Tag Archives: DJIA

Business, Coronavirus, Stock Market

The Dow Drops more than 6% as “Trump Bump” Vanishes into Thin Air

Photo Collage / Lynxotic

End of Day Bounce-back perhaps triggered by Passage of Aid Package

In spite of unprecedented intervention from the Federal Reserve and Congress the markets continue to plunge, generally every other day, in what has become a volatile and, for many, alarming pattern.

Intraday, the Dow dropped to more than 2000 points lower, for the second time this week. At moment in time the level was below where the Dow sat on January 20th, 2017 when Trump was inaugurated.

Neither the two rate cuts, the second one being a massive 1% “surprise” (which sent rates to zero for the first time in history) intervention on Sunday, nor the trillion dollar stimulus package pushed forward by the White House, appears to have had any significant effect on the consistently declining share prices.

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The Senate today passed the congress approved relief package, which provides for free coronavirus testing and paid emergency leave, and is expected to be signed into law by the President.

As we have pointed out in previous posts, while the novel coronavirus is getting 100% of the credit for the unwelcome bear market and the attendant fears, the market swoon and the pandemic could also be parallel events without any direct causal connection.

Naturally the companies and sectors such as travel which are directly and negatively affected have had large hits to their stock prices based on the catastrophic business outlook.

On the other hand there are companies and business that could even benefit from the shift of economic activity necessitated by the preventive measures that are being universally implemented. For those companies it is the underlying bear market sentiment that can and will, in all likelihood, drag them down along with the rest.

Oil Continues to Plummet as Likely Halt to the Travel Industry Looms Large

The oil shock as mirrored in Exon (XOM) and U.S. Oil (USO) shares continues in spectacular fashion falling over 10% and 16% respectively. This can be seen as a secondary shock in the cascading price depressions influences initially by the production increases used by Saudi Arabia and Russia to start an all out price war, and now being hit by the virtual shutdown of the travel industry. The initial shockwaves reverberated sending the crude prices down 30% while the losses in the socks (and ETF) above are adding to the depressed levels.

Delta Airlines (DAL) was down even more on the outlook for the travel industry dropping an incredible 26.73% today alone. At $23.02 it is hard to believe that the stock was over $63 two days ago. Pending bailout aside, this is indicating that airline bankruptcies are now beyond probable and verging on a strong likelihood. Presumably a bailout would turn the stock price around, but potentially not shield it completely from the bear market across-the-board progression.

Naturally, after crowing and bragging at every uptick and new all-time high in the markets for more than three years, Trump is placing the “blame” for current intensely downward trajectory squarely on the “chinese” coronavirus and attempting to avoid any responsibility for the state of the markets, economy or anything at all on planet earth for that matter.

Naturally, in an election year this is to be expected. At the same time the reality that this bear market has only just begun, the all time high was little more than a month ago on February 12th, does not bode well for his chances, likely against Joe Biden, in the general election this November.

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Breaking News, Coronavirus, Stock Market

Dow Drops Nearly 3000 points – -12.93 percent after Surprise 1% Fed rate cut has no Juice

Photo / Adobe Stock

Bear has begun and shows no signs of Returning to Cave anytime soon

Historic is hardly the word for it. At times like these it seems like we have to repeat to ourselves “it’s just stock prices”. The VIX, a measure of “fear” in colloquial terms, rose 40% to hit the highest point in history at 80, two points above the level that it was at on two previous occasions. Both of those previous occasions were during the 2008 financial crisis.

The unique fact in the mix, this time around, is that these extreme readings in the fear gauge and the obvious volatility that has the Dow up and or down one thousand to three thousand points on any give day and it’s almost “normal” is all happening barely a month from the all time high that was reached on Feb 12th.

And therein, as they say, lies the rub. The bear market that started last week, based on the common but meaningless measurement of a 20% drop from that high, likely has a long time yet to go. Naturally there will be ferocious short covering rallies and even, eventually, slow days without mega up or down moves. But just because the percentages from the high are large, or because the VIX is at its all time high, does not mean that the bear market will be over soon.

The novel coronavirus is clearly a serious event and will cause disruption both economically and in the disruption of our daily lives, but the bear market that was, in truth, long overdue would have happened eventually in any case as bear markets always follow bull markets eventually. The concern is that the remedies and actions by the Fed and the political establishment never addressed the underlying causes and weaknesses of the entire system during the 2008 crisis, dooming us all to re-live that terrible time, potentially with an even more extreme set of circumstances.

Let’s hope that both the health crisis and the parallel financial crisis will be less dangerous and less extreme than it would appear on a day like this one.

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Business, Observation, Stock Market

Dow Plunges in Largest 1-Day Point Drop in History – and it’s Still not Because of the Coronavirus

Photo Collage / Lynxotic – Various

Down nearly 4000 points in Five Days in Correction Territory, but Bear is Still Hiding in Plain Sight

At the time of this writing the DJIA futures are down nearly 400 additional points (1.54%) at 25,161. As is often the case at major market turning points there is talk of corrections (commonly measured as a drop of 10% but less than 20%) and, naturally, afterwards, a probable return to all time highs.

There are ridiculous attempts to “blame” the drop on the election, Bernie Sanders, The Corona Virus and even an intentional combination of all of the above to sabotage Trump’s re-election hopes.

The financial press has a similar job to the President, to calm fears. That’s why there are numerous articles that all say the same thing: don’t worry, corrections are healthy, by definition they represent a decline of 10% or more – and are not the start of a Bear Market. Unless they are.

There are articles advising to buy the dip, or to wait a little longer and then buy the dip. There are literally dozens of articles saying that virtually 100% of the downturn is based on “fears” that can be directly attributed to the Coronavirus.

More honest are the articles that use the word “amid” as in “Dow tumbles almost 1,200 points, 124-year record, amid coronavirus scare”. The word amid implying that the two things – the scare and the drop in stocks are in proximity, yet not necessarily a case of causation and causal correlation.

Naturally, being a part of the world economic situation, the virus and fears that it will spread and become a Pandemic have an impact. But 100%? As if all sellers are literally freaking out together about precisely this one thing?

Just as Summer leads to Fall and Fall Leads to Winter, there’s another Explanation the we should All Consider

The minority of the media weighing in, and from anecdotal evidence it is a tiny, tiny faction of the whole, actually mention the most likely and even obvious “cause” for the market showing a very strong propensity for decline at this juncture. The fact that Bull markets always end eventually and are followed by Bear markets.

Further, that the many all time highs that Trump has been touting at every opportunity were, in reality, the last throes of a bull market that was juiced in every possible way, initially to stimulate the economy after the 2008 “Great Recession” and, more recently, at Trump’s prodding, to help with his re-election efforts.

Optimism has been off the charts, and investing and paying insane sums to invest in companies that have zero profits was, until very recently, considered by many a permanent condition that would just keep expanding, along with the beneficiaries.

So, in the midst of all kinds of likely causes and reasons, the most obvious, the most likely, the most logical and the reason that is being emphasized by the extent that it is being ignored and ruled out stands out clearly, like a beacon in the fog.

A long overdue Bear Market has started. Just as with a virus threatening our health, it is best to be prepared if there is a chance ( possibly, a very significant chance) that it is coming.

Say the B Word, have no Fear, as Forewarned is Forearmed

So, rather than being behind the curve as wishful thinking grips us and makes literally any other explanation than the obvious one more attractive, it’s best to at least come to grips with the Bear Market scenario.

If this is the start of a Bear Market phase, here is what will happen next. This initial drop will continue for hours or days longer but not weeks. That will be followed by a rebound, possibly sharp, that will last a few weeks or even longer – climbing and clawing up takes longer than a straight drop.

Then, right around the time that all the articles are saying the worst is probably over, that all time highs are possible even likely, the next down phase will come. It will be at least as strong and deep as the current one and once it is about halfway through it’s decline many will begin to change perspective and become pessimistic for the first time in years.

So, prepare and be safe, both regarding your health, and finances. Hope for the best but prepare for the worst or, at least, the unanimously unexpected.

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Business, Stock Market

Black Swan? Coronavirus? Bernie Sanders? None of these are the reason for the Huge Stock Drop This Week

And, no, this is not a Conspiracy to Stop Trump from Getting Re-elected

This week, so far, the Dow Jones Industrial Average lost over 1900 points in two days. Although the percentages were not record breaking the point totals qualified as the third and fourth highest loses ever. In the S&P the two day loss percentage was the largest since 2015: 6.3%, while the dollar calculation in market value for that same index was $1.7 trillion, as tabulated by S&P Dow Jones Indices.

In addition to the supposed calculations above the an all time record low for the 10-year Treasury yield was also noted. It is possible that in some cosmic way all of these factors played a role, except perhaps Trump’s delusional conspiracy theory.

You can be sure that if the market continues to decline in a prototypical Bear market pattern, the President will twist this theory and any other that comes to mind in an effort to blame anyone and anything. And, in truth, the coming issues trace back to the stimulus “rescue” actions (TARP) taken in 2008 and many actions not taken since. However, that does not absolve the current occupant of the White House of his ill-advised self-congratulations each time the market made new highs.

There is a perverse tendency to ascribe correlation to virtually anything that is negative in the news on a given day to a concurrent stock market decline. The same bad news on a day the markets rise suddenly morphs into strong “shrugging off” of the “headwinds” or are seen as proof of a “resilient” bullish potential.

From the Ridiculous to the Sublime, Creative Explanations for the Consecutive Down Days Abound

How about Senator and Presidential candidate Bernie Sanders causing $1.7 trillion in losses by threatening to become the democratic nominee – which could happen maybe in July? Or it’s just a “Black Swan” out of nowhere a one in a trillion event that is aimed at some specific detail in your life – like Trump projecting that this is all a plot to ruin his re-election hope. All just reasons to pretend that Bull markets are not followed, inevitably, by Bear markets, which, unfortunately they always are.

However, as counterweight to that pattern of assuming a correlation where there is none, are other facts. Such as the fact that the Coronavirus has been known and killing people for months and during that entire time the markets have risen substantially.

And, further, these kinds of superficial causality explanations fail to add context of anything beyond news stories. For example, this has been a nearly 11 year Bull market, the longest in history and more than twice as long as the 4.5 year average.

The measurements that show a likely peak in sentiment and a potential end (bull markets are always followed by bear markets, without exception) to the climb have been flashing red for some time. Of course, since many pundits are invested, literally, in an endless continuation of rising stock prices, there are those that argue that there were several tiny baby bear markets during the last decade, which would negate the longest ever status.

Many indicators and the wise predictors among asset managers are pointing towards at least a drop of 38% likely, which would qualify as a Bear market, but that is also a very conservative estimate.

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Further, if available data and common sense are taken into consideration, it is possible that the markets could regain what has been lost in the last week and once again enter positive territory for the year. It is not likely, however, that any such bounce would be anything beyond a temporary respite before the Bear is back.

And the Cornavirus? We all hope that it will be contained and we can all rest a little easier. But don’t plan on stocks having a lock on the ups and downs of that saga, anymore that they are trading in lock-step with the trade war with China, for example. It is absolutely possible that both of those issues could be resolved and have no positive impact on stock prices whatsoever. Of course, if that happened there would be a new convenient scapegoat waiting in the wings.

All that being said, for anyone holding substantial sums in the markets, or if you happen to be an incumbent President, there is a dose of double trouble in the wind. Both the rapid plunge in stock prices and the rise of a potential global pandemic are negative and scary. One just doesn’t happen to be the cause of the other.

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Breaking News, Business, Economics, Stock Market

Market Drops on Trade War Escalation: Dow Closes Down 767

photo collage / Lynxotic

Does over 925 points lost by the Dow Jones Industrial Average intraday qualify as a Market Crash? With the NASDAQ down over 4% and Bonds at record low yields, and the Chinese Yuan breaking the psychologically important 7 to 1 barrier against the dollar, it appears the Trade War is getting serious indeed. The Dow closed for the day down 767 points.

After Trump’s now infamous tweet, late last week, that set markets in the US tumbling, now, China’s immediate retaliation plans have been revealed, pushing the markets into a tailspin.

Lowering the currency exchange rate has the effect of countering the tariff by increasing the number of yuan generated by dollar denominated exports. Naturally there are more complex peripheral and ancillary effects that will be debated by economists until the end of time. The People’s Bank, for what it’s worth, claimed that the drop was “driven and determined” by market forces.<p>The yuan is now at its lowest point relative to the dollar since 2008.

The NASDAQ and tech stocks are now down for the sixth straight day. A man who at his inauguration spoke of “the end of American carnage”, and who touts his ability to conjure up stock market gains is now facing a serious problem, in addition to his legal and political woes.

Dow Drops 925 Intraday on Trump’s Tariffs and Yuan Devaluation

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Business, Economics, Politics

Trump Topples Rally with Tariffs: Dow Drops Nearly 600 Intraday

10% on $300 Billion will Commence September 1st…

The DJIA was up more than 300 points when the announcement was made, then it ultimately ended the session down 280. The new tariffs are on the 300 billion in goods that have been, until this point, coming into the country without a toll. There are also 250 billion in Chinese goods that already have a 25% levy attached.

Recent trade negotiations in Shanghai concluded on Wednesday with little or no progress. Talks are scheduled to resume in September.

Speaking on July 30th, before reporters Trump speculated that China may be thinking of delaying a resolution until after the election in 2020, saying:

“They would just love if I got defeated so they could deal with somebody like Elizabeth Warren or Sleepy Joe Biden…. They’ll pray that Trump loses. And then they’ll make a deal with a stiff, somebody that doesn’t know what they’re doing like Obama and Biden, like all the presidents before.”

Donald J. Trump

Calling the tariff a “small additional levy” Trump also said in a series of tweets that China’s promise to buy large amounts of agricultural products from the US, was not kept.

While speaking to reporters this afternoon at the White House, he also threatened to lift the percentage to 25% and beyond, “But we are not looking to do that, necessarily”.

Products that will be included in this new batch of tariffed goods will be consumer electronics such as iPhones, toys and shoes, among other items.

There was some surprise noted, as the meetings and discussions in Shanghai appeared to end on a somewhat positive note, initially. Now, with this announcement, there is a sense of the talks having fallen short of any progress at all.

Fallout of the Trade War to Begin Hitting Home

Trump continues to claim that China will pay these levies, although studies have shown that the consumer in the US will ultimately pay through higher costs on all tariffed goods. The higher prices will also harm sellers in the US due to a reduced volume of sales.

While there is sill also a lot of “carrot” talk, how the negotiations can also take a turn for the better at any time, coming from both sides, it does not appear that there is much substance to be gleaned from these pronouncements.

Since the percentage of some of the products that will be affected, such as toys, include as high as 85% currently coming from China, these tariffs can have a substantial effect on the marketplace.

Also, possibly unintended beneficiaries to the trade war are neighboring countries such as Vietnam and Cambodia, that are already showing signs of increased activity due to the shifting of origin of manufacturing to those countries in order to avoid the levies.

Tariff-man is staying true to his self-given moniker and in September, as the next wave hits, it is yet to be seen what the economic effects will be, either in China or here in the US.

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