With continued uncertainty in global markets, today two legends in the business sent King World News powerful pieces about the chaos in global markets and how it’s all become such a frightening charade.
December 8 (King World News) – Key portions of today’s note from Art Cashin: “Plunge In Crude And Other Commodities Sink Stocks – Oil went into near freefall Monday morning in a somewhat delayed reaction to Friday’s inaction by OPEC. The effect of oil on stocks was not instant and immediate. In fact, early stock futures looked to a higher opening only to roll over as the opening bell loomed.
Stocks opened lower and continued to recede over the next two hours.
We reached what would turn out to be the day’s lows just as the closing bell was ringing at the European bourses.
Stocks tried to regroup and rally but were only able to pare less than one- third of the day’s losses.
The markets then rolled over and fell back to retest the late morning lows around 1:00.
For most of the afternoon, the indices would repeat those prices – retesting the morning low and watching rallies fail at approximately the same level that they had failed at around noon.
That process ended in the final hour, when the bulls managed to push higher and cut the day’s loss in half.
The bulls even got help from a mild market on close buy program, which managed to swell the final volume to a rather respectable 953 million shares.
Data Dependent You Say – My insightful friend, Peter Boockvar over at the Lindsey Group picked up on this morning’s NFIB release and a bit more.
Here’s a bit of what he wrote:
The US NFIB small business optimism index fell to 94.8, the lowest level since June from 96.1 in October and that is the 2nd lowest print since early 2014. Plans to Hire were unchanged while those expecting Increased Capital Spending fell 1 pt. Those that Expect a Better Economy fell 3 pts to -7%, the lowest since June and those that Expect Higher Sales fell 5 pts to -1%, the weakest since March ’13. Those that said it’s a Good Time to Expand was down by 1 pt and those seeing Positive Earnings Trend fell by 3 pts to -19%, matching the lowest level since March.
The positive within the data was Net Compensation Plans which rose by 3 pts to 20%, matching the best level since 2001. Finally in this recovery, wage growth should begin to accelerate but at the price of squeezed profit margins. The NFIB though did say “it is not clear how increased comp is divided between take home wages and rising benefits.” Those that expect Higher Selling Prices rose 1 pt to the most since July but is just back in line with the 6 month average.
In describing the report the NFIB said this, “During this holiday season, small business owners are finding little to be hopeful or optimistic about including the economy in the New Year. This month’s index continues to signal a lackluster economy and shows that the small business sector has no expansion energy whatsoever.”
For entertainment purposes I’m including the rest of Bill Dunkelberg’s commentary because the guy is a curmudgeon who went on a rant in the press release:
“Society is showing stress fractures all around, on college campuses, mass shootings, terrorist attacks, major cities and their police forces, scandals and incompetence rampant in D.C., a Justice Department politicized, a political IRS and EPA running roughshod over individual rights and personal freedom, a Fed that can’t make up its mind about 0 interest rates “for too long”, a Congress that can’t seem to stay in the “power ring” with the President for a round, a President who thinks that our most important problem and threat is climate change (formally known as global warming) and is willing to punish the current economy for inconsequential benefits in the future just to set an example for the world (right!). It feels like we are starting to “lose it”, to dissemble.”
Terror And Commerce – Yesterday, I was asked on Squawk on the Street why the markets had such muted response to the tragedy at San Bernardino. I replied that while it was awful, it was seen as insular. It was a soft target, which the assailant was very familiar with. If there were to be a U.S. based event that was more random, as the Paris strike was, the reaction would be broader. If, for example it struck at a mall, the economic consequences could be huge. Recall President Bush’s response when he was asked, after 9/11, what a patriotic populace could do to help the country – he replied “Go Shopping!” He meant it.
Overnight And Overseas – Chinese trade data looked a bit limp and added to global angst over falling oil and commodities. Shanghai and Hong Kong both fell over 1%. Tokyo saw better economic data but the strong yen spooked exporters, sending the Nikkei down over 1%. India lost a little bit less but most emerging markets got clocked.
In Europe, stocks were generally lower but only about half the level of the Asian rout. Crude oil has stabilized a bit and is churning just south of $38.
The dollar backs off from yesterday’s rally but that gives no help to metals, which are mostly lower with gold, silver and nickel leading that parade. Grains, too, are mostly lower.
Consensus – Traders will continue to home in on crude. There will also be a three year Treasury auction at 1:00. Futures look weak so we’ll look to Thursday’s lows (circa S&P 2045), if things really get ugly. Stick with the drill – stay wary, alert, and very, very nimble.”
Also, this is from Raymond James Chief Investment Strategist Jeffrey Saut’s note today: OPEC met last Friday in Vienna, eliciting this email from one of our financial advisors:
“I may be the only one who watched the entire OPEC press conference. After the ‘official’ press conference was over, as the secretary general was leaving, reporters surrounded him. They started asking questions, but there was no audio. About halfway through the second question, they worked in a mic. He was rattled by one of the questions. He then said ‘We’re going to do this ONE MORE TIME.’ He then said it again, ‘one more time.’ I took it as we’re going to stick with this strategy until the next meeting.”
One of our energy analysts responds to the financial advisor, “The quote you cited is interesting and I haven’t seen it mentioned in the press, but we shouldn’t read too much into this. First, the secretary general of OPEC is not a policymaker but merely a bureaucrat, so he cannot speak for what member states will eventually do. Second, it’s worth emphasizing that OPEC didn’t ‘raise production’ at Friday’s meeting. They merely went through a paper exercise of adjusting their (symbolic) production target to where actual production already is. Even if they wanted to raise production, the fact of the matter is that even Saudi Arabia has almost no spare capacity left. (This, by the way, means that they couldn’t respond in the event of a war or another unforeseen supply disruption.)”
The Martin Wolf article from December 2nd went on to note, “People tend to believe that oil is an exhaustible resource whose price is likely to rise over time. . . . Part of what is shaking these assumptions is the U.S. shale revolution. From virtually nothing in 2010, U.S. shale oil production has risen to around 4.5 million barrels a day.” Further in the article, Martin writes, “In its World Energy Outlook 2015, the IEA forecasts a price of $80 a barrel in 2020.” Yet the article continues, “Forget peak oil, over the past 35 years the world has consumed around 1 trillion barrels of oil. Over that same period, proved oil reserves have increased by more than 1 trillion barrels.”
And evidentially, the crude oil markets “listened” because yesterday oil got pounded (-5.6%). As seems to be the case recently, the “crude crash” spilled over into the equity markets, leaving the S&P 500 (SPX/2077.07) off 14.6 points and back into its 2070 – 2080 support zone. If that level doesn’t hold, “they” will gun for the December 3rd intraday low of 2042. My model, however, still favors the upside; but if 2070 “falls,” that may flip it negative. Of worry is that there were more than 300 new annual lows in yesterday’s trading. ***To hear Dr. Stephen Leeb’s powerful audio interview CLICK HERE OR ON THE IMAGE BELOW.
***ALSO JUST RELEASED: Is This What Has The Gold Shorts So Worried? CLICK HERE.
***To listen to billionaire Eric Sprott discuss this week’s panicked trading and what’s directly ahead, you can listen to his extraordinary KWN audio interview by CLICKING HERE OR ON THE IMAGE BELOW.
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