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“A man who has made no enemies is probably not a very good man.” – Antonin Scalia
Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.
After getting the pulp kicked out of them yesterday, bulls are looking to regroup this morning, and futures are marginally higher ahead of the opening bell, with the S&P 500 and Nasdaq both indicated up about 0.50%. Now, if you put any trust in those numbers, where have you been for the last three weeks? That’s not to say the market can’t squeak out an up day today, but lately, there has been little correlation between where futures look an hour before the opening bell versus where they finish the day.
Earlier this morning, small business sentiment from the NFIB came in weaker than expected for the second month. The only other report on today’s calendar is the January JOLTS report at 10 AM. In political news, the House is expected to vote on a continuing resolution to fund the government. While there is optimism that the vote will pass to help avoid a shutdown this weekend, the higher hurdle will be the Senate, where 60 votes are required to pass.
President Trump is also scheduled to meet with several CEOs at a meeting of the Business Roundtable today, so we’ll see what, if any, headlines come out of that meeting. The market’s main concern up until this point has been that the deteriorating levels of confidence on the part of consumers and businesses would translate into actual declines in activity. That remains to be seen in actual data, but Delta (DAL) may be showing hints of that effect starting to happen as the company cut guidance last night noting “the recent reduction in consumer and corporate confidence caused by increased macro uncertainty”. This morning, we’re also getting similar comments from several other airlines citing weakness in Q1 but expecting a rebound later in the year. CEOs at the meeting will voice their concerns to the President, so we’ll see how much he listens.
The Nasdaq Composite moved firmly back into correction territory yesterday as the drawdown from its December high reached 13.4%. Looking at the chart of the index over the last year shows an interesting pattern where it made numerous unsuccessful attempts to break above its December high in the last few months. After failing again less than three weeks ago, the Nasdaq ran out of gas and has collapsed to its lowest level since September 11 of last year.
No one can tell you when this decline will run its course, and it will depend on several factors. The only thing we can do at times like this is look back at history for a guide to see the range of possible outcomes. The chart below shows Nasdaq drawdowns from all-time highs since its inception, with the red line showing the level of the current decline. Believe it or not, the Nasdaq has been further from an all-time high than it currently is on 49% of all trading days, a lot of which were during the dot-com bust. That’s one extreme period we all hope is in the cards!
