Things you need to know.
– Global mkts under pressure as the slowdown chatter builds
– US futs getting clocked again – about to test intermediate support at 2924
– Schwab and TD cut commission to ZERO – but it ain’t FREE
Stock finished deep in the RED, headlines scream:
“World Economy Sends up Flares as Manufacturing Slump Hits US”
“US Economy’s Slowdown Spurs Concern It’s Nearing Stall Speed”
Stall speed? Really dude? Stall Speed?
PMI’s (Purchasing Managers Indexes) around the world suddenly all appear to be crashing….and here at home the eco data yesterday in the US mirrored the weak reports we have been seeing around the globe. Markit US Manf PMI coming in fine at 51.1 – slightly better than the expectation, but the ISM Manufacturing Index – apparently the one that the algo’s pay attention to – PLUNGED – slicing right thru 50 – skidding to a stop at 47.8 – the lowest level since 2009! ISM employment also a bit worse than expected at 46.3 down from 47.4 last month. So, this one report caused the algo’s to go haywire……fueling fears that the slowdown seen in Europe and Asia is now beginning to take root in the US. (A bit dramatic).
Katie Nixon – Chief Investment Officer at Northern Trust had this to say:
“We are clearly seeing a very weak backdrop for manufacturing. The concern is the contagion effect into the services economy, which is the driving force of the US economy. We cannot take this lightly and we think the FED shouldn’t take it lightly either!”
Talk about dramatic…. I mean really? Not to be outdone – Donny wasted no time chiming in…..taking to Twitter to say –
“As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies; they don’t have a clue. Pathetic!
So, was it the report that caused the drama or was it Trump that caused the chaos? Is the ongoing trade war having any effect on the manufacturing PMI? Are companies holding back because of the ongoing trade uncertainty? Is the dollar stronger because it is considered a safe haven asset in a world of so much uncertainty? Should the US follow the world and go negative? I mean look how helpful negative rates have been to those countries offering negative interest rates……Just think Germany….
It is hard to believe that this ONE report is causing all of this drama but it once again speaks to the angst that is simmering in the mkts. This is the first weaker datapoint that has seen such a violent reaction suggesting that the mkt is tired and investors are exhausted.
Remember though, – The US is a SERVICES ECONOMY, manufacturing is a small part of what we do…..so the real datapoint to watch is the one tomorrow…. At 9:45 am we get the Markit US Services PMI – exp of 50.9 and then at 10 am we get the ISM (Institute of Supply Management) NON-Manufacturing (services) Index – exp of 55.2.
if either of them falls below the magic 50 mark then expect another wave of selling as the algo’s shift into overdrive. (I would argue though that the one to watch is the ISM report vs. The Markit report – but if the mkt wants to accentuate anything negative then it will focus on the most negative report it can find. Period.
It’s like when the yield curve inverted two months ago – causing analysts, strategists, and economists to predict the end of the world….remember that they were taking bets on ‘when’ the recession would hit. Would it be next week? 6 months? 10 months? 18 months? I mean the algo’s reacted the same way… over a period of 5 days the algos took 7% out of the S&P because of the COMING RECESSION. It then churned for the month of August and then surged to all-time highs in early September. (Wait? What about that inversion?)
Then yesterday, the algos sent the Dow down by 343 pts or 1.28%, the S&P lost 37 pts or 1.23%, the Nasdaq fell by 90 pts or 1.13% and once again the Russell 2000 (small and mid-caps) took it on the chin – losing 30 pts or 1.97%. At this rate we will be off 7% in 3 more days…….. but not to worry – the FED is meeting on October 29th/30th and you can be sure that rates are not going UP. We just need to start talking about that coming cut to stop the insanity……or maybe not? Maybe we should see how far the algo’s will go, how much devastation they will cause before the industry smartens up and takes back the night. But hey – that’s another story…..
This morning we wake up and find that global mkts are all in the red….. the story is the same around the world…..FEAR OF A GLOBAL ECONOMIC SLOWDOWN after yesterday’s weaker US PMI’s. Trade talks are due for next week so that may begin to shift the conversation – only time will tell. Japan –0.49%, Hong Kong –0.19%, China (closed all week) and ASX –1.53%.
European mkts are down on ECONOMIC FEARS. German Economic Institute lowered the 2019 GDP Growth from 0.8% to 0.5% and cut the 2020 forecast from 1.8% to 1.1%…..I guess those negative rates in Germany are really helping that economy! next – UK PM BoJo is set to unveil his latest BREXIT proposal this afternoon…. and the feeling is it’s a non-starter. BREXIT gets kicked down the road. FTSE –1.98%, CAC 40 –-1.56%, DAX –1.23%, EUROSTOXX –1.31%, SPAIN –1.27% and ITALY –1.13%.
US Futs are down this morning…..Dow futs lower by 161 pts, the S&P is off by 17, the Nasdaq is down by 54 and the Russell is lower by 10. Eco data includes Mortgage apps and they were up 8.1% (makes sense – mortgage rates are back in the mid 3’s) and ADP employment – exp of +140k jobs created. But like I said it is tomorrow’s ISM Non-manufacturing Index report that will be the one to watch. Nancy Pelosi is due to speak at 10:45 am – and NY’s Fed Pres Johnny Williams is set to take the stage at 10:50 am. Investors will be listening to both of these speeches for very different reasons.
Now yesterday’s move took the S&P down and thru 2950 – a trendline level that I have been saying should be support – we closed at 2940 and this morning looks like we are about to test the intermediate trendline at 2924. Now if tomorrow’s ISM reports disappoint – then watch as the algo’s throw a fit and go on to test long term support at 2835! And if it does – that would represent a 6% move off of the highs….so stay tuned.
Oh – and Charlie Schwab did it…they cut transaction costs to ZERO causing TD Ameritrade to follow suit. – essentially telling you that it is FREE to do business at Schwab or TD…..This ladies and gentlemen is not the story at all. They are making a killing by selling your order flow and then by offering you all of the other ‘high fee’ services….trust me – the transaction cost may be $0 – but it is far from FREE.
Take good care.
Greek Style Filet of Sole
This is a simple yet delicious dish to make. Takes no more than 30 mins – start to finish.
You need: fresh squeezed lemon juice, plus one thinly sliced lemon rounds, olive oil, butter, shallots – thinly sliced, capers, s&p, garlic powder, 2 lbs of filet of sole – (10 – 12 pieces), scallions – trimmed and sliced in half lengthwise, and chopped fresh dill.
Preheat your over to 375 degrees.
Now in one bowl – mix the lemon juice, olive oil, melted butter. Stir in the shallots, garlic and capers.
In another bowl – mix the s&p, and garlic powder – now rub the filets with this dry mix
Next – place the filets on a lightly oiled baking dish. Using a pastry brush – rub the juice mixture on both sides of the fish and then pour the balance on the fish. Take the sliced scallions and sliced lemon rounds and place on top of the fish pieces.
Place in the oven and cook for 10 mins – maybe 15 mins max – but do not overcook. Remove and present on warmed plates – garnish with the chopped dill. Serve with roasted potatoes and a tossed mixed salad – dressed in fresh lemon juice, olive oil, s&p and oregano.