Is this it? Is the panic over? Have the sellers become exhausted and have the buyers stepped back into the breach? Is this, after weeks of churning, the bottom?
- U.S. stocks were higher at the open on Friday, following a batch of solid earnings reports that eased concerns about the impact of weak global demand on U.S. growth and businesses.
Strong right out of the gate and holding steady the market is. She be happy me thinks. As it stands at this moment, the Dow is down just about 1,000 points from its all-time high and the S&P 500 is down just about 125.A quick calculation in my head means the Dow has fallen just shy of 6% and the S&P is down just shy of 6%. That’s a decent correction, assuming the market is done correcting.
Both indices will finish the week on the downside, as will the NASDAQ. Interestingly, though, and quite telling, the Russell 2000 (RUT) and the S&P Mid-Cap Index (MID) will finish the week higher. My guess is risk-on investors understood what I have been pointing out – the market panic was a buying opportunity because the sell-off was not fundamentally driven, other than valuations were at the top end of the range. Well, that is no longer the case, so …
- With earnings season beginning to ramp up, it is important to focus on the earnings picture because if the fundamentals continue to support equity prices – we continue to see earnings growth – that means equity prices should move higher.
Really? The market should move higher? What about those poor economic numbers that came in earlier this week?
- BIG MISSES ACROSS ALL DATA: RETAIL SALES, PRODUCER PRICES, EMPIRE FED ALL WHIFF
Hard to miss the above headline that came out on Wednesday and when the market tanked, the breathless went right with the idea that the US was beginning to flounder economically. “We just got a slew of bad economic data” the reporter told us in that article. Oh, really? Let’s look at that bad data, starting with those “disappointing” retail sales for September.
- On a year-over-year basis (this September’s retail sales figures compared to last September’s), overall retail sales were up 4.0%, and without cars, retail spending still grew 3.6%.
Now, the above retail sales numbers are impressive, indeed, but when looked at in comparison to August’s stellar retail numbers, September’s numbers were not so pretty. Again, the trend is more important. The month-to-month stuff is a distraction and, for many indicators, irrelevant.
What about the manufacturing numbers that pointed to the New York area as having a major manufacturing slow down? That was scary, right? The US was succumbing to slow global growth, right?
- The New York Fed’s latest Empire manufacturing report came in way below expectations at a reading of 6.17 against expectations for a 20.25 reading. This is also down from 27.54 the prior month.
Well, let’s take a look at the bigger picture, the measure of capacity utilization and industrial productivity for the US economy.
- We’re now using 79.3% of our factories’ potential, which is tied with the highest reading in years. And, our industrial output grew by 1.0% in September. That index now stands at its highest reading ever.
Did I read that right? The US industrial output is the highest ever recorded? My-oh-my, how bad can that be? Maybe that number reflects the USA’s record export levels. Ya think?
And those nasty producer-price numbers that the doom and gloom crowd latched onto as the market tanked. Those “poor” numbers clearly showed deflation was on the way for the good old USA, yes?
- Producer prices fell 0.1% in September, below expectations for a 0.1% increase.
Well, that is not quite the reality of where the US is regarding deflation, as the numbers below show.
- On a year-over-year basis producer prices rose 1.6% against expectations for a 1.8% increase.
Okay, okay, so the rise missed expectations. Everyone jump off a bridge, now! Wait! Those numbers don’t actually mean the US is headed toward deflation, right?
They don’t. So, let’s do this. Add to my take on the data above the good earnings reports from GE and others that came out today, the news about the US housing industry that came out today, and, oh yeh, the US consumers’ current state of mind.
- General Electric shares rose 3.8 percent to $25.17 after the company reported third-quarter earnings that topped analyst expectations,
- U.S. housing starts and permits rose in September, as groundbreaking rose 6.3 percent to an annual 1.02 million-unit pace.
- The Thomson Reuters/University of Michigan preliminary October reading on the overall index on consumer sentiment came in at 86.4, the highest since July 2007 and above the 84.1 estimate.
For me, it is a little bit easier to say, “Hang in there” when the Dow is threatening 300 for the day, but, then again, it is not so hard when one actually looks at the economic and market fundamentals, and, oh yeh, earnings that continue to come in strong quarter after quarter after quarter after quarter.
Trade in the day; invest in your life …
