Ah, what’s a good October without a 600-point intraday selloff! Economic growth worries caused stocks to continue yesterday’s pullback with the Dow off 492 at 26,078. Trading volume was higher, but stocks did trade up from a 600-point intraday low. With corporate stock buybacks being suspended pending the Q3 earnings report season, a major source of buying has moved to the sidelines. For example, Microsoft three weeks ago announced a $40 billion share buyback and a 10% dividend increase but the buyback is on hold until a week after the company reports earnings on the 22nd of October. Treasury bonds moved higher in a flight to safety and the 10-year yield fell to 1.59%. Gold also moved back up to $1,505 an ounce.
Yesterday’s weak ISM manufacturing report is the latest indicator of global economic stress caused by the US-China trade war. Tariffs slow things down. Since this in now the second weak ISM reading in a row, market gurus have become keenly focused on other data points in an effort to ascertain if this is a legit trend that might derail a strong US consumer. Today the ADP private payroll data came out showing that 135,000 private payroll jobs were created which was below expectations calling for 157K new jobs. Within the report however, job gains for small business was good meaning that economic growth might be shifting from Wall Street to Main Street. All eyes are now on Friday’s September jobs report which could confirm fears if a weak number comes out or calm the waters if a good report comes out.
Luxury home builder Lennar reported better than expected earnings sending shares higher. Revenue gained 3% and net income fell 1% with was better than the 6% decline that gurus were expecting. Deliveries were up 7%, new orders were up 9% and selling prices gained 3%. CEO Stuart “Stu” Miller said that underlying housing markets are solid due to low unemployment and a strong consumer.