Things you need to know.
– Stocks appear to be a bit tired.
– Earnings misses are overshadowing earnings beats.
– TECH is clearly in focus and will remain the ‘soup du jour.’
– Oil, gold and bonds churn.
– Try the Country Style Chicken Parts.
Ok – so here we go again…..Stocks struggled to take back some of the losses that we have seen over the past couple of weeks….the Dow lost 57 pts, the S&P down 9, the Nasdaq lost 10, the Russell gained 22, the Transports lost 245 while the equal weighted S&P gave up 25 pts.
This even after we got a new bunch of earnings that beat the estimates – think GM, GE, DHR, KMB, PHM, KO, PM, SHW, LMT, HCA and the list goes on and on…..so while we had more companies beating the estimates we had UPS that failed to meet the expectations…..talked about the cost of labor (due to a new labor contract negotiated with the union) and how demand has been uneven…they missed on both the top and bottom lines…..and that’s all investors/traders and algo’s needed to hear…and boom – the bottom fell out….the stock ended the day down 12% or $17.50/sh….. To which I would say – what were they thinking?
You see – the pencil pushers at UPS knew damn well that they were not going to meet (or come close) to the street’s estimates – This wasn’t a surprise to them….but what they failed to do was pre-announce, hint at lower numbers, basically guide street analysts lower weeks ago….….but they chose not to…and so this is what happens…Leaving me to ask – How management could allow analysts estimates to be that off? And why? Because then they get punished and punished hard all while investors get dinged. You see, if they chose to pre-announce a week ago (like many companies do) – they would have blunted the blow…. Yes, the stock would have traded off, but my experience shows that it would not have gotten smashed the way it did, and why? Because they sent out a warning flag, they would have prepared the street for lower numbers, so that investors would not be blindsided… what they did yesterday was foolish…UPS is an economic indicator….it speaks to broader economic activity……..think shipping volumes, business clients, consumer behavior, global reach & supply chain insights – all of which speak to the broader economy…. Adjusted EPS came in at $1.79 vs. consensus of $1.99 – that’s a 10% miss…. but they tried to pacify investors by announcing a new $1 bill share buyback program! How’d that work out? In any event – just so you know….yesterday’s move left a big gap in the chart….$15 pt gap….plunging thru the long term trendline at $139….so it is going to have to work hard to regain credibility…after moves like this – you (as an investor) need to let it trade for 2 or 3 days before it settles down….and before you make any new moves…
And then after the bell we got both TSLA and GOOG – and they were the start of what is expected to be a big test for the markets and investors. The whole group is facing tougher comparisons….profits for the group are expected to rise by 29% y/y…and while strong, it is down from earlier comparisons….so everyone is on the edge of their seats to see how it all flushes out….but here’s the thing….We know this…this is not new information – the market has priced this in….and so the weakness we have seen leading up to this day is not a bad thing – because if investors/traders rallied them into earnings, then any disappointment would cause a ‘meltdown’ among the same people that took them up…
After the bell – TSLA reported EPS of 52 cts/sh vs. consensus of 60 cts/sh…and so they took it down 8% in the afterhours session and this morning it is quoted at $227/$227.5 down $20….but don’t forget – they have taken the stock up 37% into earnings….so this is no surprise.
GOOG reported $1.89 vs. $1.84 – a beat…but traders took that down 3% in the afterhours…. this morning it is quoted at $177/$177.50 – down $6. The issue here? YouTube weakness and delays in AI investments to pay off…..investors also have taken this stock up 26% before they gave back 6% last week….so today’s reaction is still to be determined and while it is quoted a bit lower in the pre-mkt – my sense is that it will turn around.
We are going to get another batch of earnings……. this morning…already 5 companies reported and 4 beat the estimates…. after the bell, we will get IBM (one of my favorites) F, WHR and CMG.
Eco data today is all about services and manufacturing PMI’s…. both expected to be in expansionary territory. New Home Sales at 10 am – are expected to be up 3.4% m/m.
Oil is trading at $77.70 and remains above the long term trendline at $76.71. A failure to hold that level would see oil trade down to the low 70’s.
Gold is holding tight at $2460….and remains above all 3 trendlines. We are in the $2430/$2500 trading range.
Bonds continue to do nothing… the 2 yr. is yielding 4.42% while the 10 yr. is yielding 4.23%.
The VIX is up 70 cts at $15.45 – well above the trendline at 14.10 but below last week’s high of 17.20…. the elevated VIX suggests weakness in the markets and….
US futures are down…. Dow futures -181, S&P’s -44, Nasdaq -225 and the Russell is -8. Note the weakness in the Nasdaq….as we prepare for the onslaught of tech earnings….
The S&P closed at 5555 – and the weakness this morning suggests that we are going to test 5500…… Remember – I said I think we need to test trendline support at 5420 in the short-term….…… and then we enter the seasonally weak time of year….so prepare yourself for more volatility ahead….
From an investment perspective – continue to focus on the long game…. take advantage of any chaos created by an overreaction to earnings. Remember – having a plan and staying focused is key for a long-term investor… Give me a call to discuss.
Take good care.
kpolcari@slatestone.com
Sources: Bloomberg, CNBC, Reuters, Wall Street Journal
Disclosure: The content provided in this material is designed for educational and informational purposes only, and it is important to note that it does not constitute personalized recommendations. This commentary is not nor is it intended to be relied upon as authoritative or taken in substitution for the exercise of judgment. The comments noted herein should not be construed as an offer to sell or the solicitation of an offer to buy or sell any financial product, or an official statement or endorsement of Kenny Polcari or SlateStone Wealth.
The market commentary is the opinion of the author and is based on decades of industry and market experience; however, no guarantee is made or implied with respect to these opinions, which may not necessarily align with our firm’s standpoint.
While considerable effort has been invested to ensure the accuracy and dependability of the information presented, we must clarify that we cannot guarantee the accuracy of third-party information. Our usual sources for third-party data include channels such as Bloomberg.
Kenny Polcari is the Chief Market Strategist for SlateStone Wealth. Neither Kenny nor the partners of SlateStone Wealth are compensated in any manner by the issuers of any securities mentioned in the publication.
Country Style Roasted Chicken
For Chicken lovers – this is a simple and easy dish… takes no time to prepare – yet gives you a hearty and wholesome meal. For this you need:
3 lg. potatoes – sliced in half and then half again- lengthwise, Chicken pieces, legs, thighs, s&p, like 5 crush garlic cloves, dried oregano, fresh chopped Italian parsley, dry white wine (you can use chicken broth if you prefer), olive oil.
Preheat oven to 425 degrees.
Combine – the garlic, oregano, parsley and white wine (or broth) in a small bowl – set aside.
Season the chicken pieces with s&p… toss in a bit of olive oil (just enough to give it a glisten). Do the same with the potatoes. Now add the chicken to the roasting pan – skin side down. Toss in the potatoes and arrange nicely. Bake for 20 mins… then turn, bake for 20 more mins… juices should be running clear now… if not – then cook for another 10 mins or so… Now pour the garlic/wine mix over the chicken and cook for an add’l 15 mins. The pieces should be browning up nicely. Turn to make sure both sides brown. You can always finish off by broiling – just make sure that you don’t burn the chicken or potatoes.
Remove and serve on a family style platter with a large mixed salad dressed in a simple oil/vinegar dressing.
Buon Appetito.
