Chaos on the Trading Floor as Narrative Shifts, Earnings Misses Pile Up

Trading immediately is chaotic. We’re watching earnings land and misses pile up, while the narrative on the economy shifts from inflation to a recession. 

The producer price index report on Wednesday morning was lower than expected, which helped to cause a powerful open as price fears continued to drop. As well as, retail sales were weaker than expected, which illustrates slowing demand and will even temper inflationary pressures, nevertheless it raises concerns a few sputtering economy. The Fed could have already tightened an excessive amount of, and we’re beginning to see the economy respond accordingly.

Early breadth was very strong but is beginning to slip because the S&P 500 falls into the opening gap. The Nasdaq and Nasdaq 100 have had seven-straight positive days, so a “sell the news” response wouldn’t be a giant surprise. There also is a few poor positioning that’s providing support for now.

Conditions are actually ripe for an intraday reversal, and we’re seeing some signs of that now. The economic news on Wednesday is a mixed bag because it indicates inflation is cooling, however the likelihood of recession is increasing. 1 / 4 percentage-point hike is now expected at the subsequent Fed meeting — with the percentages now at 97% — so weaker inflation is already discounted.

In response to the market motion, I’m managing positions tightly, holding high levels of money and see little opportunity to construct longer-term positions immediately. One name I’ve added to is small-cap pharma stock, Actinium Pharmaceuticals Inc., (ATNM) , but otherwise, I’m working on some index shorts.

To date this week we has seen 18 earnings reports, and 11 earnings per share misses. That is very unusual. Typically EPS beats are 70% or more. But stocks haven’t been hit too hard on these misses to date. Now we have to look at this closely.

(Please note that as a consequence of aspects including low market capitalization and/or insufficient public float, we consider this stock to be a small-cap stock. You need to be aware that such stocks are subject to more risk than stocks of larger corporations, including greater volatility, lower liquidity and fewer publicly available information, and that postings similar to this one can affect their stock prices.)

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