Stocks slammed on slowdown fears
We begin with breaking news stocks slammed as a major sell-off hits. Wall Street the S. and P. Five hundred posting its biggest two day drop since August August and the selling was widespread all eleven. SNP sectors finishing the day in the red so the question tonight is simple the time to get worried tim well the data seems nice to be getting worse and so we have some important data coming up tomorrow and on Fridays I assume services and we tend to want to believe that this is the more important number as opposed to manufacturing number which everybody Eddie spooked. This is a trade war. That seems to be manufacturing trade war to what extent we get that tomorrow it should be noted that last month's ISM services was they very bullish number which had the markets reverse a two day plunge just like the one we've had when people thought okay here we go but you also had. ADP which showed that the labor market ser- ser- it could be if you look at the kind of three month average on jobs on ADP were down about twenty five thousand over the twelve month but not much as changed yet in the labor market yeah carrying you said last night thank you were getting worried. You're more worried run relative basis. Are you even more worried today. I'm a I'm a little more worried today but I'm starting to see. There's a lot more fear in the market right right. There's a lot more things are starting to feel a little bit a little panicky not a super panic but you know one of the things. I watched really closely as the vix. We had a very big spike in the vix today. I'm actually I think now is not the time to buy volatility. I think it's too far too fast and if anything we have sort of the story the the EU tariff that just came out. If that's sort of that was some Tesla numbers we will get later if that's sort of starts a momentum down now. There's a big down open. I will probably be selling protection into that. I like to look at to buy things when they start to trade an integer some of which I own sadly that are trading and introduce down. I'm going to be looking for some of those to add technically. We were weak. We cut through the fifty cut through the day. I said at the other end of the show. I don't see us doing doing what we did last year. I mean it's too easy so I do think I don't think the worst is over but I think you're okay to dip a little bit on the buy side. You would buy this today. The other day about alter sold it a so so stock specific today thought about buying Roku was on the fence on it things that have been beaten up drastically that are due for a bounce. I think you're okay with so just think about this time. Last year. The was up almost ten percent pity around twenty nine. I'm fifty and no one thought we could go down twenty percent no matter a month and we did and and I don't think anything's too easy when we're talking about selloffs in the market especially when we have a situation where rates are so low and people think it really is the only place to be. They think that US equities is the only place to be relative to what's going on in Europe Asia that sort of thing. I just don't like hearing this trade stuff up moving around. I don't like it floating. I know we've been talking about trade as it relates to China and that is the most important thing that is the economy that's growing six plus percent and when they slow down it reverberates all all over the world but I don't like the fact that we know the data in Germany's been horrible. Okay is practically in a recession and that is the big economy over there so we start talking about this trade war or having the potential to go on multiple fronts. I say to myself you may get your headline that you're waiting for an China trade. PM is the global we're negative. They were the first ones that were negative. They were negative. Were over a year and now for the last two months. You're starting to see that turn so might be. Aus- chasing facing them down at this point. I don't know well I m days. That's terrible news. I mean being the last man standing when we certainly we have the resilience that we have in this economy. Look I mean we talk a lot about credit and people come on save credits. Okay you're not. GonNa see credit. Hold up if you start to really see the job market off because consumer credits going to trickle through but also the corporate credit side. We talked about this bounce. She's numbers by the way if you look at the the High Yield E. T. S. whether you're looking at the H. Y. J. H. Y. it's down two points over the last couple of days not great news so if you look at the two day moves though in a number of sectors including banks banks in two days have taken taken out almost that entire rally twin and China is and has gone down although the healtcare Stephen because the expectation on the low end is actually getting a little bit more. I I also think it's kind of interesting to go back and think about two thousand sixteen which is a very volatile year. There's a lot of stuff going on brexit caused a lot of volatility June July of two thousand and sixteen and into our election and I think we're starting to see just this week. We're seeing politics start to infuse themselves into our market so bit and you know I'm on the air. Today I heard well does that leg down because Bernie's in the hospital and that means that Warren might be the this is stuff that we're going to hear for the next year so it may start to have an impact earning star when there's whenever there's a void of something real fundamental to buy into the markets trade off of whatever you give and do we think that earnings are going to be decent for the third quarter. I mean given what we've had so far Micron Carnival Fedex clorox taking their guidance down today. Delta saying that their costs are higher. I don't know well. I thought Delta is actually a little bit overdone. Yeah I mean but on a day like today. It doesn't really matter things are GonNa get overdone and the pendulum swings very far. I'm interested to see what the banks tell us not so much what happened happened during this past quarter but what they're seeing not just for their own business which is really important obviously for what they they have a great insight into what is happening in the US economy so that we'll be really interesting. you know the autos kind of rolling over. Don't love that either right but I do totally agree with. Steve we need. That's the main something to me. The main piece of data when via stock is what are the fundamentals of the company not not Lauren or who's ahead or what you know and also would also look at. We start off the show. I'm saying we're where. Are we going to be the same way as it's time to buy time to sell last year we had everyone was raising rates or we were on the raising a a higher rate path. Now everyone is on a lower rate because needs are really bad. Here's the thing at a certain point is going to matter. I don't like it doesn't matter now. I don't like the technical setup. I think we're in week since around that three thousand level when we broke down from there my issue. Is that the Fed does not have enough AMMO Komo to fight the next recession unless he uses the balance sheet so once you use the balance sheet. That's a whole nother Pandora's box. That's the only thing we're talking about. Technicals that goes and we're talking about kind of where we are. In the market cycle. I also WanNa talk about positioning which we talk about all the time and ultimately think it's the most important thing and while we've talked about equity investors certainly could be considered underinvested in Agra. We look across retail and institutional. If you look in the data that I'm getting from my prime brokers as it relates to total gross capital at at the balance sheet the size of capital work in other words how much exposure is in the market. We're at ninety fifth percentile for hedge funds for long short hedge funds and other as they may be more net neutral and they you may not be net long in ways that they had in the past but they bigger balance sheet which is dangerous in other words at times of higher risk which whatever you WanNa say about where we are. We have so many more factors out there that could be things to be worried about and the fact that the Hedge Fund community is near what would be seen extreme levels in terms of overall Balaji. I don't like back going into the fourth so in other words if there's if there is a cell situation head for the exits than we see all that money I could actually see guys as things have to change into your and some of these guys might not even make it through this. They'RE GONNA have to be selling some of the crowded winners and you're actually going to see some of the weaker hands and some of the weaker stock to actually achieve catch a bit on short-covering but yeah. I just think you're supposed to simplify during a difficult period right now. You're not supposed to get more complicated and I think that there are guys that have become more complicated. Yeah I just again you know I. I don't think it helps market participants that the president just yelling at everybody all day today all day long that we're on every network you know that sort of thing and I just just think back to two thousand and nine when we were in the throes of just the worst sell off that we've had in a long time and we had a president who was pretty calm. Just you said that sort of thing and I think those are the sorts of things would really be helpful going forward and so I think this is something that you guys better get used to because this is going to happen here on out you on a daily basis as we get into the end of this year and we've had a president has been y'all. Everyone in the market went to all time highs. I think now right now anything Stephen Eighteen market timing is under the president. That's being gay and it went to all time highs under every other. I don't think that's your litmus test. I think what you have to do is dig in starts starts but the point is is that yelling at the Fed in trying to kind of get them to do something that may not be particularly natural says he'll be aware of something. We've been aware of this. We've had a president. You've been complaining about this president for the last four years. We went to all time highs. That's the point I'm making. We haven't done anything he may. He may preside over one of the worst sell off. We've seen in a decade too because the policy is also catching up to. That's a really important point. I slightly moving on what back to to what you're talking about is where politics will inject and where they haven't even mattered think about what we're actually starting to contemplate if you get any change from this administration. None of it is is good. None of is good for the mark is what I'm saying. In terms of what you have in terms of legislation art agent indebted hasn't ranked eighteen months and it hasn't been good for the economy so forget it. I'm I'm not making up. Hold on that from here on out. If you change the prospect of the status quo the market's not gonNA like it one of Wall Street's biggest bulls believes the market is overreacting acting to risk recession fears. Chris Harvey is a head of Equity Strategy at Wells Fargo Securities Chris Great to have you with us on a daylight today. You actually say it might be time to put money to work here on on this back back. What we're looking for is so obviously we saw what the manufacturing did. We'll get is some servicing tomorrow so for in line or less. I would expect the equity market to start to sell off a little a bit more. We get a one two percent sell up then it starts getting interesting twenty-eight.