Stocks Slammed As Interest Rates Climb; Fed Officials Not Concerned

While the losses on Thursday weren't quite at the disaster level, the declines were significant enough to get people's attention. The Dow lost 200 points, the first time that has occurred since July 11 (-219.21), though it could have been much worse. The 30 blue chips were down more than 350 points early in the afternoon, but some "buy the dip" specialists stepped in to rally stocks into the close.

The NASDAQ fared much worse than its peers, as investors scrambled out of speculative tech stocks, some of which carry significant debt loads. With interest rates rising, debt servicing costs are going to be scrutinized as they can materially contribute to deterioration of bottom lines.

With a decline of 1.81%, the NASDAQ losses were nearly one percent worse than the S&P (-0.82%) and easily outdid the Dow Industrials (-0.75%).

Blaming rising interest rates for all equity woes might be a bit of a stretch, but it is becoming more of a concern as the 10-year note yield kicked higher, reaching 3.20%, an attractive number for those who wish to reduced risk, and apparently, many do.

Other indices slid lower as well, with the Russell 2000 and Dow Transports also in the red. This indicates that investor sentiment may have soured, and this could be serious, coming so close to reporting of third quarter earnings.

An interesting development is the Federal Reserve's ebullient attitude toward the US economy. Chairman Jerome Powell seems to be in the camp that the economy will continue to expand, and he is echoed by other Fed officials, though their giddy projections are in stark contrast to some of the biggest players on Wall Street, including Ray Dalio, Peter Boockvar, and Stanley Druckenmiller, to name just a few. The insightful article is posted at investopedia.com by Matthew Johnston, and can be found here.

That Fed officials are touting the economy is more than a little disconcerting, being that they're cold-hearted bankers and have held interest rates down near zero for a long time. Additionally, they're in the process of unloading trillions in excess securities and they'd like nothing more than to see that proceed smoothly. Surely, they'd like to collect more interest from everybody, so their comments about the strength of the economy are extremely self-serving.

Dow Jones Industrial Average October Scorecard:

Date	Close	Gain/Loss	Cum. G/L
10/1/18	26,651.21	+192.90	+192.90
10/2/18	26,773.94	+122.73	+315.63
10/3/18	26,828.39	+54.45	+370.08
10/4/18	26,627.48	-200.91	+169.17

At the Close, Thursday, October 4, 2018:
Dow Jones Industrial Average: 26,627.48, -200.91 (-0.75%)
NASDAQ: 7,879.51, -145.57 (-1.81%)
S&P 500: 2,901.61, -23.90 (-0.82%)
NYSE Composite: 13,042.29, -76.25 (-0.58%)

July Best Month Since January for Dow Industrials

Ending the month of July with a spirited, sugar-coated, window dressing rally, the Dow Jones Industrial Average posted the best month of gains (+1143.78) since January (+1430.17).

While that number may be pleasing to the buyers of stocks in much of 2018, longer term holders will note with interest that the close on July 31 is lower than the close on January 31 and significantly lower than the all-time high reached on January 26, 2018 (26.616.71). It is 1201.52 points lower than that January 26 close, or nearly four percent off the high point.

Five percent may not sound like much, but, in the perspective of a six month time frame, it's impact become clearer. From February to June, stocks languished in what could be seen as equity limbo. They were worth less than they were in January and still are.

In real terms, a $100,000 portfolio in January would be worth about $95,000 today. Optimists might see the glass as half full, adding that the very same January $100,000 portfolio was worth only about $90,000, when the Dow bottomed out at 23,533.20, on March 23, a dip of more than 10% from the all-time high.

Year-to-date, the Dow has gained 695.97 points, or, less than three percent. In monthly terms, that's a gain of less than one-half of one percent. Nobody's calling their mother to tell her how great they're doing in the market. Neither is anybody crying in their beer over any loss.

Stocks, and the global economy, remain at a significant crossroads.

Dow Jones Industrial Average July Scorecard:

Date	Close	Gain/Loss	Cum. G/L
7/2/18	24,307.18	+35.77	+35.77
7/3/18	24,174.82	-132.36	-96.59
7/5/18	24,345.44	+181.92	+85.33
7/6/18	24,456.48	+99.74	+185.07
7/9/18	24,776.59	+320.11	+505.18
7/10/18	24,919.66	+143.07	+648.25
7/11/18	24,700.45	-219.21	+429.04
7/12/18	24,924.89	+224.44	+653.48
7/13/18	25,019.41	+94.52	+748.00
7/16/18	25,064.36	+44.95	+792.95
7/17/18	25,119.89	+55.53	+848.48
7/18/18	25,199.29	+79.40	+927.88
7/19/18	25,064.50	-134.79	+793.09
7/20/18	25,058.12	-6.38	+786.71
7/23/18	25,044.29	-13.83	+772.88
7/24/18	25,241.94	+197.65	+970.53
7/25/18	25,414.10	+172.16	+1142.69
7/26/18	25,527.07	+112.97	+1255.66
7/27/18	25,451.06	-76.01	+1179.65
7/30/18	25,306.83	-144.23	+1035.42
7/31/18	25,415.19	+108.36	+1143.78

At the Close, Tuesday, July 31, 2018:
Dow Jones Industrial Average: 25,415.19, +108.36 (+0.43%)
NASDAQ: 7,671.79, +41.78 (+0.55%)
S&P 500: 2,816.29, +13.69 (+0.49%)
NYSE Composite: 12,963.28, +59.85 (+0.46%)

Stock Market Losses Will Not Be Tolerated

In a world which is prodded, directed, managed, and ultimately controlled by central banks and government authoritarians, the narrative is often more important than the reality of life under the thumb.

A case in point comes today - a day after the NASDAQ, S&P 500, Dow Industrial Average each set new all-time highs - in which actual economic data diverged from the preferred narrative of "everything is peachy-keen."

Two important data sets were released prior to the opening of US equity markets, July PPI and July retail sales. Both were disappointing.

PPI came in at -0.4% and retail sales posted a sluggish 0.0% (zero) growth, with the core - ex-autos - down 0.3%. These figures not only suggest deflation, but are actually indicative of a deflationary environment, the sole condition which can awaken central bankers from sound sleep in cold sweats and is, at the same time, a relief for cash-strapped, income-stagnant workers and consumers.

According to the book of central bank policy, should one actually exist, the wants and needs of the average working Jane or Joe is to be disregarded in such an instance, preference given to fat-cat Wall Street types who do no work, produce nothing of value, but rake in billions of dollars in fees, profits, and commissions for their trading activities in the stock market casino.

So it came to be that since stocks had just made all-time highs, a major setback could not and would not be tolerated. The major indices slumped most of the session, but were boosted higher going into the close, with losses trimmed on the Dow and S&P, the NASDAQ actually closing positive, as deemed appropriate by the masters of the the universe.

The rigging of markets is never going to work out long term. Massive mis-allocation of capital has been taking place since the last financial crisis, setting the global economy up for a colossal, catastrophic, cataclysmic collapse. Maybe it won't be as bad as our alliterative case suggests, if only because ordinary people have had time to adjust and prepare, but, for anyone owning stocks at current altitudes, losses are nearly a certainty. That is, unless the entire world remains in a state of suspended animation, normalcy bias, and cognitive dissonance, and the wild-eyed central bankers of the world are allowed to continue their insane policies of negative interest rates, naked purchasing of equities (already a de facto policy of the BOJ and ECB, still a clandestine operation by the US Fed), stimulus, and maybe, if we're really lucky, helicopter money.

The week ended well for the titans of Wall Street. Have a (few, lots of, keg of) beers, enjoy the weekend, and sleep on it.

Friday's Figures:
Dow Jones Industrial Average
18,576.47, -37.05 (-0.20%)

NASDAQ
5,232.89, +4.50 (0.09%)

S&P 500
2,184.05, -1.74 (-0.08%)

NYSE Composite
10,820.79, -15.26 (-0.14%)

The weekly figures weren't all that impressive, though the NASDAQ recorded its seventh consecutive weekly gain.

For the Week:
Dow: +32.94 (+0.18%)
NASDAQ: +11.77 (+0.23%)
S&P 500: +1.18 (+0.05%)
NYSE Comp.: +37.92 (+0.35%)