The S&P closed at 2716.26 – So today’s circuit breakers are:
Level 1. 190.13 pts (7%) or 2526.13
Level 2. 353.11 pts (13% total) or 2363.15
Level 3. 543.25 pts (20% total) or 2173.01
WMT gets crushed…falling 10% after reporting earnings that ‘weren’t so good’ – think gross margin pressure – Ok so they missed the estimate at $1.33 vs. the exp of $1.37 – clearly NOT the end of the world at all….but they revised (lower) full year estimates for FY 2019 from $5.13 to a range of $4.75-$5.00 (OK not ideal), they raised their annual dividend to $2.08 (bullish), they BEAT on the top revenue line at $1.36 bil vs the exp of $1.34 bil (that was good), so you ask – why did they crush the stock yesterday? Down 10% – that’s a big move for a report that wasn’t a complete disaster at all…so what gives? Can you say AMAZON? Hidden in all of this was the realization that WMT’s E-Commerce business was WEAKER than expected and that changes the narrative completely…. because it implies that they are having trouble competing against AMZN. WMT reported that E-Commerce & GMV (Gross Merchandise Volume) grew at an annual rate of 23% & 24% respectively…. down significantly from 50% & 54% in October….
So, traders and investors punished the stock yesterday – as well as others in the group – TGT -3.7%, COST – 1.8%, DG – 3.2% – The retail ETF – XRT also got clocked – closing 2% on the day….………traders and investors took WMT down 8 pts on the opening only to take it down another 3 pts by the end of day…. the gap down breached short-term support at $101.05 AND intermediate term support at $95.02 – leaving the stock to end the day at $94.11 – OUCH! Now two weeks ago during the ‘meltdown’ – WMT fell $10 pts found support and then last week rallied back nicely – regaining 5 of the lost 10 pts…. but after yesterday – it has some work to do and investors have clearly re-priced the risk…watch the action today – will she be able to hold on at the intermediate support or will the AMZN phenomenon continue to haunt her?
If you look at the chart on the O’Neil Panaray platform – You can see that it has broken its stage 2 flat base at $100.13, You can also see that its relative strength (RS) has plummeted and is under continued pressure…..The action in the days ahead will be important – and if the broader mkt remains weaker – then we could see more money coming out of WMT and being re-deployed in more exciting stories….as the focus shifts…..Now recall that stocks that gap UP or gap DOWN usually go back and fill that gap…and guess what….back in October when they reported – the stock gapped UP $6 and never filled that gap – UNTIL NOW…..Yesterday’s action began that process – for it to fill the gap it needs to trade back down to $89 ish….so stay tuned…..
Let’s move on…. the broader mkt ended the day right where it began…. yesterday morning futures pointed to a weaker opening and that what we got – with the DOW and S&P falling nearly 1% early on – but was that a head fake? By 11:30 we went positive…and the chatter was all about getting ‘sucked into’ the black hole…HFT (high freq) traders patting themselves on the back – as they continue to think they are the smartest guys in the room…..and then boom – by 1 pm – the tone changed, the pressure was building, WMT was getting weaker and then they all ran for the doors -sending the broader mkt lower into the end of day….breaching short term support at 2726 to end the day at 2716….this then puts us back into the technically weakened position – as investors and traders prepare for today’s release of the January FOMC (Federal Open Mkt Committee) minutes – (FOMC is the FED) – and Chair Powell’s first official press conference…..What will he say? How will he say it? Will he smile or frown? How will he be received? We are about to find out….as treasury yields tease with 3%.
So, is 3% the boogeyman that it has been made out to be? Apparently not so much anymore…robust global growth coupled with a strong US economy appear to be putting the inmates at ease (or at least that is what they want us to believe) ……. Analysts and strategists telling us that we don’t have to worry about ‘secular stagnation’…. forget you ever heard the phrase….
Secular stagnation is “the hypothesis that growth and interest rates will remain depressed for years as economies around the globe grapple with stalled wages and soft employment”
According to Jim Vogel – Head of Interest Rate Strategy at FTN Financial – told us that ‘those concerns don’t apply any longer’…investors will now have to focus on ‘long dormant inflation and central banks efforts to step back from extraordinary stimulus measures’……
DUDE! New flash…..investors HAVE been focusing on ‘dormant inflation and central bank action’ – which is why we are suddenly having a bit of a fit……The tension is building – as yields rise at the same time the FED is taking away the Kool Aid…and this will surely push rates up and thru 3% – toss in the larger budget deficits predicted that will force the gov’t to increase the amount of bonds we need to sell to finance this and boom – prices will drop (simple supply/demand concept) and yields will rise….so let’s just see where the intersection of stock valuations and interest rates coincides…. (there are $258 bil worth of treasury auctions this week….and this will surely add to the pressure on prices forcing yields higher – just sayin..)
(Just a note…. the implied inflation forecast from inflation -indexed treasuries is 2.14% – for the next 10 yrs….and the forecast from inflation bonds that mature in 2047 is just 2.13%… so are we making a mountain out of a molehill? Either way – what do I care – I’ll be dead by then……!)
This morning US futs are down 3 pts…..The dollar index (DXY) continues to rally – currently up 0.17 at 89.89 as higher yields suddenly appear to be supportive of the greenback….this all ahead of the FOMC mins….as investors await the report to dictate the next FED move…..look – the mkts have been skittish about rising inflation and I expect that the mins will re-inforce the idea that the FED is also on guard about any hint of firming inflation – as they prefer to be in front of it vs. behind it.
Eco data today includes Mortgage Apps – – 6.6% (think higher rates), Market US Manf PMI of 55.5, US Services PMI of 53.7, and Existing Home Sales of +0.5%.
The focus today is all about the FED….Philly Fed Pres Patty Harker will speak before the opening bell – so traders will be paying attn to what he has to say – for no other reason than it may be a prelude to what we hear this afternoon…. Futures have now gone flat…. I suspect that it will struggle hard to push up and thru 2726…if she fails then expect a bit of pressure as investors will test intermediate support at 2651.
OIL is down 0.30 cts at $61.49 – this as the dollar rallies…. Now OPEC continues to cut production so that is helping oil NOT collapse – I came across this quote this morning explaining the action in oil….
Stephen Brennock – Oil analyst at PVM Oil Associates – tell us
“A sense of harmony has returned this morning with both crude benchmarks (WTI and Brent) ploughing a southerly furrow as the dollar gains further ground”
Is this guy for real? I mean really – A SOUTHERLY FURROW? What is that? I had to look it up…a Furrow is ‘a trench in the ground made by a plow’…not sure how that relates but now we all have a new word in our vocabulary…
How about this? – the dollar is rallying putting pressure on commodities including oil……I mean that’s just a simple explanation – but I guess someone has to justify his salary….Can you imagine what this guy gets paid? Southerly furrow? Really???
European mkts are lower mixed. Both the Eurozone and German PMI Composite Flash reports missed expectations and this is pressuring stocks across the continent……sending the Euro low and the dollar higher…. FTSE +0.12%, CAC 40 -0.24%, DAX -0.55%, EUROSTOXX -0.50%, SPAIN -0.92% and ITALY -0.47%.
Take good care –
This is a great dish if you are planning a party….it is easy to prepare and goes along way. You can make it ahead of time and just heat it up in the oven when ready. Served with another entree in a buffet style along with a large mixed green salad, Rice Pilaf and some sautéed broccolini – it makes a great presentation.
You will need to start with boneless/skinless breasts, and thighs. rinse, drain and pat dry….
To prepare – you need: – 4 lemons – sliced into 1/8-inch slices…. seasoned flour (s&p), beef broth, butter and bit of olive oil.
Cut the chicken breasts/thighs into bite size pieces – dredge in seasoned flour and set aside. Next – in a large sauté pan – melt the butter and a bit of olive oil to prevent the butter from burning – make sure it is hot before adding chicken. Add enough to fill the pan – but do not overcrowd. Keep the heat on med high/high. brown the chicken all over….it will take on a golden hue…. should be about 5 mins or so……
next add enough beef broth to bathe the chicken pieces – lay lemon slices on top of chicken and cover. Turn heat to med and allow the lemon and broth to permeate the chicken. About 3 / 5 mins more.
Keep your eye on it and turn the chicken so that it does not burn. The broth will begin to thicken so make sure to not overcook. Transfer to a baking dish and repeat process for the balance of the chicken. You can cover and keep warm in the oven until complete.
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