Stocks opened higher but then continued to retreat with investors moving into more safe investments like utilities and bonds. Earnings continue to show strength, but rumors of a global economic slowdown persist. At the close the Dow tumbled to a 608-point loss at 24,589. (ouch) Trading volume was down for most of the day but spiked at the close. Tesla and Microsoft report earnings after the close and the numbers look good.
Boeing reported earnings that bested guru estimates and, as icing on the cake, the company increased its forward guidance. Boeing delivered 190 commercial aircraft in Q3 and said its on track to deliver a total of 810 airplanes this year. Margins are up as they work to squeeze suppliers and in the defense business they secured several new contracts to include the T-Z trainer. For the quarter Boeing’s top line grew 4% and the bottom line jumped 37%. Shares were higher in trading as the report was well received.
In economic news US housing starts fell 5.5% in September coming in below estimates and making this the 4th month in a row of declining sales. This could help explain the fall in lumber prices and Random Lengths noted that several mills in Canada and the US are beginning to curtail production by cutting shifts or going on extended maintenance outages. Some gurus thought the decline was hurricane related but that is proving not to be the case and is more likely related to affordability. This trend bears watching.
Deutsche Bank, the largest bank in Germany reported lower than expected results today sending shares down the hatch like a mug of beer during Oktoberfest. Meanwhile the German economy reported a weak PMI reading as factory orders contracted for the first time since 2014. The Bundesbank attributed the slowdown to trade issues and financial market volatility as well as issues like Brexit and Italian budgets. Here are Greystone however we attribute Germany’s troubles to Tesla. Why? German car companies are the dominant force in the German economy employing 1 in every 7 workers. Gurus feel that German car companies have been complacent in allowing Tesla to gain a huge technological advantage in the fast growing EV marketplace. Buyers are choosing Tesla over brands like BMW. To partly prove our point about issues facing German car makers, here is a link to our Facebook page showing acres of parked Volks Wagons at the old Satsop nuc site in Washington State. These VWs are victims of the diesel emission scandal and might be emblematic of legacy headwinds in German auto manufacturing. It is an amazing sight and begs the question….”Was ist los?”