Friends
It’s good to remember that stocks can go down too. With the run we have had over the last few months one could hardly blame the bulls if they became a bit complacent. The rating agency Fitch downgraded the debt of the United States yesterday afternoon so you could attribute today’s weakness to that if you so choose. I really don’t think that was the reason we saw stocks tumble today. Signs have been flashing during this earnings season, warning investors that a lot of good news was already priced into this market. Good results have often not translated into good share price action during this earnings season. Valuations had gotten stretched once again, so if you are a long-term bull, a little reset is healthy.
As for today, by the close the Dow Jones Industrial Average was down 348 points to finish the day at 35,282. The S&P 500 was down 63 points to close at 4,513. The Nasdaq Composite Index was down 310 points to close at 13,973. Gold was down $7 to trade at $1,971 per ounce, while oil was down $1.62 to trade at $79.75 per barrel WTI.
We saw a much hotter than expected ADP private payroll number this morning indicating that the employment picture continues to be solid. We will get the non-farm payroll number on Friday. But with GDP numbers trending higher not lower and a robust job market, the talk of a hard or soft landing is dissipating. Perhaps there will be no landing at all. And to that end we are seeing the yield curve uninverting (is that a word?) some – short rates ticking lower while longer term rates are ticking higher. Remember, the yield curve has been inverted (shorter maturity yields higher than longer maturity yields) for a while now as market participants have been preparing for recession (hard landing). The steepening, though modest still, of the yield curve is/would indicate that the economy is not heading for recession. And, if it’s not heading for recession, what is the Fed to do (after all they have been trying to create a recession to kill inflation for a year now)? Well, that’s a lot to chew on for one day. We have Apple’s earnings after the close tomorrow and the jobs report on Friday. Buckle up.
Have a nice evening everyone.
