*Time to start over?
*Retail sales shriveling ...
*Ebola takes flight ...
*ISIS gains momentum ...
Uncommon Wisdom Wrote:
Well, that was an interesting day. The stock market already looked bad, but today looked even worse. The Dow dropped more than 400 points and the major benchmarks briefly gave up all this year’s gains. Will the bear keep growling?
***
Whenever markets make a big move, it’s tempting to pick out one event and make it bear the blame. That’s usually a mistake. Avalanches like this one happen when several negative factors coincide.
Going into today, we already had crashing crude oil prices, signs of global economic weakness, various geopolitical hotspots, and fears that Ebola would keep spreading in the U.S. and Europe. What else could go wrong?
We have a whole list of bad news items. Take your pick:
The U.S. Commerce Department’s September retail sales report came out weaker than expected after looking good most of this year. This was a hint that the U.S. economy may be less resilient than people thought.
Abbvie (ABBV) may abandon its $51 billion takeover of pharmaceutical giant Shire (SHPG) because new government regulations make the tax inversion plan less attractive.
Rapidly falling inflation stats, including today’s U.S. Producer Price Index, are making people fear the other side of the coin: deflation.
The Empire State Manufacturing Index, which just last month was growing at its fastest pace in almost five years, has now dropped sharply to show almost zero growth.
A second Dallas hospital worker tested positive for Ebola as a nurse’s union said isolation procedures were shockingly lax.
Worse, the worker actually flew on a Frontier Airlines flight from Cleveland to Dallas-Fort Worth just one day before she began showing symptoms. Airline stocks didn’t like that news at all.
Greece’s stock market crashed last night as the country’s leadership resisted Eurozone austerity measures.
The Pentagon said Islamic State forces have “tactical momentum” in Syria despite the U.S. bombing campaign.
Any one of these would have been bad news, but probably not set off the frenzy we saw today. Seeing them all at once spooked more people into selling.
A last-hour rally helped the benchmarks close well above the day’s low point, but plenty of traders still had their nerves rattled.
***
What will tomorrow bring? Probably a surprise or two. We’re in the thick of earnings season now. This evening, analysts will dig through reports from American Express (AXP), eBay (EBAY) and Netflix (NFLX).
Before tomorrow’s open, we will hear from Goldman Sachs (GS), Charles Schwab (SCHW), Baker Hughes (BHI), Delta Airlines (DAL) and United Healthcare (UNH).
Tomorrow is also the day Apple (AAPL) will unveil some new products. The last few weeks would have been much worse if Apple hadn’t held up relatively well. It is the largest component in many cap-weighted market indexes.
Today Dan Hassey told his Gold & Energy Investor subscribers that what the market really needs is a few days of sideways consolidation. I think Dan is right. A sharp rally from here, while nice to see, might be a dead-cat bounce.
***
Here is a comment on Ebola Economy: Time to Mask Up?
Reader Michele L. says: “I think that you forgot public transportation in your list of risky places. They are much more dangerous than airlines or taxi services, especially at rush hour... when people might perspire!”
Brad: That’s an excellent point, Michele. Millions of people ride trains and subways to work in the Northeast corridor every day. What will they do if Ebola cases appear in New York, Boston or Washington? It would paralyze many businesses.
Again, this can happen even if the outbreak stays very limited. It won’t take many more cases to generate a lot of fear.
What do you think about today’s market action? Are you looking for bargains or headed for the hills? I love to know what readers think. You can leave a comment on our website or send me an e-mail.
***
Here are a few more highlights from this crazy day.
As of today’s close, the S&P 500 is down 7.4% from its Sept. 18 high point. The year-to-date gain is down to only 0.8%.
The Dow lost as much as 460 points during the day, but recovered into the close to lose “only” 173 points.
Positive sign? The Russell 2000 Small Cap Index, which looked awful this morning, managed to close with a 1.1% gain.
Bond yields dropped hard as capital fled to perceived safety. The ten-year U.S. Treasury Notes ended at a 2.09% yield, after trading as low as 1.87% earlier in the day.
Crude oil prices slid a little further but not like we saw yesterday.
Gold and silver rose a bit, but economically sensitive copper fell more than 2%.
Check out other post on this blog; you would love them.
Happy Reading!
Nwadu Obiora.
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