The US economy isn't exactly on its back, but it also isn't growing by the phony 3+ percent the government reported in the past two quarters.
Speaking strictly from an economist's perspective, the US government GDP figures include grossly-inflated government spending and just about every spare dollar their statisticians can unearth from the mainland, Alaska and Hawaii.
GDP-watching is a Wall Street phenomena, serving the interests of the corporatists who need to return dividends or share growth to stockholders. Thus, it adds impetus to the argument that investing in US corporations is a good idea. That may or may not be true, depending largely upon which corporation is attracting the investing dollars.
Obviously, the FAANGs (Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Google (Alphabet, GOOG) have been the most attractive of the past six to eight years, while quite a few have faltered. Most of the stocks making gains since the GFC of 2007-09 have been the result of massive stock buybacks, a dubious distinction, as these high-fliers are the ones most prone to collapse in the case of a market rout.
They've diluted their shares and have deployed capital in one of the worst ways, buying back shares in order to boost EPS (earnings per share). Having fewer shares available while keeping profits at roughly the same level improves EPS, but it does not expand the business potential. Banks and financials are especially guilty in this regard. They're over-leveraged and will pay a price, but their executives and shareholders are happy little clams, for now.
When the share price falls, and dividends are slashed, the shareholders will be singing a different tune. The executives will be long gone because they've proven to care only about their own pockets and bonuses.
In any case, stocks ran through a very volatile week, punctuated by a massive dead-cat-bounce rally on Thursday which stanched some of the losses incurred since all-time highs the previous Tuesday.
There could be a waterfall effect developing, because confidence is waning. The holiday shopping season - which is demonstrably longer than last year's - should provide a boost, but the economy is lurching closer to two important events: the December Fed meeting and the expected rate hike, and another round of negotiations in congress over the debt ceiling limit, both mid-month.
Elsewhere, oil remains at elevated levels, above $55/barrel for WTI crude, gold and silver were bounced around but appear ready for a breakout (as they have too many times in the past four years, with nothing to show), bonds were flatter still.
At the Close, Friday, November 17, 2017:
Dow: 23,358.24, -100.12 (-0.43%)
NASDAQ 6,782.79, -10.50 (-0.15%)
S&P 500: 2,578.85, -6.79 (-0.26%)
NYSE Composite: 12,302.89, -0.39 (0.00%)
For the Week:
Dow: -63.97 (-0.27%)
NASDAQ: +31.85 (+0.47%)
S&P 500: -3.45 (-0.13%)
NYSE Composite: -19.71 (-0.16%)
Showing posts with label FAANG. Show all posts
Showing posts with label FAANG. Show all posts
Sunday, November 19, 2017
Thursday, June 29, 2017
Which Way is Up? Stocks Battered Again; VIX, Bond Yields Exploding
Volatility is back, to the chagrin of equity investors who have enjoyed the easiest ride to Easy Street possibly in the history of the US stock market.
The VIX, a broad measure of market volatility, spiked today as high as 15.16, a huge move, considering the close on Wednesday was 10.03. That's better than a 50% move to the top, though the slaughter was interrupted and canceled midday, when it appeared the world was ending. No doubt, the PPT another central bank cohorts rushed to the aid of everybody in quelling the panic, sending the VIX back to 11.44 at the end of the session.
The Vix halting helped the major indices to some degree, though it could not stem the selling. The Dow melted down as low as 21,203, a full 250 points from the close on Wednesday. The NASDAQ was again hit full force, bottoming out at 6090, before receiving somewhat to close with a mere 90-point loss.
With the Federal Reserve's loose policy unchecked for eight years running, stock picking has been easier than throwing darts at a barn door. Despite the easy money, most hedge fund and money managers have failed to keep pace with simple indices, a shameful state of affairs for the people who are supposed to know what they're doing when it comes to investing. Now, as everything from the presidency to health care to the media and the future of the global economy is being questioned, the bifurcated reasoning of ultra-low interest rates and gambling recklessly in equities is beginning to lose some favor.
All of this came as the government reported, prior to the opening bell, first quarter GDP at a surprising 1.4% growth rate. This was the third estimate, after the first - back in April - came in at 0.7, and the second, in May, was better, at 1.2, were still below an acceptable range. Apparently, nobody is particularly interested in an economy that is growing at less than two percent, and maybe even less interested in the government's goal-seeking statistical chicanery.
It seems, from all appearances, that the Federal Reserve is being taken seriously about rising rates, if one agrees that bonds tell the real story. The rally in the 10-year note has been shunted, with yields spiking the past few days, opening at nearly 2.30%. The note closed at 2.267, a gain of better than two percent, a large move in treasuries.
Tech stocks were the usual suspects, as the FAANGs took the heat. Facebook, Apple, Amazon, Netflix, and Google all suffered losses on heavy volume.
So, is this the beginning of the end of the bull market?
Maybe. Maybe not. Nobody really would know, though there are those of the opinion that the market is vastly overextended and the core economy is under-performing and facing severe deflationary pressure.
What to watch now are the movie averages. The Dow is still gleefully above its 50-day moving average, but the NASDAQ closed precisely on its 50-day, as is the S&P. Further weakness could send sell signals and a plummet through the 50-day toward the 200-day.
Also to keep in mind is the rough guideline for correction territory, which is casually assumed to be a 10% decline.
The NASDAQ topped out at 6341.70, nearly three weeks ago. A quick look at a NASDAQ chart reveals the collapse on Friday, June 9, exactly three weeks ago as of tomorrow, as if somebody rang a bell, denoting the tippy-top of the market. A level of 5707 would have to be met for the NAZ to fall 10% and it is the most vulnerable index, having had the best run-up over the past three months.
Not that it would be a huge move, though significant in percentage terms, but it would erase gains all the way back to February 9, so just five months of lost appreciation.
Friday closes out not only the week, but the month and the quarter, so it should be instructive from a technical standpoint, if that actually matters any more.
Bull markets do not last forever, no matter how low interest rates are nor how easy money is to lend.
At the Close, 6/29/17:
Dow: 21,287.03, -167.58 (-0.78%)
NASDAQ Composite: 6,144.35, -90.06 (-1.44%)
S&P 500: 2,419.70, -20.99 (-0.86%)
NYSE Composite: 11,739.98, -72.82 (-0.62%)
The VIX, a broad measure of market volatility, spiked today as high as 15.16, a huge move, considering the close on Wednesday was 10.03. That's better than a 50% move to the top, though the slaughter was interrupted and canceled midday, when it appeared the world was ending. No doubt, the PPT another central bank cohorts rushed to the aid of everybody in quelling the panic, sending the VIX back to 11.44 at the end of the session.
The Vix halting helped the major indices to some degree, though it could not stem the selling. The Dow melted down as low as 21,203, a full 250 points from the close on Wednesday. The NASDAQ was again hit full force, bottoming out at 6090, before receiving somewhat to close with a mere 90-point loss.
With the Federal Reserve's loose policy unchecked for eight years running, stock picking has been easier than throwing darts at a barn door. Despite the easy money, most hedge fund and money managers have failed to keep pace with simple indices, a shameful state of affairs for the people who are supposed to know what they're doing when it comes to investing. Now, as everything from the presidency to health care to the media and the future of the global economy is being questioned, the bifurcated reasoning of ultra-low interest rates and gambling recklessly in equities is beginning to lose some favor.
All of this came as the government reported, prior to the opening bell, first quarter GDP at a surprising 1.4% growth rate. This was the third estimate, after the first - back in April - came in at 0.7, and the second, in May, was better, at 1.2, were still below an acceptable range. Apparently, nobody is particularly interested in an economy that is growing at less than two percent, and maybe even less interested in the government's goal-seeking statistical chicanery.
It seems, from all appearances, that the Federal Reserve is being taken seriously about rising rates, if one agrees that bonds tell the real story. The rally in the 10-year note has been shunted, with yields spiking the past few days, opening at nearly 2.30%. The note closed at 2.267, a gain of better than two percent, a large move in treasuries.
Tech stocks were the usual suspects, as the FAANGs took the heat. Facebook, Apple, Amazon, Netflix, and Google all suffered losses on heavy volume.
So, is this the beginning of the end of the bull market?
Maybe. Maybe not. Nobody really would know, though there are those of the opinion that the market is vastly overextended and the core economy is under-performing and facing severe deflationary pressure.
What to watch now are the movie averages. The Dow is still gleefully above its 50-day moving average, but the NASDAQ closed precisely on its 50-day, as is the S&P. Further weakness could send sell signals and a plummet through the 50-day toward the 200-day.
Also to keep in mind is the rough guideline for correction territory, which is casually assumed to be a 10% decline.
The NASDAQ topped out at 6341.70, nearly three weeks ago. A quick look at a NASDAQ chart reveals the collapse on Friday, June 9, exactly three weeks ago as of tomorrow, as if somebody rang a bell, denoting the tippy-top of the market. A level of 5707 would have to be met for the NAZ to fall 10% and it is the most vulnerable index, having had the best run-up over the past three months.
Not that it would be a huge move, though significant in percentage terms, but it would erase gains all the way back to February 9, so just five months of lost appreciation.
Friday closes out not only the week, but the month and the quarter, so it should be instructive from a technical standpoint, if that actually matters any more.
Bull markets do not last forever, no matter how low interest rates are nor how easy money is to lend.
At the Close, 6/29/17:
Dow: 21,287.03, -167.58 (-0.78%)
NASDAQ Composite: 6,144.35, -90.06 (-1.44%)
S&P 500: 2,419.70, -20.99 (-0.86%)
NYSE Composite: 11,739.98, -72.82 (-0.62%)
Monday, June 12, 2017
Tech Wreck? Hardly. Stocks Shaky, But Steady Late Monday; Gold, Silver Slaughtered
Not to worry, the sky isn't falling... yet.
Tech stocks got bashed again, this time in foreign markets, after Friday's mini-meltdown, but cooler heads (or those more in control) late in the day, bringing the NASDAQ back to its best level of the day into the closing bell.
However, the S&P and Dow both suffered losses, albeit minor. What's interesting is that amid all the noise and clamor, gold and silver have been dashed, the selling merciless over the past week. This is the same pattern that developed at the onset of the GFC. As strange as it may seem, precious metals were liquidated before stocks, purportedly to make margin calls. Apparently, most of those in brokerage-land just think PMs are nothing more than hedges and fast cash in case of emergencies.
While that may be true, one wonders why such violent action in gold and especially in silver is occurring at this juncture. Sure, the FAANGs are overvalued and should be taken to the whipping post, but liquidation of PMs is a more serious business, though admittedly, quick.
If, indeed, margin calls have been making the rounds, there's little doubt that the PMs would get sold, and also no question that more trouble is on the horizon.
Tuesday and Wednesday are set for the FOMC policy meeting, so there may not be much in the way of wild swings until 2:00 pm ET on Wednesday, when the policy is set. There have been strong indications that the Fed will raise the federal funds rate by 25 basis points and this hissy fit in techno-land is unlikely to disrupt that.
The remainder of the week, after the FOMC meeting, should prove insightful for market participants. Continued weakness could signal significant trouble ahead and a serious turn of fortune for stockholders.
Stay tuned.
At the Close, 6/12/17:
Dow: 21,235.67, -36.30 (-0.17%)
NASDAQ: 6,175.46, -32.45 (-0.52%)
S&P 500 2,429.39, -2.38 (-0.10%)
NYSE Composite: 11,746.46, +1.73 (0.01%)
Tech stocks got bashed again, this time in foreign markets, after Friday's mini-meltdown, but cooler heads (or those more in control) late in the day, bringing the NASDAQ back to its best level of the day into the closing bell.
However, the S&P and Dow both suffered losses, albeit minor. What's interesting is that amid all the noise and clamor, gold and silver have been dashed, the selling merciless over the past week. This is the same pattern that developed at the onset of the GFC. As strange as it may seem, precious metals were liquidated before stocks, purportedly to make margin calls. Apparently, most of those in brokerage-land just think PMs are nothing more than hedges and fast cash in case of emergencies.
While that may be true, one wonders why such violent action in gold and especially in silver is occurring at this juncture. Sure, the FAANGs are overvalued and should be taken to the whipping post, but liquidation of PMs is a more serious business, though admittedly, quick.
If, indeed, margin calls have been making the rounds, there's little doubt that the PMs would get sold, and also no question that more trouble is on the horizon.
Tuesday and Wednesday are set for the FOMC policy meeting, so there may not be much in the way of wild swings until 2:00 pm ET on Wednesday, when the policy is set. There have been strong indications that the Fed will raise the federal funds rate by 25 basis points and this hissy fit in techno-land is unlikely to disrupt that.
The remainder of the week, after the FOMC meeting, should prove insightful for market participants. Continued weakness could signal significant trouble ahead and a serious turn of fortune for stockholders.
Stay tuned.
At the Close, 6/12/17:
Dow: 21,235.67, -36.30 (-0.17%)
NASDAQ: 6,175.46, -32.45 (-0.52%)
S&P 500 2,429.39, -2.38 (-0.10%)
NYSE Composite: 11,746.46, +1.73 (0.01%)
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