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Wall Street Hell Week: DC Swamp, Fed, machines smash stocks again

Written By | Dec 20, 2018

WASHINGTON.  For starters, let’s adapt that old 1970s Top 40 radio pitch to describe this beyond-miserable Wall Street week: “And the hits just keep on comin’!” And it’s nothing but “hits” that any remaining traders and investors left felt Wednesday as their fast-dwindling stock portfolios suffered yet another brutal beating. Yes, it’s another Wall Street Hell Week. Thursday’s closing numbers merely added to the ongoing carnage.

The heck with Christmas spirit. Screw middle America’s dads, moms and kiddies. By the time the actual holiday rolls in next week, there will be little if anything to celebrate. There won’t be any money left to celebrate it with. At least that’s what the Fed’s Open Market Committee (FOMC) essentially told us Wednesday afternoon – when the Dow was still up well over 300 points.

After the Fed’s clueless 2 p.m. prognostications Wednesday, the markets quivered for a bit. Then they took a 600+ point nose dive, recovering somewhat before the close. But not enough to give investors any confidence at all. Except maybe for the perma-bears and shorts. They’ve been laughing a hearty “Ho-ho-ho!” ever since we left Labor Day behind. Just another day of Wall Street Hell Week. With more to come.

More gloom and doom as Wall Street Hell Week continues apace

In a publicly available market report via the reliable service we subscribe to, contributor Tom Bowley had a lot to say Wednesday evening about the latest edition of Wall Street Hell Week festivities. We quote him here at some length.

“This was a Fed day that could have lasting damaging effects. Fed Chair Jerome Powell and his band of cronies decided to ignore the one piece of data that’s probably the best leading indicator – the U.S. stock market.  The stock market has been telling everyone, except apparently the Fed, that economic growth is slowing.

“Despite these signals, the Fed announced its course of higher interest rates will continue. They hiked the fed funds rate another 25 basis points yesterday, which most traders expected. However, their language regarding 2019 really didn’t change that much, moving from the potential of three rate hikes to two. That hawkish tone came at a time  (2pm EST) when the Dow Jones was trading at 24050.  Major intermediate-term price support was roughly 23500, established at its March low.

“In one hour, the Dow Jones fell nearly 900 points. 900 POINTS!!!!  Hello, Fed…..anybody home???  Price action tells us a story and yesterday’s was a horror story.

Thursday’s Wall Street Hell Week box scores
  • Dow Jones Industrials: Closed at 22859.60. Loss of 464.06 points, a 2 percent decline on the day.
  • S&P 500: Closed at 2467.42. Loss of 108.42 points, a 1.63 percent decline on the day.
  • NASDAQ: Closed at 6528.41 for a loss of 39.4 points Thursday, a 1.58 percent decline.

And remember, these are just daily numbers.

More Bowley Hell Week stuff

“Let’s look at the sectors hurt the most yesterday [Wednesday]:

  • Communication services (XLC):  -2.14%
  • Consumer discretionary (XLY):  -1.98%
  • Technology (XLK):  -1.98%
  • Industrials (XLI):  -1.89%

“At first glance, you might think that’s not so bad.  But consider that at 2pm EST, the consumer discretionary group was at 102.33, which was higher by approximately 1.8% on the session.  After the Fed’s incredulous [sic] remarks, the XLY hit 97.97 by 3pm EST. That’s more than 4% in one hour. And let’s not forget that stocks were already under considerable selling pressure in December. It simply got worse.”

(Italics above by this columnist.)

Nothing to quarrel with there, though the tech sector was much worse today and on higher volume. But Bowley had a chilling postscript to his remarks, citing the bellwether Dow Jones Transportation Index (the “transports”) as the canary in the investing coal mine.

“The character of the economically-sensitive transports’ chart clearly has changed in Q4. We were humming along until September (as was just about every area of the U.S. stock market). Since then, U.S. stocks have begun to price in considerable slowing of our economy in 2019. Is it a likely recession?  It’s way too early to make that call, but it’s fairly obvious that transports are seeing a weakening ahead. Why can’t the Fed see it?  Two more rate hikes? Traders have been placing their bets on economic weakness ahead and the Fed essentially is guaranteeing it with their policy.”

Washington’s Royal Smart People are actually kind of dumb

Why can’t the Fed see this? Easy. Because they’re not really looking and they don’t really care. America’s fat cats – many of whom helped cause the Great Recession and none of whom ever did a perp walk because of it – got their ill-earned gains back five to seven years ago, courtesy of the Obama Fed’s easy money policy. It doesn’t take a Commie to see that once the fat cats have got their (un) fair share of the pie, the hell with the middle class. Having regained access to credit at last after a roughly 10-year hiatus, it finally dawned on the the middle-class this year that the Fed has chosen to remove the big fiscal punch bowl just as their families were finally recovering. Too bad Deplorables!

Add Fed policy to the never-ending Deep State-based #Resistance against the legitimately and constitutionally elected Republican President, Donald J. Trump. Add the cynical machinations of foreign “allies” and enemies of the US alike. Then mix in the negative headline-driven attack of Wall Street’s newly resurrected high-speed, high-frequency traders and their pet supercomputing machines. Voila! What you get a financial disaster in the making.

That’s what we’ve all been seeing for months now. (Except for the Fed.) But sadly for all, it seems to be coming to a climax just in time to ruin the holiday cheer of anyone invested in the market. Maybe there won’t be a Holly Jolly Christmas at all. Maybe we’ll have just another Wall Street Hell Week instead.

“Warning! Danger, Will Robinson!”

But wait! There’s even more, say both CNBC and Peter Boockvar.

“Also weighing on sentiment Thursday, the Trump administration and more than a dozen international allies condemned Beijing for what the coalition views as continued efforts by the Chinese to steal other countries’ trade secrets.

“The mass reprimand against China’s actions represents a growing view that the Asian nation is defying international norms of fair economic practice. The U.S. and China are in the middle of a bitter trade dispute, with both nations slapping tariffs on billions of dollars worth of each other’s imported goods.

“The market’s has more to do with tax loss selling and forced redemptions, said Peter Boockvar, chief investment officer at Bleakley Advisory Group. Boockvar added that the shutdown is not a factor and that the S&P broke through February’s lows.

“It’s in ‘no man’s land,’ he said.

CNBC’s much-maligned but often correct Jim Cramer has some more pointed comments on the market’s current lunar landscape. Check out the video below.

Cramer’s top take-home remark, re: the Fed’s current direction: “If you’re not rich, it’s not so great.” Like we said. It’s that kind of disconnect that’s giving us our current edition of Wall Street Hell Week.

Let’s wrap this gloomy edition of our column with another vintage quote. This one is well-known and well-beloved by fans of the campy 1960s vintage “Batman” TV mini-serials. Teasing the second of a two-episode story, “Batman’s” announcer always warned us:

“The worst is yet to come!”

— Headline image: The bears are having fun on Wall Street again, just like they did in this 1907 cartoon.
(Via Wikipedia entry on Bear Market)

Terry Ponick

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 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