WASHINGTON. After digesting Federal Reserve Chairman Jerome Powell’s narrative explaining the central bank’s latest opinings on the economy and interest rates, Wall Street traders and investors responded positively but rather limply Wednesday. But Thursday morning, after sleeping on the usual Fed bafflegab, the gang apparently decided to go bullish all the way. The Dow soared some 200 points at the open and seemed happy hanging out at around +150 on the day. Then everyone heard Iranian war drums beat in the distance. That put an end to Thursday’s bull run. At least for the moment.
Thursday’s Fed led bull run could run aground
As we log today’s action, around 12:30 p.m. ET, all three major averages are sinking closer to the flatline action they embraced for much of the post-Fed pattern on Tuesday afternoon. The Dow is currently up only 41.45 points, a 0.16 percent gain. The broader-based S&P 500 and the tech-heavy NASDAQ are behaving nearly the same on a percentage basis.
The early Thursday market surge briefly took the S&P 500 into record high territory before its current retreat. But, given the touchiness of the current international political scene – the U.S.-China trade war and the latest Iranian provocations come to mind – any decisive market move these day could turn indecisive or completely reverse itself in a New York minute. It’s just too hard to sustain a lengthy bull run in this kind of market.
About those Iranian war drums
News hounds are already well aware of the attacks on oil tankers in the shipping lanes separating Iran from Saudi Arabia and the Emirates. They’re likely the work of Iran’s Revolutionary Guards, their frogmen, or both. The Straits of Hormuz constitutes the chokepoint for Iranian aggression and saber rattling. And Iran’s Shiite thug-ocracy rattles those sabers and beat those Iranian war drumes whenever they don’t get what they want.
And lately, unlike the Obama administration, the Trump administration isn’t giving the mad mullahs anything that they want. The Trumpians did this simply by declaring Obama’s fake U.S.-Iran “treaty” – never ratified by the Senate – inoperable, as Ron Zeigler once might have said.
Barack Obama’s fake – and now defunct – U.S.-Iran “treaty”
Furthermore, the president, freed of this fake, toothless “treaty,” promptly restored the onerous sanctions previously placed on the Iranian regime. They’d been working before, when Obama lifted them. At the same time, he airlifted literal crates of U.S. dollars. That enabled the mullahs to re-fund their murderous Hamas and Hezbollah friends. They, in turn, cranked up their activities once again in the troubled Gulf region.
Under the Obama “treaty,” the Iranians were supposed to halt certain key activities in their oft-denied nuclear weapons program in return for the U.S. lifting its crippling sanctions. This the Iranians promptly did. Likely for about a day, before resuming their nuclear weapons drive. In this they took a page out of the (North) Vietnamese Book of U.S. Treaty Behavior: Negotiate hard but give the U.S. what they want. Send them back to the states with smiles. And promptly start violating all agreements. What a great “investment” in peace that was.
Point-counterpoint in the volatile Middle East…
Which gets us to the latest provocation, Iran’s apparent (but likely) shooting down of a U.S. reconnaissance drone. Which, of course, was shot down over sovereign Iranian territory. Say the Iranians. The U.S. claims otherwise.
But, sad to say, the U.S. can’t always be regarded as stewards of the absolute truth either these days. But we’ll go with our guys for now, mainly because the Iranians are such consistent liars.
President Trump was asked this morning if the U.S. now has plans to strike back at Iran. “You’ll soon find out,” he replied. Naysayers to the contrary, it’s the right response to these nasty Iranian dead-enders, no matter what the President actually plans to do. But unlike Barack “Red Line in the Sand” Obama, this president will find a way to deliver on this threat in a time of his own choosing.
… could mean trouble for U.S. markets
As we’ve noted before, U.S. markets respond more quickly to news headlines these days than they do to profit and loss statements. The moment the Iranian provocation hit the wires, Thursday’s big, powerful rally reversed. It gained downside momentum when the President’s response to the Iranian action crackled across the Internet.
In sync with the Iranian attack and the U.S. verbal response, oil prices got a big kick in the pants. They’re gaining about $3.00 per barrel for West Texas Intermediate (WTI). WTI currently stands at $56.72 bbl., only a few days removed from a feared decisive drop below $50. More expensive Brent crude made a similar move on the news. It currently stands at $64.27, up $2.45 thus far. Gold, understandably, heard those Iranian war drums too. It’s also responding sharply to the upside, as is its custom in such situations.
But even as all this goes down, please remember: Our daily reports on the market depend on when we post them. So don’t be surprised if both oil and the major averages close quite differently from the numbers we’re seeing now. Every minute of every trading day is another thrilling episode in an international serial that may have no end. Particularly if we keep hearing those relentless Iranian war drums. The re-imposed U.S. sanctions on that country are killing Iran’s already mismanaged economy. Clearly, they’re getting desperate. A desperation that may not offer a pleasant social or economic conclusion.
Some shockingly positive news for Allergan (AGN) shares
For us, at least, the good news continues with our reduced holdings in large-cap pharmaceutical company Allergan. (Trading symbol: AGN). It’s been on a tear for roughly the last three days after sinking recently to horrendous 5-year lows, barely halting its decline earlier this week to $114 and change per share. This for a stock whose shares stood at about $280 per share barely 2 years ago. We could use a real bull run in this one issue alone. Fingers crossed.
Anyway, AGN shares are up again today. They’ve darted about for most of the trading day in the $129-131 neighborhood. Recent catalysts apparently include improved prospects for a highly effective irritable bowel syndrome drug. Plus rumors that this badly managed company may head for a two-or-three way split at some point. The idea: to “unlock shareholder value.” At least one vulture capitalist is urging them to do precisely that.
Rumors are rumors. But heavy trading and the roughly 16-point recovery in these shares in only 2.5 trading days indicate something is up. I.e., our current AGN position just went positiveafter three years of sheer agony. So we’ll hold our ground (and our shares) here and see what happens. We deserve something nice from this company after all the sturm und drang we’ve suffered through. But, as we well know, that doesn’t mean we’ll get it.
Wrapping up Thursday so far…
Enough verbiage for today. There’s never any point in generating too much of it. Particularly on a day where everything we’ve just said could get turned on its head by today’s closing bell. Particularly when we hear those Iranian war drums getting louder and louder.
But we do hope the current bull run continues in what’s turning out to be an unusually weird trading year.
— Headline image: The bull looks set to go after the bear at the stock exchange in Frankfurt, Germany.
(Image via Wikipedia entry on market trends, GNU 1.2 license)