Equity traders remained on the sidelines once again as the three major averages are officially in correction territory. As 2019 looms closer, more-and-more pundits are reducing their outlook for economic growth. The not to long-ago 3% forecast has now settled closer to 2.3%-2.5%. That would also be well below the 4.2% and 3.5% gains reported, respectively, in the second and third quarters of 2018, and perhaps less than the 2.5% GDP improvement expected in the current quarter. Also, the “R” word is appearing in the daily headlines as some economists are predicting a recession on the horizon. For the week, the Dow and the S&P 500 fell 1.2%. The Nasdaq Composite pulled back by less than one percent, but small and mid-cap stocks were negative by 2.5%. And for those who subscribe to the Dow Theory, transportation stocks were again badly bruised with the Dow Transports falling 4.4% and well off their September highs. Technology and utility stocks were the only two sectors in the green, each moving higher by 0.6%. Energy stocks fell over 3.5% and financial names were lower by about 3%, on average.
Non-manufacturing activity slowed from its once-formidable rate of growth in November, while manufacturing, albeit rebounding last month, held below the levels of August and September. Further, our foreign trade gap has reached its highest point in a decade, on easing exports. Job growth moderated in November, with just 155,000 new jobs added. That made it two months in the past three in which this predictor has disappointed. Adding to the concerns, the Federal Reserve’s 2019 interest-rate stance remains hazy as does the outcome of trade talks with China. Finally, crude oil prices edged lower despite production cuts by OPEC, as demand is still not keeping up with the reduced supply.
Market technical are also troublesome. The New York Stock Exchange advancing stocks for the week were at 782 compared to 2,317 declining. And only 89 stocks made new 52-week highs compared to 957 new lows. The only technical indicator that was encouraging is that stock prices have tumbled on lower than usual volume. However, that may too come to an end as tax-selling may bring on more investors unloading some losing positions before year-end. At times such as these, and particularly with company fundamentals still sound, the best strategy is to keep calm and stay the course. Indeed, one should not be tempted to make sudden shifts based on talk show headlines, but a cautious and conservative stance does remain prudent.
On the earnings front, we have two blog candidates reporting earnings early this week: Oracle Corp. and Jabil, Inc., both looking to best last year’s earnings by about ten percent.
Here is the answer to last week’s trivia question: In 1914, Greyhound Bus Lines was founded in Hibbing, Minnesota. From 1987 to 1998, the company’s operations were controlled by? Soap maker Dial Corp., The U.S. Department of Transportation, Amalgamated Transit Union or National Trailways Bus System. Answer: Dial Corp. as the company had become a conglomerate with its 1970 acquisition of meat producer Armour and its Dial soap product line.
Today’s Trivia Question: Japan’s Takeda Pharmaceutical Co. is in the process of closing on its $62 billion acquisition of rival Shire. Shire, specializing in drugs for rare diseases, has its headquarters in? Basil, Switzerland; Kenilworth, NJ; Kyoto, Japan; or Dublin, Ireland.