Saved. The bulls got saved again. So often, ever since the market's bottom a little more than a decade ago, good things just come out of nowhere and they change the market or a stock's direction when you least expect it.
Last week I was beyond belief concerned about what looked like the dissolving of the always cordial relationship between the United States and Canada. I know that we have a "special relationship" with England. But Canada is our acknowledged best partner with remarkably strong ties, ties that seemed to fray last week when the president took pot shots at the prime minister of Canada, Justin Trudeau and his trade representative, Crystia Freeland. I was astonished at how brazen he was in his insults and how stark his treatment of the nation to the north was versus every other president.
So we went into the weekend believing that, while we had a very solid deal with Mexico, including provisions that made it so the economics of U.S. companies moving to Mexico were no longer that enticing, we were going to blow up the relationship with a country that 36 states regard as their largest trading partner.
The fears were so palpable we left here believing that without Canada we could lose the Mexican portion of the deal, too.
Then, right in the middle of an afternoon of watching football, the news broke that Canada had folded, that it accepted the insults with aplomb, or with fear, and the U.S. got a much better deal than it had, a deal that compels car companies to make a higher percentage of a car to be sold here in the United States. That means more jobs for Americans, the president's intent for the entire redo of NAFTA. The deal, provided it is approved by Congress, is a win for U.S. automakers because they already comply but many foreign car makers don't.
Suddenly, whole sectors that looked like they might be rolling over, sectors like the rails, catch bids. Kansas City Southern (KSU) , which brings so many cars to the U.S. from Mexico, soared. So did the stocks of Union Pacific (UNP) and Norfolk Southern (NSC) which also stand to gain from the agreement. Parts makers, many of which were stuck in the middle, exploded: Lear (LEA) and Magna (MGA) took off as certainty was at last upon them. Steel companies with auto business rallied including Nucor (NUE) which has been a dud ever since the government invoked 232, and put tariffs on steel.
It was a radical change in the story line, something caught many bulls by surprise on this first day of the new quarter and left bears stunned as they were all set to pounce on tech and transports alike.
Now, because of the incredible twist of Canadian fate, there's a newfound belief that China might be ready to fold like Canada, especially because China has reported a slowdown in manufacturing. We had thought that the Chinese were taking a long view, or at least a view that the Chinese want to see how the midterm elections turn out. But the stocks that benefit the most from Chinese relationships getting better soared today. If you had told me that Boeing's (BA) stock would hit an all-time high while this dispute rages, I would have told you that you should have your head examined. The Sturm und Drang about how bad Boeing will be hurt given that one out of every four planes is said to go to China, was part of the negative narrative that has plagued us since January.
But there it was, up nine points, busting through the $372 high going right through to $382. Now, of course, there is no deal with China. It seems like things are pretty frosty between our two countries. However, they couldn't get more tense than they were between the United States and Canada a week ago and it worked. So now you have to wonder if it will work in China. We have more leverage than they do if only because we take about $500 billion of their goods and they take $100 billion of ours. It's tough to get them to stop stealing ideas or demanding outlandish joint ventures. Nevertheless, nervous bears have to be thinking, "hmm, maybe the Chinese are afraid, too." Maybe the Chinese don't have as much game as so many pundits claim. I have always been in the camp that we have made them more powerful than they are. That's not been the prevailing wisdom. However, after Canada got shamed into a deal, maybe the Chinese will be, too.
Another save? How about this Tesla (TSLA) ? Last Thursday, Elon Musk spurned a deal from the SEC that would make shareholders thrilled: some independent directors and an independent chairman. Those changes are the antidote to those who believe that Musk is too erratic to run the company. It was positively insane that he walked away from that deal and risked the wrath of the agency.
Sure enough, this weekend Musk came to his senses and agreed to the board changes, accepted a $20 million fine - as did the company - and acceded to a ruling that he must have supervision to tweet.
No sooner did he sign then we learned that Tesla made 80,000 Model 3 cars in the third quarter, much better than the bulls thought.
So, we leave the office Friday thinking that Musk could be fighting the government for no reason, something that put his whole relationship with his company in jeopardy. We come in Monday and he's ensconced, safer than ever, with much better corporate governance. It's a fairy tale ending to a very dicey situation.
Finally, there's General Electric (GE) . Here's a company that had become a sort of Achilles heel for the market, a once gigantic colossus that strode the earth. But because of a series of decisions made by Jeff Immelt, the former CEO of GE, a company that had been a proud jewel of the United States turned into an unmitigated disaster.
Thirteen months ago GE picked an insider, John Flannery, to try to turn the company around. The stock dropped about 50% and the dividend was cut during his tenure.
Today Flannery was fired for not moving too fast to save the company. I found it to be a little astounding given that there were so many things wrong at the company he inherited that it was difficult to fathom how much had to be fixed in such a short period of time. We learned, once again, that the company is doing far worse than we thought, that the power division is even more of a disaster than we thought, that there is no easy fix whatsoever. At the same time, though, the company appointed board member Larry Culp, a brilliant manager who ran a fabulous company, Danaher (DHR) , before this, and produced a return equal to five times the S&P 500.
Now the skeptical analysts remain skeptical and with good reason. There were no details given about how the company's doing but when you boot a CEO after just 13 months, the presumption is that the company's doing far worse than you think. Otherwise, why not let Flannery muddle through.
It's a brutal move but Wall Street loved it even as it didn't change the minds of the bearish analysts. I figure they might change their view once the full story is known.
Now, the bulls won't win every contest. There were a bunch of tech stocks that rallied last week, notably the cloud kings that opened strong and reversed. Social media got shelled again. Alphabet, up huge early on, quite visibly reversed.
What matters, though, is that, once again the bulls snatched victory from the jaws of defeat. That's been the story for the year and for the decade.
It remains the story as we turn the corner on a brand new quarter.
