WASHINGTON. After a feeble attempt – several, actually – last Friday, markets did finally try to close in the green. And the Dow Jones Industrials actually did at the 4 p.m. closing bell. Marginally. It wasn’t impressive. As a result, dejected markets tanked at the open on Monday. Popular market averages predictably remained mired in Fed wrangles and international tangles Monday as measured by fractional percentages. That is until, all of a sudden, stocks began to rally, circa 2:30 p.m. or so.
As we approach 3 p.m., the Dow is up about half a percent, the broad-based S&P 500 is up 0.25 percent. But today, as it was all last week, the tech-heavy NASDAQ is still the party-pooper. It’s off a small fractional percentage right now although it was down harder earlier in the day, courtesy of big drops in big techs. My guess is we’ll close today in the red. But, as always, I wouldn’t stake my life on it.
Tech stocks hit again
Notably, beaten up techs today include Apple (symbol: AAPL), Netflix (NFLX) and a few others. Given their heavy weighting, they can drag the Nazz down quickly. And hard. Both fell due to warnings from major brokerage house research shops. But when it comes to the volatile tech sector, frankly, nobody knows what the hell he or she is talking about. These are the easiest stocks to move, big time, up or down, even by only the hint of a rumor.
Investors in tech stocks may be worrying, however, about the worsening situation regarding the U.S.-China trade dispute. American tech companies have become way too dependent on routing not only supply chains but even the bulk of manufacture and assembly over in Chicom land. In return, the technologies of America’s tech firms have been plundered ruthlessly by China’s phalanx of industrial spies.
This is really what the Trump Administration is trying to accomplish through its ever-escalating tariffs. Businesses here that view themselves on the receiving end because their business involves too much Chinese sourcing are screaming the loudest. But what? They’ve planned so badly that they need to let China keep ripping off their advantages until they have none left?
It’s weird. But you can’t get the newspapers, virtual newspapers and fake news networks to report truthfully on this business and tech morass. Nope. It’s all Trump’s fault. (Before which, it was all Bush’s fault.) As Kurt Vonnegut was fond of writing, “So it goes.”
Fed wrangles, markets tangle over central bank’s nonsensical interest rate policy
Macro-economically, however, the bears and perma-bears are fixated this week on the Fed’s slash-and-burn interest rate policy.
CNBC had a good deal to say about this in an article published online a bit earlier in the day.
“‘Certainly, the bond market is suffering from rising inflation anxieties,’ said Jim Paulsen, chief investment strategist at The Leuthold Group, in a note to clients. ‘Investors face a significant risk that only their grandparents had to deal with—a bond market potentially demanding a larger inflation buffer.’
“‘Many believe inflation will only rise modestly in the balance of this recovery,’ Paulsen said. ‘However, even a moderate acceleration in wage and consumer price inflation toward 3.5% to 4% could produce an outsized and surprisingly aggressive response from the bond market.’”
International tangles: Turkey and Saudi Arabia
In addition to this, Wall Street worry-warts are also drawing a bead on the strange and still-developing story regarding the disappearance of that alleged Washington Post “reporter,” supposedly murdered, chopped up, and shipped off to parts unknown by functionaries inside the Saudi Embassy in Turkey. Why? That always loyal, always reliable Turkish dictatorship says so. And, after all, they showed how nice they are by releasing the American minister-hostage they’d kidnapped and unjustly held for 2 years just this past weekend.
I wouldn’t put murder and mayhem past the Saudis. They have a long history of chopping off heads, body parts, and whatever else they chop. But this may end up being another anti-Trump media concoction as well. That allegedly ground up WaPo “reporter” was really a source, not a journalist. And he is/was also a member in good standing of that upright and honest Middle East civic association known as the Muslim Brotherhood. The current Saudi leadership doesn’t have much truck with these stealthy murderers.
Whatever the case, sudden fears of worsening U.S. relations with our strange but more or less steady Middle East ally have been messing with oil prices rather unpredictably. After all, if our relations with the Saudis get a bit too sour, for whatever reason, they can still wreak havoc with world oil supplies.
Investment-wise, maybe there’s a nice domestic trade in oil here? If so, I’d gamble on a mostly-domestic E&P company, maybe one like Marathon Oil (MRO). But maybe not yet. It’s all still rumors. And in the Middle East, truth, unlike oil, is an extraordinarily elusive commodity.
At any rate, boiling things down, between the Saudi situation and the Fedtoday, now there’s an ever-bigger Wall of Worry for the investors to climb.
A fresh Wall of Worry to climb?
That should actually be good news. After all, it’s a Wall Street cliché that, when markets confront that wall of worry, they tend to climb it. Meaning that such intense worrying should ignite the next leg of the Great Trump Rally, which, in turn, might morph into that always beloved, year-end Santa Claus Rally.
Ah, but we shall see.
Even as we write this column the Dow is trying to backtrack on its early afternoon decision to rally. That average is now up a measly 0.14 percent at 3:15 p.m. ET. The S&P 500 is back in the red, and the Nazz never got out of it. So how’s that working for the bulls?
We’re simply indulging in watchful waiting this afternoon. At this point, selling a few week positions doesn’t appear to make much sense, given the markets could rally at any time.
On the other hand, buying up shares at this point blithely excludes the possibility that this wobbly market could plummet considerably lower, providing even better bargain basement shopping possibilities in the not-too-distant future.
So we’ll just hang onto our hats – and our positions – into today’s close. Maybe we’ll get better information tomorrow. But right now, it seems any trade we make, short or long, would just turn out to be a big, fat mistake.
4 p.m. ET UPDATE: Markets have closed, and all three major averages closed fractionally down. Another day wasted, another Wall of Worry to climb.
— Headline image: Federal Reserve Bank Building, Washington, D.C. U.S. Government image, public domain.