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Thursday October 25, 2018

// October 25th, 2018 // Comments Off on Thursday October 25, 2018 // Daily News

A lot just happened in markets over the last 24 hours: Here’s what you should know

The Dow Jones Industrial Average regained over 300 points in Thursday trading, trying to claw back some of the 608 points it lost Wednesday. The S&P 500 also partly rebounded.
As of Wednesday’s close, the Dow had lost 7.1 percent this month and was on track for its biggest monthly loss since May 2010. The S&P 500 was down 8.9 percent in October as of Wednesday’s closing.
Only two S&P 500 sectors are up this month: consumer staples, 1 percent, and utilities, 3 percent.

The last 24 hours have been a wild ride for stocks, as U.S. markets briefly erased all of this year’s gains while corporate earnings largely disappointed.

The Dow Jones Industrial Average regained over 300 points in Thursday trading, trying to claw back some of the 608 points it lost Wednesday. The S&P 500 also partly rebounded after it dropped more than 3 percent on Wednesday.
“The current decline is more a function of a weakening technical position as opposed to the fundamentals breaking down,” Bruce Bittles, chief investment strategist at Baird, said in a note Wednesday evening.
Wednesday’s decline added to what has already been a troubling October for Wall Street. As of Wednesday’s closing, the Dow had lost 7.1 percent this month and was on track for its biggest monthly loss since May 2010. The S&P 500 was down 8.9 percent in October and headed for its biggest one-month decline since February 2009. The Nasdaq shed 11.7 percent and was on pace for its worst monthly performance since October 2008.
Then came the earnings reports after the closing bell.
Advanced Micro Devices shares plummeted over 25 percent in after-hours trading after the company gave weak revenue projections for the remainder of the year. Southwest Airlines stock tumbled after the carrier warned shareholders that its costs are rising. Shares of pharmaceutical giant Merck slipped after the company’s latest quarterly revenue report was weaker than expected by analysts surveyed by FactSet.
A few tech companies helped the market regain its footing overnight. Microsoft shares rose as much as 4 percent after hours after the tech bellwether beat expectations on the top and bottom lines. Tesla shares rose 5 percent on the day after the automaker reported a surprise profit for its third-quarter earnings. Twitter stock also popped Thursday, with the company reporting strong quarterly earnings results despite a purge of bots and other accounts on its platform.
Ford shares jumped as well after the automaker delivered better-than-expected earnings with strong sales of trucks in North America. Despite mixed results, Visa shares also rose.

Monday October 15, 2018

// October 15th, 2018 // Comments Off on Monday October 15, 2018 // Daily News

‘We’ve had the bulk of the gains we’re going to get’ in stocks, warns a disciple of Julian Robertson

The market has basically topped and won’t deliver the eye-popping returns of recent years, hedge fund manager David Gerstenhaber says.
“I’m not predicting a bear market at this point,” says Gerstenhaber, one of Robertson’s first so-called Tiger Cubs.
With economic growth and corporate profits slowing, and inflation creeping up, Gerstenhaber says those factors argue for “more cash.”

Matthew J. Belvedere | @Matt_Belvedere

The stock market has basically topped out and won’t deliver the eye-popping returns that investors have become accustomed to in recent years, hedge fund manager David Gerstenhaber told CNBC on Monday.
“I’m not predicting a bear market at this point. I want to be very clear about that,” said the Argonaut Capital Management president. “[But] you probably don’t get a peak of substance in the market until the end of the economic cycle is in sight.”
Stocks traditionally tend to shoot up in the last legs of an economic cycle, Gerstenhaber said. While he did not predict when that cycle might end, he did say, “If things work out quite well, you probably get 3 to 5 percent over the market next year.”
Gerstenhaber is one of Julian Robertson’s first so-called Tiger Cubs, stars who managed money at Tiger Investment Management. As a trained economist, Gerstenhaber launched the macro investment group at Robertson’s shop, which was responsible for some of the fund’s biggest calls during the 1990s, such as betting on the collapse of the British pound and the sharp slide in crude prices following the onset of the Persian Gulf War.
About 10 days ago, Gerstenhaber said he thought the market looked vulnerable. He put on “put spreads” on the S&P 500 and the Nasdaq. He said he’s evaluating when to cover those “put spreads,” which are an options strategy for investors who are moderately bearish. “[The market] has gotten down to where I thought it was going to get in terms of the hard break.”
In early trading on Monday, the S&P 500 has been down and up, continuing the volatility of last week, which ended with strong gains on Friday. But those gains were not nearly enough to make up for the rout on Wednesday and Thursday. The S&P 500 fell 4 percent for the week.
“Looking back a year, the Fed was radically mispriced, in my opinion. It seemed economic growth was pretty strong. The Fed had indicated that they wanted to tighten and the market really didn’t believe it,” Gerstenhaber said in a “Squawk Box” interview.
But that changed on Oct. 3. After the market closed that day, Federal Reserve Chairman Jerome Powell said monetary policy was a “long way” from neutral, touching off concerns the central bank would hike interest rates more aggressively than forecast. The stock market has essentially been under pressure ever since as higher rates make equities less valuable.
In 2018, the Fed increased rates in three 0.25 percentage point moves in March, June, and September to a range of 2 percent to 2.25 percent. Another hike is expected in December.
After their September meeting, central bankers were projected on a path to raise rates to 3.4 percent, before pausing.
In making his case for capped market gains, Gerstenhaber said he sees the Fed raising rates “multiple times next year” after hiking in December.
“They are doing that against the backdrop of slower economic growth and slowing profit growth,” he continued. “The inflation rate is probably creeping up, in my opinion, given what we’re likely to see on wages at this point. So the Fed will keep going.”
Against that backdrop, Gerstenhaber said investors must be prepared for lower rates of return on financial assets. “It’s an argument for more cash, unequivocally at this point.”

The S&P 500 is coming off a 19.4 percent gain last year, on top of a 9.5 percent advance in 2016. The index was basically flat in 2015, after three straight years of double-digit gains.