foxex: WE MADE IT!

The Market Sum | INVESTOPEDIA

Insight after the bell

By Caleb Silver, Editor in Chief

Friday's top stories:

1 - WE MADE IT! Stocks stagger into the weekend

2 - Chart of the day - Auto stocks are still sputtering

Final Numbers:

DJIA: + 0.26%

S&P500: - 0.04%

Nasdaq: - 0.48%

#1 Stocks stagger into the weekend
Feeling that October volatility, yet? This week was Exhibit A, or V, for that matter.

The DJIA eked out gains today, snapping its three-week losing streak but the S&P 500 slipped in the red and the Nasdaq shed close to a half percent after an exhausting week for investors.

There was no news on the economic front to derail the bounce-back rally after yesterday's devastation, and no tweets or comments coming out of Washington D.C. to fan the flames of tariff fears or Fed-shaming. Investors were able to just focus on fundamentals for a change, and those looked good for some stocks.

Proctor & Gamble saw its biggest gains in 5 years, climbing 9 percent on a better than expected earnings report.

PayPal popped 9.5 percent on news that Venmo, the popular peer to peer payments app, is finally starting to make some money for its parent company.

Still, there are weaknesses and signs of vulnerability in key sectors, namely auto stocks and housing.

We address auto stocks below in our chart of the day, but suffice to say that U.S. automakers have been sliding all year on tariff concerns, slowing sales and rising interest rates.

On the housing front, U.S. Existing Home Sales fell to their lowest levels since 2015. This was the sixth straight drop in monthly sales, although home prices continued to rise at the higher end of the market. This is a case where you can clearly point to rising interest rates weighing on sales as potential buyers are skittish about sinking themselves into higher monthly mortgage payments. According to the National Association of Realtors, homes under $100,000 saw the biggest sales declines, dropping 18 percent from last month. Regionally, the South faced the biggest declines, dropping 5.4 percent on an annual basis.

Why it Matters: Our homes and our automobiles tend to be some of our biggest ticket purchases outside of substantial spending on college tuition and unforeseen medical expenses. They are also key indicators of consumers' economic health and confidence in the future. The U.S. economy is strong, generally speaking, but declines in these areas tell us that we might not all believe that is sustainable. We are nowhere near another subprime induced financial crisis as we were a decade ago given tighter lending rules and historically low rates. But continuing declines in home sales show some cracks in consumer confidence. To be sure, existing home sales and new home construction are not the same. They both reflect consumer confidence, however, and both are weak. The Census Bureau reported on Wednesday that new home construction fell 5.4 percent in September, so we are experiencing overall weakness in the housing sector. Look no further than the real estate ETF over the past month for signs of a shaky foundation.

We'll keep a close eye on this sector.

What's Next: We know the Fed will raise rates at least twice before the end of the year. That's not going to help potential buyers get in the game unless housing prices continue to soften and the tax breaks actually make people feel richer. Rich people will feel richer because they are getting the biggest breaks, but how many homes can they buy, really?

The Michigan Consumer Sentiment Index will be released next Friday. We generally don't pay too much attention to the details inside the report, which can be quite granular. We do want to focus on the trend from month to month and any warning signs that may pop up in the survey. In September, the biggest concern among those surveyed was tariffs. That will likely come up again next week, but we've also had a nasty bout of market volatility since the last reading. If sentiment falters, the housing market won't be too far behind.

P.S.: We know everyone is blinded by the $1 billion Mega Millions jackpot. It's staggering, and I, for one, have already spent that money on future homes, a new wardrobe and several islands. I am not going to win it and I am sorry to say, most of you aren't likely to either. But if you do, or you just want to pretend that you will, Robert Pagliarini, one of the financial advisors on our Advisor Insights platform, can help you decide if you should take the lump sum or monthly payouts.

You are welcome!

Fun Reading: Here are a few stories from other publishers that made us smile:

Bloomberg: Blame Trump for Your Football Team's Lousy Record

Reuters: Starkist admits to Tuna Fish price Fixing

CNN: Why Horror Films make a killing at the Box Office

Chart of the Day: Auto stocks sputter to long-term lows
As we mention above, automakers' stocks have been hit especially hard this year. Brewing troubles in the global auto industry have been exacerbated by U.S.-led threats of new auto tariffs and looming trade wars. While stocks of fabled automakers like Ford have been on a general decline for several years now, the global auto industry has seen a sharp downside reversal that only started at the beginning of this year.

The chart below shows the steep decline of the CARZ Global Auto ETF, which has fallen by more than 21% year to date, hitting nearly a two-year low on Friday. Helping to drive that fall have been struggling and heavily-pressured automakers like GM and Ford, both of which have dropped even more severely this year than the overall automakers' market. Ford's stock lost the most of the group at a whopping 32% loss so far this year.

The once-mighty Tesla, which has long traded as more of a technology growth stock than an auto stock, has lately suffered severe setbacks stemming from controversies surrounding its CEO Elon Musk. TSLA stock was in positive territory back in August when it came close to retesting its all-time high, but it's been downhill ever since. While not as bad as many auto stocks, TSLA is down a substantial 17% since the beginning of the year.