Sell the rattling news event
“Buy the rumor and sell the news.” - Anonymous
“It would seem there is a specific reason behind every day’s market action, or at least journalists think so.” – Norman “Fearless” Fossback (Stockmarket Logic)
What role does news play in markets? Norman Fossback writes that it is hard to say. But he suggests there are factors that determine the impact of a news event on stock prices.
These factors include an event’s financial significance and the extent to which an event deviates dramatically from market expectation. In other words, stock perturbations reflect more the event’s relational to the market’s expectations, than to the actual news.
Different events can have different degrees by which their impact can be efficiently incorporated into stock pricing. For example, catalyzing activity in the supply chain of soy is hard to measure or time.
Which brings us to the week now passed -- It was not all about the news, until the end, when it was.
There has been a somewhat steeply inclined downslide in the works, as discussed in our blog post SHIFTING TRADE EXPECTATIONS GIVE PAUSE – – this week’s S&P decline of 1.32% follows skinny dips last week and the week before and the week before… with the trend on May 31 (Day 104) having the gauge at +9.8% for the year-to-date (the whole trend being basically up since last December’s house cleaning) tho down from a high on day 85 of +17.5% for year.
There was a decline along the week, but an actual mini-rush for the exits on Friday, when the Dow dropped 300 points because (President?) Trump tweeted his plan to slap tariffs on Mexico (just basically for the hell of it). A fascinating backdrop to these Tweets is found in Trump's former brief career as a NY Tab publicist and Wall St. stock tout.
Some headlines:
*Trump’s Tariff Threat Rattles Markets and Prompts Outcry
*American farmers, affected by both the trade war and surging floodwaters, are facing an uncertain year.
*As China Takes Aim, Silicon Valley Braces for Pain
*President Trump’s decision to punish Mexico with tariffs sent stock prices sliding
*New Tariffs Against Mexico Signal the U.S. Isn’t a Reliable Negotiating Partner
*Wall Street is betting the president won't let stocks collapse
Let’s look at two political ends of the rich folk spectrum.
Said Michael Bloomberg:
Said the WSJ August Editorial Board, after pointing to His Nibs’ good traits as a tax reformer and deregulator :
Discussion upon Financial Significance and Market Expectation in relation to Event.
In significance - To me it seems as the effect of these tariffs would be hard to mark as they'd ripple thru the supply chain. But maybe not impossible, as WSJ and others are on the case, and they gauge that Trump's threats could cover $360 billion in goods, a good hunk of GDP. Industries in line for disruption would be automotive, energy, food, and so on. In 2018, 76% of desktop PCs and servers arrived from Miexico,and 62% of TVs. Union Pacific gained $2.5 billion in revenues last year freighting stuff from Mexico - 12% of its overall freight rev. People are watching for FedEx earnings reports - in Dec. they'd seen Euro slowdown. That was bad news that caused buy calls. What about cerveza? - can Corona and Modelo quaff up price increases? I'd say this news has legs.
In relation - It wasnt that very long ago when investor folk in their secrot souls were sure this tarrif war would work itself out - that, of course, sound heads would be prevalent, and that the US Admin's position was 80% blunderbuss and bound to moderate - tut-tut.
That changed a few weeks ago when a promising trade summit began with ultraTrump Bluster and ended with no agreement (and more bluster). Still, investors probably still want to think they know how this will end. And there are completely unrelated reasons to cut holdings to begin with - once that were top of mind for many when they'd discounted the trade war peril.
More from the WSJ: “The best scenarios is that this tariff threat is The Siberian Candidate's familiar bluster… stock markets fell only about -1.4% which suggests investors also think Mr. Trump will walk back from the ledge.” Maybe over the weekend the investors will drink enough wine and vodka to believe the WSJ on this. However, I think it will dawn on them at a flash that stuff is really truly at stake. Tomorrow was made for some, for all we know. Maybe the Mexicans, Europeans, and Chinese.
Forward Fast - At 11 am Monday Nasdaq, SA&P and Dow are each up about 0.3%. At noon the three together averaged down -0.65%. At the end of the day the Dow was up very slightly (to 24,819, or 0.02%), the S&P 500 down a bit more than slightly (to 2744, or 0.28%) and the Nasdaq into correction territory (at 7333, or down 1.61%). The Nasdaq loss is laid to Regulatory issues the Trump Admin may be preparing for Google and Facebook.
Tuesday sees some blowoff from something that had been bubbling. Trump Trade War is changing the economic outlook such that Fed governors have begun talking about rate cuts - earlier in the year, to Trump's and "the Market's" chagrin, they were still moving up rates up. Blowoff, you say? How about, blowtop?! Dow went up +2.06% to 25,332; Nasdaq uncorrects to 7527 (up 2.65%) and S&P vaulted 2.1% to 2803. These moves are based on salve to sensitive investor confidence, as Fed Pres. Paulson echoed the recent rate cut mantra. Trump wants rate cuts - and he will get them because he can do whatever he wants to do. My Friday assertion that investors will realize things could go bad seems off.
Related links
https://www.macrotrends.net/2490/sp-500-ytd-performance
Week ending May 31 2019
Stocks
S.&P. 500 2,752.06 || –36.80 ||–1.32%
Dow 24,815.04||–354.84 || –1.41%
Nasdaq 7,453.15 || –114.57 || –1.51%
Bonds
3-month 2.35% –0.0065
2-year 1.92% –0.0199
5-year 1.92% –0.0131
10-year 2.13% –0.0088
30-year 2.57% –0.0123
Commodities
Crude Oil 53.36 || –$3.23 || –5.71%
Natural Gas 2.46 || –$0.08 || –3.26%
Gold 1305 || 18.43 || 1.43%
Europe
FTSE 100 7,161.71 || -56.45 || -0.78%
“It would seem there is a specific reason behind every day’s market action, or at least journalists think so.” – Norman “Fearless” Fossback (Stockmarket Logic)
What role does news play in markets? Norman Fossback writes that it is hard to say. But he suggests there are factors that determine the impact of a news event on stock prices.
These factors include an event’s financial significance and the extent to which an event deviates dramatically from market expectation. In other words, stock perturbations reflect more the event’s relational to the market’s expectations, than to the actual news.
Different events can have different degrees by which their impact can be efficiently incorporated into stock pricing. For example, catalyzing activity in the supply chain of soy is hard to measure or time.
Which brings us to the week now passed -- It was not all about the news, until the end, when it was.
There has been a somewhat steeply inclined downslide in the works, as discussed in our blog post SHIFTING TRADE EXPECTATIONS GIVE PAUSE – – this week’s S&P decline of 1.32% follows skinny dips last week and the week before and the week before… with the trend on May 31 (Day 104) having the gauge at +9.8% for the year-to-date (the whole trend being basically up since last December’s house cleaning) tho down from a high on day 85 of +17.5% for year.
There was a decline along the week, but an actual mini-rush for the exits on Friday, when the Dow dropped 300 points because (President?) Trump tweeted his plan to slap tariffs on Mexico (just basically for the hell of it). A fascinating backdrop to these Tweets is found in Trump's former brief career as a NY Tab publicist and Wall St. stock tout.
Some headlines:
*Trump’s Tariff Threat Rattles Markets and Prompts Outcry
*American farmers, affected by both the trade war and surging floodwaters, are facing an uncertain year.
*As China Takes Aim, Silicon Valley Braces for Pain
*President Trump’s decision to punish Mexico with tariffs sent stock prices sliding
*New Tariffs Against Mexico Signal the U.S. Isn’t a Reliable Negotiating Partner
*Wall Street is betting the president won't let stocks collapse
Let’s look at two political ends of the rich folk spectrum.
Said Michael Bloomberg:
“The administration plans to harm businesses north and south of the border, and to impose additional new taxes on U.S. consumers, not to remedy a real or imagined trade grievance but to force Mexico to curb migration to the U.S.”
Said the WSJ August Editorial Board, after pointing to His Nibs’ good traits as a tax reformer and deregulator :
“…out of the blue late Thursday Mr. Trump announced escalating tariffs of up to 25% on U.S. imports from Mexico for alleged sins … Mr. Trump has come to view tariffs as a blunt-force tool to achieve any diplomatic goal…. Senate Republicans need to get off their sedan chairs and send this President a message on trade or they may be in the minority in 2021.” [Ed. Note: That ships sailed.]……..
Discussion upon Financial Significance and Market Expectation in relation to Event.
In significance - To me it seems as the effect of these tariffs would be hard to mark as they'd ripple thru the supply chain. But maybe not impossible, as WSJ and others are on the case, and they gauge that Trump's threats could cover $360 billion in goods, a good hunk of GDP. Industries in line for disruption would be automotive, energy, food, and so on. In 2018, 76% of desktop PCs and servers arrived from Miexico,and 62% of TVs. Union Pacific gained $2.5 billion in revenues last year freighting stuff from Mexico - 12% of its overall freight rev. People are watching for FedEx earnings reports - in Dec. they'd seen Euro slowdown. That was bad news that caused buy calls. What about cerveza? - can Corona and Modelo quaff up price increases? I'd say this news has legs.
In relation - It wasnt that very long ago when investor folk in their secrot souls were sure this tarrif war would work itself out - that, of course, sound heads would be prevalent, and that the US Admin's position was 80% blunderbuss and bound to moderate - tut-tut.
That changed a few weeks ago when a promising trade summit began with ultraTrump Bluster and ended with no agreement (and more bluster). Still, investors probably still want to think they know how this will end. And there are completely unrelated reasons to cut holdings to begin with - once that were top of mind for many when they'd discounted the trade war peril.
More from the WSJ: “The best scenarios is that this tariff threat is The Siberian Candidate's familiar bluster… stock markets fell only about -1.4% which suggests investors also think Mr. Trump will walk back from the ledge.” Maybe over the weekend the investors will drink enough wine and vodka to believe the WSJ on this. However, I think it will dawn on them at a flash that stuff is really truly at stake. Tomorrow was made for some, for all we know. Maybe the Mexicans, Europeans, and Chinese.
Forward Fast - At 11 am Monday Nasdaq, SA&P and Dow are each up about 0.3%. At noon the three together averaged down -0.65%. At the end of the day the Dow was up very slightly (to 24,819, or 0.02%), the S&P 500 down a bit more than slightly (to 2744, or 0.28%) and the Nasdaq into correction territory (at 7333, or down 1.61%). The Nasdaq loss is laid to Regulatory issues the Trump Admin may be preparing for Google and Facebook.
Tuesday sees some blowoff from something that had been bubbling. Trump Trade War is changing the economic outlook such that Fed governors have begun talking about rate cuts - earlier in the year, to Trump's and "the Market's" chagrin, they were still moving up rates up. Blowoff, you say? How about, blowtop?! Dow went up +2.06% to 25,332; Nasdaq uncorrects to 7527 (up 2.65%) and S&P vaulted 2.1% to 2803. These moves are based on salve to sensitive investor confidence, as Fed Pres. Paulson echoed the recent rate cut mantra. Trump wants rate cuts - and he will get them because he can do whatever he wants to do. My Friday assertion that investors will realize things could go bad seems off.
Related links
https://www.macrotrends.net/2490/sp-500-ytd-performance
Week ending May 31 2019
Stocks
S.&P. 500 2,752.06 || –36.80 ||–1.32%
Dow 24,815.04||–354.84 || –1.41%
Nasdaq 7,453.15 || –114.57 || –1.51%
Bonds
3-month 2.35% –0.0065
2-year 1.92% –0.0199
5-year 1.92% –0.0131
10-year 2.13% –0.0088
30-year 2.57% –0.0123
Commodities
Crude Oil 53.36 || –$3.23 || –5.71%
Natural Gas 2.46 || –$0.08 || –3.26%
Gold 1305 || 18.43 || 1.43%
Europe
FTSE 100 7,161.71 || -56.45 || -0.78%
Comments