Market comment October 2018

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Noteworthy, soft CapEx despite enormous corporate tax cuts, and GDP inflated by build-up of inventories front-loading tariffs:

Nonresidential fixed investment — spending on large-ticket items like equipment — added only 0.12 points to GDP growth, the lowest in seven quarters, while overall fixed investment was a 0.04-point drag, the worst in 10 quarters. Companies have said that this uncertainty and the possibility that tariffs will push up costs elsewhere could result in decreased capex spending. But the tariffs may have also helped prevent the GDP report from coming in softer than expected. Similar to the second quarter's sudden surge in exports (mostly soybeans), inventories surged in the third quarter and added 2.09 percentage points to the GDP growth figure. Michael Feroli, an economist at JPMorgan, surmised that many businesses imported goods before they were hit by tariffs, helping to boost the inventories number. "This may have reflected front-loading of imports (which increased at a 9.1% rate) ahead of scheduled tariff increases — imports which then end up temporarily in stockpiles," Feroli said..

GDP: Trump tariff, trade war hit to economy - Business Insider

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“The market will not reward earnings unless you’ve got growth in the top line, bottom line and guidance. It can be brutal for companies that don’t hit all those marks,” said Quincy Krosby, chief market strategist at Prudential Financial. “There are questions remaining on whether this market can really regain strength if tech doesn’t lead.”

Dow tumbles 550 points into correction territory, led by Boeing

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This isn't good news, especially about Italy..

Economic growth in the eurozone has fallen to its slowest pace in more than four years, and Italy is not growing at all, according to figures released Tuesday. The snapshot is likely to sharpen political divisions in the European Union and make the region more vulnerable to the forces rattling financial markets. The eurozone grew 0.2 percent from July through September compared with the previous quarter, according to the European Union statistics agency. Separately, Italy’s government statistics office said growth during the third quarter was zero as manufacturing slumped.

Eurozone Growth Slips to Four-Year Low, Fueling Crisis Fears - The New York Times