The Market Bull – April 9, 2019
The major averages finished with modest declines on little economic data of significance. The trade war heats up again as Trump takes aim at the Europeans with a tit-for-tat round of tariff’s on commercial aircraft. Following 14-years of unsuccessful litigation to settle the matter.
The Philadelphia Fed State Coincident Indexes increased in 42 states during February, fell in 4 states and was stable in the remainder. This series primarily looks at wage and employment related data.
More weak employment related data appeared in the latest Job Openings and Labor Turnover Report or JOLTS as it is known. February saw a 7.8% decline to 7.1 million jobs for the month. The largest 1-month drop since 2015. While 1-month does not make a trend employment data is a lagging indicator and the recent huge payrolls miss combined with this report is cause for concern. I wouldn’t get alarmed just yet.
Goldman Sachs took a close look at corporate share buy backs since 2010 and noted an average of 420 billion a year in share buy backs through 2018, much of it funded with cheap debt. Alternatively buying from households, mutual funds, pension funds and foreign investors was less than $10 billion for each, per Federal Reserve data compiled by Goldman Sachs. Prior to 1982 this practice was patently illegal as it was, and remains, blatant share price manipulation. Because buybacks have bolstered earnings per share by reducing the total stock outstanding, goosing the number that Wall Street analysts focus on despite falling earnings and or revenue. Given very high and rising market valuation levels the current environment demands even more share buy backs to hold down valuations as earnings look to fall for a 3rd consecutive quarter to kick off 2019.
Standard and Poors 500 Index closed at: 2,878.20 down 17.57
NASDAQ finished the day: 7,909.28 down 44.61
Gold ended trading at: $1,308.40 up $6.50