Energy stocks had a rough quarter amid fears of a global recession

Commenting on today’s trading with a global recession worry back in the headlines, Gorilla Trades strategist Ken Berman said:

a global recession

geralt / Pixabay

The technical breakout that investors have been waiting for all year might have finally started today, even though participation in the rally remains an issue.  With the S&P 500 closing at, and the Nasdaq getting close to a record high, today’s session could go down in history as a major technical milestone, but this week’s Fed meeting and earnings reports still provide uncertainty, and small-caps should remain as strong as they were today to support the breakout.”

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Q3 2019 hedge fund letters, conferences and more

The major indices all finished higher for the second session in a row, with the S&P 500 closing at a new all-time high, boosted by gains in the tech sector and services. The Dow was up 133, or 0.5%, to 27,091, the Nasdaq gained 83, or 1.0%, to 8,326, while the S&P 500 rose by 17, or 0.6%, to 3,039. Advancing issues outnumbered decliners by an almost 2-to-1 ratio on the NYSE, where volume was slightly above average.

While almost all of the key sectors finished in the green today, with only the defensive utilities losing ground, the tech sector, which was the strongest today could be in for a few volatile days due to earnings. Google parent Alphabet (GOOG) reported in after-hours trading, and the firm missed on its bottom line, causing a dip in its shares, so the sector could be under some pressure tomorrow morning. That said, as almost 80% of the reporting companies beat the consensus so far, the day-to-day volatility shouldn’t discourage bulls, as the general earnings-trend seems to be bullish.

A global recession coming?

The positive reports regarding the ‘phase one’ trade deal with China contributed to today’s gains, propelling the likes of Apple (AAPL) and Microsoft (MSFT) to record highs. The possible de-escalation in trade also boosted cyclical issues, since the risk of a global recession would be much lower without the increased tariffs, especially now, as a ‘hard-Brexit’ is virtually off the table. Global risk assets also remained strong today, and Treasury yields hit their highest levels in over a month, confirming the continued optimism.

Three healthcare giants, Merck (MRK), Pfizer (PFE), and Amgen (AMGN) will all publish their quarterly numbers tomorrow, while Mastercard’s (MA), and ConocoPhillips’s (COP) reports could shake up the financial and energy sectors. While energy-related stocks are in recovery this month thanks to the bounce in the price of oil and the broad rally in equities, the sector still had a rough and volatile quarter amid the fears of the a global recession. With the Chinese and European economies still struggling, ConocoPhillips’s guidance could provide valuable information about the outlook for the sector.

The consumer economy and the housing market will be in focus tomorrow, in terms of economic releases, with the CB consumer confidence number likely drawing the most attention besides corporate earnings. The measure took a sizable hit last month, pulling back from its near-record summer levels, and analysts expect a rebound to 128.2 from the previous reading of 125.1. Pending home sales and the Case-Shiller Housing Price Index will also be out just after the bell, and bulls are hoping that the latter measure will finally tick higher, as the lower mortgage rates continue to support activity in the sector. Stay tuned!



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Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver