Wall Street, Although Bullish, Has Uneven Distribution

Alan Penny

27 November 2019

3 min read

Wall Street buildings with US flags

  • Several major companies report earnings
  • Geopolitical issues continue
  • China-US trade optimism creeping in
  • Holiday in focus

Wall Street opened at record highs during the trading session on Wednesday amid overall optimism in the United States. Helped by a deluge of economic figures pre-market, the “risk-on” attitude of equities was on full display for the session open. Unemployment Claims, Preliminary GDP, and Core Durable Goods all surprised to the upside.

Earnings reports

There were several major companies reporting in the United States on Wednesday, showing a mixed bag yet again. Deere & Company slumped 4.9% in pre-market trade as the company noted uncertainty in its latest earnings report. This was despite sales rising during its fiscal fourth quarter.

Dell fell 5% after cutting its revenue guidance for the full year due to a shortage in CPU chips. Under Armour surged 3% higher after it was given a “strong buy” rating by Raymond James.

Tesla gained 0.6% after Elon Musk stated there were 250,000 pre-orders for its new truck. Boeing slipped 0.9% after the Federal Aviation Administration said it would take charge of inspecting any newly manufactured 737 Max jets, slowing down distribution in general.

Apple rose slightly by 0.4% after it was reported that it asked manufacturers in mainland China to double its production of AirPods, as the peripheral has become so popular in the United States.

Stock pickers’ market

For the first time in years, it appears that this is more of a stock pickers’ market as individual companies are starting to outperform others.

earnings matter again, and therefore it’s becoming more of a stock pickers’ market

Since the financial crisis, most money managers have simply bought Index following ETFs, and they’ve performed right along with the rest of the market.

That being said, though, we are starting to see earnings matter again. Therefore, it’s becoming more of a stock pickers’ market, getting traders to focus more on fundamentals rather than on the old adage “a rising tide lifts all boats.”

Optimism and the holiday

There does seem to be a certain amount of trade optimism creeping into Wall Street, as we are now starting to see Chinese officials suggest that perhaps talks are moving forward. This is much better than simply the Americans saying so, because it shows both sides are starting to warm up to the idea of working together again.

That being said, this is a market that is highly fickle and driven by algorithmic trading. That means the machines will dump stocks immediately on the wrong headline. Longer-term investing is probably the best way to go, focused on earnings and other fundamentals.

It should also be noted that Thanksgiving Day is Thursday, so markets will be closed. Friday trading is only open for a few hours, so the bulk of volume won’t return until Monday.

Keep in mind that although electronic futures will be open for the E-mini contract, most business will be of the retail and not the institutional variety, so volume will be extraordinarily light.

Written By
Alan Penny

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