Markets Climbed Wall Of Worry, Now Sliding Down Slippery Slope

Posted: Dec 21, 2018 9:26 AM
Markets Climbed Wall Of Worry, Now Sliding Down Slippery Slope

There are lots of cross currents, including today’s triple witching hour, hitting the markets.  Triple witching hour is the last hour of trading on days where stock market index futures, index options and stock options expire.  These days can bring extra volume and volatility to the markets. 

Markets were previously climbing a wall of worry, now they seem to be sliding down a slippery slope.  It feels like even good news is met with selling.  The U.S. dollar (USD) was high on the list of reasons why companies missed on revenues in the third quarter (see NKE earnings below).  Yesterday the USD was lower by as much as 0.86% against the major currencies.  In FX land that is a significant move, yet the decline did not lend support to equities.

Economic data is still pointing to a growing economy, the concerns seem to center around slowing global growth.  FedEx (FDX) lowered its outlook for 2019 due to slowing global growth.  FDX chairman and CEO, Fred W. Smith, commented, “while the U.S. economy remains solid, our international business weakened during the quarter, especially in Europe.”  He further went on to say,” China’s economy has weakened due in part to trade disputes.”      

Government news

News of a possible government shut down added additional pressure on the markets during yesterday session.  House Speaker Paul Ryan said that President Trump would not sign a Senate-passed spending bill without money for a border wall.

After the markets closed the House of representatives approved a bill that would fund most of the government into early February and provide $5.7 billion for the border wall.  The bill now goes to the Senate for a vote. 

In other government news, Defense Secretary Jim Mattis handed in his letter of resignation effective in February.  The resignation came a day after it was announced President Trump plans to withdraw troops from Syria. 

Stock news

Nike popped 7% after close, but results were far better than the headlines suggested. 

Global Sales growth as reported vs constant currency:

  • EMEA +8% in CC +14%
  • China +26% in CC +31%
  • Asia/Pacific +2% in CC +15%

Cintas (CTAS) is trading higher by 4.4% pre-market.

  • EPS of $1.76 beat consensus by $0.08
  • Revenues rose 7.0% to $11.72 billion vs. consensus of $1.69 billion
  • Raised FY19 EPS guidance to $7.30-7.38 vs. $7.26 consensus and prior guidance of $7.19-7.29
  • Raised FY revenues to $6.87-6.91 billion vs. $6.84 billion consensus and prior of $6.80-6.855 billion

There was a slew of economic reports released this morning.

  • GDP-Third Estimate was 3.4%, slightly below the prior reading of 3.5%
  • Durable Goods 0.8% vs. consensus of 1.7%
  • Durable Good-ex transportation -0.3% vs. +0.3% consensus