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Watching Next Week: FOMC, Bond Bloodletting, New Communication Sector
09/20/2018 3:28 pm EST
Next week has a couple significant concerns: one of course is the FOMC meeting, generally discounted by firmer rates. And the broadening of the Communications Sector that results in adjusted holdings by money managers, writes Gene Inger Wednesday night.
The bond market bloodletting continues. And so far, generally is ignored. I expect that the decline in dovish Fed members will be cited next week as the markets take a slightly more realistic view of the credit markets.
The other is the deadline for money managers to have adjusted holdings to account for the shifts, such as Facebook (FB) and Google (GOOG) into the new ETF we’ve pointed-out State Street brought out earlier to minimize impacts.
It was our view that managers would sell those two shares on-balance and to balance, while retaining AT&T (T) and Verizon (VZ) in that Communication Services Select SPDR (XLC) fund. So, we’ll see what happens with the compulsory date for adjustments to be done.
The market internals remain defensive as they have for days even as the senior averages climbed to higher levels. This is the bifurcation I referred to, as Nasdaq (IXIC) would clearly have broken trend if not for firmer Oils. as it should be noted Oil held above $70 even in the face of an inventory build.
It suggests other factors at-play. And perhaps geopolitical influences tending to dominate. Stories about reduced shale reserves surface off-and-on as a reminder that maintaining the U.S. preeminence requires more drilling.
Meanwhile Tesla (TSLA) rebounded despite recent news of the Saudis investing in a competing Arizona electric car maker. although frequent delays with their main factory has been an issue. To me, the key problem with Tesla in the longer term is that they don’t have a wider range of profitable vehicles, which the ever-looming competition does.
To wit: BMW, Audi, Mercedes or General Motors (GM), can certainly absorb losses on electric vehicles until EV reaches critical mass, because they have infernal (internal) combustion engine products to sell. That mix is one reason I’ve pondered why Tesla hasn’t sought-out a partner, not in EV, but with a conventional portfolio of gasoline-powered vehicles to get it from here to there as this evolves.
Thursday’s market will probably see some effort to sell-off S&P initially. And then rebound the techs. But the sustainability of any such rebound is dubious. And a subsequent fade ahead of the weekend is entirely possible, when one contemplates both the FOMC Meeting, a deadline for certain ETF portfolio adjustments, and trade negotiations.
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