WASHINGTON. After plummeting for 3 to 4 percent losses on Wednesday, Thursday markets paused at this morning’s opening bell. Then this shell-shocked stock market promptly resumed its steep dive. The Dow Jones Industrial Average went off the cliff once again, hurtling another 300 points to the downside. The S&P 500 followed suit. You could see the Grim Reaper striding purposefully on the horizon.
But almost miraculously, a legion of bloodied tech stocks, as reflected in the tech-heavy NASDAQ, is trying to rally. It’s currently 46+ points in the green, and currently stands at 74.65 or thereabouts, for a gain of 0.60 percent as of about 12:30 p.m. ET. The other averages are currently trying to follow suit. Will we get a “Turnaround Thursday,” the kind of one-day 180-degree turn that sometimes marks the bottom of a serious downdraft? Or will we endure another shellacking by that increasingly skeptical Mr. Market?
UPDATE: As of 2:45 p.m. ET, we appear to be getting at least an interim answer to our rhetorical question above. The Dow is trying on an instant replay of Wednesday’s late-day swan dive, plunging nearly 700 points at the moment, for a 2.55 percent loss. The tech-heavy NASDAQ, which tried to rally earlier, is now plunging, down over 96 points for a 1.25 percent loss thus far. The broad-based S&P 500 is throwing in the towel, at least at the moment. It’s off 58 points for a 2 percent loss. The way things are going now, we may have to wait until Monday for something resembling a snapback move, or at least our long-awaited dead-cat bounce. As for today’s closing numbers… well, you never know.
Predicting where this shell-shocked stock market will go next
We won’t waste our time predicting a renewed rally – yet – in this wildly whipsawing market environment. 200-day moving averages in various indexes, averages, and in many individual stocks were violated on the downside big time Wednesday. Much of that damage looked serious. In a staggering, shell-shocked stock market like this one, most shell-shocked investors won’t buy this nasty dip. Because it was actually a pretty big dip. And everyone is now alert and nervous.
On the flip side of pessimism, some relatively soothing financial news oozed out of The Swamp this morning. That may be helping things at least a bit today.
For example, West Texas Intermediate (WTI) crude oil prices are pulling back a bit, as inventories are up today.
Meanwhile, after nearly getting out of control Wednesday, rampaging interest rates on the widely followed 10-year Treasurys dropped six cents Thursday morning, a welcome reversal for panicking stock investors. This short-term drop may have been at least partially influenced by a usually taciturn President Trump. He got all over the Fed this morning for what he regarded as the central bank’s relentless, aggressive and arguably unnecessary rate-hike fever.
So where’s the hyperinflation?
As if in sympathy with the President, the government reported a low September inflation rate. That number “unexpectedly” came in a bit below the 0.2 percent rate analysts anticipated. It’s doubtful that this bit of good news will kill the Fed’s interest rate-hiking ardor. But it is decent news, at least according to a Reuters report appearing via CNBC. (Even though the Fed will likely ignore it.)
“U.S. consumer prices rose less than expected in September, held back by a slower increase in the cost of rent and falling energy prices, as underlying inflation pressures appeared to cool slightly.
“The modest price increases come despite a U.S. labor market that looks robust by most measures. A separate report on Thursday showed an unexpected but moderate rise in the number of Americans filing for unemployment benefits last week.
“With the readings only slightly below what analysts expected, the inflation report is not likely to impact expectations the Federal Reserve will raise interest rates at its December policy meeting.
“Overall, these data support our baseline view of a gradual pickup in inflationary pressures,” Oxford Economics said in a note to clients.
“The Consumer Price Index increased 0.1 percent last month after rising 0.2 percent in August, the Labor Department said. In the 12 months through September, the CPI increased 2.3 percent, slowing from August’s 2.7 percent advance.
“Excluding the volatile food and energy components, the CPI edged up 0.1 percent for the second straight month. The so-called core index had increased 0.2 percent in May, June and July.”
Inquiring minds want to know why stocks got hit so bad
The normally gloomy folks at ZeroHedge report a bit of optimism at Goldman Sachs as well.
“Despite much talk on desks of CTAs and volatility funds running for the hills, Goldman’s Charles Himmelberg and the Economics Research team is not buying it…
“‘We see little evidence that the recent rates selloff is due to the usual suspects such as risk parity delevering, overseas cash sellers, or mortgage hedgers. Rather the move appears partly based on fundamentals and supply increases, and partly on technicals, but we don’t see additional factors that would steepen the yield curve further in the near term.’”
(Italics and bold via ZeroHedge.)
Deep or shallow, market corrections can argue for “watchful waiting.” Like cancer.
If you’re unfortunate enough to get diagnosed as having certain low-grade cancers these days, the advice from many physicians is simply “watchful waiting.” In other words, you’re not supposed to do anything in particular about what you know is lurking inside, since the cancer doesn’t appear aggressive. Yet. So just stay alert and don’t worry. Right.
Well, seems that many investment advisors are dishing out the same type of advice to nervous shareholders these days. Granted, they’re right to an extent. Panicking and performing instant, radical surgery on portfolios by selling all our holdings while they’re down would usually be the wrong way to approach this steaming, semi-corrective shell-shocked market environment. That’s because, like that lurking cancer, things could still go either way. So yes, let’s be watchful, shall we?
But we should also remember. During this time of year, with early tax-loss selling vying for primacy place over that always-possible Santa Claus year-end rally, where Mr. Market goes next is still anyone’s guess? That holds true no matter how smart anyone thinks he or she happens to be.
As for me, I’m holding for now, having trimmed off little bits of unmitigated disasters while averaging down on tiny little buys of commission-free ETFs. But nothing big right now. At least not yet. The Fed, the upcoming November elections, and the deteriorating trade situation with an aggressive and obstinate China still provide a worrisome backdrop for current markets and market trends.
— Headline image: The Grim Reaper approaches. Royalty-free image via Pixabay.com. Adapted by the author.