If the market were inclined to sell off today, it could have found plenty of reasons.
Under the heading of one-off scary stuff, I’d put:Â Continued tensions between the Saudis and just about everyone else over allegations–which look to be true–that the Saudi government ordered the murder (and dismemberment) of a Saudi journalist inside the Saudi consulate in Istanbul.
Under the heading of scary trends, I’d file:
The increase in the U.S. budget deficit in the 2018 fiscal year that ended on September 30 to $779 billion, up $113 billion for fiscal 2017. That’s the highest deficit since fiscal 2012 when the U.S. was still in recovery mode from the global financial crisis.Federal spending rose by $127, while federal revenue grew by just $14 billion in a year that included the December 2017 tax cuts.
Further remarks from President Donald Trump raising the possibility of another round of tariffs in the U.S.-China trade war.
And a disappointing retail sales report for September showing that overall retail sales grew by just 0.1% month over month in September (vs expectations among economists surveyed by Bloomberg of a 0.6% increase.) Looking at just the core retail numbers, which exclude volatile sectors such as auto dealers, gasoline, building materials, and food services, retail sales climbed a much more promising 0.5% month over month.
But it looks like the financial markets really don’t want to go down ahead of the heart of third quarter earnings reports. The Standard & Poor’s 500 stock index was down just 0.59% on the day and the Dow Jones Industrial Average fell only 0.35%. The technology heavy NASDAQ Composite index was off 0.88% as traders sold some of the stocks that finished strongest last week. For example, Autodesk (ADSK) and Tencent Holdings (TCEHY) were down 2.59% and 4.22%, respectively on the day.
The CBOE S&P 500 Volatility Index nudged slightly lower–by 2.77%–to 20.72 as it continued its retreat from the spike of last week that took the index, which measures the prices that investors and traders are willing to pay to hedge risk on the S&P 500, to 24.98. I expect to see the VIX continue to move lower in coming days and I’m watching to see when it might be appropriate to again buy call options for my Volatility Portfolio (on my subscription sites JubakAM.com and JugglingWithKnives.com) in anticipation of yet another upward spike. Today’s drop took the index below the levels at the end of March and into early April, the time off the last volatility spike.
Oil prices moved very modestly higher as oil markets decided that the Saudi murder crisis wasn’t going to lead to immediate sanctions against Saudi Arabia and retaliation in the form of a reduction of Saudi oil production. U.S. benchmark West Texas Intermediate climbed 0.41% to $71.63 a barrel and international benchmark Brent crude rose 0.24% to $80.62 a barrel.
Despite the news on the U.S. budget deficit, the yield on the 10-year Treasury fell by one basis point to 3.16%. (Yields fall when bond prices rise.) The yield on the 2-year note held steady at 2.85%.
The dollar fell slightly with the Dollar Spot Index slipping 0.12%.
