Dow finished down 296, decliners over advancers 5-2 & NAZ dropped 151. The MLP index fell 4+ to the 254 & the REIT index was up 4+ to the 346s. Junk bond funds were sold & Treasuries rose as demand was strong today. Oil climbed higher in the 67s (more below) & gold added 5 to 1237.
AMJ (Alerian MLP Index tracking fund)
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Several US tech giants lost tens of billions of dollars in value this week as lukewarm quarterly earnings reports sent markets sharply lower downward despite strong economic data. Amazon shares fell more than 7% in trading today, one day after the e-commerce giant posted slower-than-expected revenue growth & set a holiday season sales forecast below expectations. Shares of Alphabet, the parent company of Google, fell more than 2% after its revenue growth also missed expectations. The weak results had a pronounced effect on US markets. The Dow fell more than 300 while the S&P 500 dropped nearly 2% & entered correction territory. Just 57% of S&P 500 companies have topped revenue forecasts in Q3 down from 72% in Q2. Markets sank even as US GDP grew 3.5% in Q3, according to the Bureau of Economic Analysis. Here are this week's biggest tech losers by market capitalization:
When it comes to monitoring inflation, the Federal Reserve watches a different number than the rest of us. Headlines detail the latest Consumer Price Index changes, but the central bank monitors something a lot more esoteric-sounding, the Personal Consumption Expenditure deflator (PCE price index). Both measure inflation based on changes in the prices consumers pay for goods & services, but the 2 numbers are calculated by different agencies using different factors. As the Cleveland Fed once put it, the CPI measures what households are buying & the PCE looks at what businesses are selling. Today, the Commerce Dept said Q3 GDP, the value of goods & services produced, rose by a 3.5% annual rate, slightly above expectations. The PCE rose 1.6% in the qtr, below the 2.2%t economists had forecast. The "core" PCE, which excludes food & energy prices, rose 1.6%, according to the Commerce Dept's Bureau of Economic Analysis, which does the calculation. The PCE for Sep won't get released until next week. It was up 2.2% annualized in Aug. Earlier this month, the Bureau of Labor Statistics (part of the Labor Dept) said CPI for Sep rose an annualized 2.3%. or 2.2% without food & energy. A big difference is what goes into the baskets of goods & services each index tries to measure. The CPI focuses on what consumers pay directly. The PCE is broader. For example, the PCE would factor in the cost of medical care paid by employee-sponsored health plans, Medicare & Medicaid, while the CPI would only take into account out-of-pocket spending by consumers themselves. But the 2 emphasize different factors. The PCE weights medical care spending while the CPI puts more weight on shelter costs. The PCE measures rural & urban spending, while the CPI just looks at urban. And the PCE includes spending by non-profits not just consumers. The PCE also factors in shifts in consumer behavior, for example, when people substitute cheaper items for more expensive ones. If the price of steak skyrockets & people start buying more chicken & less steak, the PCE's basket of goods would shift to reflect that, while the CPI's basket would remain the same as before. The Bureau of Labor Statistics calculates the CPI using household survey data. The Bureau of Economic Analysis comes up with the PCE using the same data that goes into the quarterly GDP report plus information from a variety of business reports, & it can revise that number just like GDP gets revised. The Cleveland Fed says CPI has run about a ½ a percentage point higher than PCE since 2000, though only about 0.3 percentage points higher since 2008. As for why any of it matters, the Fed has been trying to raise rates from historic lows without derailing an economic expansion. It wants to keep inflation in check without setting the economy back, often a tough line to walk.
The Federal Reserve's favorite inflation indicator says it is under control
Oil rises, but heads for weekly loss on oversupply worries
This was another wild day for stocks & that has become common in Oct. Not a good time for the timid. Sexy tech stocks are out of favor & that can be a huge drag for the rest of the market. The Dow dropped more than 600 this week & has fallen almost 2K in Oct. Not cheery news for the bulls & more more selling lies ahead.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
Several US tech giants lost tens of billions of dollars in value this week as lukewarm quarterly earnings reports sent markets sharply lower downward despite strong economic data. Amazon shares fell more than 7% in trading today, one day after the e-commerce giant posted slower-than-expected revenue growth & set a holiday season sales forecast below expectations. Shares of Alphabet, the parent company of Google, fell more than 2% after its revenue growth also missed expectations. The weak results had a pronounced effect on US markets. The Dow fell more than 300 while the S&P 500 dropped nearly 2% & entered correction territory. Just 57% of S&P 500 companies have topped revenue forecasts in Q3 down from 72% in Q2. Markets sank even as US GDP grew 3.5% in Q3, according to the Bureau of Economic Analysis. Here are this week's biggest tech losers by market capitalization:
Amazon (AMZN): -$64.4B (Market cap as of 10/26: $795B)
Alphabet (GOOG): -$40.9B (Market cap as of 10/26: $724.9B)
Facebook (FB): -$28.5B (Market cap as of 10/26: $416.6B)
Microsoft (MSFT & a Dow stock): -$26.7B (Market cap as of 10/26: $807.5B)
Apple (AAPL): -$25.7 billion (Market cap as of 10/26: $1.033T)
These tech giants lost $187 billion combined amid market rout
When it comes to monitoring inflation, the Federal Reserve watches a different number than the rest of us. Headlines detail the latest Consumer Price Index changes, but the central bank monitors something a lot more esoteric-sounding, the Personal Consumption Expenditure deflator (PCE price index). Both measure inflation based on changes in the prices consumers pay for goods & services, but the 2 numbers are calculated by different agencies using different factors. As the Cleveland Fed once put it, the CPI measures what households are buying & the PCE looks at what businesses are selling. Today, the Commerce Dept said Q3 GDP, the value of goods & services produced, rose by a 3.5% annual rate, slightly above expectations. The PCE rose 1.6% in the qtr, below the 2.2%t economists had forecast. The "core" PCE, which excludes food & energy prices, rose 1.6%, according to the Commerce Dept's Bureau of Economic Analysis, which does the calculation. The PCE for Sep won't get released until next week. It was up 2.2% annualized in Aug. Earlier this month, the Bureau of Labor Statistics (part of the Labor Dept) said CPI for Sep rose an annualized 2.3%. or 2.2% without food & energy. A big difference is what goes into the baskets of goods & services each index tries to measure. The CPI focuses on what consumers pay directly. The PCE is broader. For example, the PCE would factor in the cost of medical care paid by employee-sponsored health plans, Medicare & Medicaid, while the CPI would only take into account out-of-pocket spending by consumers themselves. But the 2 emphasize different factors. The PCE weights medical care spending while the CPI puts more weight on shelter costs. The PCE measures rural & urban spending, while the CPI just looks at urban. And the PCE includes spending by non-profits not just consumers. The PCE also factors in shifts in consumer behavior, for example, when people substitute cheaper items for more expensive ones. If the price of steak skyrockets & people start buying more chicken & less steak, the PCE's basket of goods would shift to reflect that, while the CPI's basket would remain the same as before. The Bureau of Labor Statistics calculates the CPI using household survey data. The Bureau of Economic Analysis comes up with the PCE using the same data that goes into the quarterly GDP report plus information from a variety of business reports, & it can revise that number just like GDP gets revised. The Cleveland Fed says CPI has run about a ½ a percentage point higher than PCE since 2000, though only about 0.3 percentage points higher since 2008. As for why any of it matters, the Fed has been trying to raise rates from historic lows without derailing an economic expansion. It wants to keep inflation in check without setting the economy back, often a tough line to walk.
The Federal Reserve's favorite inflation indicator says it is under control
Oil prices were higher, supported by
expectations that sanctions on Iran would tighten supplies, but crude
futures still dropped for a 3rd straight week as a slump in stock
markets & concerns about trade wars clouded the fuel demand outlook. US crude ended the session 26¢ higher at $67.58, posting a loss of 2.2% loss this week. The contract rose in 4 out of 5 sessions
this week, but the gains were not enough to offset a nearly $3 drop on
Tues. Brent crude oil traded around $77.61 a barrel, up 72¢,
after earlier falling more than $1 to a low of $75.77. The contract had a weekly loss of nearly 3% & has fallen by more
than $10 in the last 3 weeks. Supporting prices on today,
Iraq will stop trucking crude oil from its northern Kirkuk oil field to
Iran in Nov to comply with US sanctions, 2 sources said. The market for months has weighed concern surrounding potential
supply shortages from US sanctions on Iran, due to come into force
Nov 4. The US wants to reduce Iranian oil sales to
zero, although this looks unlikely. Many buyers, including
Iran's biggest customer, China, appear to be falling in line, forcing
Tehran to store unsold oil on tankers in the hope it can sell the crude
once sanctions are lifted. However, a global
collapse in equities has roiled oil markets this week. The NAZ confirmed a correction this week, while the S&P 500 &
the Dow erased their gains for the year. Financial markets have
been hit hard by a range of worries, including the US-China trade war,
a rout in emerging market currencies, rising borrowing costs & bond
yields, & economic concerns in Italy. There are also signs of a slowdown in global trade, with container & bulk freight rates dropping after rising for most of 2018. Meanwhile, Saudi Arabia's OPEC governor said on yesterday oil markets could face oversupply by the end of the year. "The market in the fourth
quarter could be shifting towards an oversupply situation as evidenced
by rising inventories over the past few weeks," Adeeb Al-Aama said. Saudi Energy Minister
Khalid al-Falih said there could be a need for intervention to reduce
oil stockpiles after increases in recent months. Meanwhile, US
production is soaring, boosted by technological advances that have
enabled drillers to tap shale formations, with output this year forecast
to overtake the previous annual record in 1970. The US oil rig count,
an indicator of future production, rose by 2 rigs in the latest week to
875, its highest since March 2015, after stalling this summer due to
pipeline constraints in largest US oil patch.
Oil rises, but heads for weekly loss on oversupply worries
This was another wild day for stocks & that has become common in Oct. Not a good time for the timid. Sexy tech stocks are out of favor & that can be a huge drag for the rest of the market. The Dow dropped more than 600 this week & has fallen almost 2K in Oct. Not cheery news for the bulls & more more selling lies ahead.
Dow Jones Industrials
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