Oct 23. Sometimes the wall of worry collapses
–This morning it’s about stocks as US equity futures test lows from two weeks ago. Russell is already well through those lows. In Asia, even after China’s vow of support to start the week SHCOMP has reversed and is down 2.25%, Heng Sang is near a new low -3% and Kospi is -2.6% a new low for the year. Yesterday there were signs of trouble in financials, with XLF (financials etf) -2.14% to a new low close on the year. Individual bank stocks and other financials were weak; as an example BofA was down 3.3% yesterday and Blackrock (BLK) was -2.3, bringing its decline to 34% from its high in January. European indexes also at new lows, as a Reuters article summarizes nicely “…amid ongoing worries on Brexit, Italy’s budget, Saudi isolation, trade wars, Chinese growth and US interest rates.” The cannabis crowd has latched onto the ‘buy the rumor, sell the fact’ adage like a bag of Cheetos, with pot stocks down consistently since Canada legalized on Oct 17. The Canadian Horizons Marijuana Life Sciences etf fell nearly 12% yesterday. Maybe we can just binge watch something on NFLX, which has come down hard from the earnings report euphoria of last week and is now tapping the debt markets for another $2 billion.
— Rate trading in the US was quiet, with gains of 1-2 bps across the euro$ strip. Heavy buying in EDZ8 as a ‘tweak’ to IEOR is said to be set for the December FOMC (EDZ8 gained 2.5 to close 9725.5). Even if IEOR is only raised by 20 bps again, I don’t fully see why forward libor has to come down. Price action in financials is telling us that funding and liquidity issues should not be ignored. Hey, did you ever hear of gold? They can’t hack it.
NOTE: These are NOT recommendations. Well, except for the gold thing.
