Apple, oil, China: Worried stock markets plunge Tuesday
WASHINGTON, May 3, 2016 – Short reports this week, as the Maven is heavily involved in his other pursuit as music and theater critic for this site. Washington National Opera is in the midst of its first-ever complete performance of Wagner’s epic Ring Cycle, and, as any Wagner fan knows, even attending these 4-5+ opera performances consumes and awful lot of clock.
Wall Street’s clocks have been ticking this week analysts analyze the final wave of Q1 corporate earnings reports. Some earnings are off the mark, some are surprisingly good, and others, like Apple (symbol: AAPL), are causing mass investor heartburn.
Word of Apple’s difficulties in the capricious Chinese market has spooked shareholders, who’ve been dumping the stock as fast as they were accumulating it just a couple of years ago. It’s as if the curse of being listed in the Dow Jones Industrials has finally engulfed even this mighty company, which currently seems headed towards a low price-earnings ratio that’s normally reserved for banks and finance companies.
Stocks opened down sharply in Tuesday trading, partly due to worries about the Chinese economy (or lack thereof) and IMF warnings that persistent difficulties in the Chinese economy could become persistent difficulties in neighboring economies as well. And they pay the IMF folks big bucks for this kind of obvious observation?
Just to add fun to the trading day, those hyperactive Fed blabbermouths will be out on the hustings today, no doubt making speeches and pronouncements that will confused markets even more. Up today: Cleveland Fed president Loretta Mester will be yakking it up at a Florida conference while Atlanta Fed president Dennis Lockhart will be making opening remarks at the same venue. Look out, below!
It looks like we’ll be more oil inventory reports this week as well. Any indication that storage tanks are filling up again will likely cause another wave of trader panic, as has become the tradition. Oil prices took an anticipatory dive yesterday. Tuesday, West Texas Intermediate (WTI) futures are off $1.16 bbl., standing at a still relatively healthy $43.52 bbl. as we write this column at 11 a.m. EDT.
Things change, however, and who knows where the price will be at Tuesday’s close? But oversupply worries continue, and the latest spike in U.S. gasoline prices at the pump may slide down a bit soon if these worries continue, eventually having an impact on oil prices.
The Dow has taken a dive Tuesday morning as well. Down about 200 points at its worst, it currently stands at 17,706.19, off 184.97 (1.04 percent). The S&P 500 and NASDAQ are off by similar percentages.
Today’s trading tips
Same old, same old. This market continues to make us nervous, so we’re holding a good chunk of cash, hanging on to our (mostly) term-preferred stocks, nipping into bits of gold and silver ETFs (SGOL and SIVR, which, at our brokerage, trade without commish), and adding a couple of shares here and there of Allergan Preferred A every time traders sell it, which they did again Monday.
That’s about it. The market has felt very, very toppy for a long time. The bulls have been putting up excellent resistance to a decline, but buying is on low volume and feels exhausted. And for that reason, we’ve shored things up a bit by increasing our position in double-short S&P 500 ETF, SDS. Yep, we’re down on this one for the moment, courtesy of those persistent perma-bulls. But if and when the Sell in May bug finally bites, we want to be in some SDS shares for the ride down.
See you this week when we can.