How Close Are We To A Big Selloff?

Wednesday, August 9th, 2017

After 10 straight days of the Dow closing up — including nine straight all-time highs — investors may be forgiven that this robust bull market, on the heels of another successful earnings season, had the momentum to power through anything. Then a cold chill went through everyone when President Trump retorted to new threats of attack from North Korea with “fire and fury like the world has never seen,” and the market sank to negative territory for the first time in almost two weeks. Likely we’re looking at mere idle rhetoric here. But if we’re not…

Regardless what any investors’ foreign policy beliefs and background may be, yesterday’s episode is instructional: no market bull run is completely bullet-proof (nuke-proof?). It also may help give insight into what people like the Fed presidents are constantly on the lookout for: events capable of unsettling the steady growth we’ve seen for quite some time. It may serve as a convenient reminder that there may always be a pitfall lurking, and even in the seemingly strongest of markets, one eye toward caution might always be warranted.

Productivity & Labor Costs

Economic data, meanwhile, continues its muted march to the positive; in this morning’s case, Productivity and Labor Costs reported more accommodative results than expected: preliminary non-farm business productivity reached 0.9% growth in Q2 2017, up from the 0.7% expected. Unit labor costs were lower than anticipated at 0.6%; 1.1% had been expected by analysts.

Revisions to Q1 figures both rose in today’s latest account: productivity went modestly up from unched in the previous quarter to 0.1% this read. Labor costs, on the other hand, ballooned in the Q1 revision, from 2.2% last time to 5.4% in this morning’s version. These results are more data those tracking overall inflation metrics consider, and quarterly labor costs going up 5.4% for early 2017 may be something those charged with creating policy are circling with their red markers this morning.

Earnings Continue

Zacks Rank #2 (Buy)-rated Wendy’s Co. (NASDAQ:WEN) topped earnings estimates this morning by 2 cents to 15 cents per share, on quarterly sales that soared past the $299 million expected to $320 million. Restaurant comps in North America grew by more than 3% in the quarter. Shares are trading up nearly 2.5% in today’s pre-market.

Generic pharma major Mylan (NASDAQ:MYL) missed expectations on both top and bottom lines this morning: $1.10 per share missed the $1.19 in the Zacks consensus, and revenues of $297 million came up just short of the $300 million we had been looking for.

Yesterday after the bell, Disney’s (NYSE:DIS) mixed fiscal Q3 earnings results — the company beat by 5 cents to $1.58 per share on revenues slightly below the $14.44 billion expected — were eclipsed by the announcement that the entertainment giant would be ending its distribution agreement with streaming major Netflix (NASDAQ:NFLX) . Disney plans to create its own streaming services, whereby Disney and Pixar films would be streamed on its own subscription service, including sports content through its ESPN franchise.

It’s a novel approach for Disney to shore up its content for the future. Near term, the market doesn’t like it: DIS shares are down nearly 6% in today’s pre-market. But in the longer term, perhaps the Netflix, Amazon (NASDAQ:AMZN) and other streaming models are the right way to go for the company.

Mark Vickery
Senior Editor

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Walt Disney Company (The) (DIS): Free Stock Analysis Report

Amazon.com, Inc. (AMZN): Free Stock Analysis Report

Netflix, Inc. (NFLX): Free Stock Analysis Report

Mylan N.V. (MYL): Free Stock Analysis Report

Wendy's Company (The) (WEN): Free Stock Analysis Report

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