Home Depot sales miss, interest rate spike worry Wall Street after recent rally
WASHINGTON: This column has been MIA for a few days as the columnist has been busy working on a few longish, in-depth articles that take some time to research and complete. That said, the last few days have been fun for the bullish at heart. Stocks and even bonds have been surging once again. But perhaps they’ve surged a bit too far. Slightly off-kilter Home Depot (symbol: HD) sales numbers smacked the averages at Tuesday morning’s opening bell.
Perhaps even worse, the U.S. 10-year note yield currently sits at 3.065 percent. That’s a number that bulls just don’t want to see.
Home Depot and more
The predictable result after several days of rallying? Mr. Market is taking back some of investors’ profits today. No thanks to Home Depot, the Dow, off some 200 points earlier Tuesday, remains in negative territory. At the noon hour Tuesday, it’s perched at 24695.46, now down 203.95 a loss of 0.82 percent.
The broader-based S&P 500 stands at 2708.29, down 21.55 thus far, for an equally unappetizing loss of 0.8 percent.
Worst of all, the tech-heavy NASDAQ is down 70.13 points, a loss of nearly a full percentage point.
It all looks a bit more like short-term profit taking after the recent mini-rally. The Home Depot earnings miss and the interest rate jump were only catalysts, and Home Depot still earned swell profits this quarter. But these days, you can never tell what will spook nervous investors next. If Home Depot continues to sink, it could become a serious buy candidate again.
Just beneath the surface, the market is trying to climb a wall of worry that involves the usual geopolitical headline risk factors, including Monday’s formal move of the U.S. Embassy in Israel to that country’s official capital city, Jerusalem.
Israel, Iran and other headline driven market scaremongering
Meanwhile, associated saber-rattling by Iran and their hapless, Hamas-led numskull clients in Gaza provoked the Israeli armed forces, leading a phalanx of (perhaps unwilling) human shields in an attack on Israel’s southern border, purposely sacrificing nearly 60 lives to steal the day’s headlines.
The Palestinian Arabs have been pulling this crap for half my lifetime. Until and unless they cut out the nonsense and agree that Israel has a right to exist (something they’ve never been willing to do), this kind of senseless, self-induced slaughter of their own civilians does nothing to help that wretched populace. But the Hamas-Iran Axis of Evil accomplished their objective, grabbing liberal headlines around the world, inducing the willing media to focus on the “Israeli slaughter” of (perhaps) unarmed Palestinian Arabs and diverting attention from the U.S. Embassy opening.
Great job, guys. So what did it accomplish for your people? How are they better off after 50 years of your “leadership’s” consistent stupidity?
Stuff like this, misreported by the media (which collectively blames everything on the Israelis), along with the up-and-down “trade war” with China (which has apparently eased somewhat – for now), can combine to gang tackle markets with fear and loathing, and so it is today, at least thus far.
“Sell in May?” Maybe
We continue to hold a few too many stocks at the beginning of the legendary, annual “Sell in May” kickoff and still wonder how many of the otherwise perfectly fine stocks we hold that we should sell.
The interest rate jump today has slightly damaged our holdings in the financial area, namely Bank of America (BAC) and JP Morgan Chase (JPM). But we’re still considerably ahead and see no reason to sell. Most of our preferred stocks are holding up surprisingly well today, so no dumping there, either.
On the other hand, we took a nasty hit today on UK telecom giant Vodaphone (VOD), which has suddenly lost nearly 5 percent in less than two days, after humming along and reporting excellent quarterly earnings. Perhaps investors were spooked when the company reported that it’s successful current CEO is on the way out.
Seeking Alpha offers these news bullets.
- Vodafone (NASDAQ:VOD) -3% premarket after CEO Vittorio Colao said he’ll step down in October after 10 years of major dealmaking and reshaping the company into a digital communications powerhouse.
- Nick Read, finance director since 2014, will replace him.
We worry more when a CFO (Corporate Financial Officer) suddenly exits a company, as that’s nearly always a signal there’s serious trouble with the books. Given that Vittorio Colao is leaving at a high-water earnings mark, however, means that he’s passing a healthy company off to Nick Read, who, not coincidentally, IS the company’s finance director.
That said, VOD ADRs (American Depository Receipts, the moral equivalent of the company’s UK shares for U.S. investors) are currently in smackdown mode, off $1.31 per ADR at the moment for a 1-day loss approaching 5 percent.
Well, the heck with it. We’re holding. No point in missing the upcoming ex-dividend date. VOD’s annual yield (semi-annual dividend payment) currently sits at approximately 6.24 percent. The shares should go ex-dividend on or around June 8. We’re holding, and may actually buy on this absurdly emotional dip. This one is a long-term hold and one of few international holdings in our largely Yank-oriented portfolio.
Should we “collude” with Chinese corporate giants?
Violating our “sell in May” inclination, we bought shares in Chinese tech and retail giants Baidu (BIDU) and Alibaba (BABA). “Trade War” and volatility aside, these large and (we suspect) Chinese government-protected companies should break earnings records this year no matter what happens short of war. So we’ll take a small chance on getting outsized gains from both, given this year’s anemic U.S. stock returns.
Nevertheless, we continue our focus on cutting down to a mostly ETF portfolio. We’ll discuss some of those positions in a future column. Just too much volatility (and risk) right now in this market to start getting clever. That’s particularly true when banks, governments and George Soros make markets uncomfortable for small investors.