A California district attorney reposted on social media 9/11 images along with comments blasting the election of Zohran Mamdani as New York City’s first Muslim mayor. Despite the gory images and strong denunciation of Mamdani, Dan Dow insists that he has no issues with the Muslim community in San Luis Obispo County, where he is the top prosecutor.
He has “strong ties” with the community, Dow said in an emailed statement Thursday to The Times.
But his posts have drawn backlash, and a Muslim advocacy organization is demanding an apology and an investigation.
On Wednesday, Dow retweeted a post on X from a popular right-wing account that appeared to show a snapshot moments after flames jutted from the South Tower, the second of the twin towers struck by a plane on Sept. 11, 2001.
A second visual tweet, more graphic than the first, displayed footage from two angles of a plane barreling into one of the towers. That was posted by the leader of an activist organization, described as a hate group by some, that claims to “combat the threats from Islamic supremacists, radical leftists and their allies.”
Each was posted in the aftermath of the New York City mayoral election won by 34-year-old democratic socialist Mamdani.
The posts were retweeted and subtweeted days later and 3,000 miles away by Dow, drawing rebuke from some locals, in a story first broken by the San Luis Obispo Tribune.
“I shared the posts because, in my opinion, Mamdani is going to destroy New York being a self-proclaimed socialist,” Dow responded. “I support the Muslim community and have strong ties to our Muslim community in San Luis Obispo.”
The first post Dow retweeted came from the account @EndWokeness, which vows to its nearly 4 million followers that it’s “fighting, exposing, and mocking wokeness.”
The second post came from Amy Mekelburg, founder of Rise, Align, Ignite and Reclaim (RAIR) Foundation, which is listed as a hate organization by the Council on American-Islamic Relations.
The council’s Los Angeles office demanded Thursday evening that Dow apologize and “retract his recent anti-Muslim social media posts.” CAIR-LA is also asking for an independent investigation into Dow’s conduct and “his fitness to continue to serve as DA.”
The organization is incensed at his retweeting of Mekelburg, whom they describe as “a known anti-Muslim extremist.”
Mekelburg wrote a sizable message on the video post, saying she’d “given my entire self” to warn the world “about the threat of Islam after 9/11.”
“And now … to see New York — my city — stand in this moment, where someone like Zohran Mamdani could even be elected,” she wrote. “My God, New York, what have you done?”
CAIR-LA said that Mekelburg “falsely equated the election of Mamdani with 9/11, reinforcing the harmful stereotype that Muslims are inherently tied to terrorism simply because of their faith.”
Dow subtweeted that specific post with a message that began by highlighting his 32 years of service in the U.S. Army and his four tours overseas.
“I remember like it was yesterday our nation being attacked by Islamic extremists on 9/11/2001,” he wrote. “I love this country and I do not in any way share the same views as the 33-year-old socialist Zohran Mamdani.”
He added in the tweet: “I am very sad to see the Big Apple torn apart by electing an un-American socialist who wants to trample on the values and freedoms that millions of Americans have fought and died for.”
“Dow’s decision to repost content that weaponizes bigotry and baselessly ties an elected Muslim official to terrorism is appalling and reflects the deeply rooted dehumanization and fearmongering in this country that American Muslims have had to endure for decades,” CAIR-LA Executive Director Hussam Ayloush said in a statement.
Dow’s posts also struck a nerve with one of his Muslim allies in San Luis Obispo, Dr. Rushdi Cader, who referred to the district attorney as “a personal friend” to the San Luis Obispo Tribune.
Cader told the Tribune the posts were “highly incendiary and puts Muslims at risk for harm, especially hijab-wearing Muslim women like my wife Nisha, whom Dan has himself described as ‘a kind and gentle lady’ who he ‘prayed would be blessed with peace.’”
Cader added he thought Dow’s “ugly post” was borne “out of disagreement with Mamdani’s politics” rather than any direct attack on Islam.”
Dow’s tweets drew other rebukes.
San Luis Obispo County Second District Supervisor Bruce Gibson called Dow a “Christian nationalist.”
He “occupies a powerful public office that requires decency and discipline,” Gibson said of Dow. “This post is yet another example that he has neither.”
San Luis Obispo Mayor Erica Stewart emailed The Times to say that the city was welcoming to all community members.
“Dan Dow, as the county’s District Attorney, by definition, should be objective and fair,” she wrote. “For someone in his position to express racism is unacceptable.”
Dow had his defenders too.
Orange County Dist. Atty. Todd Spitzer serves with Dow on the California District Attorneys Assn. Spitzer is the organization’s secretary-treasurer while Dow is the president.
Spitzer found no fault with Dow’s social media posts.
“Elected officials have a platform to share their views and be judged by their constituents,” he wrote in an email. “It is heartbreaking to see someone who has expressed such anti-public safety and anti-Semitic sentiments elected as mayor of New York, and we as the elected protectors of public safety have a right to express that.”
The Dow Jones Industrial Average and other major stock market indexes were in the red Thursday morning as a key inflation reading came in higher than expected in September.
The Consumer Price Index increased by 2.4% in September on an annual basis, according to data released Thursday by the Bureau of Labor Statistics. That was slightly above the 2.3% forecast. Month-over-month, prices rose 0.2% from August, also surpassing the expected 0.1% increase. Core CPI, which excludes volatile food and energy prices, rose 3.3% year-over-year, slightly higher than the expected 3.2%. On a monthly basis, core inflation climbed 0.3%, above projections of a 0.2% rise.
The data point to ongoing inflationary pressures on the U.S. economy, with attention now shifting to Friday’s release of the Producer Price Index (PPI), which will provide insight into wholesale inflation. Both data points will help inform the Federal Reserve’s next moves, including whether, how much and how fast to cut interest rates in the months ahead.
The Dow dropped 100 points, or 0.24%, to 42,411 shortly after markets opened Thursday. The tech-heavy Nasdaq and S&P 500 dipped 0.39% and 0.31%, respectively. Oil prices rose on Thursday, with West Texas Intermediate trading at $74 per barrel and Brent crude at $77 per barrel, both up 1.4%.
Elon Musk’s Tesla robotaxi reveal is finally here
Tesla (TSLA) CEO Elon Musk will finally unveil the company’s highly anticipated robotaxi on Thursday at Warner Bros. Studios (WBD) in Los Angeles. Dubbed “We, Robot,” the event is expected to provide a first look at a “Cybercab” prototype, along with a booking platform for owners and riders. There will be also an update to the company’s Full Self-Driving (FSD) technology, along with a production timeline.
Delta and Dominos fall on earnings
Domino’s Pizza (DPZ) posted its earnings report before the market opened, and its shares were down 2.9%. Delta Air Lines (DAL) stock was also down 2% after the release of its earnings report.
Wall Street soared Friday on news that employers are still hiring in strong numbers, recovering from slumps caused by fears that escalating Middle East tensions could impact global energy supply.
DowJones Industrial Average: 42,352.75 ⬆️ up 0.81%
STOXX Europe 600: 518.56 ⬆️ up 0.44%
Hang Seng Index: 22,736.87 ⬆️ up 2.82%
Nikkei 225: 38,635.62 ⬆️ up 0.22%
Bitcoin: $62,336.70 ⬆️ up 2.62%
US: Wall Street gains on stellar jobs report US employers added 254,000 jobs in September, surpassing estimates and signaling continued economic strength. The S&P 500 closed up 0.90%, and the Dow neared its record, up 0.81%. Meanwhile, the tech-heavy Nasdaq climbed 1.22% with big gains for Nvidia, Broadcom Corp. and Advanced Micro Devices.
The news erased losses from earlier in the week, as S&P 500 finished with a 0.22% weekly gain, while the Dow added 0.09%, and the Nasdaq ticked up 0.1%.
Europe: US jobs report lifts markets abroad Europe markets were mixed in early trading but gained on the U.S. jobs report. The Stoxx Europe 600 closed up 0.44% and the U.K.’s FTSE made up for losses early in the day, hovering near its Thursday close.
China: Hong Kong rally resumes after holiday Hong Kong shares resumed their rally on the back of China’s stimulus measures, jumping 2.82% a day after traders took profits following a three-week rise of some 30%.
Japan: Markets end week near where they started The Nikkei 225 ended a yo-yo week with a slight 0.22% gain after new Prime Minister Shigeru Ishiba outlined his economic agenda, which includes above-inflation pay raises and assistance for low-income households.
US stocks fell on Friday as worries over a global IT outage calmed, with Wall Street looking for recovery from a sell-off that saw the Dow snap a run of wins and a tech rout continue.
The Dow Jones Industrial Average (^DJI) slipped roughly 0.9%, coming off a drop of over 1% for the blue-chip index. The S&P 500 (^GSPC) fell 0.5%, while the tech-heavy Nasdaq Composite (^IXIC) declined 0.5%.
Stocks are facing weekly losses after a wobbly handful of sessions that saw a dive in techs, with AI-focused chip stocks bearing the brunt. Investors are rotating out of the tech heavyweights that have fueled the recent rally and into small caps, seen by some as benefiting more from interest-rate cuts.
In the early hours, investors assessed the potential impact of an “unprecedented” failure in computer systems worldwide that grounded flights and hit banks, telecoms and media companies, among others. But concerns eased after CrowdStrike (CRWD) said a fix was in place for the glitch, a botched update that affected Microsoft-based (MSFT) systems.
CrowdStrike shares plunged as much as 20% as the outage spread, but pared losses to around 10% by afternoon trading. Shares in Microsoft — which was working on problems with its Azure cloud services — were down less than 1%.
Meanwhile, Republican presidential contender Donald Trump used his nomination speech on Thursday to say he would “end the electric vehicle mandate on day one.” His comment comes as the market wakes up to the “Trump trade” — the implications of his policies for assets if the former president takes the White House.
Shares of Tesla (TSLA) and other EV makers fell on Friday, along with the broader market.
Live8 updates
Nvidia, Tesla lead losses on Nasdaq 100
The Nasdaq 100 (^NDX) sank to a session low, down roughly 1% on Friday.
EV manufacturer Tesla (TSLA) dropped more than 4% while shares of chipmaker Nvidia (NVDA) sank more than 2%.
Other semiconductors also dropped with Intel (INTC) falling more than 5% and ASML (ASML) declining 3%.
Nasdaq 100 sank roughly 1% by 1:00 p.m. ET on Friday.
Tesla falls 4% after Trump says he will end ‘electric vehicle mandate’
Electric vehicle stocks were under pressure on Friday after former President Donald Trump criticized the Biden administration’s clean energy initiatives, referring to them as the “green new scam” during the Republican Convention.
Trump said, “I will end the electric vehicle mandate on day one, thereby saving the US auto industry from complete obliteration, which is happening right now, and saving US customers thousands and thousands of dollars per car.”
The comments were made despite an endorsement from Tesla (TSLA) CEO Elon Musk. Shares of the EV giant sank as much as 4% on Friday. Rivian (RIVN) and Lucid (LCID) were also down more than 1%.
The Biden administration doesn’t have an EV mandate, but critics point to the Environmental Protection Agency’s auto rules aimed at lowering carbon emissions introduced in March as a way of accelerating electric vehicle mass adoption.
Tech and Consumer Discretionary lead declines
Almost all the S&P 500 sectors fell on Friday, with Technology (XLK) and Consumer Discretionary (XLY) stocks leading the declines.
The Materials Sector (XLB) was also down by 1%. All three major averages were in the red by 11:45 a.m ET.
Healthcare (XLV) was the only sector slightly higher.
Netflix memberships grew 34% quarter on quarter, boosted in part by the removal of the basic plan in certain markets.
Netflix were up as much as 3% in early trading before giving up those gains.
CrowdStrike falls 10% following global IT outage
CrowdStrike (CRWD) shares were down as much as 10% on Friday following an “unprecedented” failure in computer systems that impacted everything from airlines to hospitals.
Early on Friday CrowdStrike CEO George Kurtz said a fix was in place for the glitch.
On social media platform X, Kurtz wrote “CrowdStrike is actively working with customers impacted by a defect found in a single content update for Windows hosts.”
Stocks little changed after global IT outage
Stocks were little changed on Friday as more details emerged about a global IT outage. Wall Street was struggling to recover from a sell-off that left all major averages in the red on Thursday.
The Dow Jones Industrial Average (^DJI) slipped 0.2% after dropping more than 1% in the prior session.
The S&P 500 (^GSPC) hovered around the flatline, while the tech-heavy Nasdaq Composite (^IXIC) slipped 0.2%.
Investors have been rotating out of tech stocks this week with AI focused chip stocks leading to the downside.
Early this morning investors assessed the impact of an “unprecedented” failure in computer systems that work with CrowdStrike (CRWD) and Microsoft-based (MSFT) platforms.
CrowdStrike CEO George Kurtz said a fix was in place for the glitch. He said “CrowdStrike is actively working with customers impacted by a defect found in a single content update for Windows hosts.”
Off the phone with: American Express CEO
Another solid quarter from American Express (AXP) will see it hike its marketing budget to $800 million this year to $6 billion, CEO Stephen Squeri just told me by phone.
He also had this to say on whether he is thinking more cautiously on the second half of the year because of the election:
“If I was baking in more caution. I wouldn’t have raised the guidance. I wouldn’t be increasing the marketing and so forth. I think we’ll just be consistent and I think that’s the key point here. The Fed will do what the Fed is going to do probably in September. I certainly is not going to raise rates, they’ll probably be cut, they’ll probably be another cut before the end of the year. I think that’ll help you know, consumer confidence. I think we’ll see whatever happens in the election in November, which I don’t think anybody has any idea and the reality is this company has been around for 174 years with 30 presidents — we’ll get through whatever is we need to get through.”
In other news…
In news not related to Trump’s RNC speech, Hulk Hogan ripping his shirt off at the event moments earlier, and CrowdStrike’s (CRWD) outage wreaking havoc on life (and its stock price) this morning…
We DID have Netflix earnings last night, which Yahoo Finance’s Alexandra Canal breaks down here. The stock is down slightly in the premarket, with some concern on third quarter subscriber guidance.
Here’s what Jefferies tech analyst Brent Thill had to say on this front:
“We don’t think [guidance is a problem]. Given the massive growth over the last 12 months from password sharing (+39M net adds), a slowdown in sub growth shouldn’t be surprising. It is worth highlighting that the 8M net adds in Q2 was the strongest Q2 the company has reported except for Q2’20. We expect Q4 sub growth to accelerate to 7.7M net additions given the content slate (Squid Game S2, NFL Games) and better seasonality in Q4 vs. Q3.”
The S&P 500 notched an all-time record on Friday, closing above its previous high set two years ago.
The Dow and Nasdaq also surged as traders took in strong economic data.
The University of Michigan’s consumer sentiment gauge jumped to its highest since 2021.
Strong economic data fueled the S&P 500 to a record on Friday, with markets getting more optimistic about potential rate cuts from the Federal Reserve.
Soon after trading began, the benchmark index was already on pace to clear its all-time closing high of 4,796.56 set two years ago. And by midday, it cleared its intraday record of 4,818.62.
The Dow Jones Industrial Average had already topped its prior high last month and set a fresh record on Friday. Meanwhile, the Nasdaq Composite outpaced the other indexes as chipmakers led the tech sector higher, but it remains more than 4% below its highs.
The stock market rally came as the University of Michigan’s consumer sentiment survey showed Americans are feeling better about the economy and see prices cooling.
Inflation expectations for the year ahead fell to 2.9%, the lowest since December 2020, giving the Fed more breathing room to loosen monetary policy this year.
“The powerful surge shows Americans are feeling the effects of lower inflation,” said Robert Frick, an economist with Navy Federal Credit Union. “That’s transmitted directly through prices at the pump, which have been falling since September, and less directly given wage increases have risen above the rate of inflation. The strong jobs market also heavily influences American’s view of the economy in general.”
Here’s where US indexes stood as the market closed at 4:00 p.m. on Friday:
Here’s what else is going on:
In commodities, bonds, and crypto:
Oil prices dropped, with West Texas Intermediate down 0.28% to $73.87 a barrel. Brent crude, the international benchmark, moved lower 0.23% to $78.88 a barrel.
A ‘Now Hiring’ sign is seen posted in the window of a restaurant looking to hire workers on May 5 in Miami, Florida. Joe Raedle/Getty Images
While federal employment data is sometimes considered a lagging indicator, some parts of the July jobs report hint at potential weakening ahead, economists cautioned Friday.
The temporary help services industry shed jobs for the sixth consecutive month, dropping by nearly 22,000 positions in July, according to Bureau of Labor Statistics data. Through July, the industry has lost 205,000 jobs, a 6.5% hit, since its recent employment peak in March 2022, BLS data shows.
“This suggests that the overall labor market will continue to slow down in the coming months,” Selcuk Eren, senior economist at the Conference Board, said in commentary issued Friday.
Temporary employment activity is often viewed as a bellwether for future hiring activity: When times are good, businesses bring on more temps to take on extra work and potentially convert them into new hires; when times get lean, those positions are usually among the first to go.
Temporary employment declined in advance of the 2001 and 2008 recessions.
Separately, average workweek hours ticked down to 34.3 in July from 34.4 in June. During the past three months, average hours per worker fell at a 1.2% annualized rate, noted Preston Caldwell, Morningstar’s chief economist.
“That offset the bulk of the job gains, meaning that aggregate hours worked increased at a mere 0.5% annual rate in the past three months — which is indeed below normal,” he wrote. “Given that employers can only cut hours so much, this is a harbinger for increased layoffs and a slowed pace of total job gains.”
Additionally, the teenage jobless rate rose for the third consecutive month, increasing to 11.3% from 11% the month before.
That’s “another sign of the cooling employment picture,” said Sung Won Sohn, finance and economics professor at Loyola Marymount University and chief economist of SS Economics.
August the best month for average stock market performance? Or is it the worst?
The answer depends on the period of stock-market history you examine. Over the 90 years from the Dow Jones Industrial Average’s DJIA, +0.50%
inception in 1896 until 1986, August on average was far ahead of the other months — more than four times larger, as you can see from the table below. August outperformed the other months’ average by 1.4 percentage points. This difference is significant at the 95% confidence level that statisticians often use when determining if a pattern is genuine.
In the years since then, in contrast, August has been the worst month for the stock market, on average, lagging the other months’ average by 1.7 percentage points. Since 1986, in fact, August has been a worse month for the stock market than even September, whose reputation for stock market losses is widely known.
August’s average DJIA return
Average return of all other months
August’s rank among all 12 months
1896 to 1986
+1.8%
+0.4%
1st
After 1986
-0.8%
+0.9%
12th
If the 36 years since 1986 were all that statisticians had to go on, they would conclude that August’s underperformance was significant at the 95% confidence level — just the opposite of the conclusion that emerges from the 90 years prior. But when analyzing the Dow’s entire history since 1896, August’s performance is no better or worse than average.
This August, in order to use history as a basis for investing, you’d first need to come up with a plausible explanation of what changed in the 1980s that caused August to swing from best to worst.
Though I’m not aware of any such explanation, it’s always possible that one exists. To search for it, I analyzed monthly values back to 1900 for the Economic Policy Uncertainty (EPU) index that was created by Scott Baker of Northwestern University, Nicholas Bloom of Stanford University, and Steven Davis of the University of Chicago. We know from Finance 101 that the stock market responds to changes in economic uncertainty, so we’d be onto a possible explanation of August’s seasonal tendencies if the EPU underwent some fundamental change in 1986.
But no such change shows up in the data. August’s average EPU level is no different than for any of the other months of the calendar, either before or after 1986.
Another possible explanation might trace to investor sentiment. To investigate that possibility, I analyzed stock market timers’ average recommended equity exposure levels, as measured by the Hulbert Stock Newsletter Sentiment Index (HSNSI). I was looking to see if, after 1986, the HSNSI was significantly different at the beginning of August than in other months, on average. The answer is “no.”
A plausible explanation might still exist for August’s change of fortune beginning in the mid-1980s, notwithstanding my inability to find one. But absent such an explanation, the most likely explanation is that it’s a random fluke.
It would hardly be a surprise if randomness is the culprit. Most of the patterns that capture Wall Street’s attention are in fact nothing more than statistical noise. The reason we nevertheless insist that significant patterns exist is because — as numerous psychological studies have shown — we’re hardwired to find patterns even in randomness.
That’s why your default reaction to all alleged patterns, not just those involving August, should be skepticism. The odds are overwhelming that they aren’t genuine. Only if those patterns can survive the scrutiny of a skeptical statistician should you even begin to be interested.
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com
This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers visit http://www.djreprints.com.
U.S. stocks closed mixed on Wednesday as weaker economic data weighed on equities and focus among investors returned to recession concerns. The Dow Jones Industrial Average DJIA, +0.24%
gained about 80 points, or 0.2%, ending near 33,482, according to preliminary FactSet data, but the S&P 500 index SPX, -0.25%
and Nasdaq Composite Index COMP, -1.07%
fell 0.3% and 1.1%, respectively. That left the S&P 500 down for two straight days and the Nasdaq lower for a third day in a row. Investors were focused on an ADP report showing that private-sector employers added 145,000 jobs in March, well below the 210,000 expected by economists surveyed by The Wall Street Journal. Also, the bellwether Institute for Supply Management’s service sector activity index showed business conditions at U.S. companies fell to a three-month low of 51.2% in March.
If you invest in dividend stocks, you are probably looking for long-term growth to go with the income. Otherwise you might be content to hold one-month U.S. Treasury bills, which yield 4.5% or park your money in an online savings account for a yield close to 4%.
Below is screen of stocks with current dividend yields ranging from 4.14% to 8.46%. What sets these apart from other stocks with high dividend yields is that their payout increases are expected to accelerate in 2023 and 2024 from those in 2022.
On Tuesday, S&P Dow Jones Indices said in a press release that it expected dividend payments by publicly traded U.S. companies to continue to hit record levels in 2023. But Howard Silverblatt, a senior index analyst with the firm, said that the pace of dividend increases in the first quarter had slowed and that he expected this year’s increases to be “at half the pace of the double-digit 2022 growth.”
Silverblatt also said current events in the banking industry were “expected to negatively impact future spending from both consumers and companies, which in turn may curtail corporate dividend growth.”
For many banks, there’s another big item on the table. A focus on share buybacks in recent years is very likely to end — this is a use of cash that can raise earnings per share if the share count is reduced, but there can be consequences, especially after a year of rising interest rates that pushed down the market value of banks’ investments in bonds.
In a note to clients on March 16, Dick Bove, a senior research analyst with Odeon Capital, predicted that stock repurchases in the banking industry would be “meaningfully cut back if not flat out eliminated.” He made three general points about buybacks in the banking industry:
Buybacks remove working capital that would otherwise provide returns to a bank.
Buybacks mean a bank’s board of directors is “in favor of flat-out giving capital away to investors that want nothing to do with the bank — they are selling its stock.”
Buybacks do “nothing to increase bank stock prices – many bank stocks are selling at below their prices of five years ago.”
A company might find it much easier to curtail or stop buying back shares to preserve cash than it is to cut regular dividends. Preserving and increasing the dividend over time has been correlated with good performance for stocks over time. These articles provide examples of how dividend compounding is correlated with long-term growth as income streams build up:
The S&P Dow Jones Indices report raises the question of which stocks might buck the trend.
Starting with the S&P 500 SPX, -0.50%,
there are 71 companies stocks with current dividend yields of at least 4.00% indicated by annual payout rates. Among these companies, 68 increased dividends during 2022, according to data provided by FactSet.
Then we looked at the pace of dividend increases in 2022 and the consensus estimates for dividends paid during 2023 and 2024, among analysts polled by FactSet. Among the remaining 68 companies, there are 29 for which the estimated 2023 dividend increase is higher than the 2022 dividend increase. Narrowing further, there are 14 for which the estimated 2024 dividend increases are higher than the estimated 2023 dividend increases.
Here are the 14 stocks that passed the screen, sorted by current dividend yield:
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
Any stock screen is limited, but can be useful as a starting point or supplement to your own research. If you see any companies of interest, do some research to form your own opinion of how likely they are to remain competitive over the next decade, at least.
U.S. stocks ended modestly higher Thursday in choppy trade as worries about potential weakness in the banking system resurfaced a day after the Federal Reserve increased hikes by 25 basis points. The Dow Jones Industrial Average DJIA, +0.23%
rose about 73 points, or 0.2%, ending near 32,103, down about 400 points from the session’s high. The S&P 500 index SPX, +0.30%
gained 0.3% and the Nasdaq Composite Index COMP, +1.01%
closed up 1%, according to preliminary figures from FactSet. Stocks closed off the session’s highs, but gained ground after Treasury Secretary Janet Yellen told a Senate committee that the federal government would take extra steps to stabilize the U.S. banking system, if necessary. Stocks closed sharply lower Wednesday after the Fed raised its policy rate to a range of 4.75% to 5%, up a year ago from close to zero. But some analysts said a catalyst of the selloff was comments from Yellen indicating she wasn’t yet considering ways to guarantee all bank deposits, despite regulators providing an exception to depositors in Silicon Valley Bank and Signature Bank, which failed earlier this month. Sheila Bair, who ran the Federal Deposit Insurance Corp. from 2006 to 2011, told MarketWatch on Thursday that the focus should be on underwater securities at all banks, not only regional lenders.
David Rosenberg, the former chief North American economist at Merrill Lynch, has been saying for almost a year that the Fed means business and investors should take the U.S. central bank’s effort to fight inflation both seriously and literally.
Rosenberg, now president of Toronto-based Rosenberg Research & Associates Inc., expects investors will face more pain in financial markets in the months to come.
“The recession’s just starting,” Rosenberg said in an interview with MarketWatch. “The market bottoms typically in the sixth or seventh inning of the recession, deep into the Fed easing cycle.” Investors can expect to endure more uncertainty leading up to the time — and it will come — when the Fed first pauses its current run of interest rate hikes and then begins to cut.
Fortunately for investors, the Fed’s pause and perhaps even cuts will come in 2023, Rosenberg predicts. Unfortunately, he added, the S&P 500 SPX, -0.61%
could drop 30% from its current level before that happens. Said Rosenberg: “You’re left with the S&P 500 bottoming out somewhere close to 2,900.”
At that point, Rosenberg added, stocks will look attractive again. But that’s a story for 2024.
In this recent interview, which has been edited for length and clarity, Rosenberg offered a playbook for investors to follow this year and to prepare for a more bullish 2024. Meanwhile, he said, as they wait for the much-anticipated Fed pivot, investors should make their own pivot to defensive sectors of the financial markets — including bonds, gold and dividend-paying stocks.
MarketWatch: So many people out there are expecting a recession. But stocks have performed well to start the year. Are investors and Wall Street out of touch?
Rosenberg: Investor sentiment is out of line; the household sector is still enormously overweight equities. There is a disconnect between how investors feel about the outlook and how they’re actually positioned. They feel bearish but they’re still positioned bullishly, and that is a classic case of cognitive dissonance. We also have a situation where there is a lot of talk about recession and about how this is the most widely expected recession of all time, and yet the analyst community is still expecting corporate earnings growth to be positive in 2023.
In a plain-vanilla recession, earnings go down 20%. We’ve never had a recession where earnings were up at all. The consensus is that we are going to see corporate earnings expand in 2023. So there’s another glaring anomaly. We are being told this is a widely expected recession, and yet it’s not reflected in earnings estimates – at least not yet.
There’s nothing right now in my collection of metrics telling me that we’re anywhere close to a bottom. 2022 was the year where the Fed tightened policy aggressively and that showed up in the marketplace in a compression in the price-earnings multiple from roughly 22 to around 17. The story in 2022 was about what the rate hikes did to the market multiple; 2023 will be about what those rate hikes do to corporate earnings.
“ You’re left with the S&P 500 bottoming out somewhere close to 2,900. ”
When you’re attempting to be reasonable and come up with a sensible multiple for this market, given where the risk-free interest rate is now, and we can generously assume a roughly 15 price-earnings multiple. Then you slap that on a recession earning environment, and you’re left with the S&P 500 bottoming out somewhere close to 2900.
This is just pure mathematics. All the stock market is at any point is earnings multiplied by the multiple you want to apply to that earnings stream. That multiple is sensitive to interest rates. All we’ve seen is Act I — multiple compression. We haven’t yet seen the market multiple dip below the long-run mean, which is closer to 16. You’ve never had a bear market bottom with the multiple above the long-run average. That just doesn’t happen.
David Rosenberg: ‘You want to be in defensive areas with strong balance sheets, earnings visibility, solid dividend yields and dividend payout ratios.’
Rosenberg Research
MarketWatch: The market wants a “Powell put” to rescue stocks, but may have to settle for a “Powell pause.” When the Fed finally pauses its rate hikes, is that a signal to turn bullish?
Rosenberg: The stock market bottoms 70% of the way into a recession and 70% of the way into the easing cycle. What’s more important is that the Fed will pause, and then will pivot. That is going to be a 2023 story.
The Fed will shift its views as circumstances change. The S&P 500 low will be south of 3000 and then it’s a matter of time. The Fed will pause, the markets will have a knee-jerk positive reaction you can trade. Then the Fed will start to cut interest rates, and that usually takes place six months after the pause. Then there will be a lot of giddiness in the market for a short time. When the market bottoms, it’s the mirror image of when it peaks. The market peaks when it starts to see the recession coming. The next bull market will start once investors begin to see the recovery.
But the recession’s just starting. The market bottoms typically in the sixth or seventh inning of the recession, deep into the Fed easing cycle when the central bank has cut interest rates enough to push the yield curve back to a positive slope. That is many months away. We have to wait for the pause, the pivot, and for rate cuts to steepen the yield curve. That will be a late 2023, early 2024 story.
MarketWatch: How concerned are you about corporate and household debt? Are there echoes of the 2008-09 Great Recession?
Rosenberg: There’s not going to be a replay of 2008-09. It doesn’t mean there won’t be a major financial spasm. That always happens after a Fed tightening cycle. The excesses are exposed, and expunged. I look at it more as it could be a replay of what happened with nonbank financials in the 1980s, early 1990s, that engulfed the savings and loan industry. I am concerned about the banks in the sense that they have a tremendous amount of commercial real estate exposure on their balance sheets. I do think the banks will be compelled to bolster their loan-loss reserves, and that will come out of their earnings performance. That’s not the same as incurring capitalization problems, so I don’t see any major banks defaulting or being at risk of default.
But I’m concerned about other pockets of the financial sector. The banks are actually less important to the overall credit market than they’ve been in the past. This is not a repeat of 2008-09 but we do have to focus on where the extreme leverage is centered.
It’s not necessarily in the banks this time; it is in other sources such as private equity, private debt, and they have yet to fully mark-to-market their assets. That’s an area of concern. The parts of the market that cater directly to the consumer, like credit cards, we’re already starting to see signs of stress in terms of the rise in 30-day late-payment rates. Early stage arrears are surfacing in credit cards, auto loans and even some elements of the mortgage market. The big risk to me is not so much the banks, but the nonbank financials that cater to credit cards, auto loans, and private equity and private debt.
MarketWatch: Why should individuals care about trouble in private equity and private debt? That’s for the wealthy and the big institutions.
Rosenberg: Unless private investment firms gate their assets, you’re going to end up getting a flood of redemptions and asset sales, and that affects all markets. Markets are intertwined. Redemptions and forced asset sales will affect market valuations in general. We’re seeing deflation in the equity market and now in a much more important market for individuals, which is residential real estate. One of the reasons why so many people have delayed their return to the labor market is they looked at their wealth, principally equities and real estate, and thought they could retire early based on this massive wealth creation that took place through 2020 and 2021.
Now people are having to recalculate their ability to retire early and fund a comfortable retirement lifestyle. They will be forced back into the labor market. And the problem with a recession of course is that there are going to be fewer job openings, which means the unemployment rate is going to rise. The Fed is already telling us we’re going to 4.6%, which itself is a recession call; we’re going to blow through that number. All this plays out in the labor market not necessarily through job loss, but it’s going to force people to go back and look for a job. The unemployment rate goes up — that has a lag impact on nominal wages and that is going to be another factor that will curtail consumer spending, which is 70% of the economy.
“ My strongest conviction is the 30-year Treasury bond. ”
At some point, we’re going to have to have some sort of positive shock that will arrest the decline. The cycle is the cycle and what dominates the cycle are interest rates. At some point we get the recessionary pressures, inflation melts, the Fed will have successfully reset asset values to more normal levels, and we will be in a different monetary policy cycle by the second half of 2024 that will breathe life into the economy and we’ll be off to a recovery phase, which the market will start to discount later in 2023. Nothing here is permanent. It’s about interest rates, liquidity and the yield curve that has played out before.
MarketWatch: Where do you advise investors to put their money now, and why?
Rosenberg: My strongest conviction is the 30-year Treasury bond TMUBMUSD30Y, 3.674%.
The Fed will cut rates and you’ll get the biggest decline in yields at the short end. But in terms of bond prices and the total return potential, it’s at the long end of the curve. Bond yields always go down in a recession. Inflation is going to fall more quickly than is generally anticipated. Recession and disinflation are powerful forces for the long end of the Treasury curve.
As the Fed pauses and then pivots — and this Volcker-like tightening is not permanent — other central banks around the world are going to play catch up, and that is going to undercut the U.S. dollar DXY, +0.70%.
There are few better hedges against a U.S. dollar reversal than gold. On top of that, cryptocurrency has been exposed as being far too volatile to be part of any asset mix. It’s fun to trade, but crypto is not an investment. The crypto craze — fund flows directed to bitcoin BTCUSD, +0.35%
and the like — drained the gold price by more than $200 an ounce.
“ Buy companies that provide the goods and services that people need – not what they want. ”
I’m bullish on gold GC00, +0.22%
– physical gold — bullish on bonds, and within the stock market, under the proviso that we have a recession, you want to ensure you are invested in sectors with the lowest possible correlation to GDP growth.
Invest in 2023 the same way you’re going to be living life — in a period of frugality. Buy companies that provide the goods and services that people need – not what they want. Consumer staples, not consumer cyclicals. Utilities. Health care. I look at Apple as a cyclical consumer products company, but Microsoft is a defensive growth technology company.
You want to be buying essentials, staples, things you need. When I look at Microsoft MSFT, -0.61%,
Alphabet GOOGL, -1.79%,
Amazon AMZN, -1.17%,
they are what I would consider to be defensive growth stocks and at some point this year, they will deserve to be garnering a very strong look for the next cycle.
You also want to invest in areas with a secular growth tailwind. For example, military budgets are rising in every part of the world and that plays right into defense/aerospace stocks. Food security, whether it’s food producers, anything related to agriculture, is an area you ought to be invested in.
You want to be in defensive areas with strong balance sheets, earnings visibility, solid dividend yields and dividend payout ratios. If you follow that you’ll do just fine. I just think you’ll do far better if you have a healthy allocation to long-term bonds and gold. Gold finished 2022 unchanged, in a year when flat was the new up.
In terms of the relative weighting, that’s a personal choice but I would say to focus on defensive sectors with zero or low correlation to GDP, a laddered bond portfolio if you want to play it safe, or just the long bond, and physical gold. Also, the Dogs of the Dow fits the screening for strong balance sheets, strong dividend payout ratios and a nice starting yield. The Dogs outperformed in 2022, and 2023 will be much the same. That’s the strategy for 2023.
Dow Inc. DOW followed up its downbeat fourth-quarter earnings report with another release saying it would cut 2,000 jobs as part of its $1 billion cost-cutting plan. The cuts represent about 5.6% of the chemicals and specialty materials company’s workforce, according to FactSet data. Dow said it will also shut down select assets as it evaluates its global asset base, particularly in Europe. The company said it will record a charge of $550 million to $725 million in the first quarter of 2023 for costs resulting from its cost-cutting actions, which primarily include severance and benefit costs. Earlier, the company reported…
The first trading days of January loom large on Wall Street as being able to foretell the U.S. stock market’s direction for the full year. What does that mean for 2023?
Not much. January’s reputation is largely undeserved. Even when the market declines over the first sessions of January, it still is more likely than not to rise over the remainder of the year.
That should provide some solace to followers of these “first-days-of-January” indicators, who are biting their nails over the stock market’s weakness out of the starting gate on the first trading day of the year.
The accompanying table reviews the track records of the various iterations of these indicators. The percentages are based on the Dow Jones Industrial Average DJIA, -0.03%
back to its creation in the 1890s.
Length of initial period
% of time DJIA rises over remainder of year when it rises during initial period
% of time DJIA rises over remainder of year when it declines during initial period
First trading day of January
73%
53%
First 2 trading days of January
70%
56%
First 5 trading days of January
70%
58%
All of January
74%
56%
On the one hand, notice that there are greater odds of the market rising if it also rises in the first sessions of January. On the other hand, notice also that even when the market falls in those first sessions the odds of the market rising for the remainder of the year are still above 50%.
To put the table’s data in context, bear in mind that the odds of the stock market rising in any given calendar year are 64% (based on the Dow’s track complete history). So, depending on the “first-day-of-January” indicator on which you focus, the odds of an “up” year increase or decrease by a modest amount — between 6 and 11 percentage points. These differences are only marginally significant at the 95% confidence level that statisticians often use when assessing if a pattern is genuine.
There are several additional reasons not to put too much weight on these first-days-of-January indicators:
There is nothing particularly unique about January. Many other days of the year have the same apparent ability to foretell the market’s direction over the remainder of the next year. A trader intent on following the lead of all such “indicators” would be whipsawed into and out of stocks on a near-daily basis.
The marginally significant success of the early-days-of-January indicators traces in large part to the earlier part of the 20th century. Since 1960, in contrast, their track records are not statistically significant.
The bottom line? Regardless of how the market performs over the first days of this month, the intelligent bet is that the stock market will rise this year.
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com
As large companies take on the thorny issue of doing their part to hit zero-carbon emission goals by 2050, they need to make clear to suppliers they have a role to play, too, and also need to communicate to consumers about their carbon footprint so that everyone is on board, business leaders said at a Fortune conference on Thursday.
Marriott International president Stephanie Linnartz, the hotel chain with 8,100 properties worldwide, said during a panel at Fortune‘s CEO Initiativesummit in Palm Beach, Fla. that 60% of customers are willing to pay more for a vacation at a Marriott property if it was sustainable.
“We’re saying this loud and clear: consumers really care about this,” Linnartz said. Marriott, she added, began a few years ago to figure out how to measure the carbon and the water footprint of a hotel and publish it on the marriott.com web site.
At the same time, hitting goals means more collaboration with other entities. For Marriott, that means incorporating its franchise hotels into its calculations against 28 specific goals. For chemicals giant Dow, it means incorporating more suppliers. Dow CEO Jim Fitterling told the conference that 350 of its suppliers are incorporated in its carbon emissions calculations, on the way to 500 next year. It helps that 92% of Dow suppliers already have metrics, and 80% of them have emission goals for both 2030 and 2050—two calendar years with specific milestone targets.
In addition to improving data quality, that information is helping Dow optimize its operations. “We can look at our supply chain team, look at our customers that are buying, say, less than truckload orders from us and how to combine them and how to give them a route that has the lowest carbon footprint for their deliveries,” Fitterling said.
And the reliability and availability of data is coming along, he added. “We’re moving down the right path, but anytime you’re going into new space, it gets a little bit chaotic.”
For beer maker AB InBev, which makes beers like Corona, hitting goals means working with farmers to make its production more sustainable. AB InBev CEO Michel Doukeris said it’s even about ensuring the company’s long-term viability. “If there is no water, if there is no barley, or if there are problems due to climate-related on the harvest of barley, then we don’t have beer,” Doukeris said. He added: “We work with nature and not against nature.”
Marriott’s Linnartz concurred, saying hitting net-zero goals was an existential matter for many companies. “Without water and barley, there’s no beer. Without beaches and mountains, there are no hotels and travel and tourism, and we all have our businesses are inextricably linked to this,” she said.
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AI forecasting software anticipated Monday’s market volatility based on patented global intermarket analysis technology
Press Release –
updated: Feb 6, 2018
WESLEY CHAPEL, Fla. , February 6, 2018 (Newswire.com)
– The leading provider of intermarket analysis software for the individual trader, Market Technologies, today announced that its VantagePoint artificial intelligence trading software predicted the largest single-day Dow Jones industrial average point drop in history.
On Monday, Feb. 5, 2018, the Dow had the largest point drop in a single day in its history, falling nearly 1,200 points, a record-setting decline for the stock market. VantagePoint software predicted this drop, five days prior on the night of Jan. 30, based on its proprietary intermarket indicators which use a global approach to analyze the behavior of the markets. All indicators pointed to a negative, downward drop.
The stock market today moves too quickly for everyday investors to adjust their portfolios ahead of key moments of volatility like the dip we saw in the Dow on Monday. By leveraging AI forecasting, we’re equipping these investors with the insight they need to stay ahead of the curve, ultimately helping to preserve and grow their hard-earned capital.
Lane Mendelsohn, Vice President
“The stock market today moves too quickly for everyday investors to adjust their portfolios ahead of key moments of volatility like the dip we saw in the Dow on Monday,” said Lane Mendelsohn, vice president of Market Technologies. “By leveraging AI forecasting, we’re equipping these investors with the insight they need to stay ahead of the curve, ultimately helping to preserve and grow their hard-earned capital.”
Traders using VantagePoint Software were able to leverage this important insight to make more informed investment decisions in advance of Monday’s historically volatile trading day. VantagePoint customers have cited saving significant amounts of money by proactively adjusting their holdings ahead of Monday’s drop. In addition to being able to anticipate and forecast the drop, the patented artificial intelligence indicators also accurately predicted the expected trading range for the following day. For example, on Monday evening, VantagePoint predicted the range for Tuesday, Feb. 6, to have a range of 1,079 points which was within 70 points of the actual range for the day. This is unbelievable accuracy considering the tremendous volatility.
VantagePoint was the first commercially available intermarket analysis software leveraging artificial intelligence to perform technical analysis. Since the first version was released in 1991, Market Technologies continues to invest in its VantagePoint Software, recently announcing Version 10 which significantly increases end-user customization and efficiency options, and provides access to 10 years of historical trading data – giving traders unprecedented predictability potential.
Headquartered in Wesley Chapel, Fla., Market Technologies, creators of VantagePoint Software, is a leader in trading software research and software development. VantagePoint forecasts Stocks, Futures, Forex and ETFs with proven accuracy of up to 86 percent. Using artificial intelligence, VantagePoint’s patented Neural Network processes predict changes in market trend direction up to three days in advance, enabling traders to get in and out of trades at optimal times with confidence.
MEDIA CONTACT
Jen Aquilino Communications Specialist JenA@vantagepointsoftware.com
