Things you need to know.
– My internet was out until now! (Thus the tardiness)
– Stocks got whacked, the 10 yr kisses 5%
– JJ to give a speech today…what will he say?
– Geo-political issues enveloping the world now…XiXi, Vlad and Chubby all in bed together
– Arab States call for an oil embargo on Israel
– Try the Dark and Stormy
Well, today is October 19th….and it was 36 years ago today that the global markets crashed – the US losing 22.5% of its value in 6 ½ hrs.…..for those of us that were there and remember it – It never really goes away, it just sits in the deep memory part of our brains….as an event that on the one hand shocked us, while on the other hand woke us up to the reality of investment risk and the reality of what the future of technology could look like…because – let’s not sugar coat this….it was technology that went berserk, It was the ‘portfolio insurance’ product – designed by people that had ZERO financial/trading experience – they were academics, they were quants, they were computer nerds – not one of them was a financial analyst, an economist, a strategist, a trader, or an investment banker…..it was the algo’s that could not process the damage but it was also the human beings that chose to do nothing, and allow the algo’s to run roughshod over the markets – there were no circuit breakers, there were no fire alarm switches as the meltdown took hold. – Global market crashed, – the US was the last market center to get hit by the tidal wave of selling that day, that event destroyed $1.7 trillion dollars of worldwide wealth…. And so, it was (and is….)
Stocks got whacked yesterday…. The Dow lost 335 pts or 1%, the S&P lost 59 pts or 1.4%, the Nasdaq down 220 pts or 1.6%, the Russell lost 38 pts or 2.1% and the Transports were down a whopping 520 pts or 3.4%.
Long term treasury yields surged to a 16 yr. high……the 10 yr. yield closed at 4.9% after testing as high as 4.98%, the 30 yr. ended the day 5.01% and this (along with the intensifying geo-political news) is what caused stocks to convulse. The swift move in bond yields is causing, and rightly so, investors to rethink valuations, while a mixed bag of earnings reports is causing confusion, and the geo-political issues continue to disrupt the balance of power in the Mid-east, in Europe and now in Asia. (Xi Xi, Vlad and Chubby – Kim Jong Un are all in bed together). Energy markets are front and center as well – as the Arab states call for an oil embargo on Israel….as the fighting heats up in the Mid-east. Oil surged to $90 a barrel before settling in at $88.25.
Conflicting reports throughout the day on who struck a hospital in Gaza created accusations on both sides as Hamas and the Arab states pinned the blame on Israel, while the Israeli’s and the Americans seem to have proof that it was not….in fact, the facts appear to suggest that it was Hamas themselves that sent the rocket into the Gazan hospital that killed hundreds. Yet – the Squad (here in DC) was quick to call out the US – an issue that needs to be addressed sooner rather than later by someone in authority in the Democratic party…… But that’s another story.
Comments by different members of the Fed seem to suggest what we all know now…the FED is going to pause again in November and possibly again in December as the bond market is doing a lot of the work -as rates surge…. leaving the FED in a position to sit back and wait. Fed fund futures are now pointing to the fact that traders expect the FED to RAISE rates in January of 2024.
Gold spiked to $1975/oz – in the ultimate safety play as the conflict intensifies. This morning it is trading at $1966 and is now in the $1957/$1985 range…. defined by both intermediate support and resistance. Further unrest across the globe will see gold move higher and my sense is that we could see it test $2000.
This morning stocks are quiet…. the market has opened, the conflict in the middle east has not gotten worse and so investors/traders and algo’s are trying to settle down. At 10 am the Dow is down 2, S&P’s up 2, the Nasdaq is up 25, the Russell is off 6 and the Transports are up 105. Fed chair JJ Powell is due to give a speech later today giving us his latest outlook. Treasury yields have backed off just a bit, but don’t expect them to fall very far…. The fact is – rates are getting higher and the sooner everyone understands the sooner the revaluation takes place. Because it will take place.
Eco data this morning revealed that Initial Jobless Claims fell by 12k (198K) jobs and Continuing Claims rose by 34k jobs (1.734 mil) …. the Philly Fed Business Outlook fell by 9 pts – more than the expected decline of 7 pts and Existing Home Sales fell by 2% – which was better than the 3.7% estimate. Leading Economic Indexes fell by 0.7%.
Stocks in Europe are lower – It is the same issues affecting the mood in Europe – Geo-political, earnings and economic data. Eurozone inflation came in at 4.3% down from the August read of 5.7% all while UK inflation came in hotter than expected at 6.7%. At 10 am – all markets in the zone are down about 0.5%.
The S&P closed at 4315 down 59 pts….and is now solidly in the 4200/4400 trading range…. My sense is that we will and almost have to test the lower limit to make sure the buyers are willing to defend it. If it fails – then a swift move to the 4100/4125 range would not be out of the question.
I am in NYC for the Headstrong Project Annual Gala – tonight. You can find more information here about the work we do to save our veterans that suffer from PTS. Our goal this year is $3 million. Won’t you consider helping us?
Take good care.
kpolcari@slatestone.com
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
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Dark and Stormy –
Considering what is happening in the world – try the Dark & Stormy….
For this you need: Dark Rum, Ginger Beer, bitters, and a lime slice.
In a tall glass – filled with ice – add the rum and then top with the ginger beer, bitters and garnish the glass with the lime wedge.
Enjoy!
Buon Appetito
