Friends
Stocks once again were under heavy selling pressure this morning with the S&P 500 falling into correction territory (correction territory is defined by a 10% or more decline from the highs). Earnings disappointments from the likes of Amazon and Google fueled the decline in the futures overnight and stocks opened considerably lower.
Now, when I say earnings disappointment let me clarify. On the bottom line both companies beat earnings estimates by a wide margin. But, revenues were a bit light and guidance again had a cautious tone to it. Regardless of bottom line earnings beats, traders are more focused on the negatives with the narrative that things can only get worse from here.
On the economic front, our first look at 3rd quarter GDP showed the economy grew at 3.5%, which was slightly better than expected. The report also showed that inflation was less than expected and consumer spending was strong. All sounds good, right? Well, once again remember, the stock market looks ahead and is seen to be a leading indicator. Right now the market is telling us that all of this good news is about to be short lived. My only caution would be that the market is a predictor, but is only sometimes right in its predictions.
It’s been a very challenging beginning to the 3rd quarter. Good news is being discarded, while bad news is being embraced. That tide may turn, but it appears we have some work to do first.
We’ll let you know how the day finishes out.
