foxex: We've Stalled

The Market Sum | INVESTOPEDIA

Insight after the bell

By Caleb Silver, Editor in Chief

Friday's Headlines

1. Market rally stalls, but stocks had a strong week

Markets Close

Dow
23,995.95 -0.02%

S&P
2,596.26 -0.01%

Nasdaq
6,971.48 -0.21%

VIX
18.19 -6.72%

INV Anxiety Index
101.43 Neutral

US 10-Yr Yield
2.701 -1.10%

This Week

Dow
23,991.64 +2.50%

S&P
2,595.65 +2.33%

Nasdaq
6,969.70 +2.89%

Russell 2000
1,446.20 +3.40%

Crude Oil
51.70 +6.20%

US 10-Yr Yield
2.701 +0.78%

We've stalled

Stocks just couldn't make it 6 days in a row as the selling pressure was on from the opening bell to the close. The damage was limited, relatively speaking. Still, markets have started out 2019 with a bang. Just take a look above.

And, if you take the chart back one month before the Christmas Eve carnage, we are about flat, although still near correction territory given the market highs of September 21, 2018.

In Other News

The U.S. Government shutdown is now tied for the longest in history. 800,000 federal workers did not get their paychecks today, and there are several key agencies that are closed or operating on a limited basis. If you have been traveling by air, you've probably noticed longer lines for security. Homeland Security is just one agency impacted by the shutdown. The Univ. of Washington has the full list, here.

If you thought for a second that the IRS would not be accepting your tax pre-payments, you would be wrong. And, if you think you don't need to pre-pay your income taxes, you better read this article to see if you qualify.

China's Slowdown

We've covered the slowdown in China's growth more than a few times in this note. Everyone from Apple CEO Tim Cook to Fed Chief Jerome Powell has mentioned it, and now it looks like the Chinese government is putting some numbers around it. Reuters reports that China has officially taken down its growth projections from 6.5% to a range of 6-6.5% for 2019. To be sure, that is still a blistering pace of growth for any economy in the history of the modern world - but just not as fast as it has been growing over the past decade. This chart from Trading Economics shows the slope.

Why it Matters

China and the U.S. are the two biggest economies in the world with the most consumers and the highest GDPs. The U.S. is expected to grow 2.5% this year, which is OK, kind of, and now we have a clearer picture of China's growth expectations. As these two mega-economies contract, multi-national corporations that sell into them have been and will be forced to reign in their own growth forecasts. Apple is the most high-profile example of this, but there are tens of thousands of companies that will feel the pinch and be forced to lower their revenue and profit forecasts. Remember - the stock market is a bet on the future profitability of companies. More than anything, that's what triggered the selloff last fall.

One company not lowering its forecasts is General Motors. The company actually raised its sales and profit forecasts for all of 2019 by a lot. CEO Mary Barra says GM sees a strong market for sales in the U.S. this year, and is deploying capital into its high growth businesses. It has a a couple of new Cadillac models coming out - one of which is electric, and a new line up of full-size trucks rolling off the line. How about that?!

James has some good stuff on one cannabis company that shot up 20% today on some news from Privateer Holdings. Sounds like 2018 all over again... but don't get comfortable.

Enjoy the weekend!

Caleb

Chart of the Day: Tilray High on Thiel

Shares of Canadian medical marijuana producer Tilray, Inc. (TLRY) jumped dramatically on Friday due to a major announcement from the company's largest shareholder. Privateer Holdings, backed by billionaire investor Peter Thiel, announced that it wouldn't sell its shares in the company during the first half of 2019. This means that even after the IPO lockup period (when company insiders are prohibited from selling their shares) expires on Tuesday, January 15, Thiel's fund would refrain from selling.

This announcement allowed investors to breathe a collective sigh of relief and resulted in a short squeeze that helped drive the stock well above $100 per share and up nearly 30% at one point during the day. By Friday's market close, the one-day surge settled at +19.40%, with price at $96-even.

Of course, big ups and downs are nothing new for Tilray, or any other marijuana-related stock. The volatility in this industry can clearly be seen in the roller coaster swings that the stock has experienced since its July 2018 IPO. Since that time less than six months ago, TLRY has risen by more than 300%, at one point shooting up to a high exactly at $300 in September before crashing back down. As with all investing, prudence and caution should always be exercised - but perhaps especially with the Wild West that is marijuana stocks.