The slowdown continues...
Rather, this is what happens when humans make poor decisions, over and over again, allowing computers to do most of the decision-making on trading. Now you're stuck between a rock and a hard place.
The rock: China's refusal to concede on many points in a trade deal.
The hard place: US insistence that a deal is "close."
This has been going on for months, about 16 to be precise, and stocks have been whipsawed in either direction depending on what the algos are going to interpret as good and/or bad news.
The latest, by presidential economic advisor and former financial talk show host, Larry Kudlow, has futures pointing higher prior to Friday's opening bell. But, we've seen this picture before. By he end of the day, there won't be a deal, and the Chinese will issue forth a press announcement that they don't agree to this or that or anything, maybe, and stocks will erase the gains they've made.
Count on it.
Judging by the figures below for Thursday's session, markets - outside of bonds - were essentially flat for the fourth consecutive day. Money Daily's headline yesterday, that this was about a dull a market as has ever been, was confirmed on Thursday.
Will Friday be any different, and, does it matter?
The chances that Friday will be different, and that stocks will find some direction, are good. It's an options expiration day, which usually adds some volatility, and it's the end of the week, so the market has those things going for it. On the other hand, there's nothing really new or different upon which to base trades.
As for the bond market, specifically treasuries, a rally is well underway. The selloff that saw yield on the 10-year note go from 1.54% on October 4 to 1.94% on November 8, is reversing course. The benchmark closed out yesterday at 1.82% and appears to have momentum heading into the holiday season. A slow-moving equity market at or near all-time highs (the S&P set another closing high yesterday) isn't helping inspire confidence, so there are many seeking the safety of government bonds.
As we head toward the opening bell in what can only be described as the welcome end to a week of insignificance, it's worth noting that even the phony impeachment hearings on Capitol Hill aren't even making headlines. That speaks volumes about how poorly the news media is perceived and even more about how loathsome our political leaders have become.
OK, you can go back to sleep now...
At the Close, Thursday, November 14, 2019:
Dow Jones Industrial Average: 27,781.96, -1.63 (-0.01%)
NASDAQ: 8,479.02, -3.08 (-0.04%)
S&P 500: 3,096.63, +2.59 (+0.08%)
NYSE Composite: 13,392.00, +6.94 (+0.05%)
Friday, November 15, 2019
Thursday, November 14, 2019
This Is About As Dull A Market As There Ever Has Been
It's been a slow week.
"How slow is it," the crowd chants, Johnny Carson style.
Well, the Dow is up 102 points as of Wednesday's close. That's the good news, and it's about as good as it gets. The NASDAQ, in three sessions, has gained six points, the S&P just under one point, and the NYSE Composite is down 22.75 points.
That's how slow it is.
As for the causes, anybody's guess will do, but the most likely candidates are uncertainty over just about everything, from impeachment hearings in the House of Representatives, to ongoing and increasingly-violent protests in Hong Kong, to backtracking in US-China trade relations, to just plain old vanilla market overbought conditions. It's not like the economy is booming (1.9% 3rd quarter GDP), or that most of the fuel has been courtesy of the Federal Reserve (another $200 billion added to their balance sheet in just the past two months), or that stock buybacks have been responsible for more than 60% of the gains over the past five years (maybe).
There are ample reasons for people to take a look-and-see stance. Just in case nobody's noticed, it's almost the end of 2019, allocations have already been made and funds are sitting on their hands, lest they get burned hitting the BUY button before year end.
If the New York stock exchange shut down for a day or two, or even a week or two, would it matter to anybody but the ultra-wealthy? Probably not, and, since the ultra-wealthy are, ahem, ultra-wealthy, why should they be buying stocks at nosebleed levels anyhow? They're waiting for the next greater fool, so they can sell some of their holdings at nice profits.
Thus, it's a simple assumption to make that if there are few buyers, and ample sellers who are holding out for the best prices, not much is going to happen, and that's why this week has been so slow. Whether that translates into a major downdraft, as many have been predicting once new highs were made last week, or another step up the ladder of success depends largely on news flow, and that hasn't been particularly encouraging of late (see above).
There's an old adage that reads something like, "never short a dull market," which falls a bit short in the logic department. If a market is dull, it obviously is in need of a catalyst to move ahead, move quicker, move at all. Will selling short bring out buyers? Maybe that's the idea, but there's no proof that a dull market is any more prone to melt up than a volatile market. If things are hot, people are buying and selling, brokers are making commissions (well, that's how it used to be), and stocks are going somewhere, up or down, that would seem to be a more dangerous place into which to sell.
There will be short sellers, but, at the present, there doesn't seem to be many eager buyers out there.
This is what happens when nothing happens. You have to write about nothing happening as if there is actually something happening.
Nothing is happening.
At the Close, Wednesday, November 13, 2019:
Dow Jones Industrial Average: 27,783.59, +92.10 (+0.33%)
NASDAQ: 8,482.10, -3.99 (-0.05%)
S&P 500: 3,094.04, +2.20 (+0.07%)
NYSE Composite: 13,385.05, -2.57 (-0.02%)
"How slow is it," the crowd chants, Johnny Carson style.
Well, the Dow is up 102 points as of Wednesday's close. That's the good news, and it's about as good as it gets. The NASDAQ, in three sessions, has gained six points, the S&P just under one point, and the NYSE Composite is down 22.75 points.
That's how slow it is.
As for the causes, anybody's guess will do, but the most likely candidates are uncertainty over just about everything, from impeachment hearings in the House of Representatives, to ongoing and increasingly-violent protests in Hong Kong, to backtracking in US-China trade relations, to just plain old vanilla market overbought conditions. It's not like the economy is booming (1.9% 3rd quarter GDP), or that most of the fuel has been courtesy of the Federal Reserve (another $200 billion added to their balance sheet in just the past two months), or that stock buybacks have been responsible for more than 60% of the gains over the past five years (maybe).
There are ample reasons for people to take a look-and-see stance. Just in case nobody's noticed, it's almost the end of 2019, allocations have already been made and funds are sitting on their hands, lest they get burned hitting the BUY button before year end.
If the New York stock exchange shut down for a day or two, or even a week or two, would it matter to anybody but the ultra-wealthy? Probably not, and, since the ultra-wealthy are, ahem, ultra-wealthy, why should they be buying stocks at nosebleed levels anyhow? They're waiting for the next greater fool, so they can sell some of their holdings at nice profits.
Thus, it's a simple assumption to make that if there are few buyers, and ample sellers who are holding out for the best prices, not much is going to happen, and that's why this week has been so slow. Whether that translates into a major downdraft, as many have been predicting once new highs were made last week, or another step up the ladder of success depends largely on news flow, and that hasn't been particularly encouraging of late (see above).
There's an old adage that reads something like, "never short a dull market," which falls a bit short in the logic department. If a market is dull, it obviously is in need of a catalyst to move ahead, move quicker, move at all. Will selling short bring out buyers? Maybe that's the idea, but there's no proof that a dull market is any more prone to melt up than a volatile market. If things are hot, people are buying and selling, brokers are making commissions (well, that's how it used to be), and stocks are going somewhere, up or down, that would seem to be a more dangerous place into which to sell.
There will be short sellers, but, at the present, there doesn't seem to be many eager buyers out there.
This is what happens when nothing happens. You have to write about nothing happening as if there is actually something happening.
Nothing is happening.
At the Close, Wednesday, November 13, 2019:
Dow Jones Industrial Average: 27,783.59, +92.10 (+0.33%)
NASDAQ: 8,482.10, -3.99 (-0.05%)
S&P 500: 3,094.04, +2.20 (+0.07%)
NYSE Composite: 13,385.05, -2.57 (-0.02%)
Wednesday, November 13, 2019
Stalled Out: Dow Finishes Unchanged; NASDAQ, S&P Flat Following Trump Speech
After President Donald J. Trump's speech before the Economic Club of New York, stocks retreated, wiping out gains made earlier in the session. Trump spoke during the noon hour, maintaining a hard line on negotiations with China and the European Union.
The president reiterated the need for fair and reciprocal trade, addressing the unfairness in trading with China and praising his administration for raising tariffs on Chinese imports. As is his style, the president called out the Chinese for stealing intellectual property, subsidizing their own industries at the expense of the US, and dumping products on our shores at under-competitive prices.
Critical of the president's tough approach with the Chinese, the media produced enough negative headlines to send the algorithms into a spasmodic tailspin, selling stocks with abandon. The Dow was up nearly 80 points in early trading, but sold off in the afternoon, eventually finishing unchanged.
It was the first time the Dow had closed unchanged since 2014, and the third time since 2000. According to the Motley Fool, the chance that the Dow Jones Industrial Average would close unchanged for a single day became more difficult when the index adopted decimalization in 2001. Prior to that, advances and declines were measured in eights of a point, a much larger denominator than today's, which is one cent. The article points out that the Dow finished unchanged ten times in the 1990s and four times in just one year: 1979.
With the Dow flattened out for the day along with the other major indices, interest turned to global markets which uniformly reacted with negativity. All Asian markets were lower overnight and European exchanges were also showing declines, though the losses were less than spectacular. Other than Hong Kong's Hang Seng Index - which is a separate case altogether due to the ongoing protests and disruptions - none of the major indices were down more than one percent.
As daylight broke over America's Eastern shores, stock futures were pointing to a negative open. Dow futures were off more than 100 points.
At the Close, Tuesday, November 12, 2019:
Dow Jones Industrial Average: 27,691.49, 0.00 (0.00%)
NASDAQ: 8,486.09, +21.81 (+0.26%)
S&P 500: 3,091.84, +4.83 (+0.16%)
NYSE Composite: 13,387.62, -0.49 (-0.00%)
The president reiterated the need for fair and reciprocal trade, addressing the unfairness in trading with China and praising his administration for raising tariffs on Chinese imports. As is his style, the president called out the Chinese for stealing intellectual property, subsidizing their own industries at the expense of the US, and dumping products on our shores at under-competitive prices.
Critical of the president's tough approach with the Chinese, the media produced enough negative headlines to send the algorithms into a spasmodic tailspin, selling stocks with abandon. The Dow was up nearly 80 points in early trading, but sold off in the afternoon, eventually finishing unchanged.
It was the first time the Dow had closed unchanged since 2014, and the third time since 2000. According to the Motley Fool, the chance that the Dow Jones Industrial Average would close unchanged for a single day became more difficult when the index adopted decimalization in 2001. Prior to that, advances and declines were measured in eights of a point, a much larger denominator than today's, which is one cent. The article points out that the Dow finished unchanged ten times in the 1990s and four times in just one year: 1979.
With the Dow flattened out for the day along with the other major indices, interest turned to global markets which uniformly reacted with negativity. All Asian markets were lower overnight and European exchanges were also showing declines, though the losses were less than spectacular. Other than Hong Kong's Hang Seng Index - which is a separate case altogether due to the ongoing protests and disruptions - none of the major indices were down more than one percent.
As daylight broke over America's Eastern shores, stock futures were pointing to a negative open. Dow futures were off more than 100 points.
At the Close, Tuesday, November 12, 2019:
Dow Jones Industrial Average: 27,691.49, 0.00 (0.00%)
NASDAQ: 8,486.09, +21.81 (+0.26%)
S&P 500: 3,091.84, +4.83 (+0.16%)
NYSE Composite: 13,387.62, -0.49 (-0.00%)
Tuesday, November 12, 2019
Stocks Stagger Into New Week
It was an unruly start to the trading week, as Veterans Day ushered in sellers of stocks and kept a lid on bids.
The Dow Jones Industrial Average, which opened at the low of the day, was off 164 points, but gathered momentum throughout the session and finished with the only positive close amongst the major indices.
Otherwise, everything else held fairly steady throughout the US session, with gold hitting a three-month low at 1448.90 and silver remaining below $17/ounce. The 10-year note held firm with a yield of 1.93% as bond markets were closed for the holiday.
As Mondays go, this one was lacking in luster. Big hitters in the market may be waiting for President Trump's speech on trade at the Economic Club of New York Tuesday afternoon, so Tuesday could also be something of a disappointment for those craving more excitement.
This temporary lull is likely a good thing for stocks, giving investors time to gather up the courage to trade stocks to even higher highs. Already at or near all-time highs, buying stocks at this level may be viewed as unnecessarily risky. The Shiller PE, or CAPE, stands at 30.01, nosebleed territory.
At the Close, Monday, November 11, 2019:
Dow Jones Industrial Average: 27,691.49, +10.25 (+0.04%)
NASDAQ: 8,464.28, -11.04 (-0.13%)
S&P 500: 3,087.01, -6.07 (-0.20%)
NYSE Composite: 13,388.12, -19.69 (-0.15%)
The Dow Jones Industrial Average, which opened at the low of the day, was off 164 points, but gathered momentum throughout the session and finished with the only positive close amongst the major indices.
Otherwise, everything else held fairly steady throughout the US session, with gold hitting a three-month low at 1448.90 and silver remaining below $17/ounce. The 10-year note held firm with a yield of 1.93% as bond markets were closed for the holiday.
As Mondays go, this one was lacking in luster. Big hitters in the market may be waiting for President Trump's speech on trade at the Economic Club of New York Tuesday afternoon, so Tuesday could also be something of a disappointment for those craving more excitement.
This temporary lull is likely a good thing for stocks, giving investors time to gather up the courage to trade stocks to even higher highs. Already at or near all-time highs, buying stocks at this level may be viewed as unnecessarily risky. The Shiller PE, or CAPE, stands at 30.01, nosebleed territory.
At the Close, Monday, November 11, 2019:
Dow Jones Industrial Average: 27,691.49, +10.25 (+0.04%)
NASDAQ: 8,464.28, -11.04 (-0.13%)
S&P 500: 3,087.01, -6.07 (-0.20%)
NYSE Composite: 13,388.12, -19.69 (-0.15%)
Sunday, November 10, 2019
WEEKEND WRAP: Stocks Set Records; Bonds, Precious Metals Battered
The three major averages - Dow, NASDAQ, S&P 500 - all reached record territory this week, and, despite some give-back on Wednesday, closed out the week with all-time high closing prices. The lone laggard was the NYSE Composite, which hasn't yet managed to get back to January 2018 levels, but it is close, within 250 points.
Catalysts for the massive run-up through October and into November were supposed breakthroughs in the ongoing US-China trade deadlock and the Fed's 25 basis point cut in the federal funds rate last Wednesday (October 30). Positive news, or even the hint of such, was enough to ignite stocks in the US while Europe tetters on the verge of recession.
Gains made during the past five or six weeks look to be locked in for year-end, but there's barely a sniff of selling among the investment crowd. New records could be set in the indices through Thanksgiving, Black Friday and beyond, especially if indications of renewed vigor in manufacturing develops. It's been dragging lately, but the sector is wide and varied. Some states are doing well as opposed to ones like New York, which has lost 10,000 manufacturing jobs this year, and some sub-sectors are outperforming. Metal tooling is seeing a revival thanks to tariffs on steel, while semiconductors are slumping.
While stocks continued on their merry way to equity nirvana, fixed investment took a beating, especially in the case of the benchmark 10-year note, which appears headed back above two percent, closing out this week with a yield of 1.94%, the highest since July 31 (2.02%). The long end of the curve is certainly steepening, and in a hurry. The 30-year bond checked out on Friday with a yield of 2.43, just a basis point below the closing on August 1 (2.44%).
The short end of the treasury yield curve is still flat, with the difference between 1-month bills and the 5-year note a mere 18 basis points (1.56-1.74%). The curve has maintained an un-inverted posture for nearly three months now, since the 2s-10s crossed for three days in August of this year. That brief period of inversion did engender some recession fears at the time, but they have been allayed by the curve settling into a more orderly regimen.
Recession still being a possibility, always, chances of it occurring anytime soon were quelled when third quarter GDP came in hotter than expected, at 1.9%. Not a good number, the fact that it was above most estimates (1.6%) was enough to hold off the bears. If the measurement holds for the next two estimates of third quarter GDP, the absolute earliest recession bells could ring would be after the first quarter of 2020, if both the fourth quarter of 2019 and first of 2020 were negative, and those are some pretty big ifs.
Thus, it's unlikely that the US will encounter a recession - or at least have one reported - until after the second quarter of 2020, but the economy is looking like it will continue to grow, albeit modestly, until at least the elections in November, good news for President Trump and Republicans in general, and not-so-good for Democrats who wail about everything, even when nothing is amiss in any major way.
Also hammered were precious metals, with silver falling below the Maginot line of $17/ounce late in the week to close out at $16.77. Gold fell from right around $1500/ounce to end the week at its lowest level since the start of October, at $1458.80.
If interest rates continue to climb, it could exacerbate the bearish tone already developing in the metals. To holders, it may not be such a big deal, but more of an opportunity to buy more on the supposed cheap. Precious metals have been out of favor since their massive run-up from 1999 to 2011, and there seems to be no end in sight for the overall bear regime that has taken hold.
One has to consider the rationale for gold or silver as one of protection, so, from a buyer's standpoint there's absolutely nothing wrong with holding or storing some of the shiny stuff. It still maintains value, though it has been fluctuating greatly over the past 20 years, but what hasn't. Gold and silver still provide peace of mind and a store of value that is better, over the longest of terms, than any other investment, save possibly real estate, the difference being that no taxes have to be paid on the shiny metals.
Outlooking for the next seven weeks through Christmas is decidedly positive for stocks, which is all anybody really seems to care about these days. Pension funds are all in, as many have to be, in hopes that there will not be massive underfunding for the retiring baby boomers.
In the most simplistic of ways, stocks may be overvalued, but the rising yields on bonds may tempt some of the less-daring speculators to dive into a safety play. Worse things have happened, but, for now, there seems to be a nice balancing act between the Fed, the government, business, and heavily-indebted consumers, the latter group buoying and buying into the great money scheme of the longest bull market in history.
Some day, it will all come to a screeching halt. By most measures, it's not stopping any time soon.
At the Close, Friday, November 8, 2019:
Dow Jones Industrial Average: 27,681.24, +6.44 (+0.02%)
NASDAQ: 8,475.31, +40.80 (+0.48%)
S&P 500: 3,093.08, +7.90 (+0.26%)
NYSE Composite: 13,407.80, +12.26 (+0.09%)
For the Week:
Dow: +333.88 (+1.22%)
NASDAQ: +88.92 (+1.06%)
S&P 500: +26.17 (+0.85%)
NYSE Composite: +107.54 (+0.81%)
Catalysts for the massive run-up through October and into November were supposed breakthroughs in the ongoing US-China trade deadlock and the Fed's 25 basis point cut in the federal funds rate last Wednesday (October 30). Positive news, or even the hint of such, was enough to ignite stocks in the US while Europe tetters on the verge of recession.
Gains made during the past five or six weeks look to be locked in for year-end, but there's barely a sniff of selling among the investment crowd. New records could be set in the indices through Thanksgiving, Black Friday and beyond, especially if indications of renewed vigor in manufacturing develops. It's been dragging lately, but the sector is wide and varied. Some states are doing well as opposed to ones like New York, which has lost 10,000 manufacturing jobs this year, and some sub-sectors are outperforming. Metal tooling is seeing a revival thanks to tariffs on steel, while semiconductors are slumping.
While stocks continued on their merry way to equity nirvana, fixed investment took a beating, especially in the case of the benchmark 10-year note, which appears headed back above two percent, closing out this week with a yield of 1.94%, the highest since July 31 (2.02%). The long end of the curve is certainly steepening, and in a hurry. The 30-year bond checked out on Friday with a yield of 2.43, just a basis point below the closing on August 1 (2.44%).
The short end of the treasury yield curve is still flat, with the difference between 1-month bills and the 5-year note a mere 18 basis points (1.56-1.74%). The curve has maintained an un-inverted posture for nearly three months now, since the 2s-10s crossed for three days in August of this year. That brief period of inversion did engender some recession fears at the time, but they have been allayed by the curve settling into a more orderly regimen.
Recession still being a possibility, always, chances of it occurring anytime soon were quelled when third quarter GDP came in hotter than expected, at 1.9%. Not a good number, the fact that it was above most estimates (1.6%) was enough to hold off the bears. If the measurement holds for the next two estimates of third quarter GDP, the absolute earliest recession bells could ring would be after the first quarter of 2020, if both the fourth quarter of 2019 and first of 2020 were negative, and those are some pretty big ifs.
Thus, it's unlikely that the US will encounter a recession - or at least have one reported - until after the second quarter of 2020, but the economy is looking like it will continue to grow, albeit modestly, until at least the elections in November, good news for President Trump and Republicans in general, and not-so-good for Democrats who wail about everything, even when nothing is amiss in any major way.
Also hammered were precious metals, with silver falling below the Maginot line of $17/ounce late in the week to close out at $16.77. Gold fell from right around $1500/ounce to end the week at its lowest level since the start of October, at $1458.80.
If interest rates continue to climb, it could exacerbate the bearish tone already developing in the metals. To holders, it may not be such a big deal, but more of an opportunity to buy more on the supposed cheap. Precious metals have been out of favor since their massive run-up from 1999 to 2011, and there seems to be no end in sight for the overall bear regime that has taken hold.
One has to consider the rationale for gold or silver as one of protection, so, from a buyer's standpoint there's absolutely nothing wrong with holding or storing some of the shiny stuff. It still maintains value, though it has been fluctuating greatly over the past 20 years, but what hasn't. Gold and silver still provide peace of mind and a store of value that is better, over the longest of terms, than any other investment, save possibly real estate, the difference being that no taxes have to be paid on the shiny metals.
Outlooking for the next seven weeks through Christmas is decidedly positive for stocks, which is all anybody really seems to care about these days. Pension funds are all in, as many have to be, in hopes that there will not be massive underfunding for the retiring baby boomers.
In the most simplistic of ways, stocks may be overvalued, but the rising yields on bonds may tempt some of the less-daring speculators to dive into a safety play. Worse things have happened, but, for now, there seems to be a nice balancing act between the Fed, the government, business, and heavily-indebted consumers, the latter group buoying and buying into the great money scheme of the longest bull market in history.
Some day, it will all come to a screeching halt. By most measures, it's not stopping any time soon.
At the Close, Friday, November 8, 2019:
Dow Jones Industrial Average: 27,681.24, +6.44 (+0.02%)
NASDAQ: 8,475.31, +40.80 (+0.48%)
S&P 500: 3,093.08, +7.90 (+0.26%)
NYSE Composite: 13,407.80, +12.26 (+0.09%)
For the Week:
Dow: +333.88 (+1.22%)
NASDAQ: +88.92 (+1.06%)
S&P 500: +26.17 (+0.85%)
NYSE Composite: +107.54 (+0.81%)
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