And that is troubling as our models, going back to mid-August, were looking for a three-beat:
The Peak-to-Trough Magnitude of the Recent Decline Was 4.3%
I'd expect the next one to be deeper but also reward "Buy-the-dips" setting up a nasty little experience on the next-next one for folks coming in at down 10% who watch in horror as the drop doubles to 20%....We'll have a lot more over the next few days. First though where things stand right now.
And for what it's worth we're looking at emerging markets, financials and small caps as potential buys.
From Barron's Stocks to Watch:
You know you’re in trouble when the biggest film hitting the box office is Ridley Scott’s Exodus: Gods and Kings, which tells the tale of Moses leading the Jews out of Egypt. Not to be confused with Cecil B. DeMille’s The Ten Commandments, a classic if not exactly a work of art, Exodus is getting destroyed by critics. The New York Post’s Lou Lumenick calls the film “an utterly clueless, relentlessly grim and rambling action epic guaranteed to displease devout Jews, Christians and Muslims alike, amuse atheists — and generally bore everyone.” Newsday’s Rafer Guzman, meanwhile, says “Exodus turns out to be part of a time-honored tradition: the old-fashioned, super-spectacular Hollywood bomb.” Best of all, God turns out to be a petulant boy with a British accent (personally, my favorite God is Alanis Morissette in Kevin Smith’s Dogma). BoxOfficeMojo is predicting a $29 million haul for Exodus but expects it to make most of its money overseas.
Investors staged an exodus of their own this week, fleeing the stock market as quickly as the Hebrew’s fled Egypt. The S&P 500 fell 3.5% to 2,002.33, its worst percentage drop since May 2012, while the Dow Jones Industrial Average dropped 677.96 points, or 3.8%, to 17,280, its biggest decline since Sept. 2011. The Nasdaq Composite dropped 2.7% to 4,653.60 and the small-company Russell 2000 finished off 2.5% at 1,152.45.
The selling started in earnest on Friday when the International Energy Agency cut its demand forecast for oil, a sign that global economic growth is slowing. That fact apparently freaked out investors, despite the fact that U.S. economic data has remained resilient. Still, the drop in oil contributed to a very weak reading of the producer price index, increasing concerns that the U.S. will be wrestling with deflation in the near future.
Still, Wall Street remains reasonably optimistic. Citigroup’s Tobias Levkovich reconsidered his 2015 outlook, but ultimately kept his target for the end of that year at 2,200. He explains why:...MORE
While the 2014 estimate at $119.25 remains unchanged, the 2015 EPS forecast is being bumped up slightly to $128.25 from $127.50. Notably, 1Q15 profits should rise strongly (up 9.5% versus an overall year gain of 7.5%), due to an easy comparison as GDP dropped in 1Q14. Additionally, both the Energy sector and a stronger dollar probably will restrain what could have been an even better year for corporate net income…
With Energy sector earnings dropping an expected 17% in 2015, areas like IT, Consumer Discretionary, Health Care and Financials will need to do some heavy lifting in the face of a stronger dollar. Yet, with the greenback expected to climb about 10% versus the Euro and European direct sales exposure at under 10%, the impact may be smaller than originally perceived....
And from Barron's The Trader:
Markets Plunge as Oil Panic Spreads
As oil futures fell to $57.81 per barrel, the lowest price since May 2009, U.S. and European markets fell broadly this week. Oil tanker stocks were unduly punished; Hawaiian Electric’s new buyer doesn’t make it any more attractive.
U.S. equity markets suffered their largest point declines in more than three years last week, as investors, spooked by oil’s decline, went on a broad-based selling-spree. The Dow Jones Industrial Average gave back 678 points, and dropped more than 100 points in the last 30 minutes of trading on Friday.
“These kinds of markets test the mettle of investors,” says Tom Stringfellow, president of Frost Investment Advisors. “You have to step away from the monitor so you don’t do anything stupid, like hit a sell button.”
But most traders were ditching that advice, pounding sell buttons with both hands as the selloff spread. Friday’s plunge was particularly dramatic—the Dow fell 315.51 points. At the close, not a single Dow stock was in the black.The Dow dropped 678 points, or 3.8%, last week, to 17,280.83, its largest point and percentage drop since 2011. The Standard & Poor’s 500 index 500 fell 73 points, or 3.5%, to 2002.33, its largest point drop since 2011 and largest percentage drop since 2012. The tumble came after seven consecutive weeks of gains. The Nasdaq Composite index fell 127 points, or 2.7%, to 4653.6.
European markets also plunged, with major indexes including the FTSE 100 and the DAX registering their largest losses since 2011.
Oil led the market lower, with crude futures dropping $8.03 per barrel, or 12.2%, to $57.81, the lowest price it has settled at since May 2009. Oil hit its 52-week high of $107.26 in June, and has since fallen 46%—24% just in the past three weeks.
Oil bulls got bad news on both the supply and demand fronts. The International Energy Agency cut its estimate for oil demand growth Friday. Saudi Arabia’s oil minister said Thursday he had no intentions of cutting production amid the recent price plunge, adding to oil’s skid. “The story for crude remains the same—slower global growth, excess supply, and an unwillingness of OPEC and others to cut production as they continue to vie for market share,” wrote Yousef Abbasi, the global market strategist at JonesTrading.
Energy stocks like Exxon Mobil (ticker: XOM) and Chevron (CVX) fell nearly 8% on the week, but the damage wasn’t contained to the obvious candidates. A wide swath of companies depend on strength in the oil patch—even though energy makes up just 9% of the S&P 500, it accounts for 30% of capital expenditures, says Jonathan Glionna, head of U.S. equity strategy for Barclays, who estimated last month that the drop in prices could sap $40 billion from capital budgets.
On Friday, materials and industrial stocks led the selling, as investors fretted about a global slowdown, based on the IEA report and Chinese data showing weaker-than-expected industrial production.
There is, of course, a positive side to the decline in oil prices. Consumers are more confident than they have been in nearly eight years, according to a University of Michigan survey released Friday. But investors were not interested in considering the positives last week.
“It’s very easy for markets to mark down earnings in the energy sector It’s a very direct effect,” says David Lafferty, chief market strategist at Natixis. “You’d expect to see increases in other kinds of stocks, but it’s much more difficult to quantify the indirect benefits to other companies.”
Despite the anxiety in the market, some investors remain loath to sell this late in the year. “This time of year is so seasonally strong, that we’re hesitant to fight that,” says Grant Engelbart, a portfolio manager at CLS Investments. “We don’t see an imminent crash or anything of that nature.”
Engelbart says quality companies–those with high returns on equity, low debt, and stable earnings—have been underperforming for quite a while. “If you’re worried about the market, you should look at those types of companies,” he adds.
This week, the markets could once again be volatile as the Federal Reserve meets. The Fed will release new economic and financial forecasts and investors will be watching the statement to see if the central bank still intends to hold interest rates down for a “considerable time.”
A Smoother Ride for Tankers
The broad selloff in energy stocks has taken down virtually every oil-related stock. But one industry seems to have been unduly punished. Oil-tanker stocks have sunk along with oil, falling 10% as a group in the past six months....MORE
