Just keep swimming.
That’s been the message for investors these days. Stay afloat because we’ve had the best start for stocks since 1987. A mixed bag of earnings, another potential government shutdown and questions over a trade deal haven’t triggered an “everyone-out-of-the-pool” moment. Yet.
But welcome to Thursday, where things are looking more jittery than they have in awhile, a day after the S&P parted ways with a 5-day winning run.
First time since Jan. 30 #ES_F (30min) <200sma pic.twitter.com/RcFpB6x4ak
— Alastair Williamson (@StockBoardAsset) February 7, 2019
Worry lines are all over our call of the day, from Doug Kass, president of hedge fund Seabreeze Partners Management, who warns that “bull market complacency is back.”
Blogging at Real Investment Advice, Kass says investors are ignoring a “diminished outlook for economic and profit growth in 2019-2020,” noting that “there was nothing in the recent high-frequency data or earnings reports that changes this outlook.”
We’ve got a stock market that has “detached itself from reality,” he says. “Often, as might be the case, sharp and unrelenting advances lull us into a false sense of security, particularly when global economic growth is so fragile and beginning to show signs of deteriorating,” said Kass, though he repeats from an interview earlier this week that he’s not talking about investor euphoria similar to that seen in late January or mid-September of last year.
But others are out there ringing similar alarm bells. Take Russ Mould, AJ Bell investment director, who told clients Thursday that he’s concerned about the renewed blind love for well-known tech stocks right now.
“If you asked an investor would they be willing to pay $2.9 trillion for a company that was going to show virtually no earnings growth in 2019, after a year when operating profit and free cash flow growth had slowed to zero by the end of 2018, investment spending began to accelerate and regulatory pressure gathered then they would probably laugh at you. But this is exactly what investors are currently being asked to do in the case of the FAANG stocks, Facebook FB, -1.64% Amazon AMZN, -1.73% Apple AAPL, -1.01% Netflix NFLX, -1.67% and Google’s parent Alphabet GOOGL, -1.35% ” says Mould.
These companies have much to prove after last year’s weak finish, he says. ”Their combined market capitalizations are still teetering on ‘bear market’ territory, at around 20% below the aggregate record, and their last set of quarterly results were a mixed bag, despite the share price rallies that they prompted,” he said.
Opinion: If you own Apple, Amazon, Facebook or AMD, look out below
The quote
“Surveys show that all over the world people are losing faith in large institutions, so we’re paddling against the current in trying to sustain public faith in the Fed.” That was “guitar hero” Chairman Jerome Powell speaking to a crowd of educators Wednesday night, as he added that the U.S. economy is in a “good place.”
The market
Dow YMH9, -0.48% S&P 500 ESH9, -0.63% and Nasdaq NQH9, -0.95% futures are looking at a downbeat start. That’s after Wednesday, which saw the Dow DJIA, -0.66% S&P 500 SPX, -0.74% and Nasdaq COMP, -1.02% all close in the red.
Gold US:GCU8 is dipping, and crude US:CLU8 is off.
The dollar DXY, +0.08% is up as the pound GBPUSD, +0.3789% down ahead of a Bank of England meeting inflation forecasts will be key, as Brexit has tied the bank’s hands over rates. And U.K. Prime Minister Theresa May is off to Brussels for a better deal. Watch Twitter feed of “special place in hell” EU President Donald Tusk to gauge the tensions.
Read: India’s central bank delivers surprise rate cut.
Europe stocks SXXP, -0.72% are down. Aussie shares XJO, +1.10% rose on hints of rate cuts, while techs led the Nikkei NIK, -0.59% south.
The chart
You’re hopefully familiar with the bull-bear chart that usually surfaces on Fridays from Bank of America Merrill Lynch. Well here’s CNN’s Fear & Greed Index, which qualifies as our chart of the day.
The CNN gauge of investor emotions has swung further into “greed” territory, a far cry from “extreme fear” one month ago.
Here’s how they calculate that.
And here’s BofA’s bull-bear index from last week:
Earnings
Twitter TWTR, -10.22% is the big name on the earnings front this morning, and shares were off 7.6%. Also reporting, Dunkin Brands DNKN, -5.05% Cardinal Health CAH, +4.80% Yum! Brands YUM, -2.01% World Wrestling WWE, -1.57% Grubhub GRUB, -18.51% and Philip Morris PM, +1.10% followed by Mattel MAT, -1.68% after the close.
Earnings news lifts Zynga ZNGA, +5.32% and Match MTCH, +13.15% and GoPro GPRO, +3.75% is fired up over its results and future. While First Electronic Arts EA, +2.67% now Take-Two TTWO, +1.73% have suffered the “Fortnite” effect. Disappointment also hitting FireEye FEYE, -11.70% and MetLife MET, -4.88%
The buzz
A big bank merger has blown through, with SunTrust Banks STI, +11.27% and BB&T BBT, +5.13% getting together in a tie-up worth about $66 billion.
Bank mergers? What year is this?
— Ivan the K™ (@IvanTheK) February 7, 2019
Apple AAPL, -1.01% reclaims the throne as the most valuable U.S. company.
Christopher Balding, associate professor, HSBC School of Business, Peking University, Shenzhen is drawing attention for his tweetstorm about Huawei and trade deals. From here it’s a long, but interesting thread:
I'm seeing a lot of debate and stupidity about Huawei so let's tackle from a very simple angle whether or not Huawei is a security risk. Let me emphasize there are many ways to study this question and this is just one. Is Huawei a private company free from CCP influence? 1/n
— Interim Huawei CEO Balding (@BaldingsWorld) February 7, 2019
The ante is upped on Venezuela crisis as the Maduro government blocks crucial humanitarian aid from Columbia.
Weekly jobless claims and consumer credit are the only data points on tap.
The quote
“Surveys show that all over the world people are losing faith in large institutions, so we’re paddling against the current in trying to sustain public faith in the Fed.” That was “guitar hero” Chairman Jerome Powell speaking to a crowd of educators Wednesday night. He also said the U.S. economy is in a “good place” and discussed his desire to start up a band.
Ladies and gentlemen, put your hands together. The live rock show you’ve all been waiting for:
