Step Back

Step back.  Stocks rallied yesterday as the US and Iran signaled an end to the escalation of hostilities following an Iranian missile strike on Tuesday night. Strong economic numbers continue to bolster rising stocks.

 

N O T E W O R T H Y

 

The honey badger don’t give a ****.  You can fill in any expletive you like, but the statement comes from a popular meme that circulated several years ago.  The meme came from a viral video describing the fierce attitude of the honey badger who keeps on going (mostly eating), even when stung by a horde of bees or bitten by snakes.  Perhaps it is time that we consider retiring the bull as the spirit animal of the stock market and replace it with the honey badger.  The behavior of stocks in the past several years demonstrates that investors are willing to push stocks up in the face of conventional danger with very little retreat.  You may have read headlines like “stocks continue to climb the wall of worry”, which pops up now and again.  In the olden days (like a few years ago) when tensions rose, stocks retreated a bit and consolidated, awaiting a new stimulus that would define the market’s next move.  Today, what might have been considered “bad” news may not affect the market at all while good  news is most likely to cause stocks to soar, even if the news is expected. Don’t get me wrong.  I am not saying that the market shouldn’t be going up as interest rates remain low, employment continues to be strong, the consumer is buying confidently, and corporate profits proceed to grow (albeit at a slower pace). These are all good reasons for why the near term outlook for stocks remains constructive (that is a Wall Street term for positive). Clearly if any of those factors change, the climate may change… or will it?  To sum it up, even though the spirit of resilience may pervade the market today, one wonders if this attitude is setting us up for some gut wrenching volatility in the future.  What is clear, based on the numbers, is that long term investing pays off and by taking a long term approach investors can weather even the worst storms.  The S&P500 has returned an annual average of 9.8% over the last 90 years… perhaps the tortoise might be a strong candidate as well.

 

THE MARKETS

 

Stocks traded up yesterday after both the US and Iran appeared to be backing away from tensions. President Trumps evening tweet turned stocks around and his midday press briefing gave the bulls the signal they needed to push the buy buttons.  The S&P500 traded up by +0.49%, the Dow Jones Industrial Average climbed by +0.56%, the Russell 2000 rose by +0.32%, and the NASDAQ Composite Index jumped +0.67% to a new high. Bonds pulled back and 10-year treasury yields climbed by +6 basis points to 1.87%.  Oil retreated by -4.93% as expected. Gold also retreated for the first time in eight sessions, giving up -1.14%.

 

NXT UP

 

– A lot of Fed-speak today.  Vice Chair Richard Clarida, Minneapolis Fed President Neel Kashkari, New York Fed’s John Williams, Richmond Fed President Thomas Barkin, Chicago Fed President Charles Evans, and St. Louis Fed President James Bullard will all speak today.

– The Treasury will sell $16 billion 30-year bonds.

– KB Homes and Intuitive Surgical will release results after the bell. Bed Bath & Beyond’s post bell announcement of a miss combined with a pull back of future guidance has the stock trading down by around -14% in the pre-market.

 

daily chartbook 2020-01-09

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