Scrooged! Trump China trade remarks nuke world stock markets
WASHINGTON – Perhaps the lousy, negative tone of US stocks Monday was trying to tell us something. And maybe that something showed up today. Reports hit world headlines that President Trump was in no hurry to ink even an interim US / China trade pact if it didn’t significantly move the needle on China’s rapacious dealings with American companies, trade secrets and goods. Traders and investors promptly cried “Scrooged!” invoking the named of Charles Dickens’ legendary skinflint. He’d probably have shorted the market yesterday. He certainly wouldn’t have supported a Santa Claus Rally. As for Wall Street, markets instantly reacted to the downside at Tuesday’s opening bell. Big time. The Dow plunged by over 400 points almost in an instant.
CNBC offers a pretty decent summary of this week’s business, political and stock market action as December 2019 gets off to a rocky start.
US stocks get Scrooged
“U.S. equities sank on Tuesday after President Donald Trump suggested he may want to delay a trade deal with China until after the 2020 presidential election.
“The Dow Jones Industrial Average fell more than 400 points in morning trading, led lower by trade-vulnerable Apple, Caterpillar and Boeing. The S&P 500 slid 1% amid losses in chip stocks like Nvidia, Micron and Advanced Micro Devices. The Nasdaq Composite lost more than 1%.
“Markets hit the lows of their day after Fox News reported that the White House still plans on moving ahead with scheduled Dec. 15 tariffs on Chinese goods notwithstanding recent efforts at a ‘phase one’ trade truce.
“‘In some ways, I like the idea of waiting until after the election for the China deal, but they want to make a deal now and we will see whether or not the deal is going to be right,’ Trump told reporters earlier on Tuesday.
“When asked if he had a deal deadline, he added: ‘I have no deadline, no … In some ways, I think it is better to wait until after the election if you want to know the truth.’”
This was clearly what Mr Market did NOT want to hear. Time to cue an entrance by Larry “Green Shoots” Kudlow to calm the trading waters.
France is in line to get Scrooged, too
But wait! There’s more! The Eurozone and France in particular remain in the President’s sights, again for ongoing unfair trade practices. Scrooged again!
“Trump also ratcheted up economic barbs with French President Emmanuel Macronfor comments he made disparaging NATO and the European country’s new digital-services tax, which was signed into law in July.
“The French tax imposes a 3% tax on revenues tech companies generate in France, including targeted advertising and digital marketplaces. In response, the White House on Monday said it could impose duties of up to 100% on $2.4 billion in imports of French champagne, cheese and other luxury goods.
“‘Look, I’m not in love with those companies — Facebook and Google and all of them, Twitter. Though I guess I do well with Twitter,’ Trump said from London. ‘But they’re our companies, they’re American companies. I want to tax those companies. They’re not going to be taxed by France.’
“‘I’m not going to let people take advantage of American companies because if anyone’s going to take advantage of the American companies it’s going to be us,’ he added. The U.S. president has joined other world leaders in the U.K.’s capital city to mark the 70th anniversary of NATO.”
And then, we still have to deal with China trade issues. Maybe in 2021?
Surprise! It’s politics that once again hammers at US and international stocks once again, this time, as it often is, involving China trade issues. All this dashes, at least for now, the bulls’ hopes for a record-shattering Santa Claus Rally 2019. It’s all a far cry from the bullish action everyone already assumed had gotten underway in November. For two days running, this market has clearly been Scrooged.
On the other hand, stocks have gotten a bit overheated lately, all things considered. Perhaps it was time to wake up the bulls and let them know they remain vulnerable to the occasional waterfall decline. At any rate, as we all should know by now, stocks can – and do – turn on a dime these days on any newsflash they love or hate. So who knows what tomorrow may bring? China trade topics likely will haunt the tape.
There’s almost no point in talking about specific stocks today. The majority of stocks in all sectors decided to tank at the same time, with only the occasional outpost of green ink blinking through the red ink haze.
US TIPS were happy, though, for some reason, boosting ETFs that deal in them. REITs seemed relatively unaffected, and a few preferred stocks even scored minor gains, along with the occasional oil stock. But as for the rest: “Abandon All Hope Ye Who Enter Here.” Yep. Most portfolios are thoroughly Scrooged.
As we write today’s article, circa 12:30 p.m. ET, markets are attempting their second or third feeble recovery move. All three major averages are off over 1 percent at the moment. And the blue chip Dow is worst off, still down some 380 points for a current loss of 1.3 percent. Obviously, the negative China trade news Scrooged the large, international companies like Apple (trading symbol: AAPL) and Alphabet (GOOGL) the worst.
McClellan Oscillator looks ominous
Monday’s closing McClellan Oscillator chart shows a steep, definitive decline. You can view the action in the chart below.
At this point, today’s massive downward move will make this chart look even worse by COB today. Even more problematically, if we look back over several months, while the NYMOT has spiked to numerous bullish highs, each successive high is lower. Which gives us a caution-signal over the immediate-term movements of the overall markets.
Maybe the chart is trying to tell us that 2020 really will be the Democrats’ Dream Year. By essentially encouraging a recession with their impeachment obsession vs. passing dramatically useful trade legislation like USMCA, they’re robbing the economy of juice, just like Obama did for the better part of 8 years. Is the American economy the next thing to get Scrooged by the Dems?
VIX spike = bad news for bulls, good news for Bad News Bears
Even worse, the VIX volatility index awakened from its recent slumber, spiking up rapidly and nicking the 18 mark before settling back to 16. Both numbers are pretty high in the context of this fall. But again, we’ll likely see an ominously higher number today. Which means that, all of a sudden, we may not be able to sleep soundly over the next few weeks. Instead, we’ll worry about our insta-damaged portfolios. High VIX volatility means high uncertainty, usually a negative.
Ah well… These days, and weeks, tend to happen when things are looking the rosiest. It’s Mr Market’s way of steering us away from the path of fatal self-regard and hubris. Maybe tomorrow will be a better day. But as for now, it’s probably time to take some money off the table until we see some signs of Santa Claus again. Or at least one of his energetic elves. Or President Xi bearing China trade gifts.
In the meantime, consider us Scrooged!
– Headline image: Screen capture of a scene fromScrooge. This 1951 British film is an adaptation of Charles Dickens’ A Christmas Carol (1843). Produced and directed by Brian Desmond Hurst, with a screenplay by Noel Langley, the film stars Alastair Sim as Ebenezer Scrooge. The Brits later released it in the US as A Christmas Carol. (Capsule info via Wikipedia. Fair use of image to illustrate a financial story.)