Friends
Yesterday’s stock decline was met with some dip buying and by the close much of the damage had been repaired. But, the bears had more conviction today, and there was no dip buying to speak of during this trading session (except for the last 15 minutes of trading). The idea that any deal with China is in serious jeopardy, permeated the psyche of the market, and buyers remained on the sidelines attempting to figure out just what this would all mean for valuation going forward, at least in the near term. We seemed to be sitting in a Goldilocks situation last Friday with a great employment report, low inflation, low interest rates, decent GDP growth and “reasonable” stock prices. It’s amazing how vulnerable this market is to headlines, but market participants cannot ignore the possibility of trade wars and the effects on the economy, earnings and ultimately stock prices a trade war with China would have.
As for today, by the close the Dow Jones Industrial Average was down 473 points to finish the day at 25,965. The S&P 500 was down 48 points to close at 2,884. Gold was up $2 to trade at $1,285 per ounce, while oil was down $1.07 to trade at $61.18 per barrel WTI.
As we mentioned, this week will likely be driven by news headlines. The worry is that what we believed last Friday could all be in jeopardy if a viscous trade war with China ensues. Of course, a tweet here and a well place quote there could change the narrative rather quickly. We’ll continue to monitor the situation. Again, given the amazing advance the markets have seen since the beginning of the year, a pullback is not a surprise or even a bad thing. And, of course, something had to trigger it.
Have a nice evening everyone.
