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Lockhart "Positive" Hawkishness Sparks Tapering Tumble In Stocks (Dow At Lows Of Year)

Tyler Durden's picture





 

The Dow is -1.5% in 2014 now - at the lows of the year

 

It was all looking so good. NASDAQ was green for the year (so were Trannies), stocks in general were rising and everyone on TV could proclaim how well the 'market' was handling the taper. Then Dennis Lockhart spoke...

  • *LOCKHART SEES `GROWING CONFIDENCE' IN 2014 OUTLOOK
  • *LOCKHART SAYS U.S. ECONOMY ON `MORE SOLID' FOOTING
  • *LOCKHART BACKS $10 BLN TAPER AS CONFIDENCE IN 2014 GROWS

That's great news right? Wrong? Stocks didn't like it... and NASDAQ rapidly gave up its gains... Fun-durr-mentals remain in control eh? It shouldn't be a big surprise given what Goldman Sachs warned about over the weekend!

The drop actually began at around 1219ET, before Lockahrt's headlines hit Bloomberg at around 1225ET

 

 

as perhaps it was merely a coincidence that he was hawkishly positive and stocks dumped back to JPY carry levels...

 

Which slammed the NASDAQ off its YTD green levels...

 

Late last night the music may have just skipped a major beat after Goldman released a Friday evening note that is perhaps the most bearish thing to come out of Goldman's chief strategist David Kostin in over a year, (and who incidentally just repeated what we said most recently a week ago in "Stocks Are More Expensive Now Than At Their 2007 Peak"). To wit:

S&P 500 valuation is lofty by almost any measure, both for the aggregate market (15.9x) as well as the median stock (16.8x). We believe S&P 500 trades close to fair value and the forward path will depend on profit growth rather than P/E expansion. However, many clients argue that the P/E multiple will continue to rise in 2014 with 17x or 18x often cited, with some investors arguing for 20x. We explore valuation using various approaches. We conclude that further P/E expansion will be difficult to achieve. Of course, it is possible. It is just not probable based on history. 

 

The current valuation of the S&P 500 is lofty by almost any measure, both for the aggregate market as well as the median stock: (1) The P/E ratio; (2) the current P/E expansion cycle; (3) EV/Sales; (4) EV/EBITDA; (5) Free Cash Flow yield; (6) Price/Book as well as the ROE and P/B relationship; and compared with the levels of (6) inflation; (7) nominal 10-year Treasury yields; and (8) real interest rates. Furthermore, the cyclically-adjusted P/E ratio suggests the S&P 500 is currently 30% overvalued in terms of (9) Operating EPS and (10) about 45% overvalued using As Reported earnings.

Cue David Tepper to bring out even bigger greater fools who do believe in his 20x PE multiple "thesis." Cause if 20x works, why not 40x, or 60x, or moar?

* * *

Kostin's full "market is now overvalued" note here

 


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Mon, 01/13/2014 - 13:56 | Link to Comment frankTHE COIN
frankTHE COIN's picture

BraveHart took an Axe to the Rally.

Mon, 01/13/2014 - 14:36 | Link to Comment TruthInSunshine
TruthInSunshine's picture

Who's afraid of a 4.1 trillion USD and growing balance sheet? Not the Fed.

Plosser or Evans or Ole' Yellen herself will be out with a statement about how the economy is lagging & needs MOAR FED FIAT CONJURING at 3:30 pm.

Yellen isn't going to let the PBoC outprint the Fed, directly or indirectly.

p.s. - I am sounding the alarm for a 'Holy Shit, That's Some Cognitive Dissonance Between What The MSM Is Reporting About The Health Of The Economy & The Reality Of The Health Of The Economy' alert.

The stores...they be 'a closing & the inventory be 'a stackin'. Santa took a giant dump down the retailers chimneys this year. Next Christmas Eve is Burrito Night @ the North Pole.

Mon, 01/13/2014 - 14:55 | Link to Comment disabledvet
disabledvet's picture

YOU ARE OUT OF BULLETS! You will now be merged to server the Treasury function you have been doing so ably oh these many years. Thank you very much, have nice day.

Mon, 01/13/2014 - 14:58 | Link to Comment walküre
walküre's picture

Word around the globe is that the US is making shit up about the recovery. Nobody out there really believes it. They play along because noone else is rocking the boat. It took years during the Soviet era before noise was so loud, the Comrades had to acknowledge defeat of their central planning.

Numbers and statistics are useless because they cannot be verified. The only real indicator is today and was back then what the people actually did, how they behaved and how long the bread lines were.

People in the Soviet Union accepted bullshit after bullshit even though their personal lives weren't improving and good nutrition was harder and harder to come by.

Bottom line is that you and I may never experience the day of reckoning even when people around us are starting to die off like flies from alcohol poisoning, lack of nutrition or insufficient shelter.

The regime will keep telling us that everything is under control. It helps to have friends and family that are honest about their state of affairs and at least you don't have to pretend and fake it to the people you love.

It is shitty out there and the squirrel typically lives through the winter.

Mon, 01/13/2014 - 15:15 | Link to Comment TruthInSunshine
TruthInSunshine's picture

China doesn't believe it.

There's word that the elite are "punishing" provincial bankers corporal style (look at Chinese property value trends of late).

Bad loan portfolios mess you up.

Mon, 01/13/2014 - 13:59 | Link to Comment Grande Tetons
Grande Tetons's picture

Is Lockhart Team Depends? 

Hope you are right, TD. 

Mon, 01/13/2014 - 14:07 | Link to Comment Atomizer
Atomizer's picture

LOCKHART SEES `GROWING CONFIDENCE' IN 2014 OUTLOOK, U.S. ECONOMY ON `MORE SOLID' FOOTING

Just don't be caught without a flashlight & step into central planning cow pasture patties. We're talking about the loose lipped words of Austerity programs coming in the USA. 

Mon, 01/13/2014 - 14:02 | Link to Comment Jonas Parker
Jonas Parker's picture

Quick! Hide the charts and blame the Republicans!

Mon, 01/13/2014 - 14:04 | Link to Comment Cognitive Dissonance
Cognitive Dissonance's picture

I hate it when they pull the punch bowl.

Mon, 01/13/2014 - 15:04 | Link to Comment disabledvet
disabledvet's picture

greatest keyboardist in HISTORY.

http://www.youtube.com/watch?v=eHaWKD9tjtE

Mon, 01/13/2014 - 14:04 | Link to Comment Dr. Engali
Dr. Engali's picture

Nothing better to instill a little confidence in the economy  than the market crumbling after the fed speaks. Good job Brownie. 

Mon, 01/13/2014 - 14:05 | Link to Comment Hindenburg...Oh Man
Hindenburg...Oh Man's picture

I always think: "cool, a correction, finally", but instead it is just another dip-to-be-fucking-bought. 

Mon, 01/13/2014 - 14:06 | Link to Comment orangegeek
orangegeek's picture

On Friday we said it wouldn't last long....

 

http://bullandbearmash.com/chart/sp500-hourly-closes-final-hour-bull-cha...

 

and it didn't. 

 

Still, we are currently down about 0.7% - we need a down day of near 2% as a good indication of trend reversal

Mon, 01/13/2014 - 14:43 | Link to Comment rubearish10
rubearish10's picture

Yes, the wait for that moment of disbelief that BTFD, BTATFH or New Normal philosophical fairy tails CAN ACTUALLY FAIL to materialize feels like a lifetime. These shallow moves lower are figments of granjour and mind numbing teasers.

Mon, 01/13/2014 - 16:18 | Link to Comment dow jones 20000
dow jones 20000's picture

down 124 bps on the day as of 3:17pm...

Mon, 01/13/2014 - 14:09 | Link to Comment Non Passaran
Non Passaran's picture

Overreaction! I'm sure he didn't mean it.

Mon, 01/13/2014 - 14:11 | Link to Comment cougar_w
cougar_w's picture

Bear trap.

Mon, 01/13/2014 - 14:12 | Link to Comment SheepDog-One
SheepDog-One's picture

Que 'good cop' Fed guys 'he was just joking, more free money comin' speech in 3....2...

Mon, 01/13/2014 - 14:12 | Link to Comment Wait What
Wait What's picture

Untaper! Untaper!! get Evans and Rosengren in here, stat!

Mon, 01/13/2014 - 14:15 | Link to Comment Seasmoke
Seasmoke's picture

We are Going to need much much more bad news, if we are going to have a strong recovery. 

Mon, 01/13/2014 - 14:17 | Link to Comment ...out of space
...out of space's picture

i think market  expect another 10B taper 29.01 so the Fed will show the good will about taper. and 25% taper will be it for q1.  

Mon, 01/13/2014 - 14:17 | Link to Comment praps
praps's picture

Market going bidless in 3..2.

Mon, 01/13/2014 - 14:20 | Link to Comment Frank N. Beans
Frank N. Beans's picture

Turn those machines back on!

Mon, 01/13/2014 - 14:21 | Link to Comment olle
olle's picture

Why not instead put all these finacial analytic gurus in charge of healthcare, the future survival rate of treatment will be close to 100% and most of us will live to +100...  

"the only more scarey threat than an expert, is an expert with a computer..."

Mon, 01/13/2014 - 14:22 | Link to Comment EuropeanBankster
EuropeanBankster's picture

Guess it was this comment:  "6,7 pct. unemployment rate may overestimate progress in labor market"

MAY??

Mon, 01/13/2014 - 14:26 | Link to Comment NOTW777
NOTW777's picture

"solid footing" equal - ruling elite standing on and trampling the bodies of peasants

Mon, 01/13/2014 - 14:38 | Link to Comment Atomizer
Atomizer's picture

IMHO, 7-10% downside will keep the crippled market propped up. Debt ceiling advances, Stimulus programs, unemployment financing, Obamcare will suck more investment. Without disposable serfdom income, you socialist tit-wanks have given your dependents everything but the kitchen sink. Now what? Just as a small point, they aren't working to chip into the Social Security benefits, amongst other taxable duties.

 

The gun will be shoved down your mouth. You created a deficiency in lost employment, lack of people paying into a retirement system, and when your plan collapses. The people you promised bullshit will come after you. Carry on Comrade Obama! We call it poetic justice. Winks

Mon, 01/13/2014 - 14:34 | Link to Comment Quinvarius
Quinvarius's picture

A market being algoed into the floor every time the Fed or President opens their mouth?  Where have I seen that movie before/

Mon, 01/13/2014 - 14:54 | Link to Comment CheapBastard
CheapBastard's picture

very very bullish.

Mon, 01/13/2014 - 15:24 | Link to Comment teslaberry
teslaberry's picture

professors HATE HIM!!!!

Mon, 01/13/2014 - 15:25 | Link to Comment MFLTucson
MFLTucson's picture

Is this fuckin clown referring the the wonderful employment report or the Baltic Dry Docks Index in supporrt of the confidence in this economy?

Mon, 01/13/2014 - 16:15 | Link to Comment ConqueringFools
ConqueringFools's picture

I've got no skin in this game! At 34 years old I set let the whole system F'ing implode into chaos. I've got plenty of time to regroup. People like me who have worked hard to pay off debt, live within my means, and be a responsible financially literate consumer are waiting for the housing market to tank. Let interest rates go up. Then housing prices will tumble.

The problem with the entire economy is it's being propped up for the losers who've destroyed everything. There millions of middle class Americans who are waiting on the sidelines ready for a crash so that we can gobble up resources and real estate from the idiots who are inflating everything.

Do NOT follow this link or you will be banned from the site!