in a relatively flat index, down a mere 84.01 points since the 2017 year-end close (December 29) of 24.719.22, the gains all made in January, when the Dow topped out at 26,616.71 on January 26. The losses were mostly confined to the correction in February and another poor showing in March. April and May both were positive for the Dow, though those small gains still leave the index nearly 2000 points below the all-time high.

Two stocks - Boeing (BA) and Apple (AAPL) have kept the Dow from sliding back into correction territory. Since April 30, Apple gained 15%, Boing added 23 points, or about seven percent, though both stocks have basically flatlined since mid-month.

On the holiday-shortened week, the Dow recorded losses on Tuesday and Thursday (May 31), and gains on Wednesday and Friday (June 1), the latter upswing largely attributable to the better-than-expected June non-farm payroll release, getting the new month off to a flying start.

As has been evident since the February and March selloffs, this has become a trader's market, with individual stocks and sectors favored over pure index plays. All of the major averages have gravitated around their respective 50 and 200-day moving averages, the divergences seldom taking any of them far above or below those critical lines of support and/or resistance.

With summer coming on fast, volume continues to wither away, with select stocks getting the bulk of the trading action. Bullish deniers of the Dow Theory change from April will be hard-pressed to make much of a case for buying stocks during the hot weather, as the Dow's all-time high fades farther and farther away.

Dow Jones Industrial Average June Scorecard:

Date Close Gain/Loss Cum. G/L
6/1/18 24,635.21 +219.37 +219.37

At the Close, Friday, June 1, 2018:
Dow Jones Industrial Average: 24,635.21, +219.37 (+0.90%)
NASDAQ: 7,554.33, +112.21 (+1.51%)
S&P 500: 2,734.62, +29.35 (+1.08%)
NYSE Composite: 12,620.83, +93.69 (+0.75%)

For the Week:
Dow: -117.48 (-0.48%)
NASDAQ: +120.48 (+1.62%)
S&P 500: +13.29 (+0.49%)
NYSE Composite: -14.12 (-0.11%)

Tuesday, May 22, 2018

Dow's Big Bear Market Rally Led Higher By Overvalued Boeing Shares

Monday's rally had everybody singing the praises of Treasury Secretary Mnuchin and the "on hold" status of trade negotiations with China. Supposedly, this gave the markets an "all clear" signal to buy more risk assets at elevated price levels (remember, the Dow is only off 6-7% from the all-time high of 26,616.71, January 26).

On the surface, a 300-point gain on the Dow provides a reason to cheer the market and the economy. Underneath the hood, however, the gears are grinding, sparks are coming from various frayed electrical components and the engine is sputtering and coughing. Any description of the US economy as anything better than sputtering should be viewed with resolute skepticism.

The big move on the Dow was fueled mostly by a rise in Boeing (BA), which was up 3.61% and is trading at the nosebleed level of 363 per share. For perspective, two years ago Boeing was trading at 127 per share. So, that's a triple for a company that is one of the more mature companies in America. Absurdly, Boeing is carrying a simple PE ratio of 27, a number normally reserved for high-growth companies.

Meanwhile, the seeming were out in force, disregarding the reality of a slowing, or, at best, sputtering economy (despite what you're reading or hearing) and stocks still well below the previous highs earlier in the year.

Monday's rally was nothing more than a media-inspired bear market rally. It had all the elements: only a few stocks led the way, the media was cheerleading all along, it was on a Monday.

Whatever your perspective of the market, there is little evidence that it is not massively overbought at any level above Dow 20,000. Trade wisely.

Dow Jones Industrial Average May Scorecard:

Date Close Gain/Loss Cum. G/L
5/1/18 24,099.05 -64.10 -64.10
5/2/18 23,924.98 -174.07 -238.17
5/3/18 23,930.15 +5.17 -233.00
5/4/18 24,262.51 +332.36 +99.36
5/7/18 24,357.32 +94.81 +194.17
5/8/18 24,360.21 +2.89 +197.06
5/9/18 24,542.54 +182.33 +379.39
5/10/18 24,739.53 +196.99 +576.38
5/11/18 24,831.17 +91.64 +668.02
5/14/18 24,899.41 +68.24 +736.26
5/15/18 24,706.41 -193.00 +543.26
5/16/18 24,768.93 +62.52 +605.78
5/17/18 24,713.98 -54.95 +550.73
5/18/18 24,715.09 +1.11 +551.84
5/21/18 25,013.29 +298.20 +850.04

At the Close, Monday, May 21, 2018:
Dow Jones Industrial Average: 25,013.29, +298.20 (+1.21%)
NASDAQ: 7,394.04, +39.70 (+0.54%)
S&P 500: 2,733.01, +20.04 (+0.74%)
NYSE Composite: 12,804.01, +86.59 (+0.68%)

Wednesday, July 26, 2017

Stocks Unimpressed With FOMC Decision; Dollar Dashed

The Fomc wrapped up a relatively uneventful meeting Wednesday, keeping rates unchanged and saying little to nothing about winding down the Fed's bloated balance sheet.

After two hikes already this year, rates will almost surely remain on hold until December and an announcement that the Federal Reserve is ready to shed assets may come at the September meeting, according to knowledgeable experts on the subject. Having been sufficiently prepped and prodded, the Fed can feel some confidence that a beginning of an asset unloading program won't upset the status quo too awfully much.

The one kicker is that the wildly out-of-control federal government faces a potentially debilitating debt ceiling debate and a testy budget process in September, but that will come only after congress has taken a month's vacation, pending Obamacare replace and/or repeal legislation currently under consideration in the Senate.

Nothing the Fed does can accurately predict what the paid lackeys... er, prostitutes, er, politicians will do when the rubber meets the road in terms of the soon-to-be $20 trillion national debt. Chances are good that they'll punt, laying one deep and long, giving themselves room to survive the midterm elections in 2018. One person who does not have to suffer any kind of electoral fate in that year is President Trump, who is almost certain to have boisterous opinions on the matter of the debt ceiling and federal government budget.

There are wild card outcomes which the Fed is unable to predict no matter how deep or thorough their modeling, which raises the possibility for abrupt changes in policy, and the jokers dealt by the government are not the only potential surprises. Geopolitics - specifically, North Korea, Ukraine, Iran, or Syria - may play a role in future policies, as could any number of scenarios, from ECB jump-starting their own tapering, Japan failing to follow through with continued buying of equities, or, perhaps a war between China and India stemming from border disputes in and near the Himalaya mountains. Go figure.

As far as stock movements and reactions to the FOMC nothing-burger issued today, the markets basically were held in suspended animation afterwards with a slight bias to the downside.

The outsize gains on the DJIA were largely the result of Boeing's (BA) monstrous 9.2% spike today (biggest day for BA since 10/28/08), responsible for 132 Dow points. So, essentially, the remainder of the Dow was lower, only lifted higher by the flighty airline manufacturer. Only 13 Dow components were higher, 17 lower, led down by Nike and McDonald's, the latter having made new all-time highs just yesterday, which is alarming, since what the company passes off for food has recently reached new lows. Must be their outstanding customer service or something else casual consumers just don't see or understand. Share of MCD are massively overpriced, with earnings per share of 6.25 and a stock price of roughly 156 translating to a P/E of 25. Shareholders and executives (neither of which actually eat at any of their own restaurants) are "loving' it."

The dollar got whiplashed lower, sending (alarm bells) gold and silver higher. Also on the run is the price of crude oil, as the latest reports showed a massive draw, though gasoline inventories were built. Once more, the people actually using the stuff - drivers - just don't get it, apparently.

At the Close, 7/26/17:
Dow: 21,711.01, +97.58 (0.45%)
NASDAQ: 6,422.75, +10.57 (0.16%)
S&P 500 2,477.83: 0.70 (0.03%)
NYSE Composite: 11,964.92, -0.80 (-0.01%)

Tuesday, July 23, 2013

Dow at New Record Close, NASDAQ, S&P Down, Apple Beats, Revenues In-Line

New home sales for June will be out tomorrow at 10:00 am EDT. This follows Monday's release of existing home sales data which was lower than June a year ago.

Also out tomorrow, prior to the bell, are earnings from Boeing (BA), which is trading near all-time highs.

Apple (AAPL) somewhat surprised markets after hours, beating eps estimates of 7.32 per share with a 7.47 show. Revenues were basically in-line, at 35.30 billion, on estimates of 35.02 billion. I-phone sales were well ahead of everyone's estimates and is a real driver for the company, even though same quarter earnings last year were 9.32. Growth is slowing, but Apple is still mightily profitable. As an investment, it may not be such a great performer going forward, much of its growth having been due to founder, Steve Jobs, who passed away October 5, 2011. Apple must stop pretending and create new and exciting products, not an easy task.

Incidentally, Apple's stock leapt in after-hours trading, just seconds before the earnings release, in yet another example of how the market is rigged to insiders and dangerous for individual investors.

For an idea as to how out-of-whack the markets are, consider the new highs to new lows today, at 536 new highs to 38 new lows. That's an extreme reading - sure, we're at all-time highs - but that's when things usually turn, and turn this market will, though probably without much notice. Keep powder dry.

Dow 15,567.74, +22.19 (0.14%)
NASDAQ 3,579.27, -21.11 (0.59%)
S&P 500 1,692.39, -3.14 (0.19%)
NYSE Composite 9,659.63, +9.04 (0.09%)
NASDAQ Volume 1,577,547,250
NYSE Volume 3,369,484,500
Combined NYSE & NASDAQ Advance - Decline: 3435-3033
Combined NYSE & NASDAQ New highs - New lows: 536-38
WTI crude oil: 107.23, +0.23
Gold: 1,342.80, +6.80
Silver: 20.44, -0.064

Thursday, January 17, 2013

Dow Hits Five-Year High; Why Isn't Anyone Celebrating?

Money has to go somewhere, and today it went straight into equities, pushing the Dow to a five-year high.

Whether or not this euphoric advance was based on anything more than the Fed's continuing POMO operations remains to be seen.

Housing starts and building permits for December were figuratively "through the roof," though on Main Street America, people are wondering just who it is that is buying all these new homes.

In the real economy - the one that functions on dollars and cents, not swaps, repos, debt financing and accounting fantasies - it still feels like a recession. Stores are largely empty, incomes are still declining overall and the bulk of the US consumer class has just been hit with a 2% tax increase, thanks to the assembled dunces in congress and at the White House.

Unemployment claims today came in at a multi-month low of 335,000, though continuing claims increased from 3127K to 3214K in one week, so, something at the BLS isn't quite adding up, though that's largely been the case since 2006 or before.

The Philadelphia Fed index of economic activity printed a -5.8 for the current month, following a positive 4.6 in December. This reading comes on the heels of Empire Manufacturing (NY state) showing a -7.8 after a -7.3.

If none of this makes any sense to you, consider that Boeing (BA), after having all of their 787 "Dreamliners" (make that "Nightmare Flight") grounded by the FAA (note: this is after years and years of delays and missed deadlines), shares of the nation's top plane builder finished up 92 cents (1.24%).

Beyond that, ZeroHedge notes that if you strip out the gains made by Bank of America - the top performing Dow stock of 2012 - for releasing loan loss reserves (an accounting trick), the bank actually lost something on the order of $2.5 billion last year.

Regular readers (or at least those who check the stats at the bottom of each post) will take note that new highs - new lows has today reached the pinnacle of absurdity.

Even in the very, very, very best of times there were always more than eight stocks hitting new 52-week lows, it's only natural in a normal, competitive environment. The number of new lows since the first of the year has been hovering in the teems for the most part. The money gushing from the Federal Reserve to the primary dealers to the stock market is causing the most unbalanced market ever witnessed.

And the debt ceiling increase that needs to be approved, but just seems to sit there, like a 300000000-ton weight over the US economy, ah, don't worry about that. Our "leaders" will find a way to ix that, certainly, positively, without a doubt.

We live in Wonderland. Sadly, only those who pad their wallets on Wall Street get to be either the Cheshire Cat, Mad Hatter or Alice.

Dow 13,596.02, +84.79 (0.63%)
NASDAQ 3,136.00, +18.46 (0.59%)
S&P 500 1,480.98, +8.31 (0.56%)
NYSE Composite 8,766.54, +55.98 (0.64%)
NASDAQ Volume 1,734,349,250
NYSE Volume 3,966,953,250
Combined NYSE & NASDAQ Advance - Decline: 4628-1787
Combined NYSE & NASDAQ New highs - New lows: 525-8
WTI crude oil: 95.49, +1.25
Gold: 1,690.80, +7.60
Silver: 31.81, +0.268

Friday, October 19, 2012

Reality Catching Up to Wall Street on Earnings Misses, Fears

Around June, this author told a particularly self-absorbed, furtive individual that there would be a market "event" shortly before the presidential election, designed to offer the impression that the economy, under president Obama, was failing in multitudinous ways, designed to usher in Mitt Romney as the next occupant of the White House.

Until today, that prediction seemed somewhat unreasonable, as stocks have risen sharply during the summer months, but, as third quarter earnings - in addition to various warnings from the likes of the IMF and World Bank - are proving, the US and global economies are far from what anyone would consider healthy.

Today's sharp sell-off was the product of many misses and warnings by huge multi-national companies that either missed earnings and/or revenue estimates or issued warnings for the months ahead.

Among those companies that fell short of Wall Street's lowered estimates after Thursday's close and prior to Friday's open were McDonald's (MCD), Microsoft (MSFT), Google (GOOG), high-flying Chipolte Mexican Grill (CMG), and General Electric (GE). The misses came behind similar poor showings from Intel (hit a 52-week low today) and IBM, earlier in the week and proved quite a few sell-side analysts correct in predicting that this quarter would be very rough from an earnings perspective.

Truth be told, even those companies beating earnings estimates are not beating by much, with some exceptions, and are generally hitting targets that are lower than the previous years numbers, which, as the market is a continuous-discounting mechanism, means stocks are going in reverse, with earnings falling, not growing.

That alone should explain today's deep, across-the-board, declines, but also brings into question the entire philosophy behind central bank easing and money printing on a global scale. Sure enough, easy money has propped up banks and companies and a multitude of stocks and indices, but the end result of funny fiat money always reverts to a point at which currencies become worthless and derivative instruments, such as stocks, and, further out, bonds, lose value and we could be nearing the conclusion of the failed stimulative experiment that's fixed nothing since the crash of 2008.

Speaking of crashes, today's drop pales by comparison to what occurred 25 years ago to the day, the well-known stock market crash of 1987, when the Dow Jones Industrial Average fell by 23%. It was a seminal market event that will probably (hopefully) never be repeated, as there are supposedly more safeguards and triggers - to say nothing of the PPT - to prevent such a disastrous one-day event.

That is not to say that markets, stocks and indices cannot fall hard over periods of time, though it is far too soon to call today's action the beginning of such a a downward spiral. However, with tech stocks and industrials feeling the heat from investors in an earnings season that has been short on enthusiasm and long on fear, the coming weeks, especially with the November elections as a backdrop, could produce some calamities such as have already been seen in individual stocks, many of which were grossly overvalued and highly speculative, Chipolte and Apple come immediately to mind.

Checking the charts, it's useful to point out that the Dow and S&P broke through their 50-day moving averages and closed just about right on them, a position last seen a week ago, before Monday and Tuesday's "savior" rallies pushed equities back to something of a triple top, which has now broken down in a dramatic reversal. Today's declines on the two indices were the worst since mid-June. Shortly thereafter, both indices progressed above their 50-day MA, but have now returned to the roost, setting up a very unsettling weekend and a potential breakdown on Monday or further on during the week.

As for the NASDAQ, today's worst percentage loser, that index has been screaming red for a month, having busted through its 50-day MA eight sessions ago. Any further deterioration in the beloved NAZ could trigger a serious correction, as it is already down 7% in the past month.

Looking ahead to next week, earnings reports are due out on some big names, such as Cattepillar (CAT), Las Vegas Sands (LVS), Yahoo (YHOO) and Texas Instruments (TXN) on Monday; 3M (MMM), Coach (COH), Facebook (FB) and United Parcel Service (UPS) on Tuesday; and, on Wednesday, Boeing (BA), Eli Lilly (LLY), General Dynamics (GD), Lockheed Martin (LMT) and O'Reilly Automotive (ORLY).

Those mentioned above are but a smattering of companies reporting, in what will be the busiest week of earnings season. CNBC and Bloomberg will be looking for rays of hope, while investors may have a more wary eye toward more companies missing on earnings and revenue.

One economic data point worth noting was existing home sales for September, falling 1.7% to an annual run rate of 4.75 million, well below most estimates.

Until then, the long weekend waiting game, and, on Monday night, the final presidential debate, followed on Wednesday another FOMC rate policy decision, which will probably be nothing more than a formality.

Naturally, there will be the usual can-kicking and posturing from Europe, which still cannot come up with plans for either Greece or Spain, which may or may not be part of the plan to hold off the bad news until after our elections. One can hardly wait.

That is all... for now.

Dow 13,343.51, -205.43 (1.52%)
NASDAQ 3,005.62, -67.25 (2.19%)
S&P 500 1,433.19, -24.15 (1.66%)
NYSE Composite 8,324.14, -118.68 (1.41%)
NASDAQ Volume 2,194,602,500.00
NYSE Volume 3,851,036,250
Combined NYSE & NASDAQ Advance - Decline: 1168-4339
Combined NYSE & NASDAQ New highs - New lows: 166-117
WTI crude oil: 90.05, -2.05
Gold: 1,724.00, -20.70
Silver: 32.10, -0.771