After a brief opening rally, stocks continue to retreat as the Dow fell another 507 points and sliced through support to close at 23,592. Trading volume was heavy. The bottom line thinking about all the recent market volatility continues to be that while economic fundamentals in the US are sound, no one seems to know how to “price in” all the uncertainty caused by disruption in politics, trade and innovation. The Federal Reserve meets tomorrow and will issue a ruling on Wednesday regarding a possible rate hike. There is an increasing chorus of investors who hope the Fed does not raise rates and the top reason for this among gurus seems to be directing at concern over economic slowdowns in China and Europe. The thinking goes like this: “We are fine but they are not which means we are not”.
Another example of disruption occurred late Friday when a judge in Texas ruled that Obamacare was unconstitutional. In making the ruling, the judge knew it would be challenged and so it appears the decision will not take effect, if ever, until after 2019. Hospital stocks on Monday sold off in reaction as did some health insurance companies that have a heavy presence on the state exchanges.
Boeing buys Brazil! Boeing announced it finalized the terms of purchasing 80% of the commercial aircraft division of Brazil’s’ Embraer SA. The deal comes in at $4.2 billion and now goes to the Brazilian gubment for approval before putting it up for a vote to shareholders of both companies. The markets expressed optimism that the deal will go through sending shares of both companies higher. Last week, Boeing also opened a 737-completion facility in Zhoushan, China. The new facility will help them achieve 737 delivery goals. The Renton plant in south Seattle is sandwiched between a Paccar truck plant and Lake Washington and the completion facility in China will ease congestion at Renton with delivery of 100 737’s per year.