Dow plunged 550, decliners over advancers almost 5-1 & NAZ gave back 187. The MLP index fell 3+ to the 225s (multi year lows) & the REIT index fell a relatively mild 2+ to the 294s. Junk bond funds dropped & Treasuries were in heavy demand, taking the yield on the 10 year Treasury below 1.6% (more below). Oil lost most of yesterday's gain, falling 1+ to the 55s & gold soared 10 to 1524 while stocks were being sold.
AMJ (Alerian MLP Index tracking fund)
Stocks plunge on recession, growth fears
The US bond market just flashed what could be its biggest warning yet of a coming recession, & it is not alone. The spread between the 2-uear Treasury yield & the 10-year yield flipped so that the 2-year was higher than the benchmark 10-year yield for the first time since 2007. Other parts of the curve have already inverted, but traditionally the 2-year - 10-year spread is the most widely watched by market players. The 30-year bond yield fell to a record low today, touching 2.015%, dropping thru its prior record of 2.08%. Yields across Europe fell & the German 10-year bund touched a new low of negative 0.65%. The long end of the curve, or the 10-year & 30-year yields, are reflecting fears about the global economy, therefore rates have been declining. But the shorter end, the 2-year has not been declining as quickly, since it reflects the Fed funds rate, which is still above 2%. An inverted yield curve has been a reliable recession indicator, but it does not always precede an economic contraction & the length of time before a recession occurs has varied. Strategists say in order to signal recession, the yield curve cannot just flip in & out of inversion, but it needs to stay there for some time to be meaningful. Because other parts of the curve are inverted, this signal is viewed as fairly strong. For now, the Fed is getting the blame for the recession warning, with many investors fearing the central bank could make a policy mistake by cutting rates too slowly to respond to uncertainties about growth. Fed Chairman Jerome Powell has said the Fed will be ready to cut as needed, based on concerns about sluggish global growth, the trade wars & weak inflation.
Bond markets are sending one big global recession warning
Macy’s (M) Q2 earnings report fell way below expectations, as heavy markdowns used during the spring season to clear unsold merchandise weighed on profits. Macy's also lowered its profit outlook for the full year & now is expecting EPS of $2.85-$3.05, down from $3.05 to $3.25. “Rising inventory levels became a challenge based on a combination of factors: a fashion miss in our key women’s sportswear private brands, slow sell-through of warm weather apparel and the accelerated decline in international tourism,” CEO Jeff Gennette said. “We took markdowns to clear the excess Spring inventory and are entering the Fall season with the right inventory to meet anticipated customer demand.” EPS dropped to 28¢ from 53¢ a year earlier. That missed expectations for 45¢. Net sales fell to $5.546B from $5.572B a year earlier, slightly beating expectations for $5.542B. Sales at its stores & website operating for at least 12 months were up 0.3%, short of expectations for growth of 0.4%. The company has been trying to refresh its stores, amass more loyal customers through its updated app & membership program, & is adding stop-in-shops to some locations for popular brands. Macy's said it’s “evaluating the details of new tariffs and is actively working with its vendor partners & suppliers in China to help mitigate potential impact.” Macy's is still calling for net sales to be about flat for the year, with same-store sales expected to be flat to up 1%. The stock sank a very big 3.10 (16%).
If you would like to learn more about Macy's, click on this link:
club.ino.com/trend/analysis/stock/M?a_aid=CD3289&a_bid=6ae5b6f7
Macy’s shares tank 17% as deep discounting leads to a big earnings miss and a cut in forecast
The commotion in Hong Kong has quieted down, at least for awhile. But serious fundamental problems with China remain. Recession fears are the main concern for investors & they are scary. The last time this signal was given, markets plunged. The Volatility Index (VIX) is up 3+ to the 21s versus under the mid teens in better times. As a result gold & Treasuries are in heavy demand & that money comes from selling stocks.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 55.08 | -2.02 | -3.5% |
| GC=F | Gold | 1,526.00 | +11.90 | +0.8% |
Stocks plunged at the open of the markets as a known predictor of a forthcoming recession has entered the mix. Investors are also concerned about weakening economic data in Europe & Asia. The yield curve is blaring a recession warning.
The spread between the US 2-year & 10-year yields turned negative for the first time since 2007. Such
a development has occurred ahead of each & every US recession of
the last 50 years, sometimes leading by as much as 24 months. There are global market concerns as the German
economy shrank by 0.1% in Q2 from the previous 3-month period as global trade conflicts & troubles in the auto
industry weighed on Europe's largest economy. The major European markets are trading lower. The
news was similar in Asia as China's factory output, retail spending &
investment weakened in Jul suggesting the world's 2nd-largest
economy faces downward pressure on growth. China's
factory output rose 4.8% over a year earlier, a marked decline
from Jun's 6.3%. Retail sales growth slowed to 7.6% from
the previous month's 9.8%. Japan's
Nikkei added nearly 1%, Hong Kong's Hang Seng crawled higher & the Shanghai Composite edged up 0.4 %. US
stocks are pulling back from yesterday's rally which was spurred by the
Office of the US Trade Representative saying it would delay the
tariffs on some Chinese products, including popular consumer goods,
until Dec 15.
Stocks plunge on recession, growth fears
2 days of disruptions at Hong Kong's airport settled down today as flights resumed. In
recent days, outbursts of violence highlighted the hardening positions
of pro-democracy protesters & the authorities in the semi-autonomous
Chinese city. About 3 dozen protesters remained camped in
the airport's arrivals area a day after a mass demonstration &
frenzied mob violence forced more than 100 flight cancellations.
Additional identification checks were in place, but check-in counters
were open & flights appeared to be operating normally. Protesters
spread pamphlets & posters across the floor in a section of the
terminal but were not impeding travelers. Online, they also circulated
letters & promotional materials apologizing to travelers & the
general public for inconveniences during the past 5 days of airport
occupations. "It is not our intention to cause delays to your
travels and we do not want to cause inconvenience to you," said an
emailed statement from a group of protesters. "We ask for your
understanding and forgiveness as young people in Hong Kong continue to
fight for freedom and democracy." The airport's
management said it had obtained "an interim injunction to restrain
persons from unlawfully and willfully obstructing or interfering" with
airport operations. It said an area of the airport had been set aside
for demonstrations, but no protests would be allowed outside the
designated area. The airport had closed
check-in for remaining flights late yesterday as protesters
swarmed the terminal & blocked access to immigration for departing
passengers. Those cancellations were in addition to 200 flights canceled
on Mon. More than 700 protesters have been arrested in total since early Jun,
mostly men in their 20s & 30s, but also including women, teenagers &
septuagenarians.
Hong Kong on edge: The latest
The US bond market just flashed what could be its biggest warning yet of a coming recession, & it is not alone. The spread between the 2-uear Treasury yield & the 10-year yield flipped so that the 2-year was higher than the benchmark 10-year yield for the first time since 2007. Other parts of the curve have already inverted, but traditionally the 2-year - 10-year spread is the most widely watched by market players. The 30-year bond yield fell to a record low today, touching 2.015%, dropping thru its prior record of 2.08%. Yields across Europe fell & the German 10-year bund touched a new low of negative 0.65%. The long end of the curve, or the 10-year & 30-year yields, are reflecting fears about the global economy, therefore rates have been declining. But the shorter end, the 2-year has not been declining as quickly, since it reflects the Fed funds rate, which is still above 2%. An inverted yield curve has been a reliable recession indicator, but it does not always precede an economic contraction & the length of time before a recession occurs has varied. Strategists say in order to signal recession, the yield curve cannot just flip in & out of inversion, but it needs to stay there for some time to be meaningful. Because other parts of the curve are inverted, this signal is viewed as fairly strong. For now, the Fed is getting the blame for the recession warning, with many investors fearing the central bank could make a policy mistake by cutting rates too slowly to respond to uncertainties about growth. Fed Chairman Jerome Powell has said the Fed will be ready to cut as needed, based on concerns about sluggish global growth, the trade wars & weak inflation.
Bond markets are sending one big global recession warning
Macy’s (M) Q2 earnings report fell way below expectations, as heavy markdowns used during the spring season to clear unsold merchandise weighed on profits. Macy's also lowered its profit outlook for the full year & now is expecting EPS of $2.85-$3.05, down from $3.05 to $3.25. “Rising inventory levels became a challenge based on a combination of factors: a fashion miss in our key women’s sportswear private brands, slow sell-through of warm weather apparel and the accelerated decline in international tourism,” CEO Jeff Gennette said. “We took markdowns to clear the excess Spring inventory and are entering the Fall season with the right inventory to meet anticipated customer demand.” EPS dropped to 28¢ from 53¢ a year earlier. That missed expectations for 45¢. Net sales fell to $5.546B from $5.572B a year earlier, slightly beating expectations for $5.542B. Sales at its stores & website operating for at least 12 months were up 0.3%, short of expectations for growth of 0.4%. The company has been trying to refresh its stores, amass more loyal customers through its updated app & membership program, & is adding stop-in-shops to some locations for popular brands. Macy's said it’s “evaluating the details of new tariffs and is actively working with its vendor partners & suppliers in China to help mitigate potential impact.” Macy's is still calling for net sales to be about flat for the year, with same-store sales expected to be flat to up 1%. The stock sank a very big 3.10 (16%).
If you would like to learn more about Macy's, click on this link:
club.ino.com/trend/analysis/stock/M?a_aid=CD3289&a_bid=6ae5b6f7
Macy’s shares tank 17% as deep discounting leads to a big earnings miss and a cut in forecast
The commotion in Hong Kong has quieted down, at least for awhile. But serious fundamental problems with China remain. Recession fears are the main concern for investors & they are scary. The last time this signal was given, markets plunged. The Volatility Index (VIX) is up 3+ to the 21s versus under the mid teens in better times. As a result gold & Treasuries are in heavy demand & that money comes from selling stocks.
Dow Jones Industrials
No comments:
Post a Comment