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%)

Donald Trump Is Goldilocks In Disguise; Stocks Rally; Treasury Yields Rocket Higher

Odd thing about politics: As soon as one man comes into the picture promising to fix everything that's broken with the US economy, all the other politicians instantly hate him, fight him, and actively try to get rid of him... by any means necessary.

That man, of course, is none other than the current president, Donald J. Trump, who has fended off non-stop assaults from Democrats, members of his own party, even having to defend himself against attacks from within his own administration, such as the FBI and the Justice Department.

Meanwhile, Trump, while he hasn't kept all of his election promises, has delivered on a good number of them, especially those dealing with the economy, trade, and taxes.

Trump has cut taxes for many, he's re-negotiated bad trade deals such as NAFTA, and he's presided over an economy that by most accounts is booming.

Yet, the vast majority of politicians, bureaucrats, and Baltway insiders still want him gone. They'd love to impeach him, shame him into resigning, or otherwise undermine his America First policies.

Why?

Because they're jealous, and they're petty, and Trump has exposed them as swamp dwellers whose sole interests are enriching themselves at the public's expense and getting re-elected.

Trump has delivered - with assistance from the Federal Reserve and some members of congress - the United States into the goldilocks economy: not too hot, not too cold, just right. Stocks are up, yields on treasury bonds are rising, but inflation and unemployment are low. There's so much good going o in the US economy it's actually difficult to find problem areas.

401k accounts are fatter, paychecks have less tax taken from them, incomes are rising. Just what about all of this isn't to like? Ask Diane Feinstein, Chuck (sellout) Schumer, Nancy Pelosi or any of a handful of petty thieves masquerading as honorable congress-people. They have no answer and they're worried about losing their prestige and power in the upcoming mid-term elections. That's why they and their lackeys in the media are so intent on tearing down everything related to Trump and his successes. They accuse his Supreme Court nominee of sexual assault that supposedly happened more than 35 years ago, when Brett Kavenaugh - who will almost surely be confirmed by the Senate - was a teenager in high school.

The attacks and assaults will continue up to the November elections and beyond. Russia and collusion will be thumbed up again by the wicked special prosecutor from hell (and hopefully soon to return there). The New York Times will continue to run stories in vain attempts to tarnish President Trump's image. None of it will work. The American people see results and see through the media attacks, the howling senatorial rhetoric, and the baseless accusations. Jobs are plentiful. Money is flowing. Things are good, very good.

The Dow Jones Industrial Average closed at yet another record high today, despite backing off substantially from intra-day highs. The yield on the benchmark 10-year-note reached the highest point in more than a decade, at 3.16%, a number that has Fed officials smiling, lenders beaming, and most consumers and small business owners a little bit piqued, but still not worried or upset. Interest rates are still low compared to other times; mortgages are reasonably priced. With business prosperity, the cost of money should be a little higher and it's not at a point that it does damage to one's bottom line.

Goldilocks has arrived and his name is Trump.

(Plus, baseball playoffs are underway and Alabama is #1 in college football.)

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

At the Close, Wednesday, October 3, 2018:
Dow Jones Industrial Average: 26,828.39, +54.45 (+0.20%)
NASDAQ: 8,025.08, +25.54 (+0.32%)
S&P 500: 2,925.51, +2.08 (+0.07%)
NYSE Composite: 13,118.55, +12.54 (+0.10%)

Why Does the Dow Go Up When Everything Else Goes Down?

Divergence between the NASDAQ and the Dow Industrials has been a persistent feature over the past year, although recently, the up versus down daily routine has taken on nw dimensions, with the 30 Dow stocks outperforming all other indices routinely.

Tuesday was a case in point as all major indices, including the S&P 500, NASDAQ, Dow Transportation Index, and the Russell 2000 all ended in the red, while the Dow rose majestically to a new all-time closing high. Additionally, almost all foreign markets finished lower on the day.

While there has been no rationale to sufficiently explain the phenomenon, one might easily conclude that the Dow stocks are more stable than the more speculative offerings on other indices, or that Dow stocks, in addition to steady appreciation, offer regular dividends and are generally regarded as the best behemoth companies in the American market.

None of this can fully explain why the Dow gains while other stocks fall, but the pattern has been so obvious and consistent for so long, it merits further investigation.

Conspiracy theorists can claim manipulation in order to keep the unsuspecting masses complacent, as the Dow Jones Industrial Average is the most-widely watched index on the planet. Such an explanation would be difficult, if not impossible, to prove.

Others rightly point out that the Dow is unique in that it is not a weighted average, and gains or losses by the highest-priced offerings can send the index up or down in rather large ways.

In any case, the Dow keeps going up, no matter what other markets or indices are doing.

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

At the Close, Tuesday, October 2, 2018:
Dow Jones Industrial Average: 26,773.94, +122.73 (+0.46%)
NASDAQ: 7,999.55, -37.76 (-0.47%)
S&P 500: 2,923.43, -1.16 (-0.04%)
NYSE Composite: 13,106.01, -19.34 (-0.15%)

Stocks Enter Fourth Quarter With A Bang, NASDAQ Fades To Red, Oil Rallies

At the open, on the first day of trading in the fourth quarter, stocks powered ahead, posting massive gains on the back of President Trump's successful renegotiation of the NAFTA treaty with Mexico and Canada.

It was a giddy start to October, generally a month with plenty of volatility, due partially to funds which tend to close out their books prior to November, short and long term rules of capital gains taxation, and sometimes explosive conditions in the political realm prior to November elections.

On the trade Monday, the divergence pattern which has persisted for more than a year now, appeared again, as the NASDAQ sold off while the Dow and S&P held onto gains. This divergence of mainstream vs. largely tech stocks has been confounding to index and passive investors, as the old world and new have often traded in opposite directions. The solution has been to own some of both sides, with Dow and dividend-paying stocks on one side and speculative, tech stocks on the other.

In such a case, Monday's moves were a win for the old school, as the Dow powered ahead while the NASDAQ soured during the day. Over the long term, the two varieties of stocks have moved up in tandem, producing quality gains this year.

While stocks were hot and bonds stable, the big move of the day was in the oil field, with WTI crude futures up sharply, above 75.50 into the close. The higher price is possibly a reflection of easing of concerns over trade wars, with the new North American agreement at the forefront. In addition, coming sanctions on Iran - which begin on November 4 - are expected to crimp supply. Crude prices are currently trending at four-year highs. If the condition persists, high prices at the pump for consumers could hurt holiday sales, with the big shopping season less than two months ahead.

Dow Jones Industrial Average October Scorecard:

Date	Close	Gain/Loss	Cum. G/L
10/1/18	26,651.21	+192.90	+192.90

At the Close, Monday, October 1, 2018:
Dow Jones Industrial Average: 26,651.21, +192.90 (+0.73%)
NASDAQ: 8,037.30, -9.05 (-0.11%)
S&P 500: 2,924.59, +10.61 (+0.36%)
NYSE Composite: 13,125.35, +42.83 (+0.33%)

Weekend Wrap: Stocks Slip, Yields Rise, Precious Metals Bid

Stocks closed out the week n subdued fashion, with the major averages hugging the unchanged line throughout most of Friday's session.

Overall, the close-out of the quarter was less dramatic than usual, with little to no "window dressing" done by traders and/or speculators. Stocks were generally down for the week, with the notable exception of the NASDAQ, which was the only one of the major indices to post a weekly gain.

Other than Tesla (TSLA), in which, over the weekend, CEO Elon Musk's deal with the SEC on the heels of their lawsuit, there was little to hang a trade on in the final week of the month. Musk agreed to pay a $20 million fine and the same amount from company coffers. While Musk was stripped of his role as chairman of the Tesla board of directors for three years, he will continue on as CEO.

Stocks remained near all-time highs, and October usually brings additional volatility, such with elections on the horizon and third quarter earnings trickling out after the first week of the month.

After the Fed's FOMC raised the federal funds rate to 2.00-2.25% on Wednesday, stocks fell somewhat out of favor, as bond yields continue to attract large, safety-seeking money. The 10-year note finished the week comfortably above the 3.00% demarkation line, at 3.056%, a number some analysts suggest may cause the demise of some stocks, especially the more speculative variety (read: tech) and those that do not offer a steady dividend.

Crude oil was higher for the week, with WTI topping out over $73 per barrel, a four-year high. Pinching drivers at the pump may not be conducive to gains in equity prices. High gas prices act as a tax on all consumers, but affect the poor and middle class the hardest.

Gold and silver caught some bids late in the week though they continue to wallow in a prolonged slump near three-year lows. Inflation, being still somewhat tame, will likely keep a lid on the prices of precious metals and commodities overall.

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
9/19/18	26,405.76	+158.80	+440.94
9/20/18	26,656.98	+251.22	+692.16
9/21/18	26,743.50	+86.52	+778.68
9/24/18	26,562.05	-181.45	+597.23
9/25/18	26,492.21	-69.84	+527.39
9/26/18	26,385.28	-106.93	+420.46
9/27/18	26,439.93	+54.65	+475.11
9/28/18	26,458.31	+18.38	+493.49

At the Close, Friday, September 28, 2018:
Dow Jones Industrial Average: 26,458.31, +18.38 (+0.07%)
NASDAQ: 8,046.35, +4.38 (+0.05%)
S&P 500: 2,913.98, -0.02 (0.00%)
NYSE Composite: 13,082.52, -23.20 (-0.18%)

For the Week:
Dow: -285.19 (-1.07%)
NASDAQ: +59.40 (+0.74%)
S&P 500: -15.69 (-0.54%)
NYSE Composite: -153.92 (-1.16%)