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Tariff delays, oil glut, ECB rate cut restart the stock market roller coaster

Written By | Sep 12, 2019

WASHINGTON. Thursday morning, we awoke to news trumpeting positive US and Chinese tariff delays, an increasing oil glut and a surprise additional ECB rate cut – deeper into the negative zone. All the above combined to goose most of the tech stocks and other issues Wall Street has recently dumped. Meanwhile, sellers busied themselves once again by gutting the briefly popular “value” issues in the oil patch and banking sectors. The ones everybody had been buying over the past week. We guess tech is back. For now.

That’s kind of funny. Because Tuesday and Wednesday, we read that traders and investors were bailing out of tech stocks and growth, utilities and consumer staples shares. That caused these shares to crash in an ever-accelerating selling panic. But, as we’ve just noted, those same traders and investors headed back to those long-neglected “value stocks” and small cap issues, most of which have languished in investment hell for well over a year. Lemmings? Maybe.

It all goes to show you that indulging in hair-trigger buy-sell reflexes can be a big mistake in this volatile market. Maybe if you have expensive investment software, massive bandwidth and your very own desktop supercomputer, you (or your algorithms) can take advantage of these almost minute-to-minute switcheroos. But if you have a fairly fast home computer, like yours truly, it still isn’t fast enough to catch these rapid swings. Best thing you can do: Research deeply, choose investments well and with at least a reasonable time frame in mind. And then stay put until you cross your own threshold of fear and pain.

CNBC offered a pretty decent wrap this afternoon on exactly what chess pieces are causing today’s contradictory, yet largely positive, buying and selling on Wall Street. Let’s start with news on tariff delays and maybe a bit more.




Tariff delays

“Several market moving events unfolded between the close of U.S. stock markets on Wednesday and the open on Thursday. As a result, the Average and the S&P 500 were both on the cusp of record highs on Thursday….

Stock futures climbed Wednesday evening after President Donald Trump announced he would be delaying the planned increase of tariffs on Chinese goods by 15 days, as a “gesture of good will.” The tariffs are set to increase to 30% from 25% on about $250 billion worth of Chinese goods. Treasury Secretary Steven Mnuchin told CNBC on Thursday morning that the president “could do a deal any time” with China but won’t until “it’s a good deal.”

“‘The president delayed it because of a request from the vice premier,’ Mnuchin added. He clarified that China’s Vice Premier Liu He made the request because Oct. 1 is the 70th anniversary of the establishment of the People’s Republic of China and said raising the tariffs on that day ‘caused them grave concern on the symbolism.”

That latter nugget sounds suspicious. But then again, ass-covering is a fine art in the Never-Never-Land of international diplomacy. So we’ll let this tall tale hang in there. For now.

The oil glut and the ECB rate cut

We got news this morning about further roiling in the opaque OPEC decision-making process. Meaning that we’ll likely see no reduction any time soon in OPEC output. Which was bearish for oil prices, since the ongoing oil glut will continue And so oil issue, buoyant Wednesday, promptly tanked Thursday morning. But consumers will like the oil glut. It means lower prices at the pump. Long live the oil glut. Except if you’re a deeply indebted fracking wildcatter, that is.

More concrete, and more interesting, is this for sure surprise (again via CNBC) from the idiots running the ECB. Along with the US Federal Reserve, these two supposedly sage and hallowed institutions should star in a contemporary remake of the original movie Dumb and Dumber.

On Thursday morning the European Central Bank (ECB) announced a cut to its deposit rates by 10 basis points, to negative 0.5%. The ECB also announced a substantial bond-buying program of 20 billion euros per month, as a part of its quantitative easing (QE) initiative. The Euro initially fell to its lowest level against the dollar in nearly two weeks but later rebounded, sitting at around $1.104, as foreign exchange investors remain uneasy about whether the ECB’s policies will successfully increase inflation. Additionally, bond yields in the Euro zone dropped, with Germany’s benchmark 10-year bond yield falling to negative 0.64%.

“Investors were pleased the ECB was trying quantitative easing again, hoping the new program would give the global economy a jolt.”

How low can the next ECB rate cut go? Anyone’s guess here. But then again, that’s what socialist governments do: give away money. How else can their central banks offer negative interest rates?

Global economy: yawn

The only thing that will give the global economy a jolt is for Western governments to cut off the socialist feedbag and send illegal and non-assimilable aliens back home to their own wretched countries. But that’s another article. And one that won’t rank on Google News.



So where’s the inflation?

Ah, but wait! There’s more. Remember that iconic Wendy’s commercial, “Where’s the beef?” Well, this further news brief asks the burning question: “Where’s the inflation?”

“About an hour before U.S. stock markets opened on Thursday, the Labor Department reported that consumer prices slowed last month. The Consumer Price Index, which is used as a measure of inflation, rose only slightly in August. However, the core CPI measurement rose to 2.4% year-over-year – the highest level since 2008.

“The tame inflation was likely to keep the Federal Reserve on track to cut interest rates next week.”

Gosh, who knew? President Trump and this columnist, that’s who. (Preen, preen.)


Also read: Volfefe Index: Trump ‘covfefe’ meme spawns new market volatility measure

In any event, stocks are moderately up today. Amazon (trading symbol: AMZN) is up big time. Which is good, because we hold a few of these expensive shares. But our small stable of oils is floating down, alas. You can’t win everything.

But as of now, stock indexes are once again nearing all time highs. So one of two things is about to happen. We’ll either see new highs soon. Or our roller coaster ride will plunge us viciously downward in the usual, violent, almost totally reliable September-October market correction. Or crash. And how will those tariff delays work out?

Gentlemen and Gentlewomen: Place your bets.

— Headline image: In this vintage 2001 photo, we see the crazy corkscrew turn in the “Raptor,” one of many famous roller coasters at Ohio’s Cedar Point amusement part on the shores of Lake Erie. Paying customers love this kind of treacherous, looping ride. But not so much traders and investors who are enduring another corkscrew in recent trading action. (Image via Wikipedia entry CC 3.0 license)

 

Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17