So like I said, the economic data yesterday was a non-event. While weaker, the data did not cause any kind of a sell-off in the markets.
Durable Goods came in weaker than expected at -1.1% (exp of -0.7%), Ex Transports came in at -0.3% (exp of -0.2%), Cap Good Ordered at -0.5% (exp of -0.1%) and Cap Goods Shipped at -0.7% (exp of -0.2%). So all weaker than expected (not good).
PMIs, on the other hand, were a bit better or on target. US Manufacturing at 51.5 (exp of 50.9), US Services PMI at 51 (exp of 51) and the composite at 51.2. These are good numbers as they are all better than the magic 50 number. (Recall that +50 suggests EXPANSION). So, the good cancels out the bad. But either way, it appeared that no one was paying any attention at all. As I pointed out in yesterday’s note, at this moment, it was a non-event. But in reality, it only supports the idea that the FED is really going to cut rates next week. If there was any concern at all, yesterday’s economic data was the final nail in the coffin. The weakness provides cover for the FED to cut. They can always hide behind the fact that some of the macro data is “weaker than expected.” That is in complete contrast to the earnings data, which for the most part has been “better than expected.”
Tech was the star of the day. MSFT surged nearly 2% after they beat expectations and LAM Research (LCRX) exploded higher up 14% ($32) after offering strong forward guidance. This took the chippys (and anything tech) with it.
BRKS +6.2%, FORM +3.5%, AMAT +8.9%, & KLAC +4.4%…sending the Nasdaq up 66 pts or 0.8%.
The Dow continued to get pressured as MMM missed, and traders took some money out of UNH, MCD, JNJ, CAT, DIS, and NKE. These names alone took 128 points off the Dow, while V, BA, UTX, MSFT, and DOW added 128 points. Those cancel each other out, leaving the other 18 names in control and taking the Dow down 28 pts or 0.1%.
The S&P rallied 5 points or 0.19% suggesting that investors, traders, and algos appear to be comfortable with what they are hearing from companies. The global slowdown, the trade war, talk of impeachment, and higher taxes are apparently NOT an issue. But let’s be serious, the data is causing some trepidation. As we have seen before, no one WANTS to be the first one out the door for fear of making the wrong decision, so they wait…
After the bell, AMZN disappointed as they reported a drop in profits. While the stock was UP 1% during the day, post the close they took it down 6% in the minutes after the report. Reason for the loss: they are committing a lot of money to “one day delivery,” which by all accounts is working. So this selloff, don’t sweat it. INTC beat, V missed, Paypal beat, and F missed. I have a headache and it’s only 6 am…
Elsewhere around the world, UK Prime Minister BoJo is pushing hard for a snap election on Dec 12. Parliament has blocked his attempt to push through his BREXIT deal. Opponents want to make sure that they rule out any chance of a No-Deal BREXIT. And in his final appearance on the world stage, Uncle Mario (Draghi) left monetary policy alone this month as he passed the baton onto Christine Lagarde. Lagarde is now officially the ECB (European Central Bank) President.
US futures are slightly higher this morning as the world dissects the latest earnings numbers. The one that will be on investors’ minds is AMZN. Stock was down 7% in early trade but has since rallied back and is down only 5% as of this morning. AWS (Amazon Web Services) comes in at $9 bil vs. the $9.1 bil estimates. Concern that Google is going to eat AMZN’s lunch is now all the rage.
It is the holiday shopping season, and by now you know that there is one LESS week of shopping between Thanksgiving and Christmas. So I expect that every retailer is going to start to push holiday sales. While Black Friday may be on Nov 29, expect to see “Holiday Sales” beginning next week. I mean, have you been in a Home Depot lately? On one side there are Christmas Trees, blow up Santas, elves, Frosty, and Rudolph the Reindeer. On the other side are giant menorahs and dreidels that greet you when you walk in the door… I mean — really? It’s still October!
Next week we will see more than 145 earnings reports. So far, we have heard from about 170 S&P companies. 80% of them have beaten their estimates, helping to keep the market floating closer to the highs. Next week could change that whole scene.
Or maybe not…
Dow futures are up 20 points, S&P’s are down 2 points, the Nasdaq is off by 33 points and the Russell is +1.
For now, we remain in the 2975/3015 range. It is Friday and the weekend is upon us.
In Europe, the markets are a bit lower. While earnings remain in focus, BREXIT is on the front burner. EU members are trying to decide what the appropriate length of any extension might be for the UK to part ways. Prime Minister BoJo is willing to give Parliament more time to debate IF they back that snap general election on Dec 12. Germany reports that unemployment increased for the first time in six years, suggesting that the perceived slowdown is only going to get worse in the months ahead.
Oil is lower as the sun rises over the Americas. Gloomy forecasts about global economic growth is being credited for the weakness. Reuters is reporting that a “steeper decline in economic growth is more likely than a synchronized recovery.” All this while the FED, the ECB, RBA, and BoJ all cut rates to try and stimulate growth. Again, is it a demand issue or is it a supply issue? Now in the months ahead one of two things are going to happen: either OPEC is going to cut way back on supply or OPEC is going to flood the market with oil. Remember, they did this 3 years ago as they tried to force massive losses on US producers, hoping that they would shut down the US oil industry.
How’d that work out?
Take good care,
The word – Puttanesca literally translates into “in the style of the prostitute” (where the Italian word puttana means “lady of the evening”).
This dish originated in Naples and is today a staple of the Neapolitan household. It is made from tomatoes, black olives (or Kalamata Olives), capers, anchovies, onions, garlic, oregano and parsley. It is easy to make and has an interesting history. But whatever its origin, it is a great dish that is easy to prepare, is spicy, tangy, and vibrant – an appropriate description of the market today…
Start with 3 crushed garlic cloves sautéed in olive oil about 3 / 4 mins…do not let it burn…
Next add a diced white onion and diced/minced anchovy filets and sauté for another 5 / 8 mins. As they cook they melt away. Add one can (28 oz) of kitchen ready crushed tomatoes… not puree — crushed.
Add about ¼ of a can of water. Let simmer for 10 mins or so. Next add capers, oregano, pepper, chopped Italian parsley, and rough chopped pitted Kalamata olives or pitted black olives — whichever you prefer — but do not mix… It is one or the other. No need to add salt as the anchovies are salty enough. If you like more bite, you can add red pepper flakes at this point… cover and let simmer.
In the meantime, bring a pot of salted water to a rolling boil and add the spaghetti. Do not use Cappellini as it is to thin and it clumps up etc. Let boil for 8 mins or until al dente. Remove and drain, keeping a mugful of the pasta water. Add the pasta to the sauté pan with the Puttanesca sauce and heat and stir until well coated and fragrant. Serve immediately onto warmed plates offering up grated Parmegiana cheese on the side.