Morning Minutes 09/28/2018

Morning Minutes

Stock Markets Slide; Turbulence at Tesla

September 28, 2018
10:00 am EDT

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

Note the Morning Minutes will not be issued on Monday. They should return on Tuesday October 2.

It’s the last trading day of the week, month and quarter, and investors appear to be in a profit-taking mood with the Dow and the S&P/TSX both down about 0.25%.

This week’s market decline appears a bit odd on the surface as broad market related news has been positive for the most part. Yesterday, US GDP growth at 3.3% and durable goods orders growth of 4.5% were well above street expectations. Overnight, Japanese retail sales growth of 2.7% and other key indicators were better than expected. This morning, Canada GDP growth over month of 0.2% for August beat the street but UK GDP of 1.2% fell slightly short of expectations.

The US Chicago PMI report, a widely watched leading indicator for the national PMI numbers due on Monday, just came out. The 60.4 reading is down from last month’s 63.6 and below the 62.5 street estimate but still relatively strong. US indices are holding steady on this news.

With the Hang Seng down 0.65% and the Dax down 1.3% it’s possible the global decline may be related to a sense that perhaps things can’t get any better and could be about to get worse. Trade tensions have been ramping up this week between the US and China, and President Trump’s UN speech ramped up the US go it alone rhetoric, throwing long-standing alliances and relationships under the bus. Meanwhile in Europe, Italy’s populist coalition government could be heading for a showdown with the EU over a higher deficit budget.

US-Canada trade talks face an October 1 deadline. The Trump administration has been making all kinds of negative personal comments about Canada’s negotiators, but at the same time Congress has to approve any deal with Canada or Mexico and they have to face their voters in the midterm elections in just over a month. Whether a deal happens or not and whether new auto tariffs are launched should things go off course have a big impact on trading in the Loonie and Canadian stocks over the next several days.

Tesla Motors shares have gone off a cliff this morning plunging 10.0% in early trading. Yesterday the SEC launched a suit against CEO Elon Musk related to his August tweet about taking the company private at $420 per share that never materialized. The SEC is alleging Musk made “false and misleading statements” that caused investor harm (short squeeze when the shares spiked and then the selloff when the supposed deal fell apart) and is looking to have Musk barred from serving as a director or officer of a public company. This fiasco is likely going to end up in the business textbooks as a cautionary example of why we have rules and protocols around the public disclosure of
material news including halting the stock or making an announcement outside of market hours, and issuing a press release so that everyone has access to the information at the same time

SIA Wealth in the Media:
Colin Cieszynski was quoted by Dow Jones in weighing in on yesterday’s stock market gains:
Stock market closes higher as investors focus on upbeat economic data

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