“We would lose. That's what we're programmed to do.”
Archer, the Gorgon Emissary
It was beginning to look like stocks would never put up a fight on Monday. We are talking going beyond program-trading to being programmed to lose every day. It’s was green on the screen. We haven’t seen that in a while; a broad market rally, led by Technology, Communication Services, Financials, and Consumer Discretionary. Safe havens were down earlier in the session for late buyers.
S&P 500 Index
Communication Services (XLC)
Consumer Discretionary (XLY)
Consumer Staples (XLP)
Health Care (XLV)
Real Estate (XLRE)
Finally, advancers and up volume swamped decliners and down volume, but there were only 14 new 52-week highs on the NYSE against 146 new lows. And on NASDAQ, there were 19 new highs against 122 new lows.
This week, fundamentals continue to take a backseat to other things, including negative speculation and technical breakdown. The emotional stuff reared its ugly head yesterday morning after President Trump reiterated higher tariffs coming in January and noting that not even Apple (AAPL) will be spared.
Meanwhile, charts haven’t mattered much, but that could be changing. Yesterday’s low was a key support point, going back to June, and even earlier in the year. If it looks like the key support will hold, it could attract more buyers later in the session.
All the buying will be cautious until the Dow Jones Industrial Average closes above 26,000.
Conversely, if 24,172 fails this week, it could open a trapdoor.
Dow Jones Industrial Average
Value & Takeovers
Just as individual investors are seeking value, there are many businesses and industries that look ripe for consolidation.
Watch the Cloud space, which is still reverberating after IBM made its largest acquisition by far. Also, watch for insider buying, such as the big chunk of shares bought by the CEO of Newell Brands (NWL), propelling the stock to the top of the Consumer Discretionary.
Unlocking value is another technique that might get a lot of attention. After the close, United Technologies (UTX) announced it would split itself into three separate businesses.
Of course, Wall Street likes when companies unlock value by laying folks off, which explains the big spurt in shares of General Motors (GM) yesterday. The White House is not thrilled with the company, which just posted a monster quarter, and they can’t shift production to successful trucks and crossovers, even to the right car model.
GM CEO Mary Barra met with Larry Kudlow at the White House; perhaps there could be some compromise.
The Dallas Fed report with ‘special questions’ on finding workers underscores how hard it is to fill those mid-skill level positions.
There has been a decided surge in low-skilled positions and mid-skill positions (what some are calling “new collar” jobs) since last year.
Ironically, there was a decline in high-skilled positions, which will make a lot of parents wonder about those expensive degrees.
Perhaps most alarming is the lack of applicants for these jobs. There is something very wrong with a nation that has seven million job openings and yet, so many businesses can’t find workers.
Dallas Fed Report
If you are having problems finding qualified workers, in which categories are you experiencing difficulty? Please check all that apply.*
Lots of noise this morning over President Trump saying the next round of potential tariffs on China exports will go through, and possibly include Apple, is news like I had to wear a coat to work today is news. Be that as it may, look for Wall Street proxies to complain enough to jawbone the market lower at the end of the day. Maybe, Tim Cook won’t comment, since he will have a scape goat other than slower sales, and the terrible decision not to breakout iPhone sales in the future.
The other news that crossed the intersection of Wall Street and politics is the news from General Motors. GM plans to lay off 14,000 workers, pointing to slowing car sales and the need to focus on electric and autonomous cars. The company also complained about steel and aluminum tariffs. This is the kind of move I continue to warn corporate America will come back to haunt them when people totally reject capitalism and vote in a Democrat Socialist (or unabashed socialist).
Last quarter, GM saw a decline in vehicle sales in all geographic regions, but that was mostly cars, as higher premium trucks offset declining volume to deliver record third quarter average selling price, net income and earnings.
It was all about the American consumer spending their hard earned cash.
3Q 2018 Trends
Despite that great news, there were red flags:
- North America 833,712 -9.8%
- International 306,895 -6.6%
- China 835,934 -14.9%
- Cars 10.6% from 11.4%
- Trucks 24.1% from 27.2%
- Crossovers 13.3% from 15.3%
Americans are not going to forget GM took $51.0 billion bailout from taxpayers back in December 2008, and the Obama administration closed the books on December 9, 2013, taking a $11.3 billion loss.