All Macro Hell Continues To Break Loose
Equities start the day lower as all Macro hell continues to break loose. Fresh off a 4th of July Holiday and this is what I get? Really? Remember how everyone called the US a bubble for the past 6 months and I argued it wasn’t because your uncle’s buddy wasn’t giving you stock tips at cocktail parties? I still stand by that thought process and if you really want to see what a bubble looks like (in real time) wander over to the Chinese market. Over there hairdressers are giving advice about stocks and when things go south they just flat out ban selling. Remember that chart I posted that showed the growth of Chinese retail brokerage accounts? Yea, the telltale signs were there. As for this Greece thing what more is there to say? It’s a tragedy on multiple levels and the fact that we have no compromise (or even a hint of one) days after the referendum doesn’t bode well at all. So should we puke out of stocks here? Take our Disney and Apple and Amazon and run for the safety of cash? I don’t know…even with all this trouble abroad we are flat on the year and only 3% from the all-time high. That’s pretty impressive right? We’ve seen a 32% drop in the Shanghai Composite in a little under a month and most of Europe is preparing for Grexit. Yet the S&P held its 200 day on Tuesday and price action hasn’t been atrocious (though it’s not pretty either). The primary trend higher is undoubtedly on hold, it has been for a few months. I just don’t think it’s OVER…not yet. Recessions end bull markets and economic data just isn’t pointing to one. So I think you ride out the choppy waters and hope your best ideas go sale. NKE, DIS, LLY, HAS, all 4 are near their 52wk highs. Should I sell because levered up hairdressers are getting a taste of reality?
After the open everything was going fine until the NYSE broke. Wait…another exchange broke? Come on, say it ain’t so. Yep, and this one elicited ALL KINDS of conspiracy theories in the media and on Twitter. Let’s back up a smidge: this morning United Airlines had to ground its fleet because of some computer glitch. Fine, it happens, I had a flight grounded once because the emergency slide wouldn’t function. Anyway, they started flying again mid-morning and no one thought twice about it. Around 11:30am ET the NYSE put out a release saying that they needed to halt trading on the floor because of “system issues”. Now this is where the Davinci Code / Illuminati / precious metal hoarding people came out of the woodwork wondering if the two were related. Then, to make things even stranger, the WSJ.com went down for a bit. Crazy right? But you know what, even with the NYSE down we could still do our job. We could still execute client orders on any of the other venues available to market participants. So the next time you hear people complain about fractured markets and too many places to trade stocks think about the events of July 8, 2015. The NYSE went down and markets still functioned, they didn’t curl up in the fetal position and wait for some political leader to sound the all-clear. Good job everyone. Unfortunately stock exchange glitches are the last thing we need while Greece and China do their thing so we spent the entire morning trading lower. By lunch we sat 2,053, down 1.3%. Did you know earnings start soon? Is there a single person talking about them / writing about them? Will they matter at all if China drops another 30%?
The afternoon saw the NYSE re-open for business (nice job boys) and stocks hit fresh lows, 2,046, down 1.66%. It was one ugly day here my friends and every stock market bear is growling their heads off right now. I will say this: it doesn’t feel panicky here, which might be a bad thing. On the whole I feel like people are still complacent about US equities given how long we’ve traded sideways. I might be wrong too, I might be too blasé about a changing macro landscape. But we are only 4% from the all time high, not even halfway to a “correction”. I mean didn’t people want a dip? Didn’t people want a chance to jump in at better prices? Before we wrap this up I wanted to mention MSFT, who took a $7.6B impairment on their mobile phone business (Nokia basically). What’s so noteworthy about that (other than the size of it)? Well, the entire Nokia acquisition cost $7.3B. So yea…ouch.
Final Score: Dow -147bps, S&P500 -166bps, Nasdaq -175bps, Rus2k -153bps.
I think we need to skip to the big finish because 1) today was brutal and 2) this kind of video perfectly sums up the market.
Have a good night.