[Chart courtesy of MarketWatch.com]

1. Moving the markets

Yesterday’s sea of red worsened today, as absolutely no bullish sentiment was found anywhere, which had the major indexes heading sharply south in one of the worst starts to a quarter since 2008. The downside leader was Transportations, which are now down 5% so far this week.  

In addition to Tuesday’s weak manufacturing report, traders now faced more pain in form of slower job creation with ADP’s employment gains simply collapsing. Things were bad when we learned that September’s miss of 135k vs. 145k expected hit the newswire, but they got worse when the report showed that August’s big jump of 195k was severely reduced to only 157k.

This does not bode well for Friday’s upcoming Labor Department non-farm payroll report, although sometimes these 2 data points can show some divergence.

Looking at the big picture, “we see that trade tensions, global growth concerns, geopolitical risks and signs of profit margin compression are likely to limit upside going forward,” according to BofA. The Global Maco Surprise Index seems to substantiate these concerns by collapsing sharply.

The markets reacted accordingly, for a moment considering reality, as all major US equity indexes showed signs of breaking down, with the Dow, Nasdaq and S&P 500 all sinking below their 100 DMAs. Far worse was the performance of the SmallCaps (Russell 2000), which has now taken out it 200 DMA (Daily Moving Average).

Despite a rescue effort by the Fed’s Williams announcing that they have the tools (I guess to deal with the weak economic picture) and promised to use them earlier this time, market participants would have none of that empty talk and proceeded to, as I said yesterday, sell first and ask questions later.

On a personal note, I will not be posting tomorrow and Friday. This time it’s not a business issue, but a personal one. My wife and I will be traveling to San Diego to be part of my son’s wedding. I will, however, monitor the markets and adjust our holdings, should that become necessary. Regular posting will resume this coming Monday.

Read More

[Chart courtesy of MarketWatch.com]

1. Moving the markets

An early rally turned into a beating with the major indexes heading south all session long. The culprit was identified as downright ugly manufacturing information that had stocks and bond yields plunging.

The ISM manufacturing report came in at its worst level since 2009, as the index dropped to 47.8 in September from a prior 49.1. Expectations were for a 50.2 number. Any reading below 50 signals contraction, while any reading above signals expansion.

To many analysts, this was simply confirmation of an ongoing global slowdown and the conviction that US-China trade talks don’t look like they could contribute anything worthwhile in the near term.

Some of the brokerage houses imploded today, at least their stock prices did, when Charles Schwab came out and announced that they will do away with the $4.95 trade fee and offer zero commission for most stocks, ETFs and options as of October 7. While that will benefit all of us, brokerage businesses are extremely competitive and other firms will have to follow suit.

Disclosure: I have used Charles Schwab & Co as my custodian for clients’ assets since 1990, and I receive no compensation or any benefits from them.

Not covered by MSM is the continuing saga of the overnight lending issues between banks, as the Fed had to step in again this morning to financially “rescue” some of the participants. Not much is known as to what caused this problem, but it smells like a hidden bailout to me.

Analyst Sven Henrich had this to say:

We’re in the middle of an existential crisis. We must be. That’s what central bank policies are telling us.

After all the ECB cut rates to the lowest ever with its balance sheet being at record highs and expanding.

The central bank of Australia today cut rates to their lowest levels ever.

These are policies of absolute panic crisis levels are they not?

The Fed is intervening in repo markets every single day barely able to keep the effective Fed funds rate at target. They’ve already cut rates twice and are already expanding their balance sheet.

Without these interventions markets and the economy would fall apart. That’s the message that is being sent.

In any other time in history all these policy actions and their levels would be regarded as commensurate with a great crisis unfolding.

ZH summed the day up this way:

The moves today were quite shocking: Dow futures dropped 500 points from their overnight highs, 30Y Yields crashed 13bps from overnight highs, the dollar tumbled 0.6% intraday, and gold spiked $30. Additionally, rate-cut odds for October jumped higher to 60%…

I am sure that the month of October will have more surprises in store.

Read More

[Chart courtesy of MarketWatch.com]

1. Moving the markets

I mentioned last Friday that we would need a good trade headline to give stocks a boost. That is exactly what happened but not the way you think.

There was no news in US-China trade arena, so the Trump administration came out and played down or disputed reports that they were considering blocking Chinese companies from listing shares on US stock exchanges.

The net effect was that Friday’s dump after that announcement was reversed and equities pumped on this last day of September and maintained their positions above the unchanged line all the way into the close.

For the month, the major indexes ended up barely in the green, but the S&P 500 gained +1.74%, while for the quarter, all indexes were higher with SmallCaps having an ugly close. Still, my favorite low volatility ETF (SPLV) managed to come out ahead by posting a solid +2.06%.

Not doing so well were the FANG stocks, which fell for the third straight month in September and had their worst quarterly drop since Q4 2018. ZH noted that we heard some economically encouraging news in that September saw one of the biggest surges in economic surprise data since January 2009.

Still, we’re now looking straight in the jaws of October, which historically has been a month where anything is possible.

Read More