The Long Term Investor

I comment on much day to day...."stuff"....on here......but:

Weekly Market Pulse: A Fatal Conceit

https://alhambrapartners.com/2023/01/22/weekly-market-pulse-a-fatal-conceit/

(BOLD is my opinion OR what I consider important content)

"Inflation* in the US is falling rapidly with the CPI rising just 0.9% in the second half of 2022 versus 5.4% in the first six months. Existing home sales are down 14.6% in the last 3 months and 34% over the last year. Housing starts are down 22% and permits are down 30% year-over-year. Orders for durable goods are down 1.2%, exports are down 3.8%, and imports are down 4.3% over the last 3 months.

Real disposable income is up 0.8% in the last six months but was down 3.3% in the six months prior. Real (inflation-adjusted) personal consumption of goods is down 0.7% over the last year but real personal consumption of services is up 3.5% and services spending is 60% higher than that for goods. US payrolls are up 4.5 million jobs in the last year and there are still 10.5 million job openings.

Meanwhile, the Chinese have thrown caution to the wind and are attempting to re-open their economy after maintaining very strict lockdown procedures to control the spread of COVID for the last 3 years. The virus is now spreading rapidly and expectations for Chinese growth are rising but the Chinese New Year starts today and that will keep most factories shut for the next two weeks. In Europe, the economy is performing better than expected as natural gas prices have fallen back to pre-Ukraine invasion levels; inflation is falling rapidly there too. The economic outlook has improved so much relative to the US that the Euro is up nearly 14% since October. In Asia, the Bank of Japan is widely expected to end its practice of yield curve control and the Yen is rallying in anticipation, up 17% from its October low. Overall, the dollar index is down 11.3% since late September.

In Ukraine, there are rumors that Russia will start another offensive and try to take Kyiv this spring if not sooner. Belarus may or may not be involved. Europe and the US are still sending weapons to Ukraine but there is a debate about what kinds of weapons are lethal enough to help but not so lethal as to drag NATO into the conflict directly. In Latin America, there have been political riots in Brazil and Peru in the last month and Colombia has elected a leftist who openly fantasizes about nationalizing certain natural resources. Argentina is, well, Argentina just as Italy is Italy and Greece is Greece; none seem able to get anything right for very long.

What will be the impact on the global economy of the Chinese re-opening? How will the recent drop in the dollar impact US multinational companies’ earnings? How will the rise in the Euro affect inflation on the continent? Will the rise in the Yen and JGB yields affect the price of US Treasuries? When will the Japanese allow Chinese tourists to return? Exports from Japan to China have doubled in Yen terms since 2016 and grew through COVID. Will the reopening accelerate the pace of this trend? How much will the ongoing reorientation of global supply chains affect long-term Chinese growth? Will the shift of production to Mexico affect US immigration?

What about the recent revival of industrial policy in the western world? The US government is backing an expansion of semiconductor manufacturing capacity in the US despite the fact that we already have a shortage of engineers and workers to operate such facilities. Heck, we have a shortage of welders who might be needed to build the place. The Biden administration’s Build Back Better, CHIPS and Science Act. and the misnamed Inflation Reduction Act contain multiple provisions that support various favored (green) industries directly and indirectly. The Biden administration is also continuing the trade practices of the Trump administration and their limitations on exports of technology to China are, if anything, tougher. What is the impact on US growth, short and long term, from more government-directed investment and generally more government involvement in the economy?

And of course, we aren’t alone in pursuing policies that are intended to benefit domestic producers at the expense of our friends and enemies alike. European and Asian countries have long pursued these types of policies along with favorable currency policies to build trade and current account surpluses. The state of the US trade account is not solely a function of our own lousy fiscal policy, although our wanton profligacy certainly plays a large role. Many countries around the world are now restricting exports of what they deem critical materials, mostly foodstuffs.

The US and Europe are both planning to stockpile commodities and other goods believed to be of strategic importance. How will people in poor countries react to these artificial shortages? Will there be protests? Governments overthrown? What will be the impact on prices of those goods the government decides to amass and keep off the market? Will it affect production of those goods? Will some other goods, acting as substitutes, rise in price? Will some goods not be produced because of labor shortages or raw materials price distortions caused by the government purchases?

So, I ask you, with all that going on, do you really think you or anyone else can predict the course of the global economy? The above is just what I thought of off the top of my head; there are plenty more unknowns of the known and unknown variety. Do you really think anyone can, given all the data they request, produce an accurate estimate of future growth to the tenth of a percent? Or inflation? What about non-quantifiable inputs to economic growth? Is it only the things you can put a number on that count? What about Keynes’ “animal spirits”?

Investors spend an inordinate amount of time trying to figure out something that is beyond figuring. Their views of the economy and markets are shaped by current economic data and expectations regarding the future actions of a small group of economists who have no better chance of predicting the future than a coin flip. And their collective track record at such tea leaf reading hints that the coin might be the better choice.


Fortunately, investing does not require that you know the future. In fact, you’ll be a better investor almost immediately after you stop trying to know the unknowable. We have no control over the economy at all and trying to guess the outcome of all the interactions and feedback loops in our modern global economy takes time away from working on what we can control.


We can control our asset allocation. We can invest in companies with superior management. We can diversify our investments across multiple asset classes. We can control our spending. We can control the cost of our investments. We can observe the economy in the present and be aware of existing trends in markets. All of that is a lot of work and lot more valuable than trying to figure out next month’s payroll number. Don’t waste your time trying to do the impossible. Investing is already hard. Don’t make it harder."

MY COMMENT

YES......I like to observe what is going on around me daily. BUT....when it comes to actual investing....predictions are a waste of time. I will leave that baloney to the traders. I prefer to take the long road and just meander along being carried on the wings of compounding over the long term.

 

Talking about earnings.

Inflection Points and Earnings Pessimism

https://www.fisherinvestments.com/e...tary/inflection-points-and-earnings-pessimism

(BOLD is my opinion OR what I consider important content)

"Stocks usually recover before earnings do.

We talk a lot about bear markets sowing pessimism—and that pessimism building the next bull market’s wall of worry. Inevitably it risks becoming cliché. But then a concrete example comes along. Like this one: Last summer, when stocks first reached bear market territory, pundits everywhere said analysts needed to slash earnings expectations before stocks could bottom and a recovery could begin. Only that would show they had brought expectations back in line with reality, purging their supposedly irrational optimism. Well, they have done that. Expectations for Q4 S&P 500 earnings have plunged from 4.8% y/y growth in late September to a -4.9% decline now, as earnings season dawns. That is one of the biggest swings on record. Yet now people say even this is too optimistic, and analysts must pencil in more red ink to ensure troubles are fully baked in. This, folks, is the “pessimism of disbelief” that underpins new bull markets.

That term, coined by Fisher Investments Founder and Executive Chairman Ken Fisher, refers to investors’ general tendency to ignore or pooh-pooh any remotely good news late in a bear market (and early in a new bull market), seeing only gathering storms ahead. You can see it when there is just no pleasing people, like when good economic news means only that the Fed might keep hiking rates. Dismissing the drop in earnings expectations as not deep enough is adjacent to this. Ordinarily, such a big swing in projections would cause some gasps. And now it isn’t big enough? Seems to us like a fun-house-mirror view of the world.

At the same time, maybe -4.9% y/y isn’t as bad as it will get for S&P 500 earnings. Perhaps the final tally, once all companies have reported, will miss those expectations. That would be unusual, though, given analysts are routinely too dour. As FactSet recently noted, total S&P 500 earnings beat expectations in 38 of the past 40 quarters, with Q1 2020 and Q3 2022 the lone exceptions.[ii] But it is possible. So are further declines. Analysts presently expect Q1 2023 earnings to drop -0.6% y/y and Q2 -0.7%. Those, too, are big swings from the 9.6% y/y Q1 growth and 10.3% Q2 growth analysts penciled in last June.[iii] Forecasts could get lower still, and they could prove correct.

But here is the thing: Stocks move far in advance of earnings. Bear markets typically begin well before earnings start declining—and well before those declines are known, given the lag between quarter-end and earnings reports. At the other end, bull markets begin before earnings start bouncing. For an extreme example, consider the bear market that accompanied 2007 – 2009’s global financial crisis. Then, stocks bottomed—and a new bull market began—on March 9, 2009. S&P 500 earnings kept tanking: They dropped -26.8% y/y in Q2 2009 and -15.7% in Q3.[iv] Earnings soared in Q4, more than doubling year-over-year, but it had much more to do with cost cuts and a low base effect from Q4 2008 than a rip-roaring recovery, as sales rose just 5.2%.[v] At the time, most still expected a double-dip recession and more carnage ahead. But the S&P 500 looked past all the bad news and gloom, rising 67.8% from March 9 through yearend, gains that compounded over the bull market’s succeeding 10-ish years.[vi]

More recently, in 2020’s lockdown-induced bear market and recession, stocks bottomed on March 23. S&P 500 earnings dropped that quarter. Then again in Q2, down -31.6% y/y.[vii] And yet again that Q3, albeit with a milder -5.7% decline, before modest recovery began in Q4 2020.[viii] But here, too, stocks didn’t mind that earnings kept falling: The S&P 500 soared 70.2% from March 23 through 2020’s end.[ix]

Now, these dates are all coincidental—we aren’t saying stocks bottom in March and earnings bounce the following Q4. That is mere happenstance. We think the general principle is what matters: Stocks pre-price the economic improvement that breeds the eventual earnings recovery. This is part and parcel of efficient markets. Stocks price in widely known information and probable happenings over the next 3 – 30 months. A new bull market doesn’t require actual improvement in earnings and economic data. A high likelihood of that improvement occurring within the foreseeable future is generally good enough.

Perhaps stocks have been seeing that since October 12, the most recent low. It wouldn’t be the first time a bear market had ended before an earnings drop or recession (should we get one) became official. Those who argue earnings need to cycle all the way through the bad times before a recovery becomes legit make the fundamental error of presuming there is such a thing as an all-clear signal. There isn’t. The maddening thing about capturing early bull market returns means you generally need to be invested when backward-looking data look ugliest.

Not that we are saying the bottom is for sure in. That is unknowable now. It could be, or the past few months could be a bear market rally before a last leg down. Either way, we suggest not looking to the immediate future but to the next 3 – 30 months. However earnings do immediately ahead, stocks should have a nice earnings recovery to price within that window."

MY COMMENT

It all comes down to having a long term view or a day to day view. In other words the ultimate question......are you an investor......or......are you a trader?

 

The job cuts.......good paying corporate jobs......continue to pile up. It is now a FAD.....a snowball rolling downhill. Shareholders expect it so every CEO is jumping on the bandwagon. I like it.

3M to cut 2,500 jobs as demand weakens, profit drops

https://finance.yahoo.com/news/3m-profit-falls-charges-weakening-114335391.html

 

What is happening today.....at the moment.

Stocks fall as rally wanes, earnings pour in

https://finance.yahoo.com/news/stock-market-news-live-updates-january-24-2023-124838806.html

(BOLD is my opinion OR what I consider important content)

"U.S. stocks wilted Tuesday morning after back-to-back days of gains as investors evaluated another round of quarterly financial results from companies.

Stocks resumed regular trading after dozens of names on the New York Stock Exchange (NYSE) were halted for volatility shortly after markets opened. A spokesperson for the New York Stock exchange did not immediately respond to a request from Yahoo Finance for more information.

The S&P 500 (^GSPC) and Dow Jones Industrial Average (^DJI) each barreled down roughly 0.5% at the open, while the technology-heavy Nasdaq Composite (^IXIC) was off by 0.4%.

Major stocks briefly affected by the apparent technical issue at the NYSE included Morgan Stanley (MS), AT&T (T), McDonalds (MCD), and Walmart (WMT). As of 9:50 a.m. ET, the New York Stock Exchange said all systems were "operational."

Among specific names in focus early Tuesday, shares of Verizon (VZ) edged higher after the company reported what the company deemed its best subscribed growth in seven years for the last three months of 2022 while forecasting annual profit below analyst estimates.

General Electric's (GE) stock fell 1.4% after reporting a fourth-quarter profit that was weighed down by its renewable energy business, even as the industrials company delivered an upbeat profit forecast, citing strong demand for its jet engines and power equipment.

Johnson & Johnson (JNJ) shares pared an earlier advanced after the healthcare giant reported full-year guidance above expectations despite the company's chief executive officer warning earlier this year that the macroeconomic outlook is uncertain.

Shares of 3M Company (MMM) tumbled 6% after the manufacturing conglomerate reported a lower profit over an inflation-related drop in demand for items including air purifiers and respirators, while announcing it would cut 2,500 jobs.

Microsoft Corporation (MSFT) is scheduled to report its results after the closing bell.


In other pockets of the market, the U.S. dollar steadied after falling to the lowest in nine months across recent days, while in commodities, oil futures inched higher. West Texas Intermediate (WTI) oil — the U.S. benchmark — traded near $82 per barrel.

The earnings season has been off to a milder start. The fourth-quarter net profit margin for the S&P 500 so far is 11.4%, below the previous quarter’s net profit margin of 11.9% and below the year-ago net profit margin of 12.4%, according to FactSet data. Moreover, consensus earnings estimates for 2023 have steadily trended lower.

On the economic front, Thursday's gross domestic product (GDP) reading is the highlight of the week. However, investors remain squarely focused on the Federal Reserve's next rate announcement at the start of February, with officials expected to downshift to a smaller hike.

The CME FedWatch Tool, which serves as a barometer for imminent Fed rate and U.S. monetary policy, shows markets were pricing in a 99.1% chance of a 25-basis point hike as of Tuesday morning."

MY COMMENT

A nice NORMAL open today with earnings starting to roll in. It is nice to see ZERO mention of the FED. I am actually surprised at the positive forward looking statements that are starting to be put out there by some of the companies above. A good future indicator for the markets as we strive toward a new bull market this year.

 

Shhhhhhhh.......dont tell anyone.....the markets are trying to make a come-back at the moment. We dont want to jinx it.

 

Good job Smokie.....keep listing those earnings reports.

I tend to focus on the ten companies that I own and others that might be indicators of a general trend or market direction. It is good to have someone reporting on the many other companies as they report.

Markets are TOTALLY up for grabs today. I am sure they will firm up one way or another as the day progresses and the markets have more of a chance to consider and digest all the forward looking statements that are coming out. It is nice to see a.....normal....market day without the constant fear mongering that has been the norm lately.

 

For those that like to.....compare.

Here’s how much money you need to earn to be in the top 1% in every U.S. state

https://www.cnbc.com/2023/01/24/how...e-in-the-top-1-percent-in-every-us-state.html

(BOLD is my opinion OR what I consider important content)

"Being considered rich isn’t just about how much money you make, it’s where you live, too.

State by state, the incomes the top 1% of earners in the U.S. bring in vary by over a half million dollars, according to a new analysis of 2022 incomes by personal finance website SmartAsset.

To be in the top 1% of earners in Connecticut, residents need an adjusted gross income of at least $955,261. However, in West Virginia, they only need to earn an AGI of $374,712 to be part of the top 1%.

For comparison, the median income for U.S. households overall is under $70,000, with only 10% of households earning more than $200,000, according to SmartAsset.

Coastal states like New York and California tend to have the highest earners, while top earners in more rural states like Mississippi and Arkansas make less. Only 12 states require annual earnings less than $500,000 to be considered in the top 1%.

To calculate these numbers, the analysis updated 2018 income data from the Internal Revenue Service using 2022 Consumer Price Index data to account for inflation.

Below are the incomes needed to be part of both the top 1% and top 5% of earners in each state. States are listed in descending order, starting with the state with the highest income threshold for the top 1%.

Connecticut

• Top 1% income threshold: $955,261
• Top 5% income threshold: $336,866

Massachusetts

• Top 1% income threshold: $896,932
• Top 5% income threshold: $349,737

New Jersey

• Top 1% income threshold: $825,965
• Top 5% income threshold: $338,884

New York

• Top 1% income threshold: $817,796
• Top 5% income threshold: $287,752

California

• Top 1% income threshold: $805,519
• Top 5% income threshold: $317,791

Washington

• Top 1% income threshold: $736,084
• Top 5% income threshold: $312,907

Colorado

• Top 1% income threshold: $682,897
• Top 5% income threshold: $288,694

Florida

• Top 1% income threshold: $678,816
• Top 5% income threshold: $243,617

Illinois

• Top 1% income threshold: $666,202
• Top 5% income threshold: $271,049

Texas

• Top 1% income threshold: $641,449
• Top 5% income threshold: $258,369

Virginia

• Top 1% income threshold: $635,705
• Top 5% income threshold: $294,495

Wyoming

• Top 1% income threshold: $635,458
• Top 5% income threshold: $233,212

New Hampshire

• Top 1% income threshold: $634,464
• Top 5% income threshold: $281,154

Maryland

• Top 1% income threshold: $634,255
• Top 5% income threshold: $287,246

Minnesota

• Top 1% income threshold: $616,326
• Top 5% income threshold: $264,140

Pennsylvania

• Top 1% income threshold: $591,900
• Top 5% income threshold: $250,528

Georgia

• Top 1% income threshold: $586,207
• Top 5% income threshold: $242,967

North Dakota

• Top 1% income threshold: $578,237
• Top 5% income threshold: $240,797

Utah

• Top 1% income threshold: $577,024
• Top 5% income threshold: $239,222

Nevada

• Top 1% income threshold: $571,593
• Top 5% income threshold: $221,842

North Carolina

• Top 1% income threshold: $554,221
• Top 5% income threshold: $238,562

Oregon

• Top 1% income threshold: $551,004
• Top 5% income threshold: $246,539

South Dakota

• Top 1% income threshold: $549,189
• Top 5% income threshold: $219,642

Arizona

• Top 1% income threshold: $546,798
• Top 5% income threshold: $235,447

Rhode Island

• Top 1% income threshold: $545,345
• Top 5% income threshold: $240,792

Kansas

• Top 1% income threshold: $539,002
• Top 5% income threshold: $231,855

Tennessee

• Top 1% income threshold: $535,065
• Top 5% income threshold: $220,362

Alaska

• Top 1% income threshold: $529,327
• Top 5% income threshold: $250,103

Delaware

• Top 1% income threshold: $526,858
• Top 5% income threshold: $241,817

Wisconsin

• Top 1% income threshold: $514,561
• Top 5% income threshold: $223,102

Montana

• Top 1% income threshold: $514,013
• Top 5% income threshold: $216,789

Michigan

• Top 1% income threshold: $511,240
• Top 5% income threshold: $225,673

Nebraska

• Top 1% income threshold: $510,981
• Top 5% income threshold: $224,759

Idaho

• Top 1% income threshold: $508,126
• Top 5% income threshold: $217,945

South Carolina

• Top 1% income threshold: $506,496
• Top 5% income threshold: $219,743

Vermont

• Top 1% income threshold: $502,425
• Top 5% income threshold: $193,396

Missouri

• Top 1% income threshold: $427,917
• Top 5% income threshold: $186,671

Ohio

• Top 1% income threshold: $422,373
• Top 5% income threshold: $182,635

Louisiana

• Top 1% income threshold: $417,948
• Top 5% income threshold: $212,223

Hawaii

• Top 1% income threshold: $487,092
• Top 5% income threshold: $231,685

Maine

• Top 1% income threshold: $486,893
• Top 5% income threshold: $215,213

Oklahoma

• Top 1% income threshold: $483,606
• Top 5% income threshold: $210,109

Iowa

• Top 1% income threshold: $474,160
• Top 5% income threshold: $217,390

Indiana

• Top 1% income threshold: $471,007
• Top 5% income threshold: $208,917

Alabama

• Top 1% income threshold: $466,719
• Top 5% income threshold: $209,636

Kentucky

• Top 1% income threshold: $447,370
• Top 5% income threshold: $199,963

Arkansas

• Top 1% income threshold: $446,276
• Top 5% income threshold: $198,233

New Mexico

• Top 1% income threshold: $418,970
• Top 5% income threshold: $201,646

Mississippi

• Top 1% income threshold: $383,128
• Top 5% income threshold: $181,094

West Virginia

• Top 1% income threshold: $374,712
• Top 5% income threshold: $183,97"

MY COMMENT

The best we can do as a retired couple is top 5% in some states. Our retirement income is about $200,000 per year......with the majority of that coming from Social Security and Income Annuities. BUT.....I dont count my dividends and capital gains.....in that figure.......since we dont live on that money or consider it in formulating our annual budget.

As a business owner before I retired in 1999.....we would have been top 1% in about 25 to 29 states. Although there were years where I pushed income into one year or another for tax purposes.....when I had the chance to legally do so.......and as a result our income on paper could vary from calendar year to calendar year. I did not use the calendar year for my thinking or planing regarding income when managing a business....I used April 15 to April 15......as my year for money and business purposes.

 

kind of refreshing to have a do-nothing day once in a while.....like today. The markets recovered from the negative open to close little changed.

I ended up about the same way......a VERY minimal loss for me today. I was helped by the fact that five of my ten stocks were UP today.....AAPL, NVDA, HD, HON and TSLA. I also got beat by the SP500 today by 0.06%.

 

Here is MICROSOFT earnings.

Microsoft beats earnings expectations, cloud growth continues to slow

https://finance.yahoo.com/news/micr...cloud-growth-continues-to-slow-143300475.html

(BOLD is my opinion OR what I consider important content)

"Microsoft (MSFT) announced its Q2 earnings after the bell on Tuesday, barely missing analysts' expectations on the top and and beating on earnings per share.

Here are the most important numbers from the report compared to what analysts were expecting from the quarter, as compiled by Bloomberg.

• Revenue: $52.7 billion vs. $52.9 billion expected
  
  
• Adjusted EPS: $2.32 vs. $2.30 expected
  
  
• Productivity and Business processes: $17 billion vs. $16.8 billion expected
  
  
• Intelligent Cloud: $21.5 billion vs. $21.4 billion expected
  
  
• More Personal Computing: $14.2 billion vs. $14.7 billion expected
  

Shares of Microsoft were up more than 4% following the news.

Despite the beat on earnings per share, Microsoft's cloud business continued to slow in the quarter. The company reported its Intelligent Cloud segment grew 18% in the quarter, while its Azure services grew 31%. That's down from Q2 last year, during which Intelligent Cloud and Azure saw growth of 26% and 46%, respectively.

“The next major wave of computing is being born, as the Microsoft Cloud turns the world’s most advanced AI models into a new computing platform,” Microsoft CEO Satya Nadella said in a statement. “We are committed to helping our customers use our platforms and tools to do more with less today and innovate for the future in the new era of AI.”

Microsoft's announcement follows news that the company is engaging in a multi-year, multi-billion dollar investment in OpenAI in an attempt to better tackle competitors including from Amazon (AMZN) to Google (GOOG, GOOGL).

The investment is expected to help Microsoft further differentiate its cloud offerings from competitors like Amazon and Google. The company is also said to be bringing the technology to its Bing search engine, a move that could threaten Google’s search dominance.

Just last week, however, Microsoft cut some 10,000 workers. The move comes as the company is dealing with flagging PC sales. Cloud sales are also slowing as businesses pull back on spending amidst high inflation and interest rates.

The company is also continuing in its effort to purchase video game giant Activision Blizzard for $69 billion. So far, the Federal Trade Commission, the U.K’.s Competition and Markets Authority, and the E.U.’s European Commission have either lodged complaints about ,or are outright working to scuttle, the deal."

MY COMMENT

I am going to call this a.....BEAT. A mild beat. With all the very negative expectations....the markets should be happy with these numbers.

I am already seeing better earnings in general than expected and believe we will soon see all the NEGATIVE NANCY'S reworking their predictions or pretending that their prior statements do not exist.

 

NOT a real big confidence booster for investors.

NYSE Investigates Technical Issue That Caused Wild Market Open

https://finance.yahoo.com/news/nyse-gets-wave-sell-orders-150443262.html

(BOLD is my opinion OR what I consider important content)

"(Bloomberg) -- The New York Stock Exchange is probing what caused wild price swings and trading halts when the market opened on Tuesday as shares for dozens of the biggest US companies suddenly plunged or spiked.

A “technical issue” that the exchange didn’t immediately identify resulted in some gyrations that spanned almost 25 percentage points between the high and low in a matter of minutes. Banks, retailers and industrial companies were among those affected, including Wells Fargo & Co., McDonald’s Corp., Walmart Inc. and Morgan Stanley.

The freakish action bears hallmarks of past episodes in which computer malfunctions led to sudden price distortions. While the probe was just getting started, the NYSE pointed to rules that could allow member firms affected by the swings to undo some of the damage.

“The exchange continues to investigate issues with today’s opening auction,” NYSE said on its website. “In a subset of symbols, opening auctions did not occur. The exchange is working to clarify the list of symbols.” The US Securities and Exchange Commission is also looking into the matter, according to an agency spokesperson.

At least 40 S&P 500 Index stocks were hit with trading halts, according to data compiled by Bloomberg. The distortions ripped through trading of Wells Fargo, which closed Monday at $45.03 and then fell as low as $38.10 before bouncing back. Morgan Stanley similarly plunged to $84.93 after ending at $97.13 on Monday, then made up almost all of the lost ground.

“It’s a little concerning; these are not your typical meme stocks, easily manipulated companies,” Oanda senior market analyst Ed Moya said by phone. “These are some of the giants.”

Walmart and McDonald’s were up and then down as much as 12% before reverting to more normal trading ranges. By midday in New York, the broad stock indexes were little changed.

Tuesday’s transactions occurred in New York Stock Exchange-listed securities and took place on other platforms, including ones overseen by Nasdaq Inc., CBOE Global Markets and private venues reporting to the Finra trade reporting facility.

Possible Relief

The amount of stock traded at away-from-market prices was just a tiny fraction of the usual volume in stocks that normally see millions of shares change hands each day. In companies like McDonald’s and Verizon Communications Inc., a few thousand shares went off at prices well above or below the last trade. Others like Nike Inc. and Exxon Mobil Corp. saw millions of dollars of stock move, data compiled by Bloomberg show.

Investors hurt by the moves might look to NYSE rules for some relief. In the event of a “system failure” occurring during the execution of a stock order, an organization can submit a claim and seek reimbursement for losses under Rule 18, the exchange states on its website.

Under the terms set by the exchange operator, a system failure is defined as “a malfunction of the NYSE’s physical equipment, devices, and programming that results in an incorrect execution of an order or no execution of an order that was received in NYSE systems.”

Help could also come from the “Clearly Erroneous Execution” rule, which lets organizations seek review on any order that is executed with “an obvious error in any term, such as price, number of shares or other unit of trading, or identification of the security.” The NYSE pointed out both rules in its statement Tuesday.

Previous Glitches

Episodes in which computer glitches lead to erratic pricing are rare on American exchanges but not unheard of. Perhaps the most famous was the August 2012 incident in which faulty software employed by one of the biggest market makers, Knight Trading, riddled exchanges with erroneous orders and sent shares swinging around the market.

The event sent Knight spiraling toward insolvency before it was bought out by a coalition of trading firms. Last year, Citigroup Inc.’s London trading desk was behind a flash crash that sent shares across Europe tumbling, while in Canada a software-issue caused a 40-minute outage across three stock exchanges.

Another mid-afternoon incident in May 2010 prompted Nasdaq OMX Group Inc. to cancel trades of 286 securities that fell or rose more than 60%.

Opening Auction

The start of trading in most American stocks involves a complicated but usually routine process called the opening auction, designed to limit volatility resulting from orders for shares that pile up before the start of the regular session. In it, a computer balances out supply and demand for a particular stock by establishing an opening price that can be viewed as the level that satisfies the largest possible number of traders.

“It was a bit of a scramble, said Justin Wiggs, managing director in equity trading at Stifel Nicolaus. “Overall, clients were surprisingly more reasonable and understanding than I expected,” Wiggs added. “They all seem to be willing to wait for NYSE to come back with their plan going forward. The message I’m hearing from NYSE is that it’s more or less on the individual broker to report anything they deem erroneous rather than doing a bulk halt/cancel/reset.”

At Meridian Equity Partners, “all of our phones are lighting up,” said Jonathan Corpina, senior managing partner who typically works on the floor of the NYSE. “We’re trying to field calls from our customers and try to explain to them what happened, what’s going on and relay as much accurate information so they understand what’s happening.”"

MY COMMENT

What is concerning is that they really dont have a clue what happened. In addition they dont have a really clear cut answer as to how it is all going to be made right. the lack of....human.....control or execution under these systems is going to be a really big problem some day. AND.....we all know that when it is all worked out and resolved......it will be done in a way to benefit the big brokers and Wall Street......not the little guy.

 

Here is a more comprehensive article on the MSFT earnings.

Microsoft beats on earnings as cloud unit shows strong growth

https://www.cnbc.com/2023/01/24/microsoft-msft-earnings-q2-2023.html

 

HUMP DAY tomorrow. It will also be EARNINGS day for TESLA.

I am looking for a good day tomorrow as we move further into year 2023.......and.....the continuation of the current BULL MARKET.

ENDURE.....COURAGE.