Market Volatility Shakes US Stocks

Shares in US equities fell notably early this week as international markets continue to grow concerns about weak corporate earnings and, perhaps more importantly, escalating global tensions.

For example, the Standard & Poors 500 Index showed a drop of 1.743 points (about 0.66 percent) by the end of the trading day, on Monday.  In addition, the Dow Jones Industrial Average fell 244.64 points (nearly 1 percent). Finally, the Nasdaq also fell 116.92 points (more than 1.6 percent).

These numbers extend shaky trading from the weak prior, which capped out at the S&P 500 slipping to corrective levels on Friday, during intraday trades; but both the S&P and Dow closed with levels that reset the gains for the year.

Oppenheimer chief investment strategist John Stoltzfus advises, “October has provided plenty of drama this year. However, in future hindsight, in our view, it could prove to be the best buying opportunity investors have had in some time.  Valuations haven’t been this good in years. Consider that the S&P 500 as of last week sported a forward (price-earnings) multiple of just 15x earnings.”

He goes on to say that these stock prices do not necessarily reflect the 25 percent earnings growth that has been reported so far, through the third quarter.

On the other hand, some strategist maintain that the market will continue its decline. For example, Michael Wilson of the Morgan Stanley firm comments, “Rallies should be sold until the liquidity picture improves, valuations compress further or 2019 earnings estimates are reduced.”

At this point, it is crucial to recognize that the Trump administration has prepared to announce new tariffs on all of the remaining Chinese imports if President Trump and Chinese President Xi Jinping cannot ease their ongoing trade dispute when they meet next month.

And that is important because many big American companies are vulnerable to global tariffs. Boeing, for example, has already seen its stock drop more than 6 percent.

The good news, perhaps, is that with the third-quarter nearly half over, roughly 57 percent of companies on the Standard & Poors 500 have already beaten their revenue forecasts.  Still, that is a notable decline from the second quarter, when 72 percent of S&P 500 firms had surpassed their forecasts.