Confused Fed, spreading virus, crazed Houthis hit Wednesday markets
WASHINGTON – Oil patch investors confronted another attack by crazed Houthis on a Saudi Aramco facility. Then, everyone else invested in stocks confronted more bad news on the ballooning number of spreading virus cases in China and elsewhere. And finally, lest we forget, the perpetually confused Fed gave stock market fans the central bank’s latest prognostications during their 2 p.m. Wednesday info dump.
All in all, Wednesday trading action remains positive as we move into the final hour of trading. For the second day in a row, following Monday’s sickening coronavirus-driven crash, buyers seem to outnumber sellers. But the bullish action remains erratic for the three reasons we just cited.
So let’s take a look at each one of these market movers.
First, about that missile attack on the Saudis by the Iranian funded crazed Houthis
The Tylers of ZeroHedge were on top of this story, the news of which cut Wednesday’s opening 200 point Dow rally off at its knees. For awhile.
“Yemen’s Houthis claimed Wednesday its Shia militants targeted Saudi Aramco facilities with a missile strike in Jizan on the Red Sea in the kingdom’s south, which caused a brief surge in oil, jumping above $54 a barrel in New York, before it slipped back down to a nearly 3-month low on reports that no missiles reached their intended targets, leading to skepticism about the Houthi statement.”
As you may recall, these are the same crazed Houthis who may or may not have whacked different Saudi Aramco facilities and put them out of commission in a rocket attack last September 14. This time, fear of another attack drove oil prices up and drove the market’s opening rally back down to ~50-ish points. But then…
“An hour after the announcement briefly rattled oil markets, a Saudi oil official indicated that all missiles were intercepted by Saudi defenses — though details still remain unclear and unconfirmed, especially the timeline of when the attack allegedly happened.”
At which point the Wednesday rally resumed, driving the Dow back up again, almost to the point where the rocket attack story had driven it down. Count on the crazed Houthis to keep trying to blow stuff up all year. It’s who they are, and it’s what they do. And it’s how they earn their paychecks, sent, of course, by the Iranian mullahs.
As for the latest on the spreading virus from Wuhan story…
Cases continue to mount, as the Chinese government cordons off sectors of the country and as international airlines abandon, for now, serving a number of major Chinese airports. Not far from the People’s Republic, Thailand confirmed its first death attributable to the coronavirus. And it’s popping up in other places as well. This fast spreading virus is getting to be a serious concern.
But, according to CNBC, at least one big US company is coasting to a nice gain today, due both to a good earnings report and, ironically, the coronavirus epidemic as well.
“The coronavirus outbreak is driving up demand for some of Dow’s cleaning products that are used in household cleaning items, CEO Jim Fitterling told CNBC. Fitterling said Dow’s cleaning products are seeing increased demand due to the rapidly spreading virus. ‘We’ve seen some demand pull from coronavirus on things like cleaning materials for disinfectants, like you would use in household cleaners; non-wovens for masks and wipes and those kinds of things,’ Fitterling said. ‘And I think as you see people stay at home and use more food from the grocery store, you’re going to see a pull on packaging as well.’
I guess if you can’t head off a deadly, spreading virus, at least you can clean up after it.
The confused Fed. Again
And then there’s that confused Fed announcement earlier this afternoon. It proved mystifying, as usual, like any decent oracle coming from Washington’s Delphi. But frankly, they do have a handle on the big issue that seems to affect all parts of the economy: No inflation. No matter what anyone does to get the inflation going. But what this confused Fed does not have a handle on is how to effectively punch through this one, as CNBC implies.
“In recent months, Fed officials have expressed concern over the inability to get inflation to the 2% level. While consumers welcome low prices, the Fed worries that low expectations will continue to keep inflation and, consequently, interest rates at below-normal levels, thus providing little flexibility to cut during future downturns.
“Officials hope they can jawbone inflation higher by committing to keeping rates low until the inflation level rises. They even have indicated, through the ‘symmetric’ terminology, that they will allow inflation to run above target for a while.
“‘We wanted to underscore our commitment to 2% not being a ceiling, to inflation running symmetrically around 2% and we’re not satisfied with inflation running below 2%,’ Fed Chairman Jerome Powell said during his post-meeting news conference.”
A confused Fed is not an effective Fed. But then, our currently impeached president already knows that. Which is why he stays on their case. No wonder they want this guy out of DC.
It’s 3:40 p.m. and the bulls are beginning to cave. Again. (Like the GOP on Bolton.)
Yep. Just like Tuesday, where the last 5-10 minutes before US markets closed saw a sudden wave of big time selling emerge from the pack. And, just like Tuesday, major averages find themselves quickly losing momentum. This morning’s second wave of buying brought the Dow back close to its earlier 200 point high. This afternoon’s profit-taking (and perhaps shorting) game is doing the same thing.
The Dow is now in the plus column by less than 50 points. Momentarily stabilizing in the + 50 point neighborhood, the bears may tackle the Dow and its companion averages again in the last 10 minutes of trading.
Headline risk continues. Big Time.
But we’re done fussing with portfolios for today. It’s clear that this 2020 bull market has met some determined sellers who think it’s time to take profits and go home for awhile. And maybe they’re right. But we remain fully invested, and added slightly to those of our existing positions that weakened a bit to give us a better price.
We’ll find out in the next few minutes whether that was a good idea.
Hang in there. Now the impeachment story is getting interesting. This week is turning out to be headline risk with a vengeance. At least those crazed Houthis haven’t struck again. Yet.
(Closing update: The Dow finally closed at approximately 28735.90, although there’s still a bit of runoff. That resulted in a pathetic 12.85 point gain (0.04%). A pretty pathetic end to a 200 point rally, as once again, sellers mobbed the trading floor at the last minute. The tech heavy NASDAQ did slightly better, percentage-wise, up 0.06%. But the S&P 500 took it on the chin, losing 0.08%. What a nothingburger of a close. It matches my current thesis that this market’s current problems aren’t over quite yet.)
– Headline image: Houthis protesting Saudi airstrikes againt their ongoing rebellion against the Yemeni government.
VOA photograph, public domain.