1) Slowing economies: China, Latin America
2) dollar strength
The slowing economies are leading to declines in commodity prices and a slowdown in capital spending.
No surprise multinational are feeling the pain:
Multinationals this month
United Tech down 9.1%
Caterpillar down 9.0%
Emerson Electric down 6.7%
MMM down 2.6%
Caterpillar reflects all of the concerns. They are seeing declines in their commodity business (mining), in their oil business, and in construction (China):
(Q2 revenues year-over-year)
Resource: down 12% (mining)
Energy/Transportation: down 12% (oil)
Construction: down 18% (China)
The downbeat commentary is taking some analysts by surprise. For example, 19 of 21 analysts who cover Emerson Electric lowered their full year estimates in the last month.
Sixteen analysts who cover United Technologies—almost the entire universe of analysts who cover the stock—have dropped their full year earnings outlook for the year this month, most in the last couple days.
The largest of the Latin America ETFs, the iShares Brazil ETF, is seeing very heavy volume today and is poised to break through a 6-year low.
Watch for any signs that this is spreading past the commodity and industrial names. For example, food giant Unilever (Ben & Jerry's ice cream, Knorr stock cubes, Hellmann's mayonnaise, etc.) said consumer demand was weak, with what it called "negligible" growth in Europe and North America. Sales were flat in the second quarter.
The main concern of the trading community right now is, how long will the stalwarts remain the stalwarts?