Sarhan in CNBC: S&P posts 7-day slide as US election fears linger; Fed holds rates steady

Tuesday, November 2, 2016 4pm EST

U.S. equities closed lower on Wednesday after the Federal Reserve kept interest rates unchanged, while worries surrounding the presidential election weighed on investor sentiment.

“There’s no surprises here. This meeting was about setting the mood music ahead of the December meeting. All the signs now point to a hike in December. The labour market is doing well, inflation is creeping up and growth is good,” Luke Bartholomew, fixed income investment manager at Aberdeen Asset Management.

“However, there’s the small matter of the US election to navigate in between now and the US Federal Reserve’s next meeting. That’s why the statement carries enough room for the Fed to wriggle out come December if economic and financial conditions change,” he said.

The Dow Jones industrial average briefly fell 100 points after the decision, before closing about 75 points lower. The index also closed below 18,000 for the first time since July 7. The S&P 500 fell 0.65 percent, posted a seven-day losing streak and closed below 2,100, with utilities and real estate falling more than 1 percent to lead decliners.

The Nasdaq composite dropped about 0.93 percent and briefly fell more than 1 percent. Earlier, the three major indexes broke above the flatline before retreating.

With financial markets anticipating a rate hike before the end of the year, the Federal Reserve held interest rates steady again while continuing to acknowledge that the case for a move is getting stronger.

“What they’d like to think they’re doing is ensure the environment stays the same for December,” said Robert Tipp, chief investment strategist at Prudential Fixed Income. But the election could change that environment, he said.

Federal Open Market Committee officials, however, made no direct nod to a coming rate increase at the December meeting, a move that the market is strongly anticipating. In fact, the dovish FOMC majority gained a vote.

The group in lieu of a rate hike released a statement acknowledging economic improvements that aren’t yet enough to generate a policy tightening.

“My main takeaway is that the Fed is keeping its options open, which seems to be different from the market’s initial reaction. I lean toward the FOMC not raising rates in December,” said Jason Thomas, chief economist at AssetMark.

“I still think that the election is the bigger fear in the market than the Fed, but the fact that [Boston Fed President Eric] Rosengren didn’t dissent does in fact point to a December move,” said Quincy Krosby, market strategist at Prudential Financial. “But the market may be wondering if there’s enough evidence of a stronger economy to warrant a rate hike versus a belief that Chair Yellen needs to replenish her tool kit in the event of a weakening economic backdrop.”

Rosengren was one of three dissenters at the Fed’s previous meeting, along with Kansas City Fed President Esther George and Cleveland Fed President Loretta Mester, favoring a rate hike.

Investors also watched out for new development on the U.S. presidential election front. In less than a week, what seemed like a sure victory for Democratic nominee Hillary Clinton has turned into a tighter race, with Republican nominee Donald Trump‘s polling numbers spiking after a letter said the FBI was looking into new emails related to Clinton. Financial markets around the world had largely been pricing in a Clinton victory before the letter had been released.

“If Clinton had a bigger lead, I think the Fed would feel more comfortable raising rates today,” said Adam Sarhan, CEO at Sarhan Capital.

“Investors are jittery. The [Mexican] peso slid nearly two percent since last Friday and market volatility has spiked,” said Jack Ablin, chief investment officer at BMO Private Bank. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded about 4.5 percent higher, near 19.4. The so-called fear gauge has also risen more than 16 percent this week.

In economic news, ADP said the U.S. economy created less jobs than expected in October, adding 147,000 jobs. ADP’s report serves as a preview for the government’s monthly nonfarm payrolls report, slated for release Friday at 8:30 a.m. ET. With the Fed front and center, economic data has taken a larger importance within market participants, as the central bank has consistently said it depends on it to determine its monetary policy course.

Stocks saw sharp moves on Tuesday, breaking below key technical levels as investors got jittery about the Fed and the election. This is “a market of uncertainties,” said Peter Cardillo, chief market economist at First Standard Financial. “Investors now are really focusing on the post election; in other words, a contested election, which could take months.”

“The S&P closed below support for the first time since February. You’ve had this underlying bid in the market, where buyers show up and defend support. Yesterday, buyers didn’t show up,” said Sarhan. The Dow and the S&P briefly broke below 18,000 and 2,100, respectively.

U.S. Treasurys were higher on Wednesday, with the two-year note yield lower at 0.81 percent and the benchmark 10-year yield also lower, around 1.80 percent. The U.S. dollar fell against a basket of currencies, with the euro near $1.109 and the yen around 103.4.

In oil markets, U.S. crude prices sank 2.85 percent to settle at $45.34 per barrel after the Energy Information Administration reported a crude stockpile build of 14.4 million barrels, the largest increase on record.

Meanwhile, earnings season continued on Wednesday, with Alibabaand Time Warner, among others, posting quarterly results.

DJIA Dow Industrials 17966.29
6.65 0.04%
S&P 500 S&P 500 Index 2100.09
2.15 0.10%
NASDAQ NASDAQ Composite 5111.14
5.57 0.11%

The Dow Jones industrial average fell 77.46 points, or 0.43 percent, to close at 17,959.64, with Verizon leading decliners and 3M the top advancer.

The S&P 500 dropped 13.78 points, or 0.65 percent, to close at 2,097.94, with real estate leading all 11 sectors lower.

The Nasdaq slipped 48.01 points, or 0.93 percent, to end at 5,105.57.

About three stocks declined for every advancer at the New York Stock Exchange, with an exchange volume of 984.64 million and a composite volume of 4.177 billion at the close.

Gold futures for December delivery rose $20.20 to settle at $1,308.20 per ounce.

—CNBC’s Jeff Cox contributed to this report.

On tap this week:


Earnings: Facebook, AIG, Qualcomm, MetLife, Allstate, Continental Resources, Avis Budget, 21st Century Fox, Allergan, Time Warner,Anthem, Clorox, Alibaba, Fitbit, Estee Lauder, Delphi Automotive, TransCanada, Zoetis, Yelp, NY Times, Och-Ziff Capial Management, Kate Spade, Whole Foods, TransOcean, Plains All American, Marathon Oil, First Solar, La Quinta, Red Robin Gourmet Burgers, LPL Financial

2:00 p.m. FOMC statement


Earnings:Kraft Heinz Co Kraft Heinz, CBS, Starbucks, Las Vegas Sands, Activision Blizzard, Credit Suisse, Cigna, Encana, Adidas, AMC Networks, Church and Dwight, Chesapeake Energy, Fortress Investments, S&P Global, Scotts Miracle-Gro, Hyatt, Pinnacle West, Time Inc,G FireEye, GoPro, Fossil, Ambac, Twilio, Weight Watchers,Noodles and Co, Lions Gate, TrueCar, TiVo, Skyworks, El Pollo Loco

8:30 a.m. Initial claims

8:30 a.m. Productivity and costs

9:45 a.m. Services PMI

10:00 a.m. ISM nonmanufacturing

10:00 a.m. Factory orders


Earnings: Humana, Duke Energy, Madison Square Garden, Shutterstock, Centerpoint, AES, NRG Energy, Regeneron, Virtu Financial

8:30 a.m. Employment report

8:30 a.m. International trade

4:00 p.m. Fed Vice Chairman Stanley Fischer at IMF on policy changes after great recession


Forbes: A Big Top In The Market & The Bearish Case For Stocks – Explained

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MarketWatch Quote: S&P 500 poised for sixth straight loss as stocks extend decline

Tuesday, November 1, 2106

U.S. stocks extended losses Tuesday, with the S&P 500 on track for a sixth consecutive loss, as investors grappled with a tightening presidential race, economic data and corporate earnings.

Polls show the race between Democratic nominee Hillary Clinton and Republican rival Donald Trump continues to tighten. The latest ABC News/Washington Post tracking poll showed Trump taking a one-point lead, while the RealClearPolitics polling average showed Clinton’s lead narrowed to 2.2 percentage points from more than 7 points two weeks ago.

On the data front, two surveys on manufacturing in October showed the sector expanding slowly, consistent with a consensus view that growth is healthy enough for the Federal Reserve to increase interest rates at its December meeting.

Fed officials began a two-day policy meeting, which concludes on Wednesday, and are widely expected to leave rates unchanged this time, as investors think the central bank will want to avoid influencing the outcome of the presidential election next week.

“The market has been trading with a back and forth action as investors await the election. Being in the heart of earnings season complicates matters as does the concerns related to the Federal Reserve,” said Bob Pavlik, chief market strategist at Boston Private Wealth, in emailed comments.

On the charts, the S&P 500 moved below its September low at 2,119 and its October low at 2,114. New leadership has failed to emerge and significant uncertainty hangs over the market concerning the election, the Federal Reserve’s monetary policy path and the willingness of other major central banks to continue pursuing aggressive stimulus policies, said Adam Sarhan, chief executive at Sarhan Capital.

“I don’t see new leadership emerging. From my standpoint, the market looks as if it’s building a very large top after a 7-1/2 year bull market,” he said.

An early rebound by oil futures provided support, but crude later turned south.

On the data front, the “ISM number was good, with new orders and production improving. But at this stage, investors are looking at the jobs number on Friday and election next week,” said Eric Wiegand, senior portfolio manager at U.S. Bank’s Private Client Reserve.

“The sideways move over the past month is the sign of lack of conviction among investors. With valuations this high, investors want to see earnings growth and not just improvement relative to lowered expectations,” Wiegand said.

The Dow Jones Industrial Average DJIA, -0.62% declined 156 points, or 0.9%, to 17,986. The Nasdaq Composite COMP, -0.72%  was down 56 points, or 1.1%, to 5,132.

Economic news: Manufacturing activity was also a focus in the U.S.

The Institute for Supply Management manufacturing index rose to 51.9% in October, slightly surpassing the 51.7% forecast by economists polled by MarketWatch. Meanwhile construction spending declined 0.4% in September.

Investors were also digesting monthly car sales numbers. General Motors and Ford Motor Co. reported their U.S. sales slipped in October, hurt by fewer selling days and a cutback in fleet sales.

See: MarketWatch’s economic calendar

Other markets: The ICE dollar index DXY, -0.58%  was down 0.7%.

Stocks closed mostly higher in Asia, with Hong Kong’s Hang Seng HSI, +0.93%  rising 0.9%. European stocks opened higher, but turned lower midmorning as disappointing earnings reports came in. Prices of metals, which are sensitive to growth news out of China, rose across the board.

The yen USDJPY, -0.72%  slipped after the Bank of Japan made no changes to policy. The pound GBPUSD, -0.0817% pared its gains that came after Bank of England Gov. Mark Carney late Monday said he’ll remain in his post until June 2019.

Movers and shakers: Gannett Co. shares GCI, -2.45%  initially jumped Tuesday after the USA Today publisher said it has given up its effort to acquire Chicago Tribune and Los Angeles Times publisher, which changed its name to Tronc Inc.TRNC, -11.89%  from Tribune Publishing in June.

Gannet shares were down 2.1% in recent action, while Tronc shares skidded 17%.

U.S.-listed shares of Royal Dutch Shell PLC RDSB, +3.97% RDS.B, +4.82%  rose 4% after the oil giant reported a rise in third-quarter profit.

Pfizer Inc. PFE, -2.24%  dropped 2.7% after the drug giant reported third-quarter earnings and revenue slightly below forecasts.

L Brands Inc. LB, -7.88%  shares sank 8.5% after downbeat third-quarter profit outlook.

Angie’s List Inc. ANGI, -2.08%  shares fell 2% after the company said it has hired financial advisers to review its strategic options as it continues to work on a turnaround and seeks new opportunities.

Archer Daniels Midland Co. ADM, +7.25%  rallied 7.5% after the food processing company beat the earnings forecast for the third quarter.


Friday Recap: Sarhan in CNBC: Stocks close mostly lower after new Hillary Clinton probe sends markets for wild ride

Friday, October 28, 2016 4pm EST

U.S. equities closed mostly lower on Friday after the Federal Bureau of Investigation announced it is investigating new emails related to Democratic nominee Hillary Clinton.

The Dow Jones industrial average ended about 10 points lower after trading 74.71 points lower following the announcement. The index was trading about 75 points higher before the new probe was announced.

“I sit next to one of the traders here and he was telling me he’d never seen the Dow fall so quickly,” said Art Hogan, chief market strategist at Wunderlich Securities. “There’s a lot more to this, but we won’t know how much until we get more information.”

“Regardless of the fundamental news we get next week, earnings or data, this may be the story for the next 10 days,” he said.

The S&P 500 closed about 0.3 percent lower, and was also trading higher before the FBI’s probe was announced. The Nasdaq composite ended about half a percent, off its session lows.

“She had a pretty big lead. Now this will certainly take a chunk of that, but most investors still think she’ll win on November 8,” said Jeremy Klein, chief market strategist at FBN Securities.

Investors were also watching the 2,130 level on the S&P, a level pointed out by DoubleLine Capital CEO Jeffrey Gundlach last week. He said closing below that level would be concerning for the stock market. S&P closed around 2,126 on Friday.

“The market has been very sanguine in pricing in a victory for Hillary Clinton. If something happened that threatened that outcome, then that would be hurtful for the market given the uncertainty surrounding Donald Trump’s fiscal policy,” said Phil Orlando, chief equity strategist at Federated Investors.

Clinton’s lead over Trump had narrowed even before news of the new probe had broken, according to data from RealClearPolitics.

Art Cashin, UBS director of floor operations at the NYSE, said the market fell in part “delayed reaction to oil and a little bit to the Hilary thing because that’s a new surprise, you only have 11 days to go to the election. How can the FBI reopen the case and resolve the thing in 11 days? That’s what the market is worried about.”

“The weekend talk shows will be important. The big questions will be how can they complete an investigation in just nine days. IT certainly means that probably before the inauguration if the republicans hold the house, there will be an investigation that lasts four years,” said Cashin.

U.S. Treasury yields hit their session lows following the announcement. The two-year note yield lower traded around 0.85 percent and the benchmark 10-year yield held near 1.84 percent. The benchmark yield has been rising steadily over the past three months.

Earlier, the three major indexes had drifted higher following the release of better-than-expected U.S. GDP data, while investors continued to parse through a slew of corporate earnings results.

That said, stocks have remained in a tight range over the past three months, with the S&P moving just about 1.4 percent over that time period. “What we’re seeing under the hood is fewer and fewer stocks leading the market higher,” said Adam Sarhan, CEO at Sarhan Capital. “When you see days like this and yesterday, … that tells you that the sellers are still in control.”

The U.S. economy grew at an annualized rate of 2.9 percent in the third quarter, the Commerce Department said. The 2.9 percent clip marked the fastest economic growth in two years.

Economists polled by Reuters had forecast GDP rising at a 2.5 percent annual rate in the third quarter.

Despite the moderation in consumer spending, the third-quarter rise in growth could help dispel any lingering fears the economy was at risk of stalling. Over the first half of the year, growth had averaged just 1.1 percent.

“The primary takeaway that I have from the GDP report is that the [Federal Reserve] is likely to continue on its policy path,” said Stephen Wood, chief market strategist at Russell Investments. “Third-quarter data looks like a ‘C’-to-‘C plus,’ which is consistent from what we’ve seen over the past few years.”

But Federated’s Orlando said the headline GDP number received an unseasonably large boost from a surge in soybeans exports to China. “If you take that out, I’d say GDP is closer to 2 percent,” he said.

The Fed is scheduled to meet next week and keep monetary policy unchanged. That said, investors see a December move in the cards. Market expectations for an interest rate increase in December remained unchanged at 73 percent following the GDP’s release, according to Jefferies. Other data released Friday included the final read on consumer sentiment for October, which missed expectations.

“The 4 quarter average growth run rate is now exactly at 1.5% and Q3 was saved by a big boost in exports and agricultural exports within that. Personal spending is at a 2.5% average run rate over the past 4 quarters while capital spending remains punk,” said Peter Boockvar, chief market analyst at The Lindsey Group.

The dollar held lower against a basket of currencies, with the euro near $1.098 and the yen around 104.7. “The initial move on the dollar was to the upside. … Since then, it’s moved slightly lower. Part of it has to do with personal consumption coming in about half a percent below consensus. That took a bit of wind out of the sales of the dollar,” said Minh Trang, senior FX trader at Silicon Valley Bank.

Meanwhile, the corporate earnings season continued on Friday, with energy giants Chevron and ExxonMobil both posting mixed quarterly results. Other firms that reported on Friday include AbbVie, Hersheyand Goodyear Tire.

On Thursday afternoon, Amazon posted mixed quarterly results, with sales eking above consensus and profits falling well short of estimates. At the close on Friday, Amazon shares were down about 5.2 percent. Companies scheduled to report quarterly results include Kellogg, Pfizer, Gilead Sciences, Herbalife and Alibaba.

Overseas, European equities slipped, with the pan-European Stoxx 600 index slipping 0.27 percent. In Asia, stocks closed mixed.

DJIA Dow Industrials 18161.19
-8.49 -0.05%
S&P 500 S&P 500 Index 2126.41
-6.63 -0.31%
NASDAQ NASDAQ Composite 5190.10
-25.87 -0.50%

The Dow Jones industrial average fell 8.49 points, or 0.05 percent, to close at 18,161.19, with Merck leading decliners and Chevron the biggest riser.

The S&P 500 dropped 6.63 points, or 0.31 percent, to end at 2,126.41, with health care leading six sectors lower and industrials the top advancer.

The Nasdaq slipped 25.87 points, or 0.5 percent, to close at 5,190.1.

About nine stocks declined for every five stocks at the New York Stock Exchange, with an exchange volume of 954.2 million and a composite volume of 3.939 billion at the close.

High-frequency trading accounted for 52 percent of October’s daily trading volume of about 6.28 billion shares, according to TABB Group. During the peak levels of high-frequency trading in 2009, about 61 percent of 9.8 billion of average daily shares traded were executed by high-frequency traders.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded about 5 percent higher, near 16.1.

U.S. crude futures for December delivery fell 2.05 percent to settle at $48.70 per barrel. Gold futures for December delivery rose $7.30 to settle at $1,276.80 per ounce.


Sarhan in Barron’s: After a Bumpy Week, Stocks End Up 0.4%

Saturday 10.22.16