Lower US Index Prices Cool Enthusiasm This Morning


Although major U.S. stock indicators aren’t soaring upward this morning, they’re not really plummeting either, although the S&P 500 early activity as of 10 o’clock brings value down from $2926 to $2920 and Dow Jones activity reflects a fall in value from $26,460 to $26,420. (small potatoes?)

As mentioned yesterday, some analysts are casting this market narrative as a struggle between emerging tech stocks and worn-out dinosaur industrial stocks that are under pressure and experiencing losses.

“Facebook reported first-quarter 2019 earnings of $0.85 per share that lagged the Zacks Consensus Estimate by a whopping $0.81,” wrote Zacks analysts, rolling back the tape to the end of the market session yesterday in a piece posted this morning.  

“However, revenues of $15.08 billion comfortably surpassed the Zacks Consensus Estimate of $14.97 billion. Monthly active users (MAUs) were 2.375 billion, up 8.2% year over year. Daily Active Users (DAUs) were 1.56 billion on average for March 2019, increasing 7.8% year over year and representing 66% of MAUs. Shares of Facebook was up 5.9% following the earnings result.”

By contrast, Zacks explains the down side, with 3M, a tape and packaging products maker, as the poster child:

“3M reported first-quarter 2019 adjusted earnings of $2.23 per share, which lagged the Zacks Consensus Estimate of $2.50. The company reported total sales of $7,863 million, which missed the Zacks Consensus Estimate of $8,091 million. Shares of 3M Company crushed 13% following the earnings result, reflecting its largest single-day decline since Oct 19, 1987.”

For some longer-term analysis, we can turn to a discussion of Federal Reserve activity, or inactivity, in the form of an interview this morning between Mike Swanson and Ike Iossif.

Here, Iossif suggests that we may see a replay of the 2016 trend where the Federal Reserve delayed interest rate activity and the markets responded positively.

“The Fed got scared,” Iossif said, noting that the end result was a boost of liquidity around $5.5 billion in his estimation.

“That’s quite a lot of liquidity,” Iossif said. “Now we can see the structure looks similar to what happened (in 2016).”

Iossif projects a possible S&P 500 level around $3010 and lays out some prognostications for what comes next, which you can see in the corresponding video.

Essentially, we are still enjoying the fruits of low interest rates as the Fed promises not to raise rates, but says it’s not doing it under presidential duress.

There seems to be consensus that nobody really wants interest rates raised, and as Iossif points out in a roundabout way, our economy seems to be sufficiently cold that we don’t need to raise interest rates yet. However, as eminent stock wizard Alan Greenspan has indicated over the past year, we might still be due for a market correction. The question is: when is it coming?