Whodunnit?

Whodunnit?  In a volatile day of trade, stocks swung wildly closing down on the session despite news which was somewhat positive leaving traders wondering what had caused the selling.  First the positives. CPI price data showed numbers that suggested inflation is under control, crude oil halted its fall (at least temporarily), and it looks as if UK Prime Minister Theresa May is getting close to a Brexit deal.  Now the negatives. AAPL continued its fall closing solidly below its 200 day moving average and a key Fibonacci line at 188.45 putting it in bear market territory (see the attached chart for AAPL).  The stock, having de-trended with negative momentum is now risk off.  You may have heard or read the line: “so goes Apple, so goes the market”.  The meaning of that is as follows:  Apple comprises the largest weight in the S&P500 at 3.8%, the largest weight on the NASDAQ 100 at 11.82%, and the fifth largest weight in the Dow Jones Industrial Average at 5.15%.  Apple also serves as a technology sentiment bellwether dragging technology stocks up and down with it.  Finally, Apple sits on top of an ecosystem of suppliers, all of which are also highly correlated to the stock’s movement.  Got it?  Now on to PG&E, which is California’s public utility.  The deadly wildfire gripping northern California has been linked to faulty PG&E equipment making them possibly liable for the death and destruction that continues to play out.  The company was clear that if that were the case it would be hard pressed to stay solvent.  The stock fell -21.78% in yesterday’s session pulling the Utilities sector down with it.  Finally, Goldman Sachs continued its slide yesterday putting pressure on an already weakened financial sector.  While we are on the financial sector, Maxine Waters, the Democratic Congresswoman from California who is about to become the chairperson of the powerful House Banking committee, stated very clearly during testimony that she would be taking the banks on and holding them accountable.  That means possible regulation and earnings drag.  I can go on about Fed Vice Chair Randal Quarles’ testimony in which he spoke of a strong economy which he expected to keep growing implying a continuation of rate hikes, but that is old news already.  The markets sold off yesterday because there was more bad news than good and investors remain on edge over trade and growing interest rates.  Equity indices are in weak positions with the S&P500, the NASDAQ 100, and the Russell 2000 in risk off territory.  The Dow Jones Industrial Average remains constructive having managed to close right on its 200 day moving average.  Bonds rallied yesterday in response to the equity pullback.  Ten year yields ended the session at 3.12% and the 2/10 curve ended the day around 25 basis points.

Today, we get earnings from retailers Walmart and JC Penney before the bell.  We will also receive the retail sales number which is expected to show a growth of +0.5% versus last months -0.1% decline.  Also on this morning’s schedule, we are due to get Empire Manufacturing and Philadelphia Fed business outlook.  The reports detail the health of the New York and Philadelphia regions and are expected to both come in at 20.0, both down from their prior periods.  These reports also contain written reports providing the details behind the numbers and are carefully scrutinized by analysts and economists.  Fed Chair Jerome Powell spoke after the market’s close yesterday and he highlighted the strength of the economy and his expectation that it will continue to grow.  This will be interpreted by the markets as a continuation on rate hikes.  He also announced that starting in 2019, all FOMC meetings will feature a press release making all meetings “live”.  That means they could change rate policy at all meetings, which really means more to watch and worry about.

AAPL extended cheatsheet

daily chartbook 2018-11-15