Tuesday, November 20, 2018

Markets plunge as a suvery of CFOs gives gloomy outlook for trade

Dow sank 337, decliners over advancers about 4-1 & NAZ dropped 54.  The MLP index sank 6 to the 243s (a low since Apr) & the REIT index fluctuated in the 353s.  Junk bond funds were mixed & Treasuries crawled higher.  Oil sank about 3 to the 54s & gold was off 3 to 1222.

AMJ (Alerian MLP Index tracking fund)

CL=FCrude Oil55.15
 -2.05  -3.6%

GC=FGold   1,225.50
+0.20 +0.0%

3 Stocks You Should Own Right Now - Click Here!

Stocks plunged, with the Dow dropping more than 500 as big retailers, the teicch sector & some industrial shares hammered market indexes, all 3 of which are now negative for the year with annual declines around 2%.  Shares of Apple (AAPL) are officially sitting in a bear market as investors worry about some weakness in iPhone sales, that pressured the broader tech sector.   Amazon (AMZN) , Microsoft (MSFT) & Twitter (TWTR) also weighed joined the retreat.  Crude oil prices followed stocks down, with US crude prices hitting the $54 per barrel level.  Economic news was mixed: Housing starts in Oct fell for the 2nd straight month, but building permits rose from the previous month & beat expectations.  The selling was underway globally as well.  Japan's Nikkei fell to a 3-week low as a drop in NAZ dragged down Japanese tech names, while Nissan Motor tumbled on news of Chairman Carlos Ghosn's arrest & dismissal.  The Nikkei average ended 1.1% lower.  China's Shanghai Composite retreated 1%.  Hong Kong's Hang Seng dropped 2%.  In Europe, London's FTSE traded down 0.1%, Germany's DAX traded 0.7% lower & France's CAC fell 0.7 %.

US stocks negative for year as tech, retail weigh

Target (TGT), a Dividend Aristocrat, ramped up investments online & in stores are bringing in shoppers, but they're also bruising the bottom line.  Company shares fell after it missed profit expectations for Q3, the last look at the retailer's performance as it heads into the holiday shopping season.  Revenue at stores opened at least a year rose 5.3%, its 6th consecutive qtr in that direction.  And online sales soared 49%.  In the previous qtr, TaGT racked up the strongest same-store sales growth in 13 years.  The battle for customers has become rooted in convenience and to that end,  The company leapt in front of rivals with free, 2-day delivery for any delivery.  The company reported EPS of $1.17.  EPS without one-time benefits & pretax gains were $1.09, 2¢ short of expectations.  Revenue was $17.82 B, just edging out expectations.  TGT expects full-year EPS of $5.30-5.50  The stock tumbled 7.06 (9%) to 70.
If you would like to learn more about TGT, click on this link:

Target's 3Q earnings miss, shares slide

US homebuilding rose in Oct amid a rebound in multifamily housing projects, but construction of single-family homes fell for a 2nd straight month, suggesting the housing market remained mired in weakness as mortgage rates march higher.  Other details of the report published by the Commerce Dept were also soft.  Building permits declined last month & homebuilding completions were the fewest in a year.  Housing starts increased 1.5% to a seasonally adjusted annual rate of 1.228M units last month.  Data for Sep was revised to show starts dropping to a rate of 1.21M units instead of the previously reported pace of 1.201M units.  Building permits slipped 0.6% to a rate of 1.263M units in Oct.  The forecast called for housing starts rising to a pace of 1.225M units last month.  The housing market is being hobbled by rising borrowing costs as well as land and labor shortages, which have led to tight inventories & higher house prices.  This is making home buying unaffordable for many workers as wage growth has lagged.  The 30-year fixed mortgage rate is hovering at a 7-year high of 4.94%, according to Freddie Mac.  Wages rose 3.1% in Oct from a year ago, trailing house price inflation of about 5.5%.  Residential investment contracted in the first 9 months of the year & housing is likely to remain a drag on economic growth in Q4.  Economists expect housing activity to remain weak thru H1-2019.  Single-family homebuilding, which accounts for the largest share of the housing market, dropped 1.8% to a rate of 865K units after declining in Sep.  Single-family homebuilding has lost momentum since hitting a pace of 948K units last Nov, which was the strongest in more than 10 years.  The data also suggested that housing supply is likely to remain tight in the near term.  Homebuilding completions in Oct fell 3.3%  to a rate of 1.111M units, the lowest level since Sep 2017.  Realtors estimate that housing starts & completion rates need to be 1.5-1.6M units per month to plug the inventory gap.  The stock of housing under construction rose 0.5% to a more than 11-year high of 1.137M units last month.  But the multifamily homes segment made up just over ½ of housing inventory under construction last month.

US homebuilding rose in October on a rebound in multifamily housing projects.

US trade policy has reemerged as the top concern from CFO at some of the world's largest companies.  More than 35% of CFOs taking a Q4 survey say US trade policy is the biggest external risk factor facing their business & nearly 75% of respondents expect US trade policy to have a negative impact on their business over the next 6 months.  Not a single CFO surveyed expects a positive impact as a result of US trade policy. The survey group represents some of the largest public & private companies in the world, collectively managing nearly $5T in market value across a wide variety of sectors. & was conducted Nov 13–19.  Throughout the survey, trade shows up as a nagging concern for CFOs, especially for members in Europe & Asia. More than 46% of European CFOs & over 44% of Asia CFOs say US trade policy is the biggest external risk factor facing their business.  Also in Europe, nearly 2/3 of CFOs there say the cost of raw materials will outpace rising costs of labor & capital over the next 6 months, likely a result of higher tariffs.  More than ½ of the EMEA & APAC CFOs surveyed named trade, trade war with China, tariffs, or "uncertainty created by U.S. administration" as the most important business or economic story of 2018.  Most North America-based CFOs feel the same way.  The concerns about trade come amid increasing stock market pessimism from CFOs.  A majority taking the survey now think that the Dow will fall beliow 23K (another 2K points) before ever reaching a new record above 27K.  In North America, trade worries also show up in the way CFOs feel about Trump administration officials & the pres.  There appears to be a strong correlation between these officials' views on trade & whether CFOs approve of their stewardship of the US economy.

US trade war with China won't be ending anytime soon, and concerns are growing: CNBC CFO survey

Buyers have returned after stocks were sold heavily at the opening.  But gloomy thoughts have not gone away.  The US economy is less robust than it has been earlier this year.  Housing is a big part & it's struggling.  Autos are only so-so at relatively lofty levels.  Then there is trade & the survey comments above are not encouraging for investors.  The Dow is well under 25K & with shortened trading over the rest of this week, the outlook is glum.

Dow Jones Industrials

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