April 11, 2017

Stocks opened lower this morning (Dow -110 pts; SPX -.6%). We’re right in that weird pre-earnings season period with only geopolitics to keep us busy. Financials and tech are down almost 1% in early trading. It looks like some of the stocks that have surged over the past few months are getting hit harder (MU, SWKS, AAPL, AMAT). I think the market will likely recoup some of the these losses by the end of the session. The VIX Index is up 11% to trade over 15.5; that’s a big jump in expected volatility. The VIX hasn’t been above 15 since the election. But remember, typically the VIX isn’t considered elevated unless it reaches 20. The dollar is down today (and about 1.5% year-to-date). Gold is higher on the day but most other commodities are lower. WTI crude is trading modestly lower to $52.80/barrel. Bonds are higher on the day (lower in yield). The 5-year Treasury is down around 1.84% and will likely fall to technical support at 1.80%. The 10-year Treasury is now yielding 2.31% and the next support level is 2.29%. 

Yesterday, CNBC interviewed Vanguard founder Jack Bogle. He said, “The market is pretty fully valued here, I don’t think in a highly risky way, but I wouldn’t really worry about that if you’re investing for the rest of your lifetime.” And compared with bonds, stocks look like a better value and will “almost certainly do better than bonds” going forward. 

The Nat’l Federation of Independent Business (NFIB) published its monthly small business owner optimism index. The index fell a bit to 104.7 in March vs. 105.3 in the prior month, but is still pretty close to 12-year highs. Wall Streeters watch this index for clues about the health of the business cycle because small businesses are typically more sensitive (than large companies) to changes in the economy.  

We also got the JOLTS report, which measures total job openings in the economy. Total job openings rose to 5.74 million in February from 5.625 million in the prior month. Openings have generally been in an up-trend since the middle of 2009, but more recently fell flat in 2016. The last two reports have confirmed re-acceleration in openings, and that’s good news.  

Airline stocks are taking a beating this morning after United Airlines (UAL) absolutely bungled the violent removal of a peaceful passenger from a jet that was over-booked. A video of the incident hit the internet immediately, creating a social media firestorm. The company’s heartless response to the incident, characterizing the violence as “re-accommodation” of the passenger, added fuel to the fire. UAL is down 4% this morning. Interestingly, American Airlines (AAL) is actually a trading up .8%, presumably because investors who dumped UAL are looking for a clean alternative.  

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