Much Ado About Nothing

Equities start the day lower as half the world is on holiday.  What better day to make my triumphant return to writing then Columbus Day, where our bond brethren get to sleep in, and Canadian Thanksgiving when all 42 Canadians who trade stocks are out.  By the way, do we still like Columbus?  Where are we at on that?   Anyway, if you are new to the recap welcome to my homebrewed creation that tries to take a light hearted look at markets.  “Edu-tainment” is the goal here, if you want serious boring macro / micro commentary there’s lots of places to get it, here at the recap we talk stocks, jocks, economic data, pop culture, and we’re not afraid to make fun of analysts who say “great quarter guys” when a stock is down 25% pre mkt.  So let’s catch up real quick shall we?   It’s October, people get scared of October, but like my boy @ritholtz says “you shouldn’t be”.   The worry du jour is interest rates, which are spiking faster than my heartrate after a 64oz prime rib.  Should you be worried about that?  Well, again, probably not.  That being said, stocks aren’t particularly fond of how rapidly rates are rising and that’s an important distinction from the outright level of rates.  So sure, the market is spooked, toss in Italy quaking (happens every single year, I’m not kidding) and China losing a trade war and that’s the current witches brew.  Earnings start this week so let’s hope good ole fashioned fundamentals push the toxic cocktail out of our reach.  Hey, did I mention I’m on Twitter?   I’ve spent the last few months trying to grow my presence there so I could push my recap to a few thousand more people (if you are on this email distribution, you are one of 3,100!!  How about that?).   Would you kindly head on over and give me a follow?  @bullandbaird  (anyone ever play Bioshock?  You’d get that reference if you did)


After the open we got our third rocky day in a row as all kinds of cross currents swamped the boat.  Everyone is pointing to higher yields as scaring the stock market but you know what sectors outperformed today?   Real Estate, Utilities, and Consumer Staples.  So riddle me this Batman, why would those sectors do well if the market was deathly afraid of higher rates?   Those are defensive sectors so the risk sleuth in me thinks today’s selloff was more about Italy contagion fears than anything else (Europe had a god awful session.  Italy -2.4%, Spain -1.3%, UK -1.1%).  But if people are selling stocks on Italy worries I have a message for them…Italy worries HAPPEN EVERY SINGLE YEAR.  Ok, there, I feel better.   Everything Tech / big winner / high valuation / momentum got crushed.  To wit: $TTWO was down 2.8% today.   Nobody is selling a video game maker because they are worried about higher mortgage rates in Muncie Indiana, they are selling stocks like TTWO, AMZN, MA, NFLX, etc because those are the big winners and big winners get chucked first when it’s risk off.  As I mentioned before defensive names led the way but we also saw gains in DIS, WFC, CHK, and RRC.   By lunch we sat on 2,872, down 0.45%, hoping this level would hold.


Which it did…thankfully.  We closed at 2,884, down 0.03% as the market tries to come to grips with a host of late cycle worries.   Now look, just because the 10year is at 3.23% and mortgage rates are near 5% doesn’t mean the bull market is over (read my earlier article).  A lot of smart people I follow think the cycle has oomph left in it and I’m inclined to agree with them.  When we hit 2,935 a few days ago the market was over-loved and over-believed.  The spike in rates + random macro stuff was enough to cause people to hit the sell button.   That’s it, nothing more.  If you were to ask me what my view on the market was I’d bet we finish the year closer to 3k.  Hang in there, things get rocky from time to time, nothing goes straight up.  Final Score:  Dow +15bps, S&P500 -4bps, Nasdaq -67bps, Rus2k -16bps.        


Volume was high.  News Highlights:

We’ll end tonight with a fun loving, light hearted look at people falling over.   That’s right, a good ole fashioned Fail video.




Have a good night