October 15, 2018

Stocks are mixed without direction after last week’s declines. At the moment, the Dow is down 47 pts, the SPX is down .4% and the Nasdaq is down .8%. Cyclical sectors are leading to the downside. The tech sector is down 1.3%; energy is down .7%; consumer discretionary is down .5%. On the other hand, defensives like utilities and real estate are catching a bid. Gold miners are up nearly 2%. The VIX Index is still hovering north of 20, belying some lingering fear from last week. European markets will close about .5% higher although most of Asia was down overnight. The dollar is weaker today, continuing a 1-week trend. WTI crude oil is down a bit to trade around $71.17/barrel. Bonds are trading slightly lower on the day as yields tick higher. The 5-year and 10-year Treasury yields rebounded to 3.01% and 3.16%, respectively. Remember, when stocks were tanking last week, the 10-year jumped briefly to 3.23%. So rates have backed down.

Billionaire businessman Tilman Furtitta was interviewed on CNBC Friday. Asked about his view of the economy he said, “There’s no slowdown out there. Not one economic sign out there in the economy headed down.” Mr. Furtitta owns Landry’s Steakhouse, Golden Nugget Hotel & Casino, and the Houston Rockets. He says gaming, restaurants and hotels are doing very well and the US consumer is in great shape.

Ironically, US retail sales disappointed in September, barely growing at all from August levels. There were signs of life in autos (perhaps replacement demand after the hurricane), but gasoline stations, department stores and restaurants lagged. On a year-over-year basis, retail sales decelerated to 4.7% growth from a very strong 6.5% in the prior month. Barron’s says this report may be a “head fake,” however, because 1) the hurricane temporarily impacted consumer spending, and 2) sales for the “control group” held steady at a healthy 4.9% growth. The control group excludes autos, gasoline and building materials. Barron’s conclusion: “The consumer continues to contribute solidly to economic growth.”

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