|
Thursday, October 31, 2019
Action Insight Daily Report 11-1-19
Lack of Support
| Thursday's Headlines 1. Markets Fall as Fed Rate Cut Euphoria Fades 2. Trade Concerns Trump Earnings 3. Global Exports Keep Sliding 4. U.S. Farm Bankruptcies on the Rise Markets Closed
 Image: Getty Images
Markets Today U.S. markets sold off today as the euphoria from yesterday's interest rate cuts gave way to concerns about the tenuous U.S.-China trade agreement and the slowdown in the global economy. Corporate earnings, which have been stronger than forecast, did little to move the markets as a whole, although some individual stocks benefited from strong report cards. A key manufacturing report from the U.S. Midwest showed a sharp decline in activity, further emphasizing the degree of economic sluggishness in the industrial sector.
Here are some of today's biggest headlines:
Headlines
Stocks Meet Wall of Resistance Yes, we have had several record highs for the S&P 500 over the past few days as investor sentiment has turned positive following better-than-expected corporate earnings, an anticipated interest rate cut by the Fed, and what seemed like good news on the U.S.-China trade talks.
The fact that the S&P 500 and all major U.S. equity markets sold off today is by no means a cause for alarm. After all, multiple record highs is not a bearish sign. Still, it is important to look at the price action in markets to see where the resistance and support levels lie. Markets trade on fundamental information like news, earnings, economic developments, and the like, but a lot of trading is done by algorithms, which are programmed to react to price.
We've mentioned the 3,000 level for the S&P 500 a lot lately, because a lot of technical analysts and market watchers have been focused on it. If the S&P 500 crossed the 3,000 level and continued to push higher, the thinking goes, its next resistance level would be even higher, around 3200, according to many technical analysts. That, obviously, has not happened -- at least not yet. It still might, but when we look at price action, we can see the S&P 500 churning higher, but not breaking beyond the 3050 level. The question is, is 3050 the new resistance level?
chart courtesy tradingview.com  Most individual investors like me don't worry too much about these levels since I don't trade in and out of stocks or indexes every day. But technical analysis like this does provide another useful way of looking at the markets without the noise or the news. As technical analysts like James like to say, "Focus on the price."
Read more: What is Technical Analysis?
Declining Global Exports Tell the Tale on Trade A slowing global economy is not news to anyone these days. The IMF reduced its predictions for global GDP growth for 2019 from 3.2% to 3.0% just a few weeks ago, and the U.S. reported 1.9% GDP growth for the third quarter yesterday.
But to really see the slowdown in action, we need to look at global exports, which are one of the key economic engines of all major economies. At the beginning of October, the World Trade Organization (WTO) forecast that global trade would only expand by only 1.2% during 2019, in what would be the weakest year since 2009, when it plunged by nearly 13% in the midst of the financial crisis. Only six months ago, the WTO was forecasting more than double that pace of growth, a 2.6% expansion in merchandise trade.
The U.S.-China trade war is just one of the culprits. Europe is dealing with a manufacturing recession in countries like Germany and is beset by the uncertainties surrounding Brexit. Mexico is dealing with its first quarterly decline in GDP in more than a decade, and other developed economies like Brazil and Argentina are facing their own internal challenges.
All of this is weighing down export growth, which is now negative for major economies around the world.
Source: CPB World Trade Monitor  U.S. Farm Bankruptcies Surge The decline in exports has hurt industries across the world and it is having a huge impact on U.S. farmers.
According to the U.S. Farm Bureau, farm bankruptcies in the U.S. are up 24% from a year ago. While farm income is expected to rise to $88 billion this year, the highest levels since 2014, it is still 29% below 2013's record high. Moreover, the Farm Bureau reports that 40% of the 2019 income – some $33 billion in total -- is related to trade assistance, disaster assistance, the farm bill, and insurance indemnities, and has yet to be fully received by farmers and ranchers.
It's harder than ever to make a living as an independent farmer these days with unpredictable climate events and trade uncertainties. 
(chart courtesy YCHARTS)  Medical device maker Abiomed rose 14.1% despite an earnings miss. This was because the miss was caused by an unrealized loss from its investment in fellow medical device company Shockwave Medical. Without that loss, it was well on track to beat earnings estimates. Kraft Heinz rose 13.6% today after a significant earnings beat, giving the beaten-down stock the first good news in a while.  Data storage device maker Western Digital fell 17% when it announced that CEO Steve Milligan was retiring and projected lower-than-expected earnings for next quarter. Water management company Xylem fell 8.7% as it matched earnings estimates, but missed on revenue and lowered full year projections. Insurance and investment management holding company Lincoln National fell 8.5% on an earnings miss. Word of the Day The Halloween strategy, Halloween effect, or Halloween indicator, is a market-timing strategy based on the theory that stocks perform better between Oct. 31 (Halloween) and May 1 than they do between the beginning of May through the end of October. The theory posits that it is prudent to buy stocks in November, hold them through the winter months, then sell in April, while investing in other asset classes from May through October. Some who subscribe to this tactic say not to invest at all during the summer months.  Today in History October 31, 2002 Today in 2002, ex-Enron CFO Andrew Fastow was indicted on 78 counts of various charges including fraud, money-laundering, conspiracy, and obstruction of justice. He defrauded Enron's investors by artificially inflating the company's profits by piling bad assets into financial vehicles called "special purpose entities," getting them off Enron's books. In reality, Enron was going broke. Enron was one of the largest energy companies in the U.S. when it went bankrupt in 2001.
Source: https://www.baltimoresun.com/bal-enron1031-story.html
How can we improve the Market Sum? Tell us at marketsum@investopedia.com
Enjoy the Market Sum? Share it with a friend. Or share the link below to invite friends to sign up.
CONNECT WITH INVESTOPEDIA
Email sent to: mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here.
114 West 41st St, floor 8 New York NY 10036 © 2019, Investopedia, LLC. All Rights Reserved | Privacy Policy |
