James G. Rickards is the editor of Strategic Intelligence, the latest newsletter from Agora Financial. He is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street.
The market was pulled in two directions today… like a wishbone under pressure from two equally determined foes.
The bears, inspired by disappointing news from Apple, pulled in one direction.
The bulls, jaunty after this morning’s jolly jobs report, yanked in the other.
Trade war news — first going one way, then the other — was ready to swing the contest.
Which side won?
Perhaps more importantly… which side lost?
But first, what upset the Apple cart?
The company released its fourth-quarter earnings late yesterday.
The numbers exceeded estimates. What’s more, Apple posted a handsome quarterly profit.
But the market is not so much interested in where you are — as in where you are going.
Apple offered a below-estimate next-quarter outlook and announced it will no longer provide sales figures for its iPhone and other products.
One Wall Street analyst claimed the announcement could stoke “fears the company has something to hide.”
Another called it a “tough pill to swallow.”
Apple shares were off over 7% at one point today as investors took flight… like a flock of birds at the crack of a rifle.
Like most of the “FAANG” stocks, Apple has come in for rough business lately.
The stock has now fallen into correction for the year.
Next we come to the bullish faction in today’s contest…
The Labor Department announced this morning the economy added 250,000 jobs in October — trouncing expectations.
Wall Street analysts hazarded perhaps 195,000.
In all, 156,562,000 Americans collared a paycheck in October — an all-time record number.
The (official) unemployment rate presently stands at 3.7%… the lowest since 1969.
But President Trump would accept no credit for the blowout jobs report. And he strongly disavowed any partisan advantage that may result therefrom:
Wow! The U.S. added 250,000 Jobs in October — and this was despite the hurricanes. Unemployment at 3.7%. Wages UP! These are incredible numbers. Keep it going, Vote Republican!
Here the president refers to the two recent hurricanes — Florence and Michael — that many analysts warned would skew the data.
But we might caution Mr. Trump against premature celebration…
As we have illustrated before, sub-4% unemployment is no cause for chest-thumping. History indicates that recession is never far behind when unemployment dips below 4%.
But let it go for now.
Finally we come to trade news, the makeweight in today’s wishbone-pulling bout.
Stocks surged these past few days, partly on Trump’s comments that discussions with China were “moving along nicely.”
Positive trade expectations carried markets along this morning — despite Apple’s negative tug.
But late-morning comments from Trump economic adviser Larry Kudlow set things going the other way… and gave strength to the bears:
“There’s no massive movement to deal with China.”
Kudlow added he was “not as optimistic” about a deal as he had been.
The wishbone snapped… and the bears were left holding the winning half.
The bulls — and stocks — were immediately put to rout.
The Dow Jones was down over 300 at one point. It rallied some to close the day down 110 points. The S&P ended 17 lower; the Nasdaq, 77.
And so, alas, October’s stock market trouble spills over into November.
Not even a record jobs report could win the day.
“In November you begin to know how long the winter will be,” said journalist Martha Gellhorn.
Investors had better hope the stock market warms up this month…
Managing editor, The Daily Reckoning