The Scourge Of Standard Time Descends Upon Us
Equities start the day lower as the scourge of Standard Time descends upon us. I don’t know what WW 1 nutjob invented this spring forward / fall back thing but I’d be happier if I was going home in daylight rather than pitch black. Hey, what’s been going on in this market thing lately? Are we still worried about Ebola and falling crude and a new “bear market”. What….what’s that you say? We are sitting at all-time highs just 13 sessions after a 10% correction? (I’m calling it 10%, I don’t care. It was 9.8% intraday high to low…that’s 10). You just can’t keep a good market down can you? Why though? Why did it put that awesome V shape on the chart. Anyone ever heard of this thing called earnings? Companies put out these numbers saying how good / bad they are doing and stock market participants are supposed to factor those into the value of equities. I know, it’s not as flash as diseases and geopolitical turmoil but I guess they do matter. Factset, one of my favorite entities, say they are doing pretty good! “In the aggregate, companies are reporting earnings that are 4.7% better than the Street. This is up from 3.8% last week and better than the 3.6% four-quarter average.” Everyone involved in the stock market should go read this link right now because there’s lots of juicy information to ponder. So as you sit there and ask yourself “why did the market bounce so fast” the answer might just be as simple as “these here earnings things, that are fairly important to stock prices, are actually alright”. Don’t you hate it when there’s an easy answer? Anyway, it looks like midnight outside right now so before I get Hulkbusting angry I’m going to move on to the day’s events.
After the open, we swung around on a combination of earnings and one random headline about the ECB. Reuters reported that there are grumblings about Draghi and that was enough to knock about 1% off the S&P. It’s amazing how contentious the situation is becoming over there, there must be some serious hallway intrigue going on. Will the ECB do massive QE? Won’t they? That’s the multi trillion dollar question right now. And no joke, if the ECB announced anything like the US or Japan has done the market would go absolutely vertical. But it might not happen, so there’s that too. We bounced after Europe closed and by lunch SPX was only slightly lower. Winners ADM, EXPD, DAL, IP, and ODP. Losers PCLN, HLF, KORS, X, REGN, and LYB. Crude oil continued to act horribly spending most of the day down a couple bucks. Where can crude oil go here? $60? $50? If so, is that good or bad for us? I honestly don’t know, I would think its net positive in the long run but it’s gonna crush a huge sector of the S&P. If I had told you GDP was 3-4% and Crude oil was $70 a barrel, wouldn’t you take that?
The back half of the day saw a small rally but not enough for green numbers. We closed at 2,011, down 29 bps, on a relatively uneventful day. Which is good, I’m serious. We need to digest the 8% gain we just had so if we get about 10 days in a row of sideways, boring price action, I’d be quite content. Thanks for reading and go enjoy your 15 hours of night.
Final Score: Dow +10bps, S&P500 -29bps, Nasdaq -31pbs, Rus2k -41bps.
News Highlights:
- Succinct Summation of the Day’s Events: Someone spoke critically about Draghi, no one wants to hear that. Crude oil still bad. No real intraday trend.
- I love #3, love it. I like to think it describes how I view markets: “I think it’s so important to approach the world in an optimistic manner. This doesn’t mean you allow yourself to turn into the irrational optimist, but you again have to find the right balance here. You can be an optimist, but also a risk manager. It is valuable to find the bad in the good, but you also have to be able to find the good in the bad. Being a measured optimist gives you the ability to know when to take risks, but not become consumed by the fear of not taking risks. Ironically, a good risk manager knows when to take risks. Not just when to avoid them. This is what being a measured optimist is all about.”
- This should probably scare us right? “In a CNBC interview earlier this spring CNBC interview (April 23rd), Warren Buffett expressed his view that stocks aren't "too frothy". However, both the "Buffett Index" and the Wilshire 5000 variant suggest that today's market is indeed at lofty valuations, now well above the housing-bubble peak in 2007. In fact, we can see in the first chart above only four quarters (during the dot.com bubble) with higher valuations”.
- Speaking of bubbles…you gotta take this quiz. I absolutely LOVE the first question: In November 1998, one company saw its stock increase from $3 a share to $47 a share because it announced an update to its web site. Which company was it? Does today’s market remind of you of then? Yea, I didn’t think so either.
- And this is why we have Daylight Savings Time (history nut post)
- Wanna to know who to blame the collapse in home ownership on? Nope, not millenials, my generation. 35-44yr olds.
- I bet that hurt…a lot. Also bonus points for the Robin costume.
- Amazing tweet today by Bill Murray: “You can tell how boring a person is by the lack of fear in their eyes when someone is flipping through photos on their phone”
- Is it bad that the first thing I thought after seeing this picture was “I bet sleeping in that tent would be horribly uncomfortable” ??
- Now that my friends, is an incredible view.
- I don’t know what to make of this survey from BAML (y axis?) but it looks bullish even after a huge rally.
Anytime someone sends me a link that says “watch people try and cut down a tree” I’m pretty much auto including it in the recap. So many fails…
https://www.youtube.com/watch?v=ZSQ2JVeBqGg
Have a good night.