Last night we closed the books on the first half of trading in January, which has been quite the reversal from how we ended 2018. All the major market indices have rebounded between 3.2%-5.9%, with the Nasdaq taking the lead as technology stocks have recovered.
Out of the gate for 2019, the Real Money Post-Industrial Average (RMPIA) is once again taking the lead over the S&P 500, Dow Jones Industrial Average and the Nasdaq Composite Index as it finished up more than 7% for the first half of January.
That outperformance for RMPIA reflects the upward moves in 24 of the average's 30 constituents, including double-digit gains at six of them. Those double-digit moves higher span 11.5% at the low end for Amazon (AMZN) to a just under 38% for Celgene (CELG) , which is being fueled by the takeover from Bristol-Myers Squibb (BMY) . Closely behind Celgene, is Netflix (NFLX) , which saw its shares pop earlier this week following the announcement that the company would boost its membership fees by 13%-18%. That will likely result in Wall Street boosting its revenue expectations for the coming quarters as well as reassessing not only the company's ability to spend on proprietary content but also service its debt.
Alongside RMPIA's march higher, however, we continue to get data pointing to the global economy slowing relative to expectations we had several months ago, which is raising questions over not only GDP prospects for the coming year but also earnings.
Stoking those earnings growth concerns were negative pre-announcements from Apple (AAPL) , Samsung, LG, Macy's (M) , Target (TGT) and Kohl's (KSS) over the last two weeks. That combination points to slower smartphone demand, but I continue to see it picking up in the coming quarters as the 5G ripples its way across our network operators and devices offering consumers a reason to upgrade their devices. This week we can add Delta Airlines (DAL) , Dialog Semiconductor (DLGNF) , Nordstrom (JWN) , Electronics for Imaging (EFII) , Sherwin Williams (SHW) and Ford Motor Company (F) to that list, as well as earnings misses from Wells Fargo WFC , BlackRock BLK and others. Not what one wants to hear as the December quarter earnings season gets underway.
Adding fuel to the uncertainty, this morning rail company Genesee & Wyoming (GWR) reported traffic volumes for December fell 4.8% year over year. That piles on the limited data we are getting, which included the January reading for the Empire State Manufacturing Survey General Business Conditions Index that fell to 3.9 from 11.5 in December. That drop was led by a deceleration in new orders, inventories, and the number of employees. The survey's six-month outlook also dropped, falling to 17.8 from 30.6 last month. These data points fit the view that there is a slowdown in manufacturing activity, which has piqued concerns about a broader slowdown in economic activity unfolding in 2019.
On top of that, yesterday Sen. Chuck Grassley said U.S. Trade Representative Robert Lighthizer saw little progress on "structural issues" in last week's talks with China. These issues include intellectual property, stealing trade secrets, and putting pressure on corporations to share information with the Chinese government and industries. These issues are the very ones I was concerned about in terms of the trade negotiations. With China cutting its growth forecast some days ago to 6% from 6.5% and more data pointing to that economy cooling, there is likely room for the trade talks to include those issues, but my concern remains the ticking timeline until tariffs jump further. If that comes to pass, it would be another headwind to the global economy and corporate earnings for the coming quarters.
These are like likely to present near-term issues for the market, but we'd remind readers RMPIA has been created for the long haul.
