It was another wild day in the markets. Stocks opened lower then moved into the black but as the day wore on the Dow slid to a loss of 545 points to finish at 25,052. Trading volume was higher and IBD has markets in correction mode while BTS moved from high yield to cash last Friday as low volatility coupled with 10-year treasury yields hitting a 7-year high was enough to send investors to the sidelines. BTS notes that underlying fundamentals are strong but the sudden rise in rates is causing investors to rethink the situation. All eyes are now on earnings reports. So far Delta Airlines posted better than expected numbers today.
UBS guru Keith “Spiderman” Parker shed some light on the pullback noting that as we head into quarterly earnings reports, a blackout period takes affect in which corporations and insiders stop buying shares. Corporate share buybacks are estimated to be $1 trillion this year (Apple will do $100 billion all by itself) and with these purchases now on hold until after earnings reports, a big buyer is out of the picture. Spidey thinks that the combination of corporate buyers going dark coupled with the rise in rates and the Fed dumping a huge chunk of bonds off its balance sheet last month created a temporary liquidity issue in the markets making the selloff worse than expected. He noted some sector rotation from growth to value was also a factor but thinks that in about 6 weeks when earnings are done the buybacks and dividend increases will resume. Other Wall Street types are noting the record piles of cash on the sidelines which might now be put back to work.
The wolves are circling Sears. The former king of retail is being pressured by lenders to shut down and sell assets. Sears stock fell almost 50% yesterday and it looks like the only thing they will be selling now is toast.
The head of German car giant Volkswagen is up in arms over the new EU mandate to lower CO2 emissions by 35% in 12 years. He said it could cost upwards of 100,000 jobs in Germany. The comments were an indirect admission that VW and other German car companies are upset that the EU mandate, coupled with Tesla’s huge lead in the EV marketplace, could “spill the beer” so to speak for these companies. Nearly 1 in every 7 jobs in Germany are in the auto industry and with the Tesla and EU mandate, disruption could plague the industry for the next several years.
Oil prices fell today as US stockpiles build and OPEC lowered its global oil demand growth rates by about 50,000 barrels per day. China is importing more oil from Venezuela thanks to a deal in which they loaned more money to Maduro and in return lock in a source of supply. WTI crude prices were down 2.5% to $71.30 per barrel.