Wall Street slides late; S&P 500 caps worst month since Jan 2016

Apparently The Street is still holding onto suspicions that there might be four interest rate hikes this year as, for the second day, there has been a severely panicked reaction to some rather casual comments made by our new Fed chief.  With a nearly 400 point drop in the Dow today, the Dow and the S&P have concluded February as the worst month in two years and we are once again headed for another confirmation of the correction.  Fickle is the word when a casual comment can produce this much panic.  Again, much of the slide is being blamed on algorithms and let’s keep the perspective that despite today’s drop, the indexes have still recovered half the lost ground from the January 26^th high and Q4 continues swimmingly with now 76 percent of S&P companies topping estimates.  The panic again produced a much higher than usual volume at 8.1 billion shares.

Wall Street sinks as Powell's comments fuel rate worries

It seems the magic number is 3.  The market wants 3 interest rate hikes this year and panics at any hint of a fourth.  That is what happened today.  Newbie Fed Chair Powell said that the economy was on sound ground and investors jumped to the conclusion that he was opening the door for more aggressive Fed action to help stem potential inflation, in other words a fourth hike.  The result was another 3-digit rout, this time almost 300 points.  Volume again rose to panic levels with 7.4 billion shares traded. 

Wall Street rises as concerns over interest rates ease

I’m wondering if the Fed officials buy options just before each statement they make.  If so they’re making a fortune since another little hint today about the stability of the economy and seeing “no serious [interest rate] risks on the horizon” gave the Dow another rather big bolt up 399 points.  With today’s boost, the indexes have now recovered more than two-thirds of the losses since the January 26 peak and the VIX is now at half of its correction level.  Treasury notes have eased from last week’s 4-year high and investors remain confident in the global economy.  Gains in the three critical sectors of the market – tech, industrials and financial – have reinforced focus on economic strength.  At 6.3 billion shares traded, volume is well below the 4-week average of 8.36 billion but let us recall that these extraordinary high volumes were all part of the panic selling during the correction earlier this month. 

Succinct Summation of Week’s Events 2.23.18

The Olympic closing ceremonies has occupied me tonight with Korea aptly demonstrating that they are one of the most technologically advanced countries in the world.  But you would expect the nation that is home to Samsung to be right up at the top.  So I will be limiting my usual Sunday night contribution to the succinct summation with the good news being in the past two weeks the indexes have handily recovered most of their losses from the correction earlier this month and jobless claims lower than expected, the bad news that real estate is suffering again with home resales being at their lowest in 3-1/2 years.  Hope everyone enjoyed their weekend.

Top 1% = $480,930 (AGI)

Just in case anyone's curious about exactly what defines the One-Percenters, the graphic below answers the questions for not just the One, but the Two, the Five, and the Ten, and not just for now but going back to 2006.  It's interesting that the graph didn't really change all that much during the depths of the recession.  Please note this is salary only, not other assets, not net worth, and that as the author points out, many of the One Percenters have no salary at all.  Food for thought, and a lot information in one eye-shot.  Enjoy the rest of the weekend. 

Stocks rally as Fed eases rate worry, tech climbs

It took just another little bit of encouragement from the Fed once again today to assure the markets that there would not be a flurry of hikes in the near future that sent the Dow soaring nearly 350 points to more than recover all the losses from earlier this week.  The odds of a March hike now are at 95.5%, up 2% from a couple days ago.  Bonds pulling back also contributed to the rise in stocks, even though they only pulled back 4/100^th of a point.  At just over 6 billion, volume was slightly lower than previous sessions this week. 

Dow, S&P climb on energy and industrials; Nasdaq falls

The 166 points that was lost yesterday was recaptured today so the last two days have been a wash.  It’s amazing how much everyone hangs on every word that comes out of the Fed.  Again today St. Louis President Bullard issued clarifying remarks hinting that there wouldn’t be a “bunch of hikes.”  The Dow jolted up 300 points before caution set in again and then came another dip that ended with the index up 164 at close.  It is still the consensus that there will be three more hikes this year, beginning next month.  Whether that’s considered a “bunch” is I guess a matter of individual introspection.  The good news is that most analysts believe the market will handily absorb the hikes.  Volume remains brisk at 6.8 billion. 

Wall Street falls as Fed minutes send bond yields higher

So here’s what happened on this crazy day that saw the Dow drop 167 points.  First the Fed issued its latest dictum expressing confidence that the economy is sound enough to handle needed higher rates.  At first, whew! … since investors were worried about inflation, they took the statement as an affirmation that the Fed did not see inflation as a problem.  So the Dow went up over 300 points.  But then those pesky bond yields started rising again – not much.  They’d been hanging around the 2.95 mark and went to 2.957.  But it was enough to make investors think that stocks were being devalued again and thus sent everyone on a selling spree.  Late in the session, all the gains were lost and then some.  The odds makers put a 93.5% likelihood of a hike in March.  Volume was just under 7 billion. 

Dow, S&P snap winning streak as Walmart weighs

Walmart reporting a drastic drop in holiday sales dropped its own stock over 10 percent and the Dow over 250.  No worries, the economy and earnings on firm footing remain unchanged.  Last month’s selloff was triggered by worries over the economy overheating but wasn’t it really the market that was overheated?  It’s probably not overheated anymore.  Volume was still quite healthy at almost 6.8 billion but below the overheated 4-week average of nearly 8.5 billion. 

Succinct Summation of Week’s Events 2.16.18

I feel I've sent enough supplemental reading this weekend so tonight you get the usual succinct summary and that's it.  This week there are an equal number of positives and negatives but suffice it to day that the main event was the market rally that brought the indices back just about half way from the bottom of the correction, assuming we've seen the bottom.  Hope everyone enjoyed their holiday, though probably most of us didn't get one. 

How to Prevent Gun Deaths?

Given the week's tragic events, Barry Ritholtz has taken a small detour from finance in posting two excellent features on his Big Picture blog today.  One is a very well researched article from The Atlantic arguing for the need to treat gun violence as a public health problem and the obstacles toward that objective.  The other is a hugely informative graphic that shows in a single eye-shot all of the issues relating to gun violence and how they stack up on expert opinion versus public opinion.  There are a few surprises here.  The market is closed tomorrow.  Enjoy your President's Day!

Should You Dollar-Cost Average? (plus Soaring Shares)

At least among buy-and-holders, Dollar-Cost-Averaging, otherwise known as DCA, is one of the most common investment strategies which virtually guarantees the lowest possible cost-basis with the highest possible yield.  Yet I doubt there are many investors out there who understand how it really works.  So I found it quite convenient that an article on DCA was included today on Barry Ritholtz's Weekend Reading List on his Big Picture blog.  So I offer that below as my contribution to our weekend reading.  But the real bonus today is the graphic below which shows where all the best stock buys have been during this bull market.  No need for further research, this picture is self explanatory. Hope everyone is enjoying their weekend. 

S&P 500 caps off strongest week in five years

Fri 2-16-18

Things were going great until just after noon, with the Dow up 230 points with economic reports continuing to paint a rosy picture with among other things the biggest increase in home building in a year.  Then the Mueller indictments were handed down and the markets all crashed to end just about even going into the long President’s Day weekend.  Still the S&P has seen its biggest weekly advance since 2013 and though it remains down 5% from its January 26^th high, it has still recovered significantly from correction territory and overall 2018 S&P estimates have been hiked again, today to 19% from 12% a month ago.  Volume remains strong at 7.1 billion. 

Wall St. rallies for fifth straight session on tech lift

A fifth consecutive day of gains once again fueled by the FAANG stocks, or is it just investors deciding that the economy is on solid ground after all.  Today’s 306 point bump in the Dow was at least partially due to a big move by Warren Buffett making Apple his top holding.  And, of course, there is always Q4 which continues going strong with the expectations of more of the same.  Such optimism has led to the forecast for 2018 S&P earnings now being raised to almost 19 percent.  Even the AAII made the business news today with its bullish vote hitting its highest in a month.  Volume remains vigorous at 7.1 billion. 

What inflation? Apple and Facebook drive Wall Street rally

After taking a breather yesterday, the market came roaring back today with the Dow bolting up another 253.  Without sitting down and crunching the numbers, I’d venture a guess that the correction is over. (And does it really qualify as a correction when most of the panic-selling since last Friday was generated by runaway computer algorithms?  BTW the S&P correction is over with the index now having rebounded to 6% below its record high.)  And even though the CPI today increased by more than expected (0.3 vs 0.2), the rising inflation that this was supposed to foreshadow did not set off another selling spree.  Was it because the FAANG stocks are still performing admirably?  Or did the retail sales report that came in a full ½% below forecast throw some cold water on the inflation fears?  (It was yet another example where bad news is translated to good news!)  Best of all the VIX fell below 20 today, going from 50 last week to 25 yesterday to 20 now.  After a slower than usual day yesterday, volume was back in vigorous form today at 7.8 billion. 

Wall St. advances; investors lock on inflation data

On the eighth trading day after the big correction started we’re finally seeing some semi-normal pre-correction activity with the Dow up a modest 39 points and the intraday swings in the 300 point range.  Today may have just been a day for taking a breath as the market awaits tomorrow’s consumer price and retail sales reports, considered to be litmus tests for the short-term.  But calm is once again in the air reflected by the VIX at 25.3, already at just half of the reading from last week.  Of the S&P companies, 70 percent have now reported in with almost 80 percent topping forecasts.  Volume too is back to normal levels with 6.4 billion shares traded, another indication that the panic selling may be over. 

Wall Street bounces back after tumultuous week

On the belief that the economy is fundamentally strong and thus no rational need for panic, the market came back today, though technically still in correction, the Dow boosted 410 points as investors “buy the dip.”  Though there remains caution that we have not yet seen the bottom, today’s sentiment is that “the long-term fundamentals will win out.”  The VIX even came back 3.4 points, back to pre-correction levels.  Trading remains very brisk at 8.1 billion shares. 

Succinct Summation of Week’s Events for 2.9.18

It's time for the weekly summation and I find it amusing when the first positive that's listed is that it could have been worse.  Of course, that's right, which is illustrated in this week's bonus graph which shows that this is actually the fifth correction we've had in the last eight years so, contrary to popular opinion, this has not been an eight year bull market at all.  In fact, it's only been a two year bull market.  Still, the negatives have been substantial with the worst 2-week decline in the Dow since 2011.  Let's see what Monday brings.  Hope everyone survived all the big snow this weekend. 

Is This Really About Rates?

For the past eight days during this tumultuous and by some accounts disastrous week on Wall Street, the consensus among the gurus has been that this sudden and hysterical correction was triggered over concerns regarding the Fed's plans to continue raising interest rates and the subsequent ill effects that such action is expected to create in the stock markets and, more specifically, inflation.  The bad (?) news began a week ago Friday with the publication of a strong employment report coupled with another report indicating rising wage rates after years of stagnation.  The extremists who have convinced themselves that these fears have sparked what is only the beginning of what will be a long term and calamitous rush from equities have dominated market sentiment this week.  But is it really about the interest rates?  Here to offer the contrarian point of view are our friends from Heritage Capital Research who, on Friday, published the following intriguing commentary.

Wall Street rebounds but posts worst week in two years

Well, after two days we’re still in correction territory but, due to today’s 330 point boost to the Dow, just barely.  What is of considerably more serious concern is that once again the Dow dropped over 1,000 points before rebounding and closing in the black as investors continue to struggle to find a bottom.  One-fifth of S&P companies are now down 20 percent from their 52-week highs.  There is a fundamental divide here between sound economic indicators and the potential for inflation, and the question is which one will win out?  This week has seen almost $24 billion dollars sucked out of the stock market, the largest one-week withdrawal in history.  The S&P alone has lost more than $2.5 trillion dollars.  Volume has been furious at 12 billion shares. 

Wall Street plummets again as S&P, Dow confirm correction

It was another big bath and with today’s over 1,000 point dive in the Dow, the second huge dive this week, the index has now lost more than 10% of its value since the January 26^th high, which now puts us officially in correction territory.  This is expected to continue for several more sessions while investors strive to find a bottom.  It is a correction that has long been expected – and wanted in order to cool off an overheated market.  Ironically this rout has come on a day of otherwise good news as filings for unemployment fell to their lowest in 45 years and the labor market has become sufficiently strong that people are quitting voluntarily to take better jobs and wages are finally rising again.  This hysteria over rising interest rates is misplaced as everyone knew that having the rates near zero for so long was not healthy for the economy.  This is all good news except for those people making easy profits from simple indexing.  It may soon be true that we may actually have to start earning our profits again, and this is why volume was at a feverish pitch of 10.5 billion today. 

Wall Street fades in choppy trade after week's wild start

Tonight the CFP program at OU began, and I was absent.  I have the textbooks, syllabus and other course materials so I will be teaching myself the course given that they will not let me take it.  I did read the 63 assigned pages for tonight’s inaugural investments class and found it all to be pretty basic stuff, mostly just the different kinds of stocks and bonds, yield curves, futures, etc.  They require you to have a stock broker’s license just to take this class?  But it’s a good textbook and is proving an excellent review of all these concepts I got in my first intro finance class in grad school many years ago.  And, per the syllabus, what was the first exam in this first class session going to be covering – options trading! 

Wall Street roars back, traders eye volatility ahead

In the last 48 hours there have been many gurus offering many theories as to what happened yesterday and why.  But it seems the real reason may likely just be that the crash was a computer generated illusion.  No human response can create a 1,000 point draw-down in just 7 minutes.  This was another infamous “flash crash” so the question everyone should be asking is what happened to the fail-safe mechanism created after the great Flash Crash of 2011 that’s supposed to automatically shut down trading on any stock that goes down more than 5% in 5 minutes?  This was a case of a mathematical algorithm gone berserk.  It seems yesterday that the fail-safe failed.  Well, a good half of it came back today and, with all the bargain hunters out there, volume was huge at 12.3 billion.  (There is a lot more detail about the theory of yesterday’s flash crash in today’s issue of Heritage Capital Research.) 

Wall St. plunges, S&P 500 erases 2018's gains

The carnage continues, in fact twice as bloody as before.  Today the Dow lost almost 1,200 points making it the single biggest daily point drop (though not even close to the biggest percentage drop) in history, losing in one day more than the total lost in last week’s debacle.  All gains for the year have been wiped out and the Dow is now down 8.5 percent from the record high on January 26^th.  Another 1-1/2% and we are officially in correction territory.  Some argue that this long overdue correction has been coming for months, some that it’s a reaction to concerns over rate hikes and inflation.  I tend to agree with those who say it’s just a healthy cooling of a market that’s been overheated for a long time.  The economic fundamentals remain strong and if this is really about rate hikes (which will only make the economy stronger), then it’s silly.  Trading was furious and, at 11.5 billion shares changing hands, way above recent averages. 

Succinct Summation of Week’s Events 2.2.18 (plus Finding a Financial Planner)

Wow, we all took quite a bath this week with the S&P down nearly 4 percent and the Dow losing over a thousand points.  But then a little correction is healthy now and then.  But will it keep going?  This week's bonus is an article Barry Ritholtz pulled from the New York Times this morning about how to find a financial planner if you're not wealthy, something I found amusing since the majority of clients are of middle class means.  But there was still useful information here so I'm passing it on.  Hope everyone had a great if snowy weekend.

Financial Engineers Killed the Art of Investing | Institutional Investor (plus more on the CFP)

As we brace for another six inches of snow this weekend, today's article on The Big Picture struck me as particularly relevant as, though the title doesn't really suggest this, it's really a neat little pocket summary of the recent evolution of portfolio and fund management.  It proved particularly relevant for me as I had just finished registering last Sunday for Oakland University's 2018-19 CFP program which begins this coming Wednesday.  I was hopeful that things would work out and 14 months from now on I would have my credential.  I purchased the textbooks and financial calculator and received the course syllabus. 

Dow sees worst day in two years as bond yields jump

Today was quite the rout with the Dow falling within a quarter-point of 666, and all the other indexes taking substantial dives as well making for the worst one-day pullback in nine years. Is this panic over rising interest rates (something quite necessary but, yes, there will be some pain involved for equities) or is it just letting more air out of an over-inflated market valuation?  It’s yet another example of good news being taken as bad as better than expected employment numbers came in (good) but this just stoked fears of rising wages (the biggest wage gains in over 8 years, also good since there’s been so much underemployment since the Great Recession) and more inflation (also good since you can’t keep zero inflation forever.)  The good news is that the smart money is saying that the bull market is still far from over and expectations for growth in Q4 earnings remains solid at 13.6 percent.  The other good news is that today’s crash was done on comparatively light volume of 5.4 billion shares so a better picture should emerge on Monday. 

Wall St. shares forfeit early gains as bond yields rise

Tech fell mildly but the Dow rose mildly as the market continues taking a breath after the recent furious rallies and investors try to get a handle on what they think of bond yields rising and inflation concerns, stoked further today by Q4 labor costs increasing by two percent.  But Q4 earnings continue swimmingly with now almost half of S&P companies reporting and 80% of these beating forecasts.  It was enough to drive general Q4 expectations up again, today to almost 15 percent, up from just yesterday when it was 13.7% and two days ago when it was 13.2 percent.  And not to forget that a month ago it was just 12 percent.  Volume again was quite strong at 7.8 billion shares traded.