With an FOMC meeting in the dock for Tuesday, investors took the opportunity to ramp stocks higher prior to the expected 25 basis point cut to the federal funds rate. Just prior to the opening bell, an apparently fake news story about a presidential tweet appeared on ZeroHedge.com, saying President Trump tweeted, "today will be a good day in the stock market," and, "the China deal is moving forward ahead of schedule."
We checked the president's twitter feed and could not find any such tweet. We also checked Bloomberg, which featured an article on President Trump's tweets that related to the stock market. No such tweet was shown in the article.
This clearly looks like a somebody spoofed the grammatically-challenged Zero Hedge website. It was most likely one of their "reliable" email contacts trying to look good. It's a shame that "the Hedge" has slumped to such low levels of journalism - if that's what you want to call it - because it is normally a pretty good source for economic news not found elsewhere.
Recently, Zero Hedge has taken to posting political and other non-economic articles, to its detriment. Many of the commentators who frequented Zero Hedge in its heyday (2008-2009), prior to it being purchased by ABC Media (British Columbia, not the US media giant). According to the one-liner in the website's footer - Copyright ©2009-2019 ZeroHedge.com/ABC Media, LTD - the company took it out of the original owner's hands in 2009, as the GFC was winding down.
For the S&P 500, Monday was a special occasion, setting a new all-time record high closing. Trump may not have pumped it with a tweet, but his "America First" policies have certainly contributed to the rise of all US indices.
If stocks were overvalued prior to Monday, they are even more overvalued now, and will likely be uber-overvalued after the FOMC announces another rate cut on Wednesday.
In the meantime, earnings season is in full swing. The big story was Google parent, Alphabet, third quarter earnings, reported after the close. Alphabet posted a per-share profit of $10.12 in the quarter, decidedly below the $13.06 a share from the same period last year. Analysts polled by Bloomberg were expecting a per-share profit of $12.35.
The sizable miss was due largely to losses in investments. Among investments that may have contributed to the loss, Alphabet was involved with Uber and Slack, two companies that recently IPO'd and have lost value.
Little of this will affect Tuesday's trade outside of Alphabet (GOOG). There's far too much enthusiasm for equities and anticipation of looser monetary policy from the Fed already backed into the mix.
At the Close, Monday, October 28, 2009:
Dow Jones Industrial Average: 27,090.72, +132.66 (+0.49%)
NASDAQ: 8,325.99, +82.87 (+1.01%)
S&P 500: 3,039.42, +16.87 (+0.56%)
NYSE Composite: 13,186.43, +40.19 (+0.31%)
Tuesday, October 29, 2019
Sunday, October 27, 2019
WEEKEND WRAP: Green Lights for Stocks; Flight From High Tax States Varies US Landscape
For equity investors, the week was all about Friday.
After flailing about the prior four sessions, US indices got a sizable boost on the final day of the week, sending traders home satisfied with a positive result for the week.
With the Dow, NASDAQ, and Composite mere percentage points short of all-time highs, the S&P 500 is within three points of its record closing high, recorded earlier this year, on July 26 (3,025.86).
So, with all the uncertainty surrounding geo-political events - impeachment, Brexit, trade war - stocks continue to perform magic as solid investments in a ZIRP and NIRP environment.
With the Fed committed to "not QE" through the second quarter of 2020 (at least), stocks have in front of them a glowing green light signaling fresh all-time highs. The FOMC is expected to cut another 25 basis points at its meeting this week, the second to last of the year.
In commodity trading, WTI crude oil was bid, closing out the week at 56.63 a barrel after slumping down to $52.45 over the prior two weeks. Gold and silver, both sluggish over the past month, finally were bid on Thursday and Friday. Gold was as high as $1518 on Friday, settling in at $1504, while silver crested above $18 per ounce and closed right on that number Friday.
Ten-year treasury notes continued to be shunned, finishing out the week with a yield of 1.80%, with some correlation to ongoing cuts in the federal funds rate. Bond traders are expressing a preference for short-term maturities, with 1, 2, and 3-month bills nearly at the same yield as the 10-year. While the yield curve has returned from inverted to a rather dull slope, there's certainly no consensus on direction. With the 10-year yield at its best level since August, it is still well below the average 2.72% which prevailed in the first quarter.
Earnings reports have been unreassuring, with as many misses as those topping estimates. Overall, mega-corps are still making money, just not so much to boost their prices significantly. In this environment, banging out 5-8% year-over-year gains has to be considered pretty solid, being that the current economic cycle is well past the mid-point and may be nearing an end.
Recession talk has subsided for now, though different regions throughout the vast US landscape offer varied results. In general, flight from high-tax states - New York, New Jersey, Massachusetts, Maryland, Connecticut, Illinois, and California, in particular - to Southern enclaves continues apace. Retirees are taking their money and running for the state line, seeking reduced property, income, and estate taxes in more conservative states.
States that have not raised their minimum wages significantly are experiencing an influx of new residents, and with that, housing, roads, and commercial spaces are being constructed at a hot pace. Meanwhile, the Northeast continues to suffer from an overabundance of taxation, regulation, and handouts to the indigent at the same time its infrastructure is crumbling and best residents are leaving.
New York is a prime example of the dangers of liberal policies causing middle and upper class flight. While undocumented (illegal) migrants (aliens) are offered free food, housing, and education, long-suffering native New Yorkers are feeling put out, footing the bill for government largesse while good jobs are scarce and property taxes are near the highest in the nation. Home values are depressed, despite low interest rates and job creation is limited by the excessive minimum wage and other requirements of employment paid for by companies.
New York leads the nation in lost manufacturing jobs in 2019, estimated to have shed 10,000 positions through the first nine months of the year. The Empire State has also suffered significant losses in the hospitality and construction industries, due to the higher minimum wage and lack of growth in commercial and residential building.
These so-called "high tax states" are going to face a cash crunch, as higher paid workers are replaced with low-skill, low pay employees. The revenue will not be enough to sustain the high costs of state agencies and pensions. A major bust has been building for years in many states who will have to face the reality that the days of big promises are over and government staff reduction and budget cuts are on the table.
The United States is a big country, and, similar to the nations of Europe, some states may be booming while others are failing.
Caveat Emptor.
At the Close, Friday, October 25, 2019:
Dow Jones Industrial Average: 26,958.06; +152.53 (+0.57%)
NASDAQ: 8,243.12, +57.32 (+0.70%)
S&P 500: 3,022.55, +12.26 (+0.41%)
NYSE Composite: 13,146.24, +27.33 (+0.21%)
For the Week:
Dow: +187.86 (+0.70%)
NASDAQ: +153.58 (+1.90%)
S&P 500: +36.35 (+1.22%)
NYSE Composite: +139.60 (+1.07%)
After flailing about the prior four sessions, US indices got a sizable boost on the final day of the week, sending traders home satisfied with a positive result for the week.
With the Dow, NASDAQ, and Composite mere percentage points short of all-time highs, the S&P 500 is within three points of its record closing high, recorded earlier this year, on July 26 (3,025.86).
So, with all the uncertainty surrounding geo-political events - impeachment, Brexit, trade war - stocks continue to perform magic as solid investments in a ZIRP and NIRP environment.
With the Fed committed to "not QE" through the second quarter of 2020 (at least), stocks have in front of them a glowing green light signaling fresh all-time highs. The FOMC is expected to cut another 25 basis points at its meeting this week, the second to last of the year.
In commodity trading, WTI crude oil was bid, closing out the week at 56.63 a barrel after slumping down to $52.45 over the prior two weeks. Gold and silver, both sluggish over the past month, finally were bid on Thursday and Friday. Gold was as high as $1518 on Friday, settling in at $1504, while silver crested above $18 per ounce and closed right on that number Friday.
Ten-year treasury notes continued to be shunned, finishing out the week with a yield of 1.80%, with some correlation to ongoing cuts in the federal funds rate. Bond traders are expressing a preference for short-term maturities, with 1, 2, and 3-month bills nearly at the same yield as the 10-year. While the yield curve has returned from inverted to a rather dull slope, there's certainly no consensus on direction. With the 10-year yield at its best level since August, it is still well below the average 2.72% which prevailed in the first quarter.
Earnings reports have been unreassuring, with as many misses as those topping estimates. Overall, mega-corps are still making money, just not so much to boost their prices significantly. In this environment, banging out 5-8% year-over-year gains has to be considered pretty solid, being that the current economic cycle is well past the mid-point and may be nearing an end.
Recession talk has subsided for now, though different regions throughout the vast US landscape offer varied results. In general, flight from high-tax states - New York, New Jersey, Massachusetts, Maryland, Connecticut, Illinois, and California, in particular - to Southern enclaves continues apace. Retirees are taking their money and running for the state line, seeking reduced property, income, and estate taxes in more conservative states.
States that have not raised their minimum wages significantly are experiencing an influx of new residents, and with that, housing, roads, and commercial spaces are being constructed at a hot pace. Meanwhile, the Northeast continues to suffer from an overabundance of taxation, regulation, and handouts to the indigent at the same time its infrastructure is crumbling and best residents are leaving.
New York is a prime example of the dangers of liberal policies causing middle and upper class flight. While undocumented (illegal) migrants (aliens) are offered free food, housing, and education, long-suffering native New Yorkers are feeling put out, footing the bill for government largesse while good jobs are scarce and property taxes are near the highest in the nation. Home values are depressed, despite low interest rates and job creation is limited by the excessive minimum wage and other requirements of employment paid for by companies.
New York leads the nation in lost manufacturing jobs in 2019, estimated to have shed 10,000 positions through the first nine months of the year. The Empire State has also suffered significant losses in the hospitality and construction industries, due to the higher minimum wage and lack of growth in commercial and residential building.
These so-called "high tax states" are going to face a cash crunch, as higher paid workers are replaced with low-skill, low pay employees. The revenue will not be enough to sustain the high costs of state agencies and pensions. A major bust has been building for years in many states who will have to face the reality that the days of big promises are over and government staff reduction and budget cuts are on the table.
The United States is a big country, and, similar to the nations of Europe, some states may be booming while others are failing.
Caveat Emptor.
At the Close, Friday, October 25, 2019:
Dow Jones Industrial Average: 26,958.06; +152.53 (+0.57%)
NASDAQ: 8,243.12, +57.32 (+0.70%)
S&P 500: 3,022.55, +12.26 (+0.41%)
NYSE Composite: 13,146.24, +27.33 (+0.21%)
For the Week:
Dow: +187.86 (+0.70%)
NASDAQ: +153.58 (+1.90%)
S&P 500: +36.35 (+1.22%)
NYSE Composite: +139.60 (+1.07%)
Friday, October 25, 2019
Amazon Misses, Gold, Silver Bid
Even more sloshing around as the week progresses. The Dow traded in a range of just 217 points, ramping back and forth across the unchanged line.
All other indices saw gains, although they were slight. The NASDAQ topped the list with nearly a one percent rise.
Within an hour of the opening bell Friday, Amazon (AMZN) reported eps of 4.23 per share versus an expected $4.59, a miss of 7.8%. This follows poor thrid quarter reports from Caterpillar (CAT), 3M (MMM), and Texas Instruments (TXN), on Thursday.
Gold and silver are being well bid, with silver gaining over 2.5% above $18 per ounce for the first time in over a month.
At the Close, Thursday, October 24, 2019:
Dow Jones Industrial Average: 26,805.53, -28.42 (-0.11%)
NASDAQ: 8,185.80, +66.00 (+0.81%)
S&P 500: 3,010.29,, +5.77 (+0.19%)
NYSE Composite: 13,118.91, +4.52 (+0.03%)
All other indices saw gains, although they were slight. The NASDAQ topped the list with nearly a one percent rise.
Within an hour of the opening bell Friday, Amazon (AMZN) reported eps of 4.23 per share versus an expected $4.59, a miss of 7.8%. This follows poor thrid quarter reports from Caterpillar (CAT), 3M (MMM), and Texas Instruments (TXN), on Thursday.
Gold and silver are being well bid, with silver gaining over 2.5% above $18 per ounce for the first time in over a month.
At the Close, Thursday, October 24, 2019:
Dow Jones Industrial Average: 26,805.53, -28.42 (-0.11%)
NASDAQ: 8,185.80, +66.00 (+0.81%)
S&P 500: 3,010.29,, +5.77 (+0.19%)
NYSE Composite: 13,118.91, +4.52 (+0.03%)
Thursday, October 24, 2019
Stocks Sluggish As Bonds Offer Nearly Risk-Free Money Making
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%)
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%)
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%)
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