Succinct Summation of Week’s Events for 9.28.18 (plus social media & a mini-course on the Fed)

Below please find the usual weekly summation.  On the plus side is a considerable rise in durable goods orders and consumer confidence beating expectations.  On the minus side Tesla's CEO is accused of fraud for creating the story of taking his company private and, whether the author intended tongue-in-cheek or not, "The Decline of Western Civilization continues apace."  This Sunday night I'm providing two rather revealing bonuses from Barry Ritholtz's postings this weekend.  

Gold vs. the Dow

There has always been the debate over gold vs stocks with the traditional position being that gold will always be the safe haven. Today Barry Ritholtz posted this graphic on The Big Picture web site showing the correlation between the value of gold and the value of stocks over the past 100 years.   Enjoy this nice cool weekend. 

Facebook's slide stalls Intel-led advance on Wall Street

It was a day of violent whipsaws in a 130 point range as the Dow first fell 55, then zoomed up 130 by midafternoon only to then crash down in the last couple of hours to close up just 18.  The gains were attributed to advances in utilities and real estate, both sectors that typically benefit from lower interest rates, and then the crash due to yet another major security breach at Facebook causing that stock to drop almost 2.6 percent.  The better news is that consumer spending rose steadily while inflation was contained at the Fed’s 2 percent target.  Investors seem to be comfortable with the continuation of solid economic numbers.  Q3 is right around the corner and the S&P is on track for earnings to be up nearly 22 percent.  Tesla’s in trouble though with Elon Musk now accused of fraud and the subsequent nearly 14 percent drop in the company’s stock, its biggest one-day drop in five years.  Volume was quite brisk at 7 billion. 

Communication services stocks elevate Wall Street

So for a few hours this morning investors decided to have third thoughts about yesterday’s rate increase and decided that the loss of the word “accommodative” was not such a bad thing after all and started buying like crazy boosting the Dow over 170 points by midday.  This was helped especially by boosts in three of the FAANG stocks, namely Google, Facebook and Apple.  The new Communications Services Index also provided a nice boost.  But then, just like yesterday, about 2 pm the market decided to have fourth thoughts and massive selling set in again tumbling the index almost 120 to settle at close up 54.  That’s the way it continues to go – one minute elation, the next panic.  At least volume was below average at 6.2 billion.  Since the Senate has set a 9:30 a.m. meeting Friday to vote on whether Kavanaugh sinks or swims (as could have been predicted, no minds were changed by today’s 9 hours of testimony so even the liberal pundits now believe he’ll likely be confirmed), tomorrow should be another very interesting day for the market. 

Wall Street rally disintegrates shortly before the close

Ah, the power of a word.  Today a single word proved so powerful that it brought the market down more than 250 points in the final hour or so.  That single word was “accommodative,” a word the Fed chose today to eliminate from its standard policy statement, a choice intended to placate investors but instead panicked them.  In the past, this word was taken to mean the Fed would slow the rate increases.  The intent today was to show that the economy was humming along well enough that the word was no longer needed and, as Powell noted, was meant to show that there is no “change in the likely path” and that “policy is proceeding in line with our expectations.”  And at first, the statement was taken as a big positive with the Dow climbing more than 100 points by 2:30; then there were second thoughts.  What exactly does the elimination of the word “accommodative” mean?  Could it mean more hikes?  That was all it took to start the panic selling with the Dow closing down 106.  Volume was brisk at 7 billion. 

S&P 500 dips as chip stocks and utilities tumble

The market continues to adjust to recent events with the Dow plunging another 69 points, this time in anticipation of the next Fed rate hike tomorrow with all interest-rate-sensitive sectors taking a hit.  On the bright side, consumer confidence rose to levels not seen in 18 years underscoring not only the strong labor market but also the fact that all the trade noise is not dampening overall confidence.  Also on the plus side of the ledger is Brent oil at a four-year high and the S&P having gained 9 percent so far this year.  Volume remains brisk at 6.6 billion. 

Wall Street falls as U.S.-China tariffs kick in

Evidently investors were completely okay with the whole tariff situation as long as it wasn’t quite real.  But today when it became quite real, there was a completely different reaction when once again faith in avoiding a trade war was squelched when the tariffs went into effect and the Dow plunged 181 points.  The Apple-heavy Nasdaq got a small boost when Apple got a big boost having been exempted from the tariffs.  But overall it was not a day to inspire confidence, compounded by reports that Rob Rosenstein may not survive the week and all the new anxieties and uncertainties that would create.  Volume was brisk and a little above average at nearly 7 billion. 

Succinct Summation of Week’s Events 9.21.18 (plus Global Poverty)

The time has come again for the weekly summation, the main positive being that, as of Friday evening, there is still no major trade war and the main negative that leading economic indicators came in on the low end of expectations, which isn't much of a negative.  In other words, not a bad week.  As for the negative at the end of the list, I must have missed the news this week about whatever it is that's going on in Iceland.  And there's one more pretty good positive that's not on this list.  Published today on Barry Ritholtz's web site is this very encouraging graphic showing what appears to be some pretty dramatic progress during the last 20 years to reduce global poverty.  That's a pretty good piece of news for heading into the new week. 

Mortgage Bonds Issued 1995 - 2018

We have two days to go before we find out the impact of the "quadruple witching" and sector rotation that took place on Friday.  Meanwhile, for your amusement this weekend, I present below a graphic illustrating exactly what went wrong between '02 and '07 to trigger the Great Recession.  As the graph shows, the mortgage bond market exploded with fury during these years, most of them being unsecured.  Enjoy the nice cool weekend.

Dow hits new closing high ahead of index reshuffle

As has been noted in recent weeks, Wall Street is creating a new sector called “communications services” which will merge with telecom and this will happen on Monday.  Since telecom will no longer exist after today, there was a spree of buying to get ahead of this merger which pushed telecom up 1 percent and all the FAANG stocks down between 1 and 2.  In addition to this sector rebalancing, there was also the quarterly “quadruple witching” which pushed volume way up to nearly 11 billion and the Dow up 86.  Since much of the buying today was artificially induced, we’ll have to wait until Monday to get a better picture. 

Industrials lead Dow to record high; tech boosts S&P, Nasdaq

This makes three straight days of triple-digit gains, this time with a walloping 251 point leap in the Dow.  As of today, assuming these levels remain stable, the so-called January correction is at an end with both the S&P and Dow now having exceeded the record highs achieved in January.  Investors continue to take the tariff issues in stride, all supported by the weakening dollar which boosts exports.  With the new highs, the signal seems to be “Jump in!”  Four of the FAANGs gained ground along with Nike and Under Armour.  Those betting against Nike due to the Kaepernick controversy all lost as Nike has sold 60 percent more merchandise since the Kaepernick ads began running.  The other losers today were defense industry stocks taking a hit with the announcement of new talks with North Korea.  Again, those betting on disaster have lost.  Volume was above average at 6.9 billion. 

S&P 500, Dow up as rising treasury yields boost banks

It was another great 3-digit day as investors spent a second session on a buying spree placated by an easing of anxiety over the tariff situation or, as one expert from Merrill Lynch stated, “There may be some tariff fatigue; the worry factor has waned a bit.”  The Dow is up 158 helped by the financial sector getting a boost from a sharp rise in Treasury yields.  Tech was down a bit but the FAANG stocks Apple, Facebook and Google all had gains.  Volume was a little above average at 6.5 billion. 

Wall Street bounces back as investors shrug off trade tensions

Anyone who made bets to short the market this morning in the wake of last night’s tariff announcement lost big as the tide of market sentiment changed radically today from having lost faith in the tariffs to now thinking they might well work.  The claim that the sentiment changed when Trump modified his goals to begin at 10 percent and increase to 25 percent does not really ring true since the White House has been talking about just those specifics for days.  But the bottom line is that investors are taking solace in the changes and now thinking “these numbers aren’t going to be as bad as initially thought.”  It also helped a great deal that Apple was exempt from the tariff.  The overall effect was the Dow shooting up 184 and on fairly decent volume of 6.4 billion. 

Wall Street slides ahead of Trump tariff announcement

The wait-and-see position on the Trump Chinese tariffs that caused Friday’s whipsaw was still very much in evidence today as the president remained vague about the timing of the tariffs but did state outright today that there would be more tariffs.  The consequence of this was the market losing faith in the trade war being averted and the Dow came down 92 points.  This was led mostly by the FAANG stocks, particularly Apple and Amazon which lost 2.7 and 3.2 percent respectively.  Others in the FAANG group lost almost 4 percent.  Volume was a little above the 4-week average at 6.2 billion. 

Succinct Summation of Week’s Events 9.14.18 (plus The Great Recession)

The weekly summation is below, the positives being jobless claims down and job openings up, the negatives once again mostly revolving around the tariffs.  The bonus this Sunday is yet another concise perspective on the causes of the Great Recession and the recovery thereof, posted today on the Ritholtz Big Picture web site.  This is a short one and does raise one very interesting question, self explanatory in the headline.  Enjoy our last week of summer.  Fall arrives next Saturday. 

The real Goldfinger: the London banker who broke the world

Ready for an entertaining read?  The article below, excerpted from The Guardian and posted today on Barry Ritholtz's Big Picture web site, is a deliciously scurrilous tale of financial chicanery at it most chicane.  This is the true story of the London banker who may have been the inspiration for the Ian Fleming James Bond adventure, "Goldfinger," his fiction of the evil villain Auric Goldfinger who tried to corner the world's gold market until Bond stopped him.  Anyway, the real story reads like a real life mystery/spy novel, perhaps better.   For your convenience, the text of the article is below (all 4200 words) but, if you click on the link, there are some nice photos to look at, particularly a rare glimpse of a pallet-full of 70 pound gold bullion bricks in the vault of the New York Fed.  Hope everyone is enjoying this last splash of summer this weekend.

Wall St ends near flat, but financials climb with yields

Today’s session got off to a rousing start jumping the Dow nearly 80 points before news got out that Trump had issued instructions to proceed with the tariffs against China, this despite the fact that Mnuchin was at the moment still knee deep in negotiations.  So everything came right back down again to settle at close a mere 8 points up and only saved by yet another report from an inside White House source that the timing of the tariffs remains unclear.  The takeaway was that a lot can happen over the weekend so let’s wait and see.  Other than that, the good news was that the insurance companies got a boost when analysts cut the estimates on how much damage Florence would cause.  Yesterday, the home improvement companies took a hit because the storm was downgraded.  Yes, some investors do bet on disaster (and I’m always happy when they lose.)  Today it was the other side of the coin with companies that profit from the other side.  Volume was in line with recent averages at 6.2 billion.

Wall Street rises with Apple, easing trade concerns

Today tech got the big rebound everyone was waiting for with the faltering Apple gaining 2.4 percent and the Dow 147.  Besides the tech, there was a good report showing lower inflation and a lower rise in consumer prices, which was taken to mean that maybe the Fed will be more gradual in rolling out rate hikes.  The only “bad” news, if you can call it that, is a hit taken by home improvement companies like Home Depot and Lowes when Hurricane Florence was downgraded to a Category 2.  Also late in the session was the Republican move in Congress to make the 2017 individual tax cuts permanent, the impact of which we may see more of tomorrow.  Volume was above average at 6.7 billion. 

Dow, S&P 500 end up slightly after trade talk news; Apple slips

Don’t let the modest 27 point gain today on the Dow fool you into thinking it was a quiet session.  It was actually up nearly 200 points mid-session only to come crashing down again in the afternoon to close 27 up.  This time we can’t blame China.  It was actually up because of optimism over fresh China trade talks and came crashing down due to the underwhelming response to Apple’s new iWatch and iPhone, both characterized as a yawn as neither offered any significant changes from prior products.  Apple fell 1.2 percent, as did the tech index.  It also didn’t help investor confidence that the major tech companies continue to be scrutinized by the Congress which may trigger more unwanted regulations over data privacy.  Trading was quite robust at 7.1 billion shares. 

Wall Street gains as Apple, tech rebound; oil lifts energy shares

After two losing sessions, the Dow finally had a day in the green with a 3-digit advance thanks to Apple and investors coming back to history’s biggest company with the sentiment that it’s “taken the punch and is recovering.”  While Apple rose 2.5 percent, oil got a boost of 2 percent, all amid lingering trade tensions which has kept investors in a wait-and-see mode for a while now, though with today’s volume of 6.3 billion, we’re back to slightly above average trading. 

S&P, Nasdaq edge higher after recent losses but Apple drags

Oh well, it was a straight path straight down hill all day today with the Dow losing nearly 200 points but, since the day started with a nearly 80 point gain, the end result at close was a 59 point loss.  Once again, trade war jitters are behind the uncertainty and this has been further exacerbated by the recent announcement that the tariffs on China might turn out closer to $500 billion than $200 billion.  Still the jitters would likely be a lot worse except for the optimism investors have over the economy’s strong fundamentals and positive earnings outlook.  Volume was below average at just 5.6 billion. 

Succinct Summation of Week’s Events 9/7/18 (plus the future of the bull market)

The usual weekly summation is below with employment increasing by over 200,000 and, with unemployment unchanged, this means that those who had previously gotten discouraged and dropped out of the job search are now rejoining the job market.  And it goes without saying that the major negative is all the noise being generated by the tariffs war.  The bonus this week is a concise little 9 minute video posted today on Barry Ritholtz's Big Picture site featuring a debate about how much longer this bull market can last.  Hope you all enjoyed this nice cool weekend.  We've gotten a little taste of an early autumn this weekend. 

10 fund companies advisers like most

Every now and then I find an excellent article evaluating the many different investment firms that are out there and ranking them in order of preference.  This is invaluable knowledge in terms of where the best places would be to have our trading accounts.  This past week, Investment News did just that in publishing a survey titled, "10 fund companies advisers like most."  Some of the names will be very familiar, some may surprise you.  So for your reference, both the link and text of the article is provided below.  Enjoy our nice cool weekend. 

Wall Street drops on tariff worries, with Apple in crosshairs

It was yet another day where the tariff issues caused wild swings in the market and brought all three major indexes down, the Dow today down nearly 80 points.  Today was the first day that Trump could have levied another $200 billion dollars against China but the White House announced today that no decision would be made until after they have studied the public comments, the deadline for submission of comments having ended just yesterday.  You’d think that would have eased some minds but instead there was a doubling down when (a) the White House announced that instead of $200 billion, it would probably be closer to $500 billion in new tariffs and (b) Apple announced that these tariffs would really hurt them.  Then there was the triple whammy of a very good employment report which, instead of being taken as good news, was instead taken as an inflation warning.  All in all, all the day’s good news was swamped by investor tariff anxiety.  Volume was in line with recent averages at 6.2 billion. 

Trade jitters and tech woes weigh on S&P, Nasdaq

Today the chaos and seesawing ran in not a 150 point range as in the last two sessions but in a 200 point range as confusion continues to reign over the tariff issues though, in the end, the Dow closed a slight 20 points up.  Now they are saying that Friday is the first day that President Trump might be imposing the additional $200 billion dollars in tariffs on China and, if indeed Trump chooses to exercise that option, we may be seeing more panic selling.  Already today the tech companies, the whole sector of which is the most vulnerable to these tariffs, have taken a hit on the S&P and Nasdaq.  Until investors see more clarity on these tariff issues, this chaos will continue.  Volume was a little above average at 6.6 billion.  

Nasdaq falls as U.S. lawmakers grill Facebook, Twitter executives

Yesterday there was utter chaos in the market with the index bouncing about in a 150 point range due to the Chinese tariff situation.  Today there was again utter chaos with the index bouncing about in a 150 point range due to the FAANG CEO’s being grilled on Capitol Hill with particularly Facebook and Twitter defending themselves before a skeptical Congress.  The whole tech sector took a hit due to the ever increasing scrutiny to which the FAANG companies have been subjected.  The Nasdaq and S&P both closed in the red but, despite the swings back and forth, the Dow still managed to squeeze out a slim 21 point gain.  All eyes remain on Thursday which is the first day Trump might impose the additional $200 billion dollars against China.  Volume was above average at 7 billion shares traded. 

Facebook, Nike drag Wall Street lower; trade concerns linger

Coming back from the holiday break, it was chaos in the market with the Dow plummeting 150 points right out the gate allegedly over continuing trade concerns since this was the first day of trading since the Canadian talks fell apart on Friday.  Talks are scheduled to resume Wednesday.  However, today it was a violent seesaw back and forth throughout the entire session though good manufacturing news allowed the index to recover all but 12 points by close.  Amazon also today touched the $1 trillion dollar mark in intraday trading though closed below that landmark threshold.  But wait for another dive on Thursday which is the first day that Trump could impose another $200 billion dollars in tariffs on China.  Volume was above the slow August trading at just over 6.5 billion shares. 

Succinct Summation of Week’s Events 8.31.18 (plus 20 second history of the U.S.)

To conclude this long Labor Day weekend I once again provide the succinct weekly summation below.  The positives this week included a Q2 GDP upwardly revised to 4.2% and a rise in corporate profits of 6.7 percent, more than twice the previous.  The negative was that mortgage applications fell 1 percent as opposed to the previous 3 percent rise.  The bonus this Labor Day is a very nice little animation showing the entire history of the country from colonial days to the present in less than 20 seconds.  This is one you'll probably want to watch a few times.  Hope you all had a great holiday.

The Great S&P Sector Reshuffle

For this Labor Day Sunday and related to yesterday's column about the warning signs of a crash comes today's Big Picture edition borrowed from Barron's about the Great Market Reshuffle that is currently taking place.  The corresponding graphic is particularly instructive in showing just how dominant the so-called FAANG stocks are in the big picture.  To see the after-shot that shows the new sector "Communications Services" that has been created and how that has impacted allocations, click on the link.  Enjoy your Labor Day! 

Where Will The Next Crisis Come From?

Since we're the kind of group that is always on the lookout for signs of the next big market downturn, today's edition of Barry Ritholtz's "The Big Picture" contains an article from Schwab that struck me as quite relevant -- 7 metrics to monitor that could signal the next crisis.  There is a terrific graphic to go with each talking point which, as usual, did not translate to this blog so, for the entire Big Picture, please click on the link below.  You might also take some pleasure in this graphic showing how badly bitcoin has crashed this past month.  I'm sure most of us are very much on the fence about bitcoin and this particular illustration posits a very good reason why we should continue to be.  Hope everyone's having a great weekend.