Markets churned through another day of earnings hits and misses.
Nothing really to see here as the investing community awaits the penultimate FOMC meeting of 2019, slated for October 29 and 30. Another 25 basis point reduction in the federal funds rate is expected at that time.
While cuts such as is expected in October used to be good for a good pop in stocks, lately, Wall Street has been less-than-enthusiastic when interest rates are slashed. This is clear from the current yield on the 10-year note, which refuses to budge, hovering in the 1.70-1.80 range.
That's not supposed to happen. Bond traders, however, are not being herded into low-yielding offerings at the behest of the Fed. There are certainly other ways to spread risk, into corporates or even shorter-maturity treasuries, and the bond vigilantes are taking them. There's a certain logic to taking 1.74% on a one-month bill rather than locking up money for 10 years for a yield that is only marginally higher. Having cash on hand to seize upon opportunity is smart investing.
With the yield curve so flat, there's little reason to probe the longer end, though, for safety's sake, the 30-year bond is now yielding a healthy 2.25%, nearly the best since rates were clobbered in August.
Earnings may be taking center stage for now, but the heart of the market is clearly in fixed income. Too much speculation, over-valuation, and memories of 2008 in stocks has sent money scurrying to safer places.
At the Close, Wednesday, October 23, 2019:
Dow Jones Industrial Average: 26,833.95, +45.85 (+0.17%)
NASDAQ: 8,119.79, +15.50 (+0.19%)
S&P 500: 3,004.52, +8.53 (+0.28%)
NYSE Composite: 13,114.39, +42.53 (+0.33%)
Thursday, October 24, 2019
Wednesday, October 23, 2019
Earnings Not Carrying Stocks Higher
US companies are making money, just not enough to satisfy the investing appetites at this stage of the expansion.
Traders have been poring over third quarter reports for the better parts of two weeks now, and what they're seeing is unimpressive. Gone are the heady days of the early internet boom, when companies reported growth at torrid paces. Today's market is mundane, predictable, and eventually more conditioned to move on Fed-speak, rate moves, or geopolitics, rather than fundamentals, those boring profit statements from multi-nationals.
The good news is that stocks aren't experiencing another October like the last, when the indices tumbled day after day, wiping out most of the annual gains from 2018. That underlying fear of having a rug pulled out from under may be why nobody is either irrational or exuberant at this juncture.
This and next week are the busiest reporting weeks of the month. Unless there are some big negative surprises, one can reasonably expect markets to simply glide along until the Fed meeting at the end of October, when another 25 basis point cut in the federal funds rate is expected.
At the Close, Tuesday, October 22, 2019:
Dow Jones Industrial Average: 26,788.10, -39.54 (-0.15%)
NASDAQ: 8,104.30, -58.69 (-0.72%)
S&P 500: 2,995.99, -10.73 (-0.36%)
NYSE Composite: 13,071.86, -16.76 (-0.13%)
Traders have been poring over third quarter reports for the better parts of two weeks now, and what they're seeing is unimpressive. Gone are the heady days of the early internet boom, when companies reported growth at torrid paces. Today's market is mundane, predictable, and eventually more conditioned to move on Fed-speak, rate moves, or geopolitics, rather than fundamentals, those boring profit statements from multi-nationals.
The good news is that stocks aren't experiencing another October like the last, when the indices tumbled day after day, wiping out most of the annual gains from 2018. That underlying fear of having a rug pulled out from under may be why nobody is either irrational or exuberant at this juncture.
This and next week are the busiest reporting weeks of the month. Unless there are some big negative surprises, one can reasonably expect markets to simply glide along until the Fed meeting at the end of October, when another 25 basis point cut in the federal funds rate is expected.
At the Close, Tuesday, October 22, 2019:
Dow Jones Industrial Average: 26,788.10, -39.54 (-0.15%)
NASDAQ: 8,104.30, -58.69 (-0.72%)
S&P 500: 2,995.99, -10.73 (-0.36%)
NYSE Composite: 13,071.86, -16.76 (-0.13%)
Tuesday, October 22, 2019
October Surprise? S&P 500 Closing In On All-Time High; McDonald's (MCD) Misses
For a Monday, trading wasn't very impressive. The back-and-forth of the equity markets we've been seeing for many months have elicited a cautionary mood. There's modest dip-buying and rallies are being sold, though not excessively. It makes a great market for traders on commission or those who are in and out of stocks faster than political media pundits can say, "Russia."
It being the heart of third quarter earnings season, there are likely to be bumps and grinds, but the news of the day was the S&P picking up 20 points to close above 3,000, the first time it's been there since September 19. Prior to that, the S&P remained at elevated levels for the last two weeks in July, topping out at 3,025.86 on the 26th before taking a five percent dive in August.
The question now, with impeachment talk fading, troops coming out of Syria and a tentative cease fire between the Kurds and Turks imposed, a China deal looking better every day, and still-solid employment figures, is whether the index can make a new all-time high and hold there. The Fed is certainly doing its part, adding as much liquidity as it can, as quickly as possible, but yields on the 10-year note are not making it any easier, reaching 1.80% on Monday. The good news from the bond pits is that the curve is no longer inverted and hasn't been for some time, easing recession fears.
Thus, there are shifting winds, buffeting the sails of sellers and buyers alike, but the S&P 500 appears to be marching toward uncharted territory. Another session like Monday's would put it over the top.
As far as alternatives, the aforementioned bond arena is looking better and better, though far-out alternatives like gas generators, extra canned goods, firewood, and gardening supplies have taken the front seat on the road to self-sufficiency.
It's no joke that preppers are still prepping for the inevitable crash and burn, or civil war, or zombie apocalypse. It's coming, but no one knows when. For the most part, all those canned goods have to be rotated at last every few years, but, hey, everybody has to eat.
Gold bugs and silver surfers have been backstabbed repeatedly by the futures traders whose sole mission in life, it seems, is to keep a lid on the price of precious metals. They've done a stellar job, smashing down gold every time it crests above $1500, and silver, whenever it gets to $18 per ounce, is sold as if it's some form of monetary kryptonite.
That leaves stocks, or maybe it's time to think about buying a few cows and a brace of chickens. McDonald's (MCD) may be thinking along those lines. They missed on both top and bottom line estimates with EPS coming in at $2.11 vs. $2.21 expected. Overall, it wasn't bad, however. Despite a miss on domestic same store sales - +4.8% vs. +5.2% expected - which is causing a decline of about four percent in pre-market trading, most companies would be happy with growth above four percent, especially established brands like Mickey D's.
Investors always overreact, and this is no different, though with a multiple closing in on 30, maybe the fast food giant is a bit overpriced above $200 per share.
You want fries with that sell order?
At the Close, Monday, October 21, 2019:
Dow Jones Industrial Average: 26,827.64, +57.44 (+0.21%)
NASDAQ: 8,162.99, +73.44 (+0.91%)
S&P 500 3,006.72, +20.52 (+0.69%)
NYSE Composite: 13,088.61, +81.97 (+0.63%)
It being the heart of third quarter earnings season, there are likely to be bumps and grinds, but the news of the day was the S&P picking up 20 points to close above 3,000, the first time it's been there since September 19. Prior to that, the S&P remained at elevated levels for the last two weeks in July, topping out at 3,025.86 on the 26th before taking a five percent dive in August.
The question now, with impeachment talk fading, troops coming out of Syria and a tentative cease fire between the Kurds and Turks imposed, a China deal looking better every day, and still-solid employment figures, is whether the index can make a new all-time high and hold there. The Fed is certainly doing its part, adding as much liquidity as it can, as quickly as possible, but yields on the 10-year note are not making it any easier, reaching 1.80% on Monday. The good news from the bond pits is that the curve is no longer inverted and hasn't been for some time, easing recession fears.
Thus, there are shifting winds, buffeting the sails of sellers and buyers alike, but the S&P 500 appears to be marching toward uncharted territory. Another session like Monday's would put it over the top.
As far as alternatives, the aforementioned bond arena is looking better and better, though far-out alternatives like gas generators, extra canned goods, firewood, and gardening supplies have taken the front seat on the road to self-sufficiency.
It's no joke that preppers are still prepping for the inevitable crash and burn, or civil war, or zombie apocalypse. It's coming, but no one knows when. For the most part, all those canned goods have to be rotated at last every few years, but, hey, everybody has to eat.
Gold bugs and silver surfers have been backstabbed repeatedly by the futures traders whose sole mission in life, it seems, is to keep a lid on the price of precious metals. They've done a stellar job, smashing down gold every time it crests above $1500, and silver, whenever it gets to $18 per ounce, is sold as if it's some form of monetary kryptonite.
That leaves stocks, or maybe it's time to think about buying a few cows and a brace of chickens. McDonald's (MCD) may be thinking along those lines. They missed on both top and bottom line estimates with EPS coming in at $2.11 vs. $2.21 expected. Overall, it wasn't bad, however. Despite a miss on domestic same store sales - +4.8% vs. +5.2% expected - which is causing a decline of about four percent in pre-market trading, most companies would be happy with growth above four percent, especially established brands like Mickey D's.
Investors always overreact, and this is no different, though with a multiple closing in on 30, maybe the fast food giant is a bit overpriced above $200 per share.
You want fries with that sell order?
At the Close, Monday, October 21, 2019:
Dow Jones Industrial Average: 26,827.64, +57.44 (+0.21%)
NASDAQ: 8,162.99, +73.44 (+0.91%)
S&P 500 3,006.72, +20.52 (+0.69%)
NYSE Composite: 13,088.61, +81.97 (+0.63%)
Sunday, October 20, 2019
WEEKEND WRAP: QE Is Back and Here To Stay
As can be easily shown by the numbers below, Friday's little blood-letting brought markets close to break-even for the week, that being the most likely outcome for stocks in the near-term and over the past 21 months.
Bullish and bearish arguments can generally be tossed to the trash heap at this juncture. Many funds will be soon closing their books on 2019, with a pretty fair profit baked in and the ugly returns from 2018 fading fast into the distance.
On the funding issues at the Fed and primary dealers, some are already calling it a crisis. In a nutshell, on October 1, the entire overnight lending facility nearly froze up and the Fed has been lending to the primary dealers, buying back their collateral for cash, at a frantic pace.
What many are calling, tongue-in-cheek "not QE" is exactly QE, on steroids. The Fed has to buy up more securities than the Treasury department can issue, thus, they'll be buying up foreign debt (read: at negative interest rates), in what can only be seen by any cogent observer as backdoor currency destruction.
What the Fed doesn't want to reveal is that they will have to continue doing Temporary Open Market Operations (TOMO) and Permanent OPO (POMO) well past the second quarter of next year, which they have already admitted to being their current forecast timetable. By June of next year, at the end of the second quarter, the Fed will probably be sopping up $100 billion per month, and that's a conservative estimate.
The overarching objective is to keep the current expansion (Ponzi scheme) going, so that the stock market continues toward and beyond new all-time highs and bonds continue to lower in yield. The problem, ultimately, is that it cannot go on forever, but negative interest rates will likely take care of that, reducing the monetary base to a point at which the Fed and central bankers around the world will have run out of options.
Then, it will be the average citizen who pays the price for experimental Keynesian economics, or, as a former president used to term it, "voodoo economics."
Stock up on canned goods. Great for the holidays and essential during catastrophes.
At the Close, Friday, October 17, 2019:
Dow Jones Industrial Average: 26,770.20, -255.68 (-0.95%)
NASDAQ: 8,089.54, -67.31 (-0.83%)
S&P 500: 2,986.20, -11.75 (-0.39%)
NYSE Composite: 13,006.64, -32.59 (-0.25%)
For the Week:
Dow: -46.39 (-0.17%)
NASDAQ: +32.50 (+0.40%)
S&P 500: +15.93 (+0.54%)
NYSE Composite: +73.73 (+0.62%)
Bullish and bearish arguments can generally be tossed to the trash heap at this juncture. Many funds will be soon closing their books on 2019, with a pretty fair profit baked in and the ugly returns from 2018 fading fast into the distance.
On the funding issues at the Fed and primary dealers, some are already calling it a crisis. In a nutshell, on October 1, the entire overnight lending facility nearly froze up and the Fed has been lending to the primary dealers, buying back their collateral for cash, at a frantic pace.
What many are calling, tongue-in-cheek "not QE" is exactly QE, on steroids. The Fed has to buy up more securities than the Treasury department can issue, thus, they'll be buying up foreign debt (read: at negative interest rates), in what can only be seen by any cogent observer as backdoor currency destruction.
What the Fed doesn't want to reveal is that they will have to continue doing Temporary Open Market Operations (TOMO) and Permanent OPO (POMO) well past the second quarter of next year, which they have already admitted to being their current forecast timetable. By June of next year, at the end of the second quarter, the Fed will probably be sopping up $100 billion per month, and that's a conservative estimate.
The overarching objective is to keep the current expansion (Ponzi scheme) going, so that the stock market continues toward and beyond new all-time highs and bonds continue to lower in yield. The problem, ultimately, is that it cannot go on forever, but negative interest rates will likely take care of that, reducing the monetary base to a point at which the Fed and central bankers around the world will have run out of options.
Then, it will be the average citizen who pays the price for experimental Keynesian economics, or, as a former president used to term it, "voodoo economics."
Stock up on canned goods. Great for the holidays and essential during catastrophes.
At the Close, Friday, October 17, 2019:
Dow Jones Industrial Average: 26,770.20, -255.68 (-0.95%)
NASDAQ: 8,089.54, -67.31 (-0.83%)
S&P 500: 2,986.20, -11.75 (-0.39%)
NYSE Composite: 13,006.64, -32.59 (-0.25%)
For the Week:
Dow: -46.39 (-0.17%)
NASDAQ: +32.50 (+0.40%)
S&P 500: +15.93 (+0.54%)
NYSE Composite: +73.73 (+0.62%)
Friday, October 18, 2019
Peaceful Markets Lulling Bulls and Bears Alike into Complacency
Stocks had no direction whatsoever on Thursday, same as many of the sessions from the past few months.
There doesn't seem to be any momentum in either direction, but, as the old adage says, "never short a dull market." This being the middle of third quarter earnings season, there will likely be action on the names which are reporting, though moves during such a period are often discounted as mere knee-jerk reactions.
Everything else, bonds, precious metals, oil, also seems to be in a state of suspended animation. Volatility has been wrung out of markets, which is probably a positive, since there are fears of a repeat of last October, when stocks were battered. This being a non-prime election year, perhaps a significant period of calm might be beneficial.
If you think it's easy to write about nothing, the above sentences should prove that it's not.
At the Close, Thursday, October 17, 2019:
Dow Jones Industrial Average: 27,025.88, +23.90 (+0.09%)
NASDAQ: 8,156.85, +32.67 (+0.40%)
S&P 500: 2,997.95, +8.26 (+0.28%)
NYSE Composite: 13,039.23, +44.34 (+0.34%)
There doesn't seem to be any momentum in either direction, but, as the old adage says, "never short a dull market." This being the middle of third quarter earnings season, there will likely be action on the names which are reporting, though moves during such a period are often discounted as mere knee-jerk reactions.
Everything else, bonds, precious metals, oil, also seems to be in a state of suspended animation. Volatility has been wrung out of markets, which is probably a positive, since there are fears of a repeat of last October, when stocks were battered. This being a non-prime election year, perhaps a significant period of calm might be beneficial.
If you think it's easy to write about nothing, the above sentences should prove that it's not.
At the Close, Thursday, October 17, 2019:
Dow Jones Industrial Average: 27,025.88, +23.90 (+0.09%)
NASDAQ: 8,156.85, +32.67 (+0.40%)
S&P 500: 2,997.95, +8.26 (+0.28%)
NYSE Composite: 13,039.23, +44.34 (+0.34%)
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