A Babel of opinions lead markets down as Feb. options expire

A Babel of opinions lead markets down as Feb. options expire

Fed’s yakking baboons frighten traders with more interest rate hike speculation, while oil gets hammered below $30 bbl. (WTI) once again. Tedious trading ensues.

Proliferating unreliable information these days is making Wall Street and Washington sound like a new Tower of "Babble." (Image: The Tower of Babel by Pieter Bruegel the Elder [1563], via Wikipedia article on the tower)

WASHINGTON, February 19, 2016 – Thursday’s “wilting violet” market action has extended into Friday, where anemic and worried trading has put a negative cast on the widely followed major averages, although the NASDAQ has been trying to stay in the green. Barely.

Currently, the Dow Jones Industrials (DJI) are off a little over 78 points to stand at 16335.08 as of 11:15 a.m. EST. The S&P 500 is off a few points, while the NAZZ is up 9. But Freaky Fridays—particularly those Fridays when options expire, like this one—can be weird.

Oil, after a great rally earlier this week, has resumed its losing ways and is back down below $30 bbl. for WTI, which has colored today a bit gloomy from the outset. Apparently it’s dawning on the machines that that widely-touted Saudi-Russian “agreement” to “freeze” oil output right where it is now is not really a big news after all, since it leaves things right where they are even as Iran’s mad mullahs gear up to pump as much black gold as they can.

After a couple of nice days, Apple (symbol: AAPL) is getting slapped around again, this time by the Feds who want it to just unlock its secret encryption stuff to lean more about what’s in the (deceased) San Bernardino terrorists’ iPhone. Apple says “No way,” and told a judge who’s pushing for an even-greater degree of snooping to go sit on it. Pretty much.

Read also: U.S. government wants a bite out of Apple

Apple’s reaction has pissed off the anti-terrorist faction in Congress (mostly Republicans), while it’s thrilled civil libertarians on both the left and the right. Apple’s Tim Cook, of course, has earned exactly zero Republican friends on Capitol, given his longtime embrace of Democrat leftists and faux-socialists, just like most of his mega-rich Silicon Valley peers. Whether or not this legal brouhaha influences the stock for much more than a few days, however, remains to be seen.

Apple continues to suffer from the constant drip-drip of declining iPhone sales rumors. Well, of course sales of the current model are declining, particularly since many are expecting an early introduction of the iPhone 7, perhaps even mid-to-late spring. In the meantime, Apple continues to earn industry leading margins on its products, boasts a decent dividend, and boasts a PE that’s as low or lower than boring banks and utilities, which generally have the lowest PEs in town.

Ergo, driving AAPL much lower approaches real machine trading silliness. However, given the prevailing, silly bear case, every time Apple hiccups, the stock gets slapped. Given the stock’s heavy waiting in tech indexes, including the NASDAQ and the S&P 100, those averages overreact negatively each time AAPL is hit. Ditto the DJI, where AAPL is heavily weighted as well.

So now we have oil and Apple’s latest legal issue. What else could possibly go wrong? Well, there’s always China’s failing demand economy skulking around in background, along with the Islamofascist Euro-invasion, Turkey’s increasingly weird behavior, and everybody else in the world proclaiming a Great Bear market is at hand.

Plus, another one of the Fed’s incessant and contradictory voices joyously proclaims we really could start more of those incremental rate increases, given an alleged “jump” in inflation which, if annualized, would exceed the Fed’s never-yet-met 2 percent inflation target. Since all these figures get revised all the time, however, who knows what will really happen?

Monetary and economic opinions these days are proliferating with regard to just about everything, yet nobody really has a clue as to what any of Washington’s overpaid, allegedly learned idiots is actually saying or meaning. The current situation is similar to what happened when they built the Tower of Babel, and we know how that one turned out. Will our own Tower of Babble turn out any differently?

But this little Fed give and take, plus the usual 3rd Friday options expiration and hunting expedition that’s happening today has put a generally negative cast on today’s action, turning it into just another confusing 2016 trading day. It’s really getting boring.

Given today’s action or lack thereof, and figuring Monday will be its usual negative self, we’ve simply left our portfolios alone, save for picking up a few hundred shares of the double-short S&P 500 ETF (SDS) for insurance if things go south today or Monday morning.

We’re going to head out and catch up on some consumer staples shopping at Costco. Then we’ll start the weekend early, taking two days off before re-encountering this nasty, snarly market. You should, too. Weather’s supposed to be nicer, at least on America’s east coast where we reluctantly reside these days. That weather? For sure, another bout of global warming climate change, just like our recent blizzard.

Have a good weekend.

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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17