Stocks Can't Gain Traction; Tech, Industrials Lead Broad Decline

Continuing the stock rout that began in earnest two weeks ago became deeper and more pronounced on Thursday as broad declines sent speculators scurrying for cover.

The Dow Jones Industrial Average recorded its fifth triple-digit loss of the month and its eighth losing session in 14 trading days this month. The index is down nearly 1500 points from the all-time high reached at the close on October 3rd (26.828.39). If this isn't the beginning of a serious correction or bear market, it certainly looks like one.

Only five of the 30 Dow stocks managed gains, led by Verizon (VZ, 54.65, +0.69, +1.28%). Exxon Mobil and Chevron were also among the few winners, despite another day of declines in oil futures, which slumped below $69/barrel for the first time in a month. Mirroring the decline in stocks, WTI crude futures peaked on October 3rd at 76.20, but it's been all downhill since.

Caterpillar (CAT) was the Dow's biggest loser, dragged down nearly four percent on poor results from industry peers. CAT is off nearly 15% since October 3rd.

The other major indices suffered more serious losses, with the NASDAQ leading the way down, losing 157 points, more than a two percent drop. Once again, tech stocks dominated those losing ground, with Netflix, Google, Apple, and Tesla all declining by more than two percent.

There seems to be no escaping the cascade of falling stocks in October, traditionally one of the most volatile months for equities. No sector is particularly a safe haven, though utility stocks have largely been spared, thanks to low alpha and steady dividends.

The Dow needs only to finish Friday with a loss of 39 points or better to avoid a fourth straight weekly decline. A solid close to the week would also allow the S&P and NASDAQ to close out the week with gains, thanks to Tuesday's melt-up advance. However, stocks in Europe are losing ground in early Friday trading.

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
10/5/18	26,447.05	-180.43	-11.26
10/8/18	26,486.78	+39.73	+28.47
10/9/18	26,430.57	-56.21	-27.74
10/10/18	25,598.74	-831.83	-859.57
10/11/18	25,052.83	-545.91	-1405.48
10/12/18	25,339.99	+287.16	-1118.32
10/15/18	25,250.55	-89.44	-1207.76
10/16/18	25,798.42	+547.87	-659.89
10/17/18	25,706.68	-91.74	-751.63
10/18/18	25,379.45	-327.23	-1078.86

At the Close, Thursday, October 18, 2018:
Dow Jones Industrial Average: 25,379.45, -327.23 (-1.27%)
NASDAQ: 7,485.14, -157.56 (-2.06%)
S&P 500: 2,768.78, -40.43 (-1.44%)
NYSE Composite: 12,445.48, -167.57 (-1.33%)

Why Stocks Are Unlikely To Go Any Higher

Forget about today's Fed Minutes. Forget about corporate third quarter earnings lowing to markets this week and next, and for the next month.

Forget all the gains made over the past nine years. The market has peaked, and there's good reasons to believe that and data to back it up.

First of all, stocks are wildly overvalued. By many measures, US equities are priced at the highest point they've ever been. Higher than during the dotcom phase, higher than the subprime wildness, stocks today are carrying just plain stupid valuations, like they are darling growth stocks with improving bottom lines. Many are not.

As an example, take Coca-Cola (KO) a standard of the Dow Industrials for many long years. KO is not a growth stock. It's an income stock with a dividend of 1.56, yielding a healthy 3.46% on its share price of around 45. But, here's the kicker. The P/E of Coca-Cola is a whopping 82. That's a number usually reserved for hot tech start-ups, not globally-engaged, long-in-the-tooth mature companies. It's a ridiculous situation because as the price of the stock falls, the dividend yield will rise, making it the attractive investment it is today.

But it's not. If Coke goes from 45 to 35 in a year or two, the dividend yield will be in a higher range. Revenue is falling. Earnings may be stable due to stock buybacks, which is a hidden portfolio killer. Other stocks like Coke exist, like McDonald's, Home Depot, Goldman Sachs, or just about half of the Dow Industrials.

If the simple overvaluation isn't enough to keep people from dumping their money into stocks, then there's the economic data, like unemployment, currently at 3.7%, which is an historic low. Economists generally consider anything below five percent as full employment because there are always a certain number of people changing jobs, retiring, or otherwise out of the employment market.

Inflation is moderate, but interest rates continue to rise, thanks to the Fed. Their rate hikes are putting a much needed brake on what could be a runaway speculative stock market and maybe already is. The Fed isn't going to suddenly stop raising rates, so, as 2018 winds down as a very dull year for stocks, bonds, currencies, and commodities, 2019 is shaping up to be even worse.

IN many ways, President Trump's promise to "Make America Great Again" may already have been kept. America is pretty great already. Anything more would be Nirvana. We've reached a peak. It's time to slow down a little. Recessions are healthy because they clear out excess malinvestment, like Sears, which recently filed for bankruptcy protection. Or Toys 'R Us, which went belly up last year but had been a zombie company for many years prior to its implosion.

There are other issues as well, from political turmoil in Europe, to trade tensions, to the huge credit bubble that's affecting individuals, businesses, and governments. They're all over-leveraged and deeply indebted.

For these reasons, stocks can't really go much higher, if at all. The bull run is coming to an end, but that's not necessarily bad news, it just means that investors will have to be more disciplined if they hope to profit.

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
10/5/18	26,447.05	-180.43	-11.26
10/8/18	26,486.78	+39.73	+28.47
10/9/18	26,430.57	-56.21	-27.74
10/10/18	25,598.74	-831.83	-859.57
10/11/18	25,052.83	-545.91	-1405.48
10/12/18	25,339.99	+287.16	-1118.32
10/15/18	25,250.55	-89.44	-1207.76
10/16/18	25,798.42	+547.87	-659.89
10/17/18	25,706.68	-91.74	-751.63

At the Close, Wednesday, October 17, 2018:
Dow Jones Industrial Average: 25,706.68, -91.74 (-0.36%)
NASDAQ: 7,642.70, -2.79 (-0.04%)
S&P 500: 2,809.21, -0.71 (-0.03%)
NYSE Composite: 12,613.05, -32.90 (-0.26%)

Stocks Soar On Relief Rally; Dow Remains More Than 1000 Points Off Highs

As if last week was nothing more than an annoyance, buyers emerged in droves on Tuesday, sending stocks on a skyrocket ride throughout the session.

The relief rally left stocks still well down from previous levels, however, with the Dow more than 1000 points lower than it was earlier in the month.

Current conditions in the market suggest a wait-and-see posture.

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
10/5/18	26,447.05	-180.43	-11.26
10/8/18	26,486.78	+39.73	+28.47
10/9/18	26,430.57	-56.21	-27.74
10/10/18	25,598.74	-831.83	-859.57
10/11/18	25,052.83	-545.91	-1405.48
10/12/18	25,339.99	+287.16	-1118.32
10/15/18	25,250.55	-89.44	-1207.76
10/16/18	25,798.42	+547.87	-659.89

At the Close, Tuesday, October 16, 2018:
Dow Jones Industrial Average: 25,798.42, +547.87 (+2.17%)
NASDAQ: 7,645.49, +214.75 (+2.89%)
S&P 500: 2,809.92, +59.13 (+2.15%)
NYSE Composite: 12,645.95, +220.27 (+1.77%)

Stocks Close Lower On Retail Sales Disappointment

Despite a sharp bounce-back rally on Friday, US stocks resumed their declines on Monday as disappointing retail sales and in-line earnings reports kept investors' animal spirits in check.

Retail sales for September were up just 0.1% on expectations of a rise of 0.6%, putting a damper on the market at the open and throughout the session.

Financial stocks were in focus as Bank of America (BAC) and Charles Schwab (SCHW) reported third quarter earnings on Monday. Bank of America said its earnings per share came in at 0.67 cents, above expectations of 0.62. Schwab's earnings were in line at 0.65 cents per share.

Globally, stocks in Europe were flat to slightly higher, as were Pacific Rim bourses. Japan's NIKKEI was down significantly, while the Hang Seng - Honk Kong's market - suffered a marginal loss.

Nothing new here. Significant developments may come later in the week as more companies report third quarter earnings.

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
10/5/18	26,447.05	-180.43	-11.26
10/8/18	26,486.78	+39.73	+28.47
10/9/18	26,430.57	-56.21	-27.74
10/10/18	25,598.74	-831.83	-859.57
10/11/18	25,052.83	-545.91	-1405.48
10/12/18	25,339.99	+287.16	-1118.32
10/15/18	25,250.55	-89.44	-1207.76

At the Close, Monday, October 15, 2018:
Dow Jones Industrial Average: 25,250.55, -89.44 (-0.35%)
NASDAQ: 7,430.74, -66.15 (-0.88%)
S&P 500: 2,750.79, -16.34 (-0.59%)
NYSE Composite: 12,425.68, -13.74 (-0.11%)

Weekend Wrap: Stocks Suffer Worst Week Since February As Earnings Arrive

What should be front of mind for investors this weekend and heading into the third trading week of the fourth quarter is whether the massive slip-sliding of the past week was, a) rehearsal for a full blown bear market; b) beginnings of a normal correction; or, c) a buying opportunity.

Pessimists amongst us will surely side with answer (a), noting that the bull market, now the longest ever, has to come to an end at some point, and that the various factors leading to its demise are obvious (rising interest rates, global contagion, trade and tariff paroxysm, currency confusion and convulsion).

Realists might prefer answer (b), because inflation is still tame, jobs are plentiful, unemployment is low, and interest rates are still below historical averages.

Optimists obviously will go with answer (c) because, well, you know, the market always goes up and there's money to be made.

There's a very good chance that the optimists are over-optimistic after US markets nose-dived through the worst week since February, wiping out almost all third quarter gains, leaving investors with the kind of feeling one gets about an hour after eating at McDonald's (if you've never done it, don't start now), a blase, indecisive feeling in the pit of one's stomach, as though eating was not what one should have done. In this case, that feeling may have come on Wednesday or Thursday, with Friday providing something of an Alka-Seltzer relief rally.

Even with the sizable gains to close out the week, all of the major averages suffered badly, and the condition may only be at a beginning. It would be difficult to pinpoint an exact culprit for the crime of this week's market turbulence, though the Federal Reserve is always a convenient scapegoat. Just ask President Trump, who said that the esteemed central bankers had gone crazy.

While adding 25 basis points to the federal funds rate every quarter - especially after they'd been affixed to near-zero for seven years - may not exactly define madness, there are those (such as Money Daily) who believe the Fed has overstepped its escape from years of the other madness now known as saving the global financial system from the ruinous aspects of the 2008-09 collapse.

Certainly, credit is excessive, especially the funding of corporate stock buybacks, which have reached a crescendo this annum, with more than a trillion dollars worth of corporate malinvestment on tap. The federal government has binged on debt to ungodly proportions and is getting even worse, while your average, everyday consumer has also ratcheted up the mortgage, student loan, car payment, and credit card bills to historic heights.

One could posit the expression, "nothing says white trash like a blue tarp" has an ancillary phrase in, "nothing says bubble like a new car in front of a new house with kids in college wearing new shoes."

Have we cumulatively reached the end of the road? Probably not. But, if last week's savviest stock sellers were on their marks, the road is likely to be a bumpy one through to the end of the year.

What was witnessed not just in US markets but around the world last week raised a fair share of eyebrows and lowered even more expectations. With earnings cranking up this coming week if will be most instructive to see which companies are punished, which ones prevail, and which ones offer excuses and/or outlooks suggesting more trouble ahead.

There's a lot of money sloshing around, and none of it is without a debt burden attached to it. There will be winners and losers in the fourth quarter, and, from the looks of it, tech, financials, and consumer stocks may tend to pull all the other sectors down with them.

Or, it just could be a buying opportunity, just five percent off of all-time highs, a dubious prospect.

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
10/5/18	26,447.05	-180.43	-11.26
10/8/18	26,486.78	+39.73	+28.47
10/9/18	26,430.57	-56.21	-27.74
10/10/18	25,598.74	-831.83	-859.57
10/11/18	25,052.83	-545.91	-1405.48
10/12/18	25,339.99	+287.16	-1118.32

At the Close, Friday, October 12, 2018:
Dow Jones Industrial Average: 25,339.99, +287.16 (+1.15%)
NASDAQ: 7,496.89, +167.83 (+2.29%)
S&P 500: 2,767.13, +38.76 (+1.42%)
NYSE Composite: 12,439.42, +89.89 (+0.73%)

For the Week:
Dow: -1107.06 (-4.19%)
NASDAQ: -291.55 (-3.74%)
S&P 500: -118.44 (-4.10%)
NYSE Composite: -552.53 (-4.25%)