 The Market Sum | Insight after the bell
By Caleb Silver, Editor in Chief Thursday's Headlines 1. U.S. Markets Pop After Worst Day of 2019 2. 10-Year U.S. Treasury Yield Falls to 1.5% 3. Are Stocks Oversold? 4. Walmart Crushes Forecasts 5. GE Shares Plunge as Whistleblower Cries Foul Markets Closed
 Markets Today
The DJIA and the S&P500 posted slight gains today in a very choppy session. Investors are still trying to gain their footing after Wednesday's drubbing. Sentiment is fearful right now. We can see it in the markets, and we can see it in the terms and articles our readers are flocking to on Investopedia.
Here is a small sample of what our readers are looking up on our site:
You get the point. The news cycle is driving sentiment and those are the topics that are top of mind.
Speaking of the yield, that of the 10-Year U.S. Treasury continues to fall as investors flock to its relative safety. Today, it briefly fell below 1.5% before rebounding just above that mark. It's been on a slow, but steady staircase down since October of 2018. That was right before the Federal Reserve raised interest rates which set the markets into a dizzying correction at the end of last year.  The yield on the 30-year U.S. Treasury also hit another all-time low as investors keep piling into the longest term U.S. government securities they can find.
With the 10-year yielding around 1.5% and inflation in the U.S. around 1.8%, the so-called Real Yield is effectively translating into negative interest rates here in the U.S. We can't officially state that since yields are still positive, but when you do the math you can't argue with the results. The U.S. certainly isn't alone in that camp. It's a global trend, as market researcher Charlie Bilello points out in his chart, below.
 Are Stocks Oversold? In times of heightened volatility and sentiment in either direction, stocks can either be overbought or oversold. It's a case of the extremes that we see in all markets. Tulips, Internet stocks in the 1990s, Bitcoin.. you get the point. With the extreme selling we have seen over the past few weeks, many stocks have fallen into the oversold category. The technical definition of oversold is when a stock is trading in the bottom 30% of its moving average over a period of time. That period can be 14 days, several months or even a year.
As I mentioned yesterday, 80% of S&P500 stocks are down 10% or more since the beginning of the year. They are in correction territory, even though the index itself is not. Bespoke Investments ran through the entire index to see what percentage of those stocks are actually oversold. 56.2%, or more than half of the 505 stocks in the index are oversold. (Yes, there are 505 stocks in the S&P500...not a typo) While that seems like a lot, and it is the highest percentage all year, it's nothing like the 90% of oversold stocks we saw at the end of 2018.
Translation: Things feel bad right now, but it's nothing compared to what it could be.  Walmart Cashing in on Consumers Consumer spending continues to be the candle in wind in the U.S. economy. Retail sales for July were reported this morning, and came in 0.7% higher than June and a full 3.4% higher than July of 2018. The growth was driven by higher online sales, and its hard not think that Amazon two-day long prime day didn't have anything to do with that. But consumers are spending like there is no recession coming. They might be right.
Walmart is a big beneficiary of that. It is the world's largest retailer, after all. The company reported second quarter earnings this morning, and blew through analysts forecasts and raised its guidance for the rest of the year. Here is a snapshot of the numbers:
While Walmart is certainly vulnerable to an ongoing trade war, the company has managed to keep growing its profit margins in an uncertain environment. Since it is a low cost retailer, if belts do tighten, it could benefit more than its higher priced competitors.
Shares are up 20% in 2019, beating the broader market and the basket of retailers in the XRT ETF. (WMT in Blue, XRT in Orange)
 Whistleblower Cries Foul on GE
The name Harry Markopolos strikes fear into anyone or any company that is associated with it. That's because Markopolos was the accountant who tried to alert authorities about Bernie Madoff's Ponzi scheme that bilked investors out of $53 billion over several years. Regulators failed to act on Markopolos' claims, but once Madoff admitted to his crimes, everyone knew his name.
Today, Markopolos came forward with accusations about GE and alleged accounting fraud at the company that he says dwarfs that of Enron and Worldcom.
Among other things, Markopolos claims that GE has been using what he calls "GEnron accounting" and that "GE has been running a decades long accounting fraud by only providing top line revenue and bottom line profits for its business units and getting away with leaving out cost of goods sold, SG&A, R&D and corporate overhead allocations."
Markopolos claims that GE gets away with the fraud by changing its Financial Statement reporting formats every few years. This is only detectable by reading at least 10 years of 10-K's back to back.
GE denies the claims, and CEO Larry Culp called the accusations "market manipulation", in a statement.
"GE will always take any allegation of financial misconduct seriously. But this is market manipulation – pure and simple...Mr. Markopolos's report contains false statements of fact and these claims could have been corrected if he had checked them with GE before publishing the report."
According to SEC filings, Culp bought $2 million in GE shares today - after the accusations by Markopolos were made public.
This is far from over.
Here's a link to the 175 page GET FRAUD report. photo courtesy bostonglobe.com
chart courtesy www.koyfin.com  Newmont Mining recovered somewhat from yesterday, its stock price having risen by almost 1%, after it was announced that Northern Star Resources was one of the frontrunners to bid for the joint Newmont/Barrick Gold venture's stake in the Super Pit gold mine. The remaining companies in the S&P 500 suffered significant losses today, with Ventas and Evergy the only other shares to actually increase; the latter just barely remaining above water at only 0.03%.  Shares of Macy's plummeted by over 13% today, after the company lowered its full-year earnings outlook upon failing to hit its profit expectations last quarter. Another department store, Kohl's, received similar results, falling by almost 11% amid the Zacks Consensus Estimate of its Q2 earnings going down.  Egypt was the sole exception of today's dismal performance; even though it only rose by 0.7%, it was still clearly the lucky one. The rest of the world suffered heavy losses, with Brazil, South Africa, and Israel getting hit the hardest. Word of the Day: The term oversold refers to a condition where an asset has traded lower in price and has the potential for a price bounce. An oversold condition can last for a long time, and therefore being oversold doesn't mean a price rally will come soon, or at all. Many technical indicators identify oversold and overbought levels. These indicators base their assessment on where the price is currently trading relative to prior prices. Fundamentals can also be used to assess whether an asset is potentially oversold and has deviated from its typical value metrics.  photo courtesy ssa.gov Today in Financial History Aug. 15, 1971: On Aug. 15, 1971, in a nationally televised address, Nixon announced, "I am today ordering a freeze on all prices and wages throughout the United States." After a 90-day freeze, increases would have to be approved by a "Pay Board" and a "Price Commission," with an eye toward eventually lifting controls — conveniently, after the 1972 election. Putting the U.S. economy "into a permanent straitjacket would … stifle the expansion of our free enterprise system," Nixon said.
As President George W. Bush put it in 2008, sometimes you have to "abandon free-market principles to save the free-market system." There was no national emergency in the summer of '71: unemployment stood at 6 percent, inflation only a point higher than it is now. Yet, after Nixon's announcement, the markets rallied, the press swooned, and, even though his speech pre-empted the popular Western Bonanza, the people loved it, too — 75 percent backed the plan in polls. source: https://www.cato.org/publications/commentary/remembering-nixons-wage-price-controls
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Thursday, August 15, 2019
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