Stocks ripped higher on Friday after September non-farm payrolls missed estimates, stoking expectations of another 25 basis point rate cut by the FOMC in their upcoming, October 29-30, meeting.
All US indices posted gains over one percent, offsetting about half of the losses made during Tuesday and Wednesday sessions. Despite the huge Friday gains, three of the four major indices finished in the red for a third straight weekly decline as fears of an upcoming recession, continued parlor games in Washington fueling fears of an impeachment of President Trump, and ongoing fits and starts in trade negotiations with China outweighed monetary politics and policy direction.
The NASDAQ was the lone survivor, with a gain of just over 1/2 percent.
Jittery as it has been, US equity markets continue to show signs of weakness but not of breaking down in a capitulating move. With third quarter earnings about a week away, there's optimism that corporate America still has not lost its profitable manner, meanwhile, the flight to US treasuries and corporate bonds continued apace throughout the week, with the yield on the 10-year note dropping 17 basis points - from 1.69 to 1.52% - for the week, and losing 38 basis points since the recent bond selloff sent to 10-year yield to a high of 1.90 on September 13.
Friday's closing bond price for the benchmark 10-year is nearing the lows made in late August and early September of 1.47%.
There seems to be little standing in the way of the 10-year note heading below its historic low yield made on July 5, 2016, of 1.37%, as comparable notes in developed nations - Germany, Japan, Switzerland - are all offering negative yields.
How long the treasury complex can withstand the onslaught of buying worldwide is a minor concern since the Fed has already signaled to markets that they were willing and able to offer negative yields, like the rest of the world's developed nations.
The specter of negative yielding bonds looms closer in the US, but is probably at least two years away, if it develops at all. A recession, such as has been predicted for 2020 (and also was predicted for 2019), could push the 10-year below one percent, but it's a long way down to zero for the world's most popular bond and the world's largest economy.
Unless Democrats succeed in unseating President Trump through impeachment or other means, the onus of recession remains, though it could very well be short-lived, since the US has plenty of untapped capital and productivity.
For the present time, it would be prudent to keep a close eye on the impeachment fiasco underway in congress. There's a strong likelihood that push-back by the Trump administration could send the entire bag of nonsense and dubious Democrat claims into the courts, pushing the narrative through the Democrat primaries in Spring 2020 all the way to November's presidential and congressional elections.
That actually could be the plan for Democrats, since they have made some very spurious allegations about the president, but, the mainstream media loves a circus and promotes the impeachment mantra in an unalterable, monotonous, fallacious chorus.
The American public has grown tired of the repeated attempts to besmirch the duly elected chief executive and the result could be an historic landslide victory for Republicans in the fall of 2020. The alternative, should the Democrats and their obedient lackeys in the media succeed is more than likely to cause a rift in the populace - generally between urban liberals and rural conservatives - that could foment tremendous civil unrest and lawlessness. That is the disruption Wall Street - and most of the civilized world - fears most.
Bumpy will be the ride for the economy, politics, and society over then next 12 to 16 months unless the Democrats are exposed and soundly defeated.
At the Close, Friday, October 4, 2019:
Dow Jones Industrial Average: 26,573.72, +372.68 (+1.42%)
NASDAQ: 7,982.47, +110.21 (+1.40%)
S&P 500 2,952.01, +41.38 (+1.42%)
NYSE Composite: 12,831.54, +145.78 (+1.15%)
For the Week:
Dow: -246.53 (-0.92%)
NASDAQ: +42.85 (+0.54%)
S&P 500: -9.78 (-0.33%)
NYSE Composite: -140.43 (-1.08%)
Sunday, October 6, 2019
Friday, October 4, 2019
September Non-farm Payrolls Fall Short; Stocks Brace for Selloff or Liftoff
Thursday's trading was another typical banker-assisted positive close on US indices. Stocks continued their descent from Tuesday and Wednesday's losses at the open, but quickly rebounded into positive territory. This pattern has been a feature for the Dow, S&P and NASDAQ since the late 1980s, when the PPT or President's Working Group was created, buoying stocks when losses appeared to be overwhelming.
Free markets? Probably not now and not in the near future. The Fed can put its fingers on the scales at any time, frustrating short sellers but acting as an artificial booster rocket for stocks. While the blatant manipulation is nearly-universally disliked, holders of 401k or retirement funds find the benefit of a backstop beneficial to the health of their portfolios.
That's why fundamentals really haven't mattered for some time, and especially since the GFC of 2008. The Fed or their proxies step in and stop the losses in their tracks. It's not exactly fair or transparent, but it is effective.
Prior to Friday's opening bell, September's non-farm payroll data was released by the BLS, showing an increase of 136,000 jobs for the month, below expectations of 145,000. August payrolls were adjusted upward to 168,000. Due to July's low numbers, the three-month average for payroll additions between July, August and September fell to 119,000, representing the lowest since 2012.
The jobs report sends a clear signal that the economy is slowing, but not yet going in reverse. The weak September report paves the way for the Fed to cut another 25 basis points from the federal funds overnight lending rate. Mixed signals are being sent as this produces a "bad news is good news" condition, as weaker economic numbers push the Fed to continue lowering rates.
TGIF.
At the Close, Thursday, October 3, 2019:
Dow Jones Industrial Average: 26,201.04, +122.42 (+0.47%)
NASDAQ: 7,872.27, +87.02 (+1.12%)
S&P 500: 2,910.63, +23.02 (+0.80%)
NYSE Composite: 12,685.77, +77.34 (+0.61%)
Free markets? Probably not now and not in the near future. The Fed can put its fingers on the scales at any time, frustrating short sellers but acting as an artificial booster rocket for stocks. While the blatant manipulation is nearly-universally disliked, holders of 401k or retirement funds find the benefit of a backstop beneficial to the health of their portfolios.
That's why fundamentals really haven't mattered for some time, and especially since the GFC of 2008. The Fed or their proxies step in and stop the losses in their tracks. It's not exactly fair or transparent, but it is effective.
Prior to Friday's opening bell, September's non-farm payroll data was released by the BLS, showing an increase of 136,000 jobs for the month, below expectations of 145,000. August payrolls were adjusted upward to 168,000. Due to July's low numbers, the three-month average for payroll additions between July, August and September fell to 119,000, representing the lowest since 2012.
The jobs report sends a clear signal that the economy is slowing, but not yet going in reverse. The weak September report paves the way for the Fed to cut another 25 basis points from the federal funds overnight lending rate. Mixed signals are being sent as this produces a "bad news is good news" condition, as weaker economic numbers push the Fed to continue lowering rates.
TGIF.
At the Close, Thursday, October 3, 2019:
Dow Jones Industrial Average: 26,201.04, +122.42 (+0.47%)
NASDAQ: 7,872.27, +87.02 (+1.12%)
S&P 500: 2,910.63, +23.02 (+0.80%)
NYSE Composite: 12,685.77, +77.34 (+0.61%)
Thursday, October 3, 2019
How Deep Will Stocks Dive In October?
On the second day of the fourth quarter, US stocks took a fairly big hit, with the most widely-watches indices each dropping nearly two percent on the day. The current downdraft comes on the heels of two consecutive down weeks in the US markets, but the damage has been relatively mild.
Prior to Tuesday and Wednesday's heavy declines, the Dow Jones Industrial Average was down just over 300 points, a little more than a one percent drop. Combined, the Dow fell over 800 points on Monday and Tuesday, making the entire dip about 1100 points, or just over four percent.
This is nothing to be concerned with, for now, though a repeat of 2018, when stocks ripped lower in October and December, should not be ruled out. By many measures, a slew of US equites are significantly overvalued, thanks in large part to the long-running bull market fueled by excess money printing by central banks and corporate buybacks. These are the two major components of the heady bull market and it is readily apparent that neither of these policies are going to end anytime soon.
The Fed is planning another 25 basis point cut in the federal funds rate at their next FOMC meeting, October 29-30 and corporate stock buybacks are still close to all-time high levels. With the pair policies funding all manner of excess, it would not be surprising to see any sharp decline - such as a 10% correction - countered with more easy money policy.
If there is going to be a recession, Europe will undoubtably encounter one before the United States. The EU is being battered by Brexit fears and poor economic data at the same time and its own measures of QE are barely making a dent in the declining economic conditions on the Continent. Thus, investors in the US will likely have advance warning of any GDP suffering.
Bear in mind that an official recession is defined as two consecutive quarters of negative growth. Therefore, a recession doesn't even become apparent until it is well underway. If third quarter GDP returns a positive number, that would indicate that a recession is still at least three months ahead. The world would find out if the US is headed into recession if fourth quarter GDP came in as a negative number, and that would only be reported by late January 2020.
Finally, a recession is not the end of the world for commerce nor stock investing. There will be a general malaise, as the low tide would affect all stocks in some manner, but there will still be winners, most likely in consumer staples, utilities, and dividend plays. If and when dividend-yielding stocks start taking on heavy water, that would be a time for more focused concern.
For now, caution, not panic, is advisable.
At the Close, Wednesday, October 2, 2019:
Dow Jones Industrial Average: 26,078.62, -494.42 (-1.86%)
NASDAQ: 7,785.25, -123.44 (-1.56%)
S&P 500: 2,887.61, -52.64 (-1.79%)
NYSE Composite: 12,608.43, -226.92 (-1.77%)
Prior to Tuesday and Wednesday's heavy declines, the Dow Jones Industrial Average was down just over 300 points, a little more than a one percent drop. Combined, the Dow fell over 800 points on Monday and Tuesday, making the entire dip about 1100 points, or just over four percent.
This is nothing to be concerned with, for now, though a repeat of 2018, when stocks ripped lower in October and December, should not be ruled out. By many measures, a slew of US equites are significantly overvalued, thanks in large part to the long-running bull market fueled by excess money printing by central banks and corporate buybacks. These are the two major components of the heady bull market and it is readily apparent that neither of these policies are going to end anytime soon.
The Fed is planning another 25 basis point cut in the federal funds rate at their next FOMC meeting, October 29-30 and corporate stock buybacks are still close to all-time high levels. With the pair policies funding all manner of excess, it would not be surprising to see any sharp decline - such as a 10% correction - countered with more easy money policy.
If there is going to be a recession, Europe will undoubtably encounter one before the United States. The EU is being battered by Brexit fears and poor economic data at the same time and its own measures of QE are barely making a dent in the declining economic conditions on the Continent. Thus, investors in the US will likely have advance warning of any GDP suffering.
Bear in mind that an official recession is defined as two consecutive quarters of negative growth. Therefore, a recession doesn't even become apparent until it is well underway. If third quarter GDP returns a positive number, that would indicate that a recession is still at least three months ahead. The world would find out if the US is headed into recession if fourth quarter GDP came in as a negative number, and that would only be reported by late January 2020.
Finally, a recession is not the end of the world for commerce nor stock investing. There will be a general malaise, as the low tide would affect all stocks in some manner, but there will still be winners, most likely in consumer staples, utilities, and dividend plays. If and when dividend-yielding stocks start taking on heavy water, that would be a time for more focused concern.
For now, caution, not panic, is advisable.
At the Close, Wednesday, October 2, 2019:
Dow Jones Industrial Average: 26,078.62, -494.42 (-1.86%)
NASDAQ: 7,785.25, -123.44 (-1.56%)
S&P 500: 2,887.61, -52.64 (-1.79%)
NYSE Composite: 12,608.43, -226.92 (-1.77%)
Wednesday, October 2, 2019
Is Another October Surprise Developing for US Stocks?
On the opening day of trading for the fourth quarter, stocks were beaten down, with all of the major US averages losing more than one percent on the day.
Following Monday's end-of-quarter window dressing session, the losses on Tuesday were unexpected, but not to any extreme extent.
Could the indices be entering an October surprise, not dissimilar to that which occurred in 2018, when the stock markets retreated en masse from all-time highs and then took further flight in December?
It's a real possibility, since, despite making new all-time highs during the summer months, stocks have been relatively flat for the past year. On October 1, 2018, the Dow stood at 26,447.05, which is just 126 points shy of where it closed on Tuesday. Economic conditions haven't really improved. In fact, many might posit that they have degraded.
The World Trade Organization (WTO), which in April 2018 projected global growth at four percent, recently downgraded all of 2019's growth to a paltry 1.2%. Employment, at least in the US, has peaked, with average monthly non-farm payroll data down from last year and September's figures are likely to come in soft.
ISM Manufacturing in the US fell to its lowest level in a decade, registering a 47.8, down from 49.1 points in August and the lowest level since June 2009. Two straight months below 50 indicates not only contraction, but an acceleration in the level of decline. That, in addition to the inverted yield curve, suggests that a recession is due in the US, as Europe is on the brink of recession as well and the condition has a tendency for global contagion.
Thus, stocks get sold, bonds - in a flight to relative safety - get bought and the result is depressed moods all around.
If general chaos is what one desires, this would seem like the perfect opportunity to impeach a sitting president on little more than hearsay. And that is precisely what House Democrats are attempting.
At the Close, Tuesday, October 1, 2019:
Dow Jones Industrial Average: 26,573.04, -343.79 (-1.28%)
NASDAQ: 7,908.68, -90.65 (-1.13%)
S&P 500: 2,940.25, -36.49 (-1.23%)
NYSE Composite: 12,835.35, -169.39 (-1.30%)
Following Monday's end-of-quarter window dressing session, the losses on Tuesday were unexpected, but not to any extreme extent.
Could the indices be entering an October surprise, not dissimilar to that which occurred in 2018, when the stock markets retreated en masse from all-time highs and then took further flight in December?
It's a real possibility, since, despite making new all-time highs during the summer months, stocks have been relatively flat for the past year. On October 1, 2018, the Dow stood at 26,447.05, which is just 126 points shy of where it closed on Tuesday. Economic conditions haven't really improved. In fact, many might posit that they have degraded.
The World Trade Organization (WTO), which in April 2018 projected global growth at four percent, recently downgraded all of 2019's growth to a paltry 1.2%. Employment, at least in the US, has peaked, with average monthly non-farm payroll data down from last year and September's figures are likely to come in soft.
ISM Manufacturing in the US fell to its lowest level in a decade, registering a 47.8, down from 49.1 points in August and the lowest level since June 2009. Two straight months below 50 indicates not only contraction, but an acceleration in the level of decline. That, in addition to the inverted yield curve, suggests that a recession is due in the US, as Europe is on the brink of recession as well and the condition has a tendency for global contagion.
Thus, stocks get sold, bonds - in a flight to relative safety - get bought and the result is depressed moods all around.
If general chaos is what one desires, this would seem like the perfect opportunity to impeach a sitting president on little more than hearsay. And that is precisely what House Democrats are attempting.
At the Close, Tuesday, October 1, 2019:
Dow Jones Industrial Average: 26,573.04, -343.79 (-1.28%)
NASDAQ: 7,908.68, -90.65 (-1.13%)
S&P 500: 2,940.25, -36.49 (-1.23%)
NYSE Composite: 12,835.35, -169.39 (-1.30%)
Tuesday, October 1, 2019
Investors Unconcerned Over Impeachment, Recession
As end-of-quarter trading sessions go, this one was quite on the tame side.
Sure enough, funds bought up some of the most-favored names as "window dressing" for clients, present and future, pleasure. It's an age old tactic to garner new business. "Look what we have," is how funds tout their portfolios to prospective investors, since there are no regulations prohibiting such misleading behavior.
Nonetheless, the practice is commonplace, but less and less significant as consumers become more aware of some Wall Street tactics.
Otherwise, most of the buzz on Monday was over the ongoing impeachment coup against President Trump being conducted in the House of Representatives. The Democrats are using unnamed sources in second-hand, hearsay-colored, whistleblower complaints as their latest weapon against the president.
House Speaker Nancy Pelosi also changed House rules back in December to allow committee members to take depositions from interviewees and people subpoenaed without minority (Republican) representation, which is why the Democrats are working swiftly to take statements while they are actually in recess. Clearing out the opposition is a truly underhanded tactic, not worthy of the US congress, though the Democrat party has apparently now sunk to new levels of sleaziness. More on all of this in an article authored by Raul Ilargi Meijer via The Automatic Earth blog.
Much of what's occurring in DC is apparent to the sharpest minds on Wall Street, and there's certain to be monitoring of events as the happen. Taking wall Street's apparent unconcerned posture as a clue, there's likely less than a 10 percent chance of the Democrats succeeding in impeaching President Trump. Their narrative is weak, not all members of the party are in agreement with approach and, further, if the House actually voted to impeach, a trial would have to be held in the Senate, where a 2/3rds vote is needed to convict and that is highly unlikely, given that Republicans are in the majority.
The weeks ahead will surely be replete with accusations and arguments about the president's "unfitness." A spirited counter-attack from the administration is also expected, and that should be a spectacle to behold.
Wall Street seems confident that the tremors in Washington, DC will not result in a political earthquake. While a positive outcome from their proceedings is far from assured, it is probably best to keep a level head, understanding that much of what the House Democrats are calling "crimes" are actually the president investigating the root causes of the non-stop witch hunt against him.
At the Close, Monday, September 30, 2019:
Dow Jones Industrial Average: 26,916.83, +96.58 (+0.36%)
NASDAQ: 7,999.34, +59.71 (+0.75%)
S&P 500: 2,976.74, +14.95 (+0.50%)
NYSE Composite: 13,004.74, +32.76 (+0.25%)
Sure enough, funds bought up some of the most-favored names as "window dressing" for clients, present and future, pleasure. It's an age old tactic to garner new business. "Look what we have," is how funds tout their portfolios to prospective investors, since there are no regulations prohibiting such misleading behavior.
Nonetheless, the practice is commonplace, but less and less significant as consumers become more aware of some Wall Street tactics.
Otherwise, most of the buzz on Monday was over the ongoing impeachment coup against President Trump being conducted in the House of Representatives. The Democrats are using unnamed sources in second-hand, hearsay-colored, whistleblower complaints as their latest weapon against the president.
House Speaker Nancy Pelosi also changed House rules back in December to allow committee members to take depositions from interviewees and people subpoenaed without minority (Republican) representation, which is why the Democrats are working swiftly to take statements while they are actually in recess. Clearing out the opposition is a truly underhanded tactic, not worthy of the US congress, though the Democrat party has apparently now sunk to new levels of sleaziness. More on all of this in an article authored by Raul Ilargi Meijer via The Automatic Earth blog.
Much of what's occurring in DC is apparent to the sharpest minds on Wall Street, and there's certain to be monitoring of events as the happen. Taking wall Street's apparent unconcerned posture as a clue, there's likely less than a 10 percent chance of the Democrats succeeding in impeaching President Trump. Their narrative is weak, not all members of the party are in agreement with approach and, further, if the House actually voted to impeach, a trial would have to be held in the Senate, where a 2/3rds vote is needed to convict and that is highly unlikely, given that Republicans are in the majority.
The weeks ahead will surely be replete with accusations and arguments about the president's "unfitness." A spirited counter-attack from the administration is also expected, and that should be a spectacle to behold.
Wall Street seems confident that the tremors in Washington, DC will not result in a political earthquake. While a positive outcome from their proceedings is far from assured, it is probably best to keep a level head, understanding that much of what the House Democrats are calling "crimes" are actually the president investigating the root causes of the non-stop witch hunt against him.
At the Close, Monday, September 30, 2019:
Dow Jones Industrial Average: 26,916.83, +96.58 (+0.36%)
NASDAQ: 7,999.34, +59.71 (+0.75%)
S&P 500: 2,976.74, +14.95 (+0.50%)
NYSE Composite: 13,004.74, +32.76 (+0.25%)
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