Jarring day. Totally.
We had the shutdown of the New York Stock Exchange and while there were many other exchanges that picked up the slack, nothing makes you feel more uncertain about your stock holdings than a sense that the system where they may have been initially purchased failed to work.
We made much of it today because it is such an unfortunate anomaly for the New York Stock Exchange, which I can tell you, having been involved with it since the 1980s and working there every day for the last three years, is a totally top notch place in every way. On a day when the United Airlines' (UAL) computers broke down, it's not all that comforting to believe that everything's hunky dory. Conspiracy theorists overwhelmed me today as there seemed to be no way that two broad isolated instances could happen on the same day.
Sorry, I believe the exchange when it said it wasn't hacked. Sadly, it's not comforting to see a "bad day," as NYSE Group President Tom Farley put it. No one disagreed with him.
If it were just for the trading halt, which, mercifully, ended at 3:11 we would have had a not-so-hot day.
But we had the usual dithering in Europe, which, astonishingly, seemed comforting to the European markets, which averaged a 1% gain. It says something, doesn't it, that a nothing-happening day in Europe produces positive results? I think that we are actually on the verge of a resolution and that's just a positive, no matter what it is, except if you are Greek where you have to be discouraged either way. If we get a boot from the eurozone, something that German Chancellor Angela Merkel seems to want badly, then the next aid you hear about for Greece will be humanitarian --probably from us. At least there will be a pulse. There isn't one now.
The China implosion has finally hit home and it's undeniable that the Chinese economy, often a place where we expect to see a turn, might have a turn alright -- a turn down.
Let's see, Europe stalled, China headed down. Not good.
But you know me, there's always a bull market somewhere. So, excuse me for thinking anything positive on a day when gloom ruled the day, punctuated only by moments of fear from unseen hands that might be playing havoc with machines everywhere.
But did you notice what wasn't talked about? A Fed rate hike, that's what.
Just think about the discourse two weeks ago. The front-and-center issue was when will the Fed raise? Would the Fed come out at the end of July and say, "We have no choice but to raise rates because we are in an all-systems-go economy?" You know that's what dominated and it was all about how much how fast, how high.
One look at our screens today and all I can say is wait a second, you want to tighten now? You want to tighten when China might be in full on crash mode? You want to tighten when we might be choppering in food to Greece? Do you want to raise rates when iron's down 16% in a week, copper's down more than I ever thought possible, the grains are going lower and the Chinese are selling everything that's not nailed down?
Do you want to raise rates when oil's pretty much in freefall, signifying another bout of deflation not inflation?
Most importantly, do you want to raise rates, causing the dollar to soar, squelching any hope for an export-led comeback of our economy?
I don't think so.
You know what happens when you put the Fed on hold? I'll tell you what happens. You get new buyers coming in scooping up the stocks that offer good yield because if rates aren't going higher you are back in the great search for yield.
With the Fed on hold, we saw buyers yesterday of all sorts of bond-market-equivalent stocks, the real estate investment trusts, the utilities and the consumer packaged goods being the best examples,.
We saw a remarkable turn in the latter group right in the middle of yesterday's session and you saw only a minor rollback in the likes of Kimberly-Clark (KMB), Procter & Gamble (PG), Clorox (CLX) and PepsiCo (PEP). Now we know with the computers down for much of the day on the exchange and the looming declines that so many expect to continue in China that it was a tough day to follow up with more buying, especially when wave after wave of S&P futures selling washed over the market.
But let's be really upfront about something, with commodities declining and rates falling, these stocks are back, again, as places to go, along with restaurant and retail groups that will not be hurt by China or Europe.
Now, we have watched all of these kinds of stocks be under pressure for months as the inevitability of the rate hike dawned on us.
It was too ugly to think that we could rally on a day like today, but the only green on my board at the end of the day was the CurrencyShares Euro Tust ETF (FXE), which measures the strength of the euro against the dollar. That's right, the dollar didn't rally today. It went down.
So, let's go over the setups. You have the dollar stabilizing to going higher. You have the Fed on hold. You have rates very low. You have no cessation in growth in this country to speak of, except exports, but you have interrelated markets that are way too fragile for the Fed to take action, The IMF, which twice warned the Fed not to raise this year, including yesterday, is looking mighty prescient.
Now, you know I haven't liked the setup for ages. But I could argue that the rotation into domestics and yield plays took a breather today, but no more than that.
I want you to use downturns to buy the stocks of high-quality companies that you like at your prices. We are in a volatile market where you are getting that chance.
Let me leave you with this one last thought.
Yesterday, we got a big push from a brokerage house about the stock of Disney (DIS), a company with so many catalysts, including Star Wars and the opening of Shanghai Disney. I think that the stock will now be under some pressure because people will say hold it, Shanghai Disney is going to be not as hot as it thought because of the Chinese stock market crash. Others might just say, "I don't like this market, I don't like the trading halt, I don't like the gloom, I am sick of this market," and they sell Disney down.
To me that says, maybe I have a chance down to buy Disney some 4-5% from the high.
Isn't that what you are supposed to do? Isn't that what investing is? Too worried about Shanghai and Disney, then how about all of those red-hot retailers that people loved yesterday. How about Kroger (KR)? How about Costco (COST)? Home Depot (HD)? When they come back down, do you look the other way? Or do you buy. I think you know what I would do.
You do what you have to do when you get that opportunity you otherwise wouldn't be getting because the Fed would be on the verge of doing something that everyone knows is going to send the market down, but now looks like it won't happen any time in 2015.
