Please hold. – T WASHINGTON. Depending on which blow-dried talking head you tune in, the current slightly negative trading action on Wall Street indicates one of three possibilities. A. We’re getting ready for a big rally. B. We’re getting ready for a big crash. C. We have no clue but we’re going to act like we’re smart anyway. But given another nothingburger of a market open on Monday, including a flat Dow Jones Industrials (DJI) and a surprisingly feisty NASDAQ, all three analyst flavors can claim support for their theories. That’s not exactly helpful for the average investor, but it is what it is.
So boring. Z-z-z-z-z.
Last week’s market action was modestly gloomy. The broad-based S&P 500 average lost 1.2% as investors weighed quarterly reports and conflicting signals from blabbermouth Fed officials. Weekend consensus was that the Fed had strongly indicated its preference for a 0.25 percent rate DEcrease. Allegedly, the nation’s astute central bankers will declare this number for sure after their July 30-31 meeting next week.
Behind a continuing flat Dow Jones Industrial Average, a feisty NASDAQ and an entropic S&P 500
How you get a flat Dow and a feisty NASDAQ? Markets reacted all last week by wallowing in a slightly negative ever-Never Land of pure indecision. That’s how we get a flat Dow, a confused S&P 500 and an occasionally feisty, tech-heavy NASDAQ day after day. Big, internationally important Dow stocks are subject to international tariff restrictions, while tech continues to make money despite (or perhaps because of) those nasty but persistent China trade issues that continue unresolved.
Investors had worked themselves into a frenzy by predicting a big, fat 0.50 percent Fed rate drop. Then they momentarily got scared they might not get any interest rate believe, because Trump vs. Powell. Then, they finally “concluded” that we’d get a compromise 0.25 percent rate drop since that number fell in the middle of the Trump vs. Powell battle formation.
We’ll believe whatever happens when it happens. Nobody really knows, anyway, except for the rich insiders who always know everything before those Deplorable small investors do.
A Reuters breakdown on last week’s closing numbers
A Reuters brokerage report (for which we can’t find a link) provides the following (unedited) color and numerical breakdown.
“Vast majority of sectors land on the dark side: Communication services and energy crater, while consumer staples end higher, but not with its earlier leap forward.
“Communication Services slump 3.1%. Netflix sinks ~16% on subscriber losses. Energy slides 2.7%. Oil prices fall on slowing demand concerns even as U.S.-Iran tensions simmer. Financials drop 1.3%. Mixed bag for sector as big banks kick off Q2 earnings season.
“Industrials sag 1.2%. Railroad operator CSX Corp falls as rivals chug along. Though truckers ride higher on JB Hunt’s robust forecast.
“Tech down 0.7%. Though International Business Machines gains 5% as cloud growth fuels profit beat and Microsoft hits record high Fri, powered by its growing cloud sales.
“Consumer Staples edge higher by 0.2%. Best sector performer Philip Morris gains 8% on beat-and-raise report, heats up tobacco stocks. Meanwhile, it’s early, but Q2 earnings estimates are behaving normally, though Fed cut anticipation may be papering over trade woes….”
Our Market Maven portfolios are also stuck in the trading mud
As for yours truly, I’ve been juggling the large portfolio here just a bit to get it balanced. Our overly large but still feisty NASDAQ holdings – mostly Amazon.com (AMZN), Microsoft (MSFT) and the equal weight tech ETF (RYT) has been keeping us in the game all year.
— Headline image:
That’s true even though repeated attempts to add successful foreign stocks to the “balanced” basket of stocks continue to fail. I’m still holding onto a fairly new position in UK / multinational telecom and communications stock Vodaphone (trading symbol: VOD), even though it’s performed doggishly for me in the past. You’re supposed to keep a certain percentage of your portfolio in foreign stocks according to most experts. But, frankly, this has proved tough as foreign stocks in general have well and truly sucked for the better part of 2019.
With a current 6 percent plus yield (paid out semi-annually, alas), VOD remains a semi-annual payout winner. If you love dividends, which I mostly do. However, capital gains in this stock have been elusive for 3+ years right now. So there are days (like today) when I still wonder why I added this one back in.
On the other hand, we did take a swell profit last month in Swiss pharma giant Roche (RHHBY) while also collecting a swell annual dividend. We tried to reinvest again a couple of weeks ago, after selling the position in June. But we’re out again, as this stock, as well as most big US and international pharmaceutical companies, got severely smacked upside the head with the latest White House and Congressional threats against pharma-distributor rebates and related matters. Too much headline risk currently, so we got back out. Maybe we’ll re-enter later, as RHHBY still looks like a great investment. Minus the headlines, of course.
Everything else in the foreign sphere has fizzled, however.
If I didn’t already mention it, I finally dumped a revised position in pharma horror story Allergan (AGN) for a nearly 40 percent gain, my biggest in quite awhile. The stock had been steadily dropping from its ~$170 late-June peak, achieved when AbbVie (ABBV) announced a cash and stock buyout offer for AGN. The value of the offer comes in at about $188 per share and I’d wanted to hold to see if I could get some money back vs. the $$ I lost by selling half of my ill-fated and overly large position about 2 months ago. But with the stock resuming its steadily sinking ways just days after the takeover offer hit the wires, I figured I’d just get the hell out for what amounted to an uncommonly nice profit anyway.
AGN shares have stabilized somewhat since my bailout. So I might get back in again.
But likely not soon.
When a stock ends up falling way short after a handsome takeover offer, that tends to indicate a good deal of skepticism as to whether the deal will get done. Or whether the US government ghouls force both companies to sell off X number of product lines before the merger to make sure the combination doesn’t prove anticompetitive in the industry.
In any event, a combo this big won’t likely settle for at least a year, so there’s plenty of time to get back into AGN for a trade. Or not. Since this deal won’t likely settle – or blow up – until some time in 2020.
Oil and refinery issues
On other fronts, I dumped one of my favorites, big US refiner Valero (VLO) for a quick profit once it began to sink rather irrationally last week. The large portfolio still holds some shares of Conoco Phillips (COP) – still slightly underwater. It also includes a modest position in Canadian oil sands giant Suncor Energy (SU).
Both stocks remain stubbornly underwater at the moment due to weak oil prices. But I’ve noticed that oil stocks tend to get goosed by market forces during the autumn semester each year. So they stay in the portfolio. For now. To benefit from that fall phenomenon, if and when it recurs in 2019.
I’ve added a few other small positions as well, but we’ll talk about them in a future column.
Market wrap for Monday afternoon: Flat Dow, feisty NASDAQ remain in place
As for now, we leave a confused Mr. Market at around 1:45 p.m. ET Monday with the DJIA up a hugely impressive (irony alert) 0.07 percent, but with the tech-heavy NASDAQ up a little more impressively by 0.71 percent. In other words, we continue with a flat Dow and a feisty NASDAQ, the latter bolstered by all our favorite tech issues.
The broad-based S&P 500 is nearly flatline but slightly in the green.
The Fed, Congressional budgeting issues, the Mad Mullahs of Iran, Brexit and political maneuvers in the UK, trade wars and other crosswinds will continue to confuse traders on the Street all week. So columns will likely prove sparse unless we spot likely market-moving news. Otherwise, stasis and entropy will be the order of the trading day.
— Headline image: This Moscow street vendor seems to be about as bored with Russia’s 20th century fake Communists
as we are with the capitalistic trading on Wall Street today. (Via Wikipedia)