NEW YORK (Reuters) - U.S. stocks tumbled again on Wednesday, confirming a correction for the Nasdaq and erasing the Dow and S&P 500’s gains for the year, as disappointing forecasts from chipmakers and weak home sales data fueled worries about economic and profit growth.
PETER TUZ, PRESIDENT OF CHASE INVESTMENT COUNSEL IN CHARLOTTESVILLE, VIRGINIA
“Earnings for the quarter have been ok. Seventy-five or 80 percent of companies have been beating earnings estimates, but there have been several companies across a broad variety of industries that have expressed negative guidance about the fourth quarter and 2019 for a variety of reasons including high tariffs and softness in China. This includes companies like Caterpillar that use metal in their manufacturing - and Texas Instruments in particular cited a big drop-off in the demand. These companies have given people enough pause to take some money off the table. Once a snowball like this starts, it doesn’t stop until it gets to the bottom of the hill. And we don’t know if we’re at the bottom yet.”
NICHOLAS COLAS, CO-FOUNDER OF DATATREK RESEARCH
“There’s no obvious headline. We weren’t getting the outsize earnings beats that investors typically look for. Earnings haven’t been able to take the market’s attention away from the Fed.
“There’s an old saying that retail opens the market and institutions close it. This to me says real institutional selling. It means it isn’t over.
“Over the short term you have to think about the dynamic for the next three days. Investors get very twitchy about Thursday-Friday-Monday sequences because the ‘87 crash happened on a Monday. That’s not to say it will happen again, but everyone is in risk management mode. It’s about not getting hurt so badly that your clients pull your money.
“(If we go into bear market) it will be very sharp and very fast. This isn’t a market that grinds lower, its a market that if anything, flushes, resets a level and then starts rising from there.
“The market is playing chicken with the Fed. It seems like equities are going to push the Fed to change their minds. A December (rate rise) nobody has a problem with. But markets feel the Fed is very cavalierly on autopilot. They’re not listening. They’re not listening to global equities, or what’s coming out of China or what’s happening to homebuilders or autos.”
ROBERT LUTTS, PRESIDENT AND CHIEF INVESTMENT OFFICER, CABOT WEALTH MANAGEMENT, SALEM, MASSACHUSETTS
“We’ve been educated over the last 10 years that markets have downturns and sometimes are pretty sharp. 2008/9 is still burned in investors’ memories and they all fear we could go down 50 percent again. So the first sign of trouble, which is on Monday we closed below the important 200-day moving average. That is an area on the S&P 500 where a lot of technicians say, here we are in a corrective phase and they raise cash when that happens. So the orders came in earlier this week following that signal. We’re working through that. For me, I’m going to watch carefully how long we stay below that level and how long before we get back above the 200-day moving average. The last time it was a fairly short period of time. I would not be surprised if tomorrow’s market was the exact opposite of today, up.
“You could call some of the market in bear market territory. I’m still believe we are in a bullish phase and this will pass and we move up. I would worry if I felt interest rates were going to be competition for stocks. Today’s level of the 10-year Treasury at 3.15 percent is still really not competition.
“I would be concerned if we felt the Fed was going to take us up to the 5 percent range or even 6 percent range. That would draw money away from equities. But that hasn’t happened yet and there is no indication that inflation is out of the bottle yet and until that happens I’m not going to get too cautious.”
HANK SMITH, CO-CHIEF INVESTMENT OFFICER, HAVERFORD TRUST CO, PHILADELPHIA
“I can’t point to anything specific in terms of why the market rolled over, other than this is part of a correction process. The Nasdaq now is in correction territory for first time in two years. The S&P and Dow are within a breath of a correction level. Of course, internally, if you look at the S&P 500, you have a majority of the companies have corrected and some are well into bear market territories. Particularly the cyclical sectors, basic materials, some industrials.
“But I don’t think this is a market that is pointing toward a recession. Just looking at the economic data a risk of a recession over the next 12 months continues to be a low probability event.
“Our view is this is a buying opportunity. For our clients that are dollar cost averaging into the market we’re advising them to accelerate that process, to use the market weakness as an opportunity to take advantage of and accelerate.
“For our clients that are already invested: stay patient.”
“The market pricing is not an indictment of the earnings stream. What it is, is that the market is requesting lower multiples because the visibility and uncertainty with respect to earnings is not what it used to be. There is a higher uncertainty factor looking into 2019.”
PETER JANKOVSKIS, CO-CHIEF INVESTMENT OFFICER AT OAKBROOK INVESTMENTS LLC IN LISLE, ILLINOIS
“The industrial stocks that reported, Caterpillar and 3M, continue to be weighing on people. That suggests the Fed is going to be on track to keep raising rates. Obviously rising costs have an impact on profits.
“We started this year with a strong rally in January. The market gave up those gains and we’re experiencing another drop off. The thing to keep an eye on is that the economy is still strong. We expect the economy to continue to grow. If that’s the case it will down the line justify additional gains in the stock market.”
TIM GHRISKEY, CHIEF INVESTMENT STRATEGIST AT INVERNESS COUNSEL IN NEW YORK
“(Today) was pretty ugly. Obviously a number of things going on here. Yesterday’s rebound, the market climbed back, it was a little bit misguided. Today reflected more of the evolving tone of this market. That 3M earnings report was scary. That was yesterday’s news but I don’t think it was properly digested. You see some systematic selling, especially on the downside. Some fundamental selling causes the computers to kick it and whether it’s trend following or volatility following it exacerbates the downside in the market.”
PAUL ZEMSKY, CHIEF INVESTMENT OFFICER, MULTI-ASSET STRATEGIES AND SOLUTIONS AT VOYA INVESTMENT MANAGEMENT IN NEW YORK:
“It’s a big global risk-off trade. We’ve had some headwinds - higher interest rates affecting housing, tariffs causing input costs for manufacturers to go up, which makes earnings look not as stellar… But that doesn’t mean the whole economy is rolling over.”
CHRIS ZACCARELLI, CHIEF INVESTMENT OFFICER, INDEPENDENT ADVISOR ALLIANCE, CHARLOTTE, NC
“At this point it seems selling is begetting selling. The VIX has doubled in the last couple of weeks. There’s a bit more fear in the air and you’re seeing the acceleration of growth to value.
“It looks like more panic and fear as the selling has continued to roll.”
“When I try to look at what might be a bottom is when you see the VIX really spike. If you look in February. It had a high of 37 … I’m reticent to call the bottom right now.”
“We’re still in correction territory. There’s negative sentiment and fear in the air but I’m not ready to rotate to utilities and consumer staples. The economy still looks pretty strong.”