Stock market has lost all its gains for 2018

[TitanTiger 20,510]

 

Quote

New York (CNN Business) — The gloom-and-doom on Wall Street has wiped out the stock market's gains for the year.

The Dow dropped as many as 596 points, or 2.4%, on Tuesday. Plunging retailers like Target (TGT) and Kohl's (KSS) led the S&P 500 1.7% lower. 

Tech stocks once again got hit hard, with the Nasdaq sinking 2%. Apple retreated another 4% after Goldman Sachs dimmed its price target on the iPhone maker for the second time in a week. 

All three major indexes are now slightly lower for the year. The Dow is around 2,400 points off its peak.

"The highways will be crowded this evening as the Thanksgiving rush will begin in earnest, but this morning investors are rushing for the exits," Paul Hickey, co-founder of Bespoke Investment Group, wrote to clients on Tuesday.

The Dow lost nearly 400 points on Monday as well. This week's selloff marks a continuation of a glum two months on Wall Street. The S&P 500 dipped back into a correction, marking a 10% retreat from the index's record closing high on September 21. 

The losses have been sparked by a flurry of concerns about everything from higher interest rates and crashing oil prices to the US-China trade war. But the overarching theme is that investors are bracing for the end of the fantastic economic and profit growth that marked the past year. Analysts expect a deceleration in 2019 driven by tariffs, the fading impact of the tax cuts and higher borrowing costs caused by the Federal Reserve. 

"Put simply, stocks have already started to price in the risk of an economic slowdown," Goldman Sachs chief US equity strategist David Kostin wrote to clients on Tuesday. 

Morgan Stanley warned on Monday that the US stock market is already in a bear market. The firm noted that more than 40% of the S&P 500 is down 20% from recent highs.

"The market is speaking loudly that bad news is coming," Morgan Stanley equity strategist Michael Wilson wrote to clients. 

Slowdown fears were front-and-center in the retail sector. Disappointing results sent Target and Kohl's more than 10% lower on Tuesday. TJX Companies (TJX) and Ross Stores also retreated. Home improvement retailer Lowe's (LOW) lost 5% after posting results. That leaves the home improvement retailer on track for its ninth straight daily loss. 

Investors continue to flee from the tech darlings that once carried the market higher. Worries about lackluster demand for the latest iPhones have weighed heavily on Apple (AAPL). Other momentum stocks like Netflix (NFLX), Amazon (AMZN) and Facebook (FB) are under heavy pressure. Google owner Alphabet (GOOGL) is in itsfirst bear market since 2011. 

Energy stocks were among the biggest losers. ExxonMobil (XOM), Chevron (CVX) and Hess all lost ground after US oil prices plummeted below $54 a barrel for the first time in a year. Fears of a supply glut and weaker demand have knocked crude into a bear market. It's now down around 30% from the recent high on October 3.

https://www.cnn.com/2018/11/20/investing/why-dow-dropped/index.html

 

[DKW 86 7,440]

wow...this is not good...

 

[Brad_ATX 13,654]

2 hours ago, DKW 86 said:

wow...this is not good...

 

It's not surprising.  Economy got overheated because steady growth wasn't good enough for some and Wall St went nuts with valuations.  This was nothing if not predictable.  Economists have been warning about a downturn due to an over-heated economy for a over a year.

[HVAU 673]

It begs a question related to the Fed...

Should they continue rate hikes in December, risking further negative repercussions for the stock market?

Or...

Should they relent on rate hikes, possibly weakening any leverage with which to respond once the real recession hits?

In my opinion, they should continue hiking rates to a reasonable level in order to stabilize the overbought market and gain leverage for the economic downturn that will come within the next year or so. 

[homersapien 11,447]

Meanwhile, I doubt the trillion dollar deficit projected from Trump's tax cut isn't falling.

[homersapien 11,447]

59 minutes ago, HVAU said:

It begs a question related to the Fed...

Should they continue rate hikes in December, risking further negative repercussions for the stock market?

Or...

Should they relent on rate hikes, possibly weakening any leverage with which to respond once the real recession hits?

In my opinion, they should continue hiking rates to a reasonable level in order to stabilize the overbought market and gain leverage for the economic downturn that will come within the next year or so. 

Wouldn't that have the opposite effect?  The lower the rates are, the less you can reduce them in a downturn.

[TitanTiger 20,510]

15 minutes ago, homersapien said:

Wouldn't that have the opposite effect?  The lower the rates are, the less you can reduce them in a downturn.

That's what he said.  If they stop the rate hikes, it lessens their ability to use rates to handle a downturn.

[HVAU 673]

2 hours ago, homersapien said:

Wouldn't that have the opposite effect?  The lower the rates are, the less you can reduce them in a downturn.

Sorry.  I got a bit rambly there, but Titan is right on interpreting me.

[HVAU 673]

And this just drives me nuts.  Trump speaks like the most uniformed nincompoop whenever the economy come up.  Arguments could certainly be made for leaving rates untouched, but rates had been artificially low for a long time.  The correct thing to do for economy with strength we've seen over the past few years is the inch up rates.

https://www.cnbc.com/2018/11/20/trump-says-he-would-like-to-see-lower-fed-rates.html

[homersapien 11,447]

On 11/20/2018 at 4:20 PM, TitanTiger said:

That's what he said.  If they stop the rate hikes, it lessens their ability to use rates to handle a downturn.

You're correct.  My mistake.

 

Why did you think this merited a laugh icon 78?

[homersapien 11,447]

1 hour ago, HVAU said:

And this just drives me nuts.  Trump speaks like the most uniformed nincompoop whenever the economy come up.  Arguments could certainly be made for leaving rates untouched, but rates had been artificially low for a long time.  The correct thing to do for economy with strength we've seen over the past few years is the inch up rates.

https://www.cnbc.com/2018/11/20/trump-says-he-would-like-to-see-lower-fed-rates.html

Everything he's done is set us up for future grief.  He has like a 3 month horizon and is only interested in boosting his own political position. It's not a plan for sustained success, either economically or politically.

[AU64 10,122]

18 hours ago, HVAU said:

And this just drives me nuts.  Trump speaks like the most uniformed nincompoop whenever the economy come up.  Arguments could certainly be made for leaving rates untouched, but rates had been artificially low for a long time.  The correct thing to do for economy with strength we've seen over the past few years is the inch up rates.

https://www.cnbc.com/2018/11/20/trump-says-he-would-like-to-see-lower-fed-rates.html

True but every time there is even talk of moving rates up, the market goes nuts....they were kept low by the previous admin. to help keep the cost of borrowing that that $9 Trillion reasonable....but everyone knew that sooner or later they needed to move toward market levels......well everyone but traders who love the nearly free money.      All presidents like low Fed rates and lobby for them......openly or behind the scenes.....not just DT.

[HVAU 673]

37 minutes ago, AU64 said:

True but every time there is even talk of moving rates up, the market goes nuts....they were kept low by the previous admin. to help keep the cost of borrowing that that $9 Trillion reasonable....but everyone knew that sooner or later they needed to move toward market levels......well everyone but traders who love the nearly free money.      All presidents like low Fed rates and lobby for them......openly or behind the scenes.....not just DT.

I think you'll have to provide some background on that.  I'm not claiming you're incorrect, but from what I've seen most presidents have avoid being critical of the Fed chair.  During periods of economic strength administrations usually get out of the way.

I'm curious how the stock buybacks facilitated by the tax cuts have affected the market.  My initial thought is that it overheated the market.  I'd like to know if the same corporations were reissuing those shares at the top.  

[AU64 10,122]

2 hours ago, HVAU said:

I think you'll have to provide some background on that.  I'm not claiming you're incorrect, but from what I've seen most presidents have avoid being critical of the Fed chair.  During periods of economic strength administrations usually get out of the way.

I'm curious how the stock buybacks facilitated by the tax cuts have affected the market.  My initial thought is that it overheated the market.  I'd like to know if the same corporations were reissuing those shares at the top.  

DT has been more vocal about the Fed (as he is about almost everything) but presidents have ways of influencing the Fed...by appointing people who share his views for example.....but considering the Fed only raised rates one time in 8 years under Obama and the rates were rock bottom and the economy was in a pretty steadily upward ( although very gradual rate)  so the Fed could have justified a few small increases over the years .....but did nothing....thus .there was nothing much for B.O. to complain about.  Immediately when DT came in the Fed jumped on several rate increases.

As for buybacks.....good question but seems that many companies might have done their buybacks when values were pretty high but stuff I see does not indicate that buy backs are automatically good for a stock's price....can increase the EPS but that only works if the business is prosperous.  

Plus, markets seem to be influenced by non-economic factors as much as economic issues.....let someone suggest that Apple is cutting back a shift at one of it's many plants and stock prices tumble immediately.....well before anyone actually knows if the profits are affected by the change.   Long ago I quit trying to figure out why markets go up or down because the "experts' never made a cogent argument either way about big moves.....like what is happening now. Whatever you happen to believe, you can probably find some investment analyst who will back you up. 

 

[HVAU 673]

2 minutes ago, AU64 said:

DT has been more vocal about the Fed (as he is about almost everything) but presidents have ways of influencing the Fed...by appointing people who share his views for example.....but considering the Fed only raised rates one time in 8 years under Obama and the rates were rock bottom and the economy was in a pretty steadily upward ( although very gradual rate)  so the Fed could have justified a few small increases over the years .....but did nothing....thus .there was nothing much for B.O. to complain about.  Immediately when DT came

Actually twice under Obama, but one of those was after the 2016 election. 

If you look at the charts reflecting unemployment numbers, GDP and inflation the logic the Fed has used to raise rates appears sound.

If you look at the GDP chart here you can plot the trajectory and it becomes clear at which point the recovery was firmly established, as opposed to the ups and downs between 2007-2014.

You asserted that rates were kept low by the previous administration, however, Yellen claims "“I have never had a situation where a member of the [Obama] administration has tried in any way to pressure me for any reason about the stance of monetary policy."

https://www.google.com/url?sa=i&source=web&cd=&ved=2ahUKEwj5h_GYtebeAhUEm-AKHWAoAhMQzPwBegQIARAC&url=https%3A%2F%2Fwww.marketwatch.com%2Fstory%2Fyellen-says-obama-administration-never-pressured-fed-on-policy-2017-01-18&psig=AOvVaw047mCVPd5ixiFvRkDoLFrt&ust=1542921651471877

 

 

[HVAU 673]

23 minutes ago, AU64 said:

Whatever you happen to believe, you can probably find some investment analyst who will back you up. 

On this we definitely agree.  I actually have a little game I play with Cramer.  It boils down to interpreting certain statements he makes contradictorily and watching to see if the markets match the interpretation.  It's a little silly, as there is some biased nuance to it and it assumes that either Cramer really knows his stuff, but sending people purposefully into bad decisions, or his words are regarded by most as uninformed and investors should act in an inverse manner to his recommendations.

[AU64 10,122]

The neutral rate of interest is the federal funds rate at which monetary policy is neither accommodative nor restrictive. It is a theoretical concept, meaning that it can’t be directly observed—it must be inferred from market and other economic data. Economists’ views on this rate are necessarily estimates and inherently uncertain. However, while theoretical, estimates of the neutral rate are critical to assessing and making decisions regarding the stance of monetary policy.

 

My own view, informed by the work of my colleagues Evan Koenig at the Dallas Fed as well as John Williams of the New York Fed and Thomas Laubach at the Federal Reserve Board, is that the longer-run neutral real rate of interest is in a broad range around 0.50 to 0.75 percent, or a nominal rate of roughly 2.50 to 2.75 percent.

With the current fed funds rate at 1.75 to 2 percent, it would take approximately three or four more federal funds rate increases of a quarter of a percent to get into the range of this estimated neutral level. 

By the Time the Fed Hits the Neutral Rate of Interest, the Markets Will Be Crashing

 

For 20 plus years the Fed has been "accommodative" with rates below inflation.   What was there for anyone to pressure Yellin about?  Rates could not go any lower unless they paid you to take the money. 

After sitting on rates for about 8 years, the Yellin Fed made several immediate changes when DT became president despite no evidence of inflation issues.   Now, Powell apparently is working  toward neutrality which seems to be restrictive. Powell is DT's guy but someone told ole DT to appoint him.....which he is now regretting. 

[HVAU 673]

Here's an interesting chart on the Fed Funds rate.  A lot to discuss on there.

https://www.thebalance.com/fed-funds-rate-history-highs-lows-3306135

[AU64 10,122]

8 minutes ago, HVAU said:

Here's an interesting chart on the Fed Funds rate.  A lot to discuss on there.

https://www.thebalance.com/fed-funds-rate-history-highs-lows-3306135

Thanks....interesting chart...Brought back some old memories.....of bad old days.  I was in the business world during the 70s  and early 80s when the rate hit 20% and we had a couple hundred cars on lease with adjustable rates....Fed +1% which was a pretty common practice since nobody knew what rates would be for the term of a 4 year lease.

And... home interest rates were 15%.     

[RunInRed 16,487]

People act surprised.  It's the same old story ... when the sugar high of deficit exploding tax cuts that don't trickle down wear off ...

[Proud Tiger 4,261]

Savvy traders make money either way the market goes. There is a time to be long and a time to be short

[homersapien 11,447]

36 minutes ago, Proud Tiger said:

Savvy traders make money either way the market goes. There is a time to be long and a time to be short

Yeah, but the trouble with that is you don't know who is "savvy" until after the fact. 

 

[auburn41 492]

13 hours ago, RunInRed said:

People act surprised.  It's the same old story ... when the sugar high of deficit exploding tax cuts that don't trickle down wear off ...

Did something change in early November?😎