These themes keep disappearing before our eyes and with them we lose potential buyers on weakness of the entire market.
Last night's revelation that Chinese exports unexpectedly shrank the most in seven months stuck a knife into the heart of a nascent commodity rally that had seen BHP Billiton's (BHP) share price increase from $20 to $35 this year, while Rio Tinto's (RIO) stock experienced a similar trajectory: $22 to $32 over the same time period.
Given that the Baltic Freight index had jumped 89% for the year and a host of metals, including copper and oil, looked like they had put in definitive bottoms, this overnight number busted the narrative. And it's a narrative that matters to everything from Freeport (FCX) to Cummins (CMI) to Caterpillar (CAT) and new darling Teck Resources (TCK) , the coking coal company with a stock that is pennies off its high and is up 382% this year.
These are hardly the stuff of a Chinese export number falling 10% and 1.9% drop in imports.
Losing China right now going into earnings period could be a pretty big negative, given that it had been in the thought-to-be-positive column about a month ago.
The "China's better" theme is one on which, by the way, I am not going to give up based on one night's figures. But I know that's not what matters today. It is crucial to the coming earnings season because we are getting pretty persistent reports that the U.S. is not better, despite the endless chattering that the Fed wants to move in December.
Obviously we are building in that hike with this multi-week selloff right now.
It's not just China, though. The one-two punch that Honeywell (HON) and Alcoa (AA) have thrown at the aerospace industry has been devastating. We all know that long-term travel projections are strong, but we have a morass of unusual proportions in the actual supply and demand of planes at the same time we have structural changes within the industry that are playing havoc with the figures.
Both Honeywell and Alcoa told us that there are near-term adjustments to be made in aerospace growth rates. Alcoa specifically talked about issues in the airframe and in the aero-engine businesses and how they are not as strong as they were.
Why that is? Well, it's curious. For airframe the issue, as Alcoa's Klaus Kleinfeld tells it, there's "strong demand for narrow bodies but softened demand for wide bodies." That mismatch is hurting the whole supply chain and is a reminder that Boeing (BA) did say third quarter deliveries would be 5% lower.
More important, though, is the chaos in the aero-engine side of things, where Kleinfeld used the term "teething" to me three times to describe issues that have directly to do with the difficulty in making new engines.
Here's the conundrum. Rolls Royce (RYCEY) , a major engine maker, is trying to ramp up to meet demand for new wide body engines. According to Bloomberg, it needs to double its output. At the same time, it has to replace blades for the Dreamliner after Boeing experienced some cracks in those blades. Rolls Royce has said that the issues involve a small portion of the 50-jet fleet of Dreamliners flown by ANA, a Japanese airliner. The under-reported issue, though, has apparently had big repercussions to the supply chain.
But not as big as the manufacturing problems plaguing the first run of the Geared Turbofan engine of United Technologies (UTX) . This engine has incredible qualities, including a much lower fuel usage, but UTX has had to cut delivery schedules from 200 engines to 150 this year already.
So, in the last few days two of the best themes out there, China and aerospace, have been laid low. That comes on top of the Fortinet (FTNT) cybersecurity debacle of Tuesday and the Samsung losses, which could dent the entire semiconductor equipment supply chain, one of the more powerful secular growth themes out there. Or at least we thought so until the Galaxy Note 7 fires put a dent on how much Samsung might be able to spend on new semi equipment.
You put it altogether and you can see how the loss of large areas of investible sectors can cause declines of the kind of magnitude we have been getting.
With the Fed making such loud noises about tightening, let's just say the Chinese numbers were exactly the opposite of what this market needs at this very moment.