It’s too late for the Fed to rescue the stock market, if ever it could: The Dallas Fed’s Robert Kaplan Thursday morning argued that the Fed should stop increasing interest rates for the time being, and the Wall Street consensus expects a very dovish Fed for 2019.
It’s also too late for the Trump Administration to revive animal spirits by calling off the trade war with China. China is happy to strike a deal that allows Donald Trump to claim victory, as I first reported last October, and former Chinese trade negotiator Wen Jianguo predicted in an interview today.
With NASDAQ down 3% today and the S&P 500 down 2.35%, the market looks ready to test the year-end lows. A few weeks ago the combination of dovish Fedspeak and Trumpspeak would have buoyed stock prices.
That was then.
Economic data, as well as corporate earnings guidance, both point to more damage than most analysts anticipated from the trade war. Even worse, the trade war coincides with the unraveling of some important corporate narratives.
The two big events of the day were, of course, the miserable Purchasing Managers Index report this morning, which showed a fall in the reading from new orders in the US from 61 to 51, and Apple’s drastic reduction in its revenue guidance. This comes on top of a soft Caixin PMI reading for China over the New York break.
The world economy is slowing, profit perspectives are fraying, credit conditions are tightening. There’s nothing good about the situation except that stocks are a lot cheaper than they were (Apple is down nearly 40% from its peak). But they aren’t cheap enough.
Orders are plunging around the world.
China’s export orders have fallen below the 47 mark (which means that fewer than 47% of survey respondents see growth, and overall Chinese manufacturing orders are just below the 50 mark. The American index fell off a cliff in December.
Given the sloppy performance of semiconductors and semiconductor equipment makers, it seems likely that falling CapEx is to blame. Oil accounts for a disproportionate share of CapEx in the US, and the falling oil price probably explains a good deal of the weakness.
Apple blamed the weakness of China’s economy for its sudden backtracking on prospective revenue. There is some weakness in China; retail sales grew by 8.1% year-on-year as of November, compared to a 10%-11% range during 2017. But that’s still growth.
Apple’s biggest competitor in China, Huawei, is showing handset revenue growth of more than 20% year-on-year as of December. The trouble is that Apple makes money by charging more than anyone else for premium products, and its products don’t seem all that premium today.
There are a lot of other scary situations facing market leaders. Apple took the most points off the Dow-Jones Industrial Average today, but Delta Airlines was right behind it. Apple fell 10%, and Delta fell 9%, followed by American Airlines with a fall of 7.3%.
Delta adjusted its fourth-quarter revenue projection to a gain of 7% from a previous estimate of 7.5% and the market crushed the airline stock – and this despite falling oil prices, which help airline profits. Evidently, the market fears that US consumers will claw ticket prices down. Consumer resistance to airline ticket prices is another symptom of deflation.
Yesterday we noted that real estate investment trusts had fallen 3%-4% during the session despite a sharp drop in Treasury yields, which should have buoyed REITs. That reflected fear of falling rents (the REITs had a small bounce today as Treasury yields plunged again).
Among market leaders, Netflix was the only notable gainer today, up 1.4%. Netflix currently trades at 95 times trailing earnings, while Disney – which now competes head-to-head with Netflix – trades at 15 times earnings. That makes no sense. Netflix is fighting for a share of the streaming-media market in a crowded field, against better-financed competitors with bigger content inventories.
Amazon still trades at $1,500. I think it’s a $1,200 stock on a good day (see What is Amazon Worth, Oct. 27, 2018).
The Fang will lose its fangs once Apple hits the ground in the wake of the constant trumpeter whirlwind chaos.
The Fang will lose its fangs once Apple hits the ground in the wake of the constant trumpeter whirlwind chaos.
DG always right on!
Netflix up – while job hunting, stay home and watch whatever.
DG always right on!
Netflix up – while job hunting, stay home and watch whatever.
Blame it on CHINA! If it the stock market goes down it is due to China. I did not know President Trump was Chinese or the US democrats is a bunch of Chinese politicians. LOL
The collapse in the US stock market is due to:
1. The stock market was severely overvalued prior to the collapse.
2. US has sanctions themselves out of important markets.
3. US economic wars has taken a toll on the US economy despite tax incentives and increase in wages. Tax incentives has been used for stock buy-backs, not for investments in the future.
4. Companies investor guidance has been fake and fraudulent. A few months ago, Apple painted a rosy picture of Apples 2019 sales. This despite units sold, Apples huge R&D investments has not resulted in new products the consumers want to buy.
5. US live in a dream-world thinking US products is God’s gift to mankind. The truth is US products is sub-standard and EXPENSIVE. The high US dollar is too hampering US exports.
US and China have a trade war going on. It has been going on for more than a decade. US Intelligence agencies has done their utmost to stop Chinese export of electronics and high-tech equipment. Now the US is trying to get all the countries in the extended “Five-eyes” intelligence community to boycott Chinese made products. This is a “hidden” war, unlike the public tariff war. The US Intelligence agencies want the “West” to buy substandard and more expensive products from other suppliers.
Germany has objected to the US demands of boycotting Chinese products. Germany think buying substandard and more expensive products from the “West” is a bad idea.
Huawei and ZTE targeted long before 2012. Huawei has been “robbed” for HUGE contracts with AT&T, US Sprint, and many other large companies because the US Government and the FBI has intervened and blocked the sale of “national security” reasons. 60 minutes documentary about Huawei from 2012 https://youtu.be/8AR3emaMdBc
Chinese consumers should retaliate against the US & the extended "Five eyes" intelligence cooperating countries for US unfair/criminal
trading practices.
Due to the trade war China does not need so much currency reserves in USD. Sell most of the $1 TRILLION in US Treasury Bonds and invest it to reduce poverty in Asia and to improve the environment. Reduced holdings of US Treasury Bonds reduce the risk of US extortion to confiscate Chinese assets if China refuses to follow orders from Washington. China is doing a lot do reduce their dependence of US markets, but please speed up the development of China’s Aerospace program.
Blame it on CHINA! If it the stock market goes down it is due to China. I did not know President Trump was Chinese or the US democrats is a bunch of Chinese politicians. LOL
The collapse in the US stock market is due to:
1. The stock market was severely overvalued prior to the collapse.
2. US has sanctions themselves out of important markets.
3. US economic wars has taken a toll on the US economy despite tax incentives and increase in wages. Tax incentives has been used for stock buy-backs, not for investments in the future.
4. Companies investor guidance has been fake and fraudulent. A few months ago, Apple painted a rosy picture of Apples 2019 sales. This despite units sold, Apples huge R&D investments has not resulted in new products the consumers want to buy.
5. US live in a dream-world thinking US products is God’s gift to mankind. The truth is US products is sub-standard and EXPENSIVE. The high US dollar is too hampering US exports.
US and China have a trade war going on. It has been going on for more than a decade. US Intelligence agencies has done their utmost to stop Chinese export of electronics and high-tech equipment. Now the US is trying to get all the countries in the extended “Five-eyes” intelligence community to boycott Chinese made products. This is a “hidden” war, unlike the public tariff war. The US Intelligence agencies want the “West” to buy substandard and more expensive products from other suppliers.
Germany has objected to the US demands of boycotting Chinese products. Germany think buying substandard and more expensive products from the “West” is a bad idea.
Huawei and ZTE targeted long before 2012. Huawei has been “robbed” for HUGE contracts with AT&T, US Sprint, and many other large companies because the US Government and the FBI has intervened and blocked the sale of “national security” reasons. 60 minutes documentary about Huawei from 2012 https://youtu.be/8AR3emaMdBc
Chinese consumers should retaliate against the US & the extended "Five eyes" intelligence cooperating countries for US unfair/criminal
trading practices.
Due to the trade war China does not need so much currency reserves in USD. Sell most of the $1 TRILLION in US Treasury Bonds and invest it to reduce poverty in Asia and to improve the environment. Reduced holdings of US Treasury Bonds reduce the risk of US extortion to confiscate Chinese assets if China refuses to follow orders from Washington. China is doing a lot do reduce their dependence of US markets, but please speed up the development of China’s Aerospace program.