This was another lackluster trading session, characterized by the utter indifference of buyers, despite stocks being down three of the last four days.
I've been talking a lot about the drying up of buying interest lately. There's several reasons this has been happening:
1) Stocks have been drifting lower since the Fed decision. A small but vocal minority (including Bill Gross) have insisted that the market might have been in better shape had the Fed done "one and done" and guided more positively on the U.S. economy.
Since then, we have a global marketplace that has taken another modest downturn on the exact same global slowdown concerns that existed prior to the Fed meeting, only this time the "global slowdown" story has the Fed imprimatur.
In other words, the Fed has successfully "infected" the rest of the world with its concerns over "recent global economic and financial developments."
2) Another group agrees that the market has been drifting lower since the Fed decision, but that the Fed was right and that not only has China been slowing down, recent economic data indicates the U.S. has been slowing as well.
They point to a series of recent fairly large economic misses:
- Recent economic misses
- Existing home sales
- Philly manufacturing
- Empire manufacturing
- Richmond manufacturing
This camp generally agrees that the Fed may have missed its opportunity to raise rates a few months ago, but with some signs of slowing economic growth, now was not the time to do it.
3) A third group notes that buying interest is weaker because it is obvious that weaker global growth is being manifest in: a) lower commodity prices, and b) negative revenue growth.
They're right. I noted earlier today we are heading for four straight quarters of negative revenue growth:
Revenue recession
(S&P 500 revenues)
Q1: Down 2.9%
Q2: Down 3.4%
Q3 (est.): Down 3.3%
Q4 (est): Down 1.4%
Source: Factset
We haven't had three quarters of negative revenue growth since 2009; we haven't had four quarters since the financial crisis.
This will be the big story for the remainder of the year.