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Daily Market Update – August 12, 2015 (Close)
Yesterday was a major disappointment following Monday’s very nice and broad rally, but probably shouldn’t have come as too much of a surprise to anyone. That is except for the few that thought that maybe Monday was the start of something that would take us to new highs. As it is, after yesterday’s 200+ point loss that made Monday seem as if it never existed, the S&P 500 is barely 2.5% below those all time highs. This morning that figure was going to get larger as the futures were again down sharply again being whipsawed by China as its markets again fell and late in their trading day the government stepped in to support the currency. Given that it devalued it just a couple of days earlier it was a little unusual that it was now stepping in to support it. History has long shown that governments attempting to support their currency against what the market is doing tends to be a waste of time. If there was any doubt as to whether there would be any thing actually going on while the Federal Reserve was on its vacation, China has left no doubt that it was fully capable of filling whatever voids we might have. So this morning our futures were again down triple digits as we awaited the first of the major national retailers getting ready to report their earnings. Most of those, other than Wal-Mart shouldn’t be terribly impacted by currency and may in fact find benefit to the devaluation of the Chinese Yuan. Although the news of the Chinese currency was just beginning to get digested, that could result in providing improved guidance, which could easily offset disappointing earnings, if that is going to be retail’s theme this quarter. Of course, that could lead to some minor deflation on our end if the price of consumer goods, largely imported from China falls or even stays the same. That would make it a little more difficult to find the data justifying an interest rate increase. While most everyone agrees that it’s likely that we will see that increase come in September, suddenly there is reason to re-think that target. Meanwhile, Macys did get retail off to a start early this morning and it reported disappointing revenues and wasn’t giving positive guidance, either. It blamed a decrease in foreign tourist shopping, an indirect result of the US Dollar’s relative strength. Everything is increasingly connected. This morning the market’s were down before the opening bell, but the numbers had improved just a little, or at least they may have stabilized. However, if Macys was going to be reflective of what other retailers are going to report, there may not be much reason to expect the market doing anything to turn things around this week or maybe not even next week. But if you thought that Tueday was a whipsaw day, you would have really been impressed with the way today ended, after the DJIA having been down by about 260 points, only to close the day barely unchanged, while the S&P 500 actually gained a bit. Since Wednesdays are usually slow days, I didn’t expect to do much today, but being reluctant to see any of those positions that were expiring this week potentially slip away from being assigned and then further slip away from being rolled over, thought that I might do something. Because of that, there might have been reason to consider some early rollovers just to capture some more income and forego the possibility of collecting some cash from assignments. That was the view from this morning, but as is always the case,the view is subject to change and very likely to change. I’m glad it did and I didn’t. |
