Why is this market so hard to kill? Why won't it go down and stay down?
I am going to just tick off how much bad news this market takes on a given day after a very big run and the darned thing just keeps fighting. It can take a jab, absorb multiple uppercuts and it just won't stay down, let alone lay flat on the canvas.
First, one of the absolute favorites in this market, the stock of Valeant (VRX), an aggressive pharmaceutical company, was almost cut in half today. Here's a stock, already down from $263 less than a year ago, that fell from $70 yesterday to $36 in this one session.
Valeant has the backing of some of the best minds of the era, including hedge fund billionaire Bill Ackman. It has been one of the best-performing stocks of all time, but it has been in an amazing tailspin since last August.
You would think that this stock -- which has been a political whipping boy of Hillary Clinton, who has been trashing the company since January -- could shake up the whole market with its gigantic losses. But Clinton's wrath against drug companies hasn't really resonated beyond this poster boy.
Don't ever say you can't make money from this election. If you listened to Hillary, she got you out of this one at $86 when she lambasted it as a serial raiser of drug prices. The pin action here is so minor. In another era, the spin coming off the head pin would have been a strike against the group, or even the whole market. But this one knocked the head pin into the gutter and left the rest of the field unscathed. Sure, not everything was spared -- sorry, couldn't resist -- but there truly wasn't much follow-through for an awfully close-knit sector.
You know what's really incredible? Tomorrow at this time we could know who the two candidates might be for president of the United States. The front-runner for the Democrats wants to cut prices of drugs pretty dramatically, while the front-runner in the Republican Party wants to save $300 billion by having Medicare negotiate with big pharma over drug prices. There's a Hobson's choice that seems to elude most buyers of drug stocks.
Second, we had really horrendous retail sales this morning. February retail sales fell 0.1%, but more important, January retail sales -- which had been surprisingly strong at 0.2% -- were revised to down 0.4%.
I cannot stress to you how horrible this news is. First, we are beginning to see a big inventory build-up throughout the retail system because of these weaker sales. Second, and more important, we got a sizable rally the day when the original January retail sales came out. It was a sign that the economy wasn't as weak as many feared. Indeed, there was genuine joy at the time.
Now it turns out that our joy should have been sorrow and the rally shouldn't even have occurred. But was it repealed? Nope.
I was jumping up and down about it this morning, so concerned that people would freak out, especially because it's a sure sign that auto sales have slowed and those are so crucial to the economy. No one even seemed to care. How is that possible? You go up big on a piece of false news and then it is blasted out of the water by a cold, hard reality negative, and it's ignored? Is that a sign of strength or what?
Just when we had become conditioned that every tick down in oil takes a big chunk out of the bull, we get a nasty spill in crude and the market overlooks it? We were threatening $40 a barrel the other day, where we know that a lot of oil companies can survive if not even thrive given some of the lower breakevens and the ability to raise equity. Now we are slouching back to $35, down a pretty big 73 cents on top of a more than dollar drop yesterday, and the pain is limited to some of the more indebted drillers, independents and master limited partnerships. Exxon Mobil (XOM) has spent most of the day unchanged or higher! There seem to be buyers lurking underneath everywhere in oil these days.
Europe was hammered today, with the average bourse losing almost a full percent. We have traded almost lock step in Europe as of late, even though that makes little sense because they are easing and we are tightening. Literally, their central banker is determined to send their currency lower versus the dollar and get banks lending like mad. Our central bank is going the opposite way.
Which brings us to the last of the litany: We are on the verge of a Fed meeting tomorrow where it is almost impossible to conjure a positive scenario. If Janet Yellen & Co. thinks the economy is too strong, then we are going to get a rate hike, maybe as early as June. Who knows -- we could, if they want to do a little shock treatment, give us one tomorrow, although that could be disastrous.
The fact is, though, a hard-line statement saying that inflation is going to come back because oil has come back could be horrendous for the stock market. How about if the governors think as a group that the economy is getting weaker? What can they do?
They aren't going to take the last hike back. Plus, there are always going to be hawks who will say, "We need to tighten regardless." I heard a bunch of people talking in the last few days about how a rate hike would be good for the market. Where were these people when we got our last rate hike?
Did they forget the tsunami of selling that came after the hike? Did they forget the horrendous January, the one that had people saying, "So goes January, so goes 2016," predicting a miserable next 11 months? How quickly they forget. Numbskulls. Oops, I meant ill-advised individuals.
Oh, and let's be sure, if the Federal Reserve doesn't talk about the need for rate hikes, then the banks and financials -- one of the largest groups in the S&P 500, the one that needs higher rates -- could be crushed, with numbers coming down across the board.
But no one seems to care. That group hangs in well today.
Why is this? Why can buyers be so fearless? A couple of reasons.
First, every time you could count this darned market out, something new pops up that's positive.
Yesterday, for example, a Chinese buyer comes in and busts up a huge hotel deal, Marriott (MAR) to merge with Starwood (HOT), by paying up gigantically for the latter. It was a stunning bolt of foreign lightning.
Second, you get situations such as The Fresh Market (TFM), the weak natural and organic supermarket chain; it got a bid from private equity simply because there is so much money chasing so few goods that can be bought and that money is willing to purchase wounded properties and turn them around. Apollo is paying $10 more for the stock of Fresh Market than it was a little more than a month ago!
Third, there's always something going right. This morning Morgan Stanley came out with a report saying that Apple (AAPL) i-Phone sales are running ahead of plan. That was a shocker, and there are so many companies that are levered to sales at Apple, which is part of the Action Alerts PLUS portfolio, that you got a rosy hue for almost all of tech.
Finally, there are enough retail outfits doing well that you can overlook the overall number. Today, it was Children's Place (PLCE) reporting a monster good number. Last week it was Dollar General (DG). The week before, it was J.C. Penney (JCP) and Target (TGT), which also is part of the Action Alerts PLUS portfolio. The aggregate numbers may be disappointing, but it is hard to stay negative when good ones keep popping up and surprising you.
In other words, as much as buyers should be more cautious and there should be more fear, and there should be more profit-takers every time it looks like this fighting stock market is about to go down for the count, it shakes off the punches and comes right back at you. Sure, today's a draw, but it should have been a knock-out, and the fact that it hasn't been is a huge victory for the Raging Bull.