The markets closed in mixed fashion with the Dow higher and the NASDAQ lower. Apple, McDonald’s and Exxon led the Dow to a gain of 70 points to 24,597 on light trading volume. IBD has the markets listed as “rally under pressure” while BTS is still positive. Long time guru Jeff Saut said today that he feels stocks have bottomed although I am sure David “wrong way” Stockman would disagree with him.
Disruption continues. The Dow Jones Transportation index has recently fallen more than the market which leads some gurus to suggest a recession may be in the cards. The Puget Sound Business Journal however noted that a recent tumble in the price of FedEx stock, which is the largest component of the transportation index, could be more a reflection of Amazon Air invading the territory of both FedEx and UPS. Shipping is Amazon’s largest cost item and to that end, Bezos and company have been growing its own delivery operations to include air freight, trucking and last mile delivery. PSBJ estimates this could cut 10% off FedEx’s revenue within 3 years ($6.8 billion) which is about 3% of Amazon’s total revenue. Lately in the Ballard area of Seattle, I have noticed Amazon packages being delivered by people in nice cars. It’s a head scratcher when a Mercedes pulls up to a house and a well-dressed man gets out and drops an Amazon box on someone’s porch. It’s like the reverse of a porch pirate. Could Amazon be experimenting with a last mile delivery system structured along the lines of Uber? Only Jeff’s hair dresser knows for sure and he, Jeff, is bald!
Random Lengths noted that framing lumber prices fell $3 to $340 in the latest reading. The survey showed the supply of lumber up 3.5% from last year but lumber distributors are unloading inventory to minimize yearend taxes. The survey also showed lumber retailers are lowering their 2019 sales estimates due to a softening in housing. Home builder surveys reveal that slower housing activity stems primarily from affordability concerns.
All eyes are on China which is grappling with slowing growth and credibility issues. The Ministry of Commerce in Beijing recently reported a 27.6% year over year drop in direct foreign investment. While the US continues to show overall economic strength, gurus are focused on the potential of a slowdown in China and how this might affect US and overall global GDP growth. While China played down the report, the gurus said it shows how the trade war was causing global supply chains to diversify away from China.