Equity Markets Roll Over… Investors rushed for the exits as companies reported good, but not stellar, results.
What it means – Some companies, like Nvidia (Nasdaq: NVDA) disappointed investors, some companies like Nordstrom (NYSE: JWN) confused them, and some, like Target (NYSE: TGT) just failed to excite them. Are they worried about the trade war with China? What will happen with the new Congress? If the Fed will raise rates too high? If earnings will stumble? In a word, yes.
After pricing the markets for perfection for months, investors woke up to the possibility that there might be an obstacle or two in our way. We’ll see if the holiday season can lift the equity cloud, but unless sales are off the charts, that seems unlikely.
Durable Goods Orders Disappoint, September Numbers Revised Sharply Lower… Orders excluding transportation inched up just 0.1%, but the September figure was revised from 0.1% to negative 0.6%.
What it means – Orders on everything from primary metals to defense aircraft took a beating. The headline number was down 4.4% this month, and last month’s 0.8% gain was revised to negative 0.1%. Even core capital goods, a proxy for business spending, took a hit, with current orders flat and last month’s 0.1% gain reduced to a 0.5% loss. The September revisions will dampen third-quarter GDP, and the current weakness will weigh on fourth-quarter growth. The tone of the report reflects what business leaders have been telling us with their earnings guidance, the economic future is uncertain.
Existing Home Sales Up 1.4% in October, Down 5.1% Over Last Year… This marks the biggest annual drop in four years.
What it means – Sales out west are dropping the fastest, which makes sense because that’s where prices were up the most. The national median sale price inched up to $255,400, which is still 3.8% higher than last year, but this train is clearly slowing down. It remains to be seen if this is simply a stop along the way or if it turns into a train wreck.
Housing Starts Inch Higher, Up 1.5% in October… Permits were 0.6% lower in October than in September.
What it means – The long, slow flattening in the housing market continues. While housing starts increased last month, they are still 2.9% lower than at this point last year, so we’re adding less inventory than we did in 2017. This wasn’t about Hurricane Michael, as housing starts in the South were up 4.7%. This is more about builders looking out at demand and recognizing they have a number of headwinds to consider. Higher mortgage rates chip away at affordability, while labor shortages and higher material costs drive up home prices. None of this shows signs of changing in the weeks and months ahead. We can expect more pain in housing as we close out 2018 and start 2019.
Cryptocurrencies Become Kryptonite… Bitcoin dropped below $4,500, and Ether fell under $135, as investors sold cryptocurrencies to their lowest levels since mid-2017.
What it means – Somewhere, there’s a cryptocurrency guru telling us to buy all we can because this is going to be huuuuge. Or maybe he’s too busy, desperately trying to buy a drink with bitcoin, but the transaction is taking three hours. There’s no doubt that digital dollars have lost their luster. It’s hard to see how anyone would consider them “money” when the leader of the pack, bitcoin, goes from $1,000 to $20,000 in a year, and then drops back to $4,400.
Data supplied by Dent Research/Delray Beach Publishing
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