Algo Trading Could Amplify A Correction To 10 to 15%

how do you trade? By tweet? The question as markets get Royal to buy a series of competing headlines, joining us down to discuss Matt Mainly, managing director in equity strategist at Miller, tay Back and Company. Matt, how do you trade around? Tweets the very any Ey? That's for darn sure. Uh. And it's it's, you know, they say, trying to trade around in an investor around And of course you got to keep that kind of longer term

view off things. But the one, the one thing that concerns me a little bit about the the short term or i say, over the next a month or two, is the no matter what the president tweets, we have more than just the trade issued it to face with what's going on in Hong Kong. There's no question we're also seeing a slowdown in the economy and and and earnings growth. Uh. And you know, so there's several different

issues that UH creating a headwind for the market. And you know, we're six six percent from the all time high, which really isn't that much of a decline, uh, given the the you know, the stretch valuations and stuff that we saw before. So I don't think this trade issue is gonna go away as it is. Uh. So I think we probably have some more downside here, all right,

how much more downside? Well? But you know, it's funny, given given what the uh's going on right now, I could say, you know, she's a normal eight to ten percent correction would be in the cards, and that would not be a big deal. The one little problem we do have, though, of course, is that today's mechanized tradings, with all the high frequency traders and the al goes and and things like that, that we tend to overshoot

when the month's momentum gets going in either direction. So this could become more of a a tend of fifty percent correction. UH. Again based on that kind of artificial movement. All right, So let's cue the FED reaction function here and wonder going forward how much the FED is going to respond to a possible decline of ten in US

equities and whether it will matter. So what's your expectation there? Yeah, I mean, it's one thing I've been saying for a long time is that you know, the FED is definitely data dependent and economically dependent, but they've also proven even more so in the last few years or last year or so, that there are a very market dependent So I do think that will have an impact. Now if we get that ten to fifteent correction, Uh, that will I think get another two rate cuts this year instead

of just one. And if it gets even deeper than that, if we see the same kind of a turmoil we saw on the fourth quarter of last year, I think there's a good chance that they could reignite a que program. Wow, reignite a qui program as soon as this year. I mean, by early next year, if we think things become bad. I think that's a good chance of that. But to what end, right, I mean, we're looking at thirty year treasury yields that are all time lows, benchmark yields around

the board are pretty low. What's the goal here? How much is that going to actually ignite growth? Well, I mean, as UH as we always us. As a strategist, I gotta sit there and say, oh, what what should distinguish between what they should do and what they will do? So what I've just described as what I think they will do, should they do it, I don't know what what kind of end that kind of brings it brings in. I mean to me, bear markets and and and recessions,

especially the normal ones we have. But everybody's afraid that the last two were so bad that gosh, we're gonna have another fift a bearn market. Well, usually they're mild recessions in twenty bearer markets, they're normal. Those things are healthy. Why the fed fields that we can't go have one of those is beyond me. I think would be healthy if we did that. However, I do think that they do feel it's important to keep the this uh expansion going,

and that's why I think that's what they'll do. All right, So I'm gonna talk stical perspective. Which equity index has the most upside of the most downside? Well, the one thing, the one I'm watching the most closely right now. You know,

Dave Wilson just talked about it was the Russell two thousand. Uh. You know, it's been an important leading indicator for the stock market, uh for you know, for many years, but even especially last year, and we saw it it turned down before the rest of the market did before you

that in that fourth quarter of correction. Uh. So what I'll be looking for is, right now it's testing it's June lows, uh, and so any further downside from there will give it a key lower low and probably indicate that the rest of the markets heading a little bit lower as well. You know, as I said, into that tent to percent correction territory, and uh, the Russell tends to uh see a bit of a wider, wider swings. So I think that's probably got more downside than than

the SMP. And which industry do you think, which sector of the market do you think is is poised to uh most underperform going forward? Well, it's uh, I'm afraid it's gonna have to be. You know, there's some of the chip stocks and the semiconductor I'm sorry in the text box. Overall, Uh, they've had the biggest move, uh, you know, and therefore they probably give us the biggest down side. Again, I'm not certainly not calling for what we saw in two thousand or anything like that. In fact,

I think this will present some great opportunities. And if the Fed does indeed step back on the accelerator, Uh, if people have a little extra cashiy on the sidelines that they raised now to take advantage of an overshoot to the downside, UH, they're gonna be Uh. They're gonna profit very well in next year the longer term. Matt Maylie, thank you so much for being with us. Matt Maylee is managing director and equity strategist at Miller take Back

and Company. Taking a look at how technical indicators point to further downside ahead. Question Walmart shares surging even after Macie's came out with worse than expected results. Looking around, what is the state of the US consumer? How are retailers faring? We are so lucky to have with us. Bert flicking Jar, managing director at Strategic Resource Group, joining us here in our interactive broker studios. Let's start with

Walmart shares jumping the most in a year. UH. Solid growth in their e commerce business, solid growth when it comes to consumers not seeing a huge impact by tariffs. Give us your sense, what's the most important thing we need to focus on in these earnings. Most important thing, Lisa is Walmart has the best CEO anywhere in worldwide retail and the best leadership team since Sam Walton started the company and ran it from so in that Doug

McMillan believes in doing doing what's right. So, for example, in solar sustainability, environmental Walmart wasn't there under prior leadership. Walmart is up there with Amazon and Target as being the best in solar power. What's the implication for the consumer and the comp penny is Walmart's able to pay higher prices, higher wages to its workers through the savings and the money it's making through environmental and sustainable solar

and lowering prices to shoppers. Everybody's winning. Let's let's dig a little bit further into salaries or wages, you know, hourly wages. Walmart has come under a lot of attack traditionally for not paying people that much or having people on in a part time basis so they don't have to pay them benefits. Uh, there have been a salary increases or wage increases, hourly wage increases. How has that

affected their business? It's affected the business in terms of higher workers satisfaction, higher productivity, higher retention, greater consumer satisfaction scores through consumer reports, dot Com, etcetera. So Walmart that was criticized for raising prices because Mr Sam or Sam Walton, the founder wrote in his book My Story, he always

paid workers as little as they could. His son on the four anniversary of the Walmart profit sharing plan, blew up the plan, and Doug McMillan was for the last five years record comparison and same store sales since he started because he believes in doing what's right for the worker, which is right for the shopper and right for the community. And has there been a less political pressure on Walmart

as a result, there's been less political power. McMillan, who's this son of a Vietnam veteran army doctor, took it upon himself to discontinue automatic and semi automatic weapons years ago. So, in addition to solar sustainability, discontinuing merchandise with the Confederate flag, and raising shoppers standards of living through the lowest prices Walmart's had in ten years and establishing co low price

leadership with Winco lowest in the US. Walmart's winning for the worker, the shopper and really helping to drive the economy. In the stock market today, as you said, Walmart's up almost five pc, the S and P Retail Index, the x RT on the Bloomberg's down almost one percent. So Walmart's really breaking through very clearly. The Walmart earnings inspired you on multiple levels. Let's move on to something that maybe a little less inspiring, but at least isn't as

bad as some people have been expecting. We're talking j C. Penny came out with less bad results than people hadn't been expecting. What stands out to you, Lisa's you've reported well for a long time is Penny's major debt maturities come up in three Penny has dynamic new leadership. If they get enough time and financial forbearance, they can turn

the company around. But with declining earnings and same store sales, they really have to do it between the fourth quarter and into the next fiscal years, you've reported because the debt covenants and credit lines and terms could be tightened otherwise. Yeah, it really remains to be seen whether they'll be patients among bond investors when it comes to this name, I want to broaden out generally to see what all of the earnings and the economic data means about the US consumer.

Time again, economists come out, they say businesses are pulling back their spending, but still the U s consumer is in a good state, solid continues to spend. The retail sales figures better than expected. Do you think that this is sort of lagging lagging indicator that will slow down based on what we're seeing, or do you think that this is an accurate read of where we're at. It's bifurcated. Is you reference Macy's department and specialty stores all struggling.

What we're seeing is that combat denominator. All the retailers are winning or low price t j X, Amazon, all the Walmart target, b J's costco, and they're all using solar to pay more in terms of worker compensation and lower prices. So with the lower prices they profitably increased market share, while the twentieth century proverbial Roman empires of retail are crumbling. So what does that mean? I mean if if if the low cost retailers are doing best.

Is that bearished? Does that mean at the consumer isn't doing that well because they gravitating to the lowest price items, or does it mean that people just simply can compare prices and want a go deal. It's your referencing, Lisa, consumers can compare prices. But as you've reported this week and on on the Bloombergh debt for seniors between the ages of fifty to seventy of increased seventy to UH and as a result, those are the sweet spot for

the department stores. So they're really careful in terms of spending. So instead of going to the department store, they go to Burlington, t J Max, Marshalls. And consumers, as you said, so well, whether it's price discovery, whether it's Walmart, dot Com, Amazon or Ali Baba are getting the lowest prices and buying online or buying off price. So when we talk

about Walmart, we have to look ahead to Target. To Target used to be called TARJ by some because it caters to a little bit higher end consumer than Walmart. So there seems to be a battle forest between Walmart

and Target. Who's winning? Uh, Walmart's winning, but there's an opportunity for both Target and Walmart with the liquidation of toys are us is that they both have much more room and should have more space for selling toys as well as with a record number of rescue pets, puppies and cats being adopted UH growing two to three times more than the birth rate for children in the US. UH,

pet toys and accessories are going up. In the common denominatory they both have is solar, their thirty nuclear plants being decommissioned, and even more coal. So they're locking in their power rates number two operating costs at half at the price for the next twenty years and pouring those savings back back into the shopper and their stores and innovation, while the rest of retails like Fred flint Stone and

Slate Rock Quarry just watching the world go by. I think it won't change, so just quickly here to tie this all together and put a bow on it. I'm wondering, taking a look at the earnings we've gotten out of the retail sector so far, the retail economic data that we got out this morning, how would you characterize the state of the U s consumer? UH Dick and Esque best of times and worst of times from tail of two cities. Best of times Walmart, Target Costco, all the

t j Ax, Burlington, the off price linked retailers. Worst of times for the department stores, food stores, drug stores and specialty stores. Burke Flickinger always wonderful having you. Thank you great to team up. Please thank you for Flickinger, Managing director at Strategic Resource Group, joining us here in our Bloomberg Interactive Broker studio is taking a look at Walmart. It may become the biggest initial public offering in the

chemicals space. China National Chemical is looking to potentially spinoffs in Genta. Uh in it with a listing here to discuss what this could mean. Why now? Jason Miner, Senior Global Coupicals analysts for Bloomberg Intelligence. So, Jason, China National Chemical Corporation purchased in Genta back in seen. Why are they doing this now? Well, the timing is key. So remember where this is a market that hasn't grown much over the last few years, which led to all the restruction.

We had down DuPont merge and put together Cortiva, which is one of the big competitors Buyer mon Santo and we all know there have been some challenges there. Uh, and then this year we had a massive amount of flooding. I think they're looking for a chance to bring this out into the capital markets, and when they time it, they'll have to play around with when they might get

a rebound. So with corn prices below five, well below five dollars and playing with four dollars today, those kind of heady earnings growth days of the past have been a long forgotten memory for a while. Clearly there's some capital to come from the market for an interesting idea like this um, but timing it has to do with when we could get a bounce from what's been a tough time. So we're talking about pesticides, right, We're talking about both pesticides and seeds, and that's sort of the

interesting thing. You used to have one company makes seeds and the other make the pesticides. And over the last few years we created these three new bundles. The Cyngenta KEM China story is one where we put it all together. No one's ever proved that that actually works very well. Uh. So these new pesticide and seed companies, there are really three of them globally. Uh. They're all trying to find

their way forward. Uh, sort of an unproven model. What's the what's the theory behind some of these tie ups and sort of Uh some of the speculation about why it might not work well. The theory is the one stop shop. Actually, Um, you used to have a bunch of people visiting the farmers. Some of them are selling

them seed and some of them are selling them spray. Uh. The idea is under pressure and with a lot more digital tools coming to the market, that you really want to circle that farmer and offer them an app they can put on their tablet that recommends all sorts of things from the seed to the spray. The challenges doesn't hurt innovation because, um, you're not necessary. You don't necessarily want one company who thinks of the app and the seed and the spray when deciding what to commercialize. More

competition might bring more innovation. That's the concern now. When it comes to China National Chemical Corporation, its purchase of c Genta was one of the biggest by a Chinese company of an overseas of an overseas firm in history. I'm trying to understand whether this was part of their playbook, part of their mindset when they bought c Genta that they were going to list it at some point in

the not so distant future. So they had said that in the past, and I think the challenges a lot of it has to be seen through the lens of food security. China's crop yields are in many cases half those of the rest of the world, and biotechnology, of which Centa was just one of three global platforms, is a key way to boost food security UH and to

boost those yields UM. The challenge with the idea of the I p O. It does international legitimacy, it creates confidence from the buyer's and Genta's footprint is obviously far outside of China. They've got a lot of sales in a lot of countries. UH. It certainly raises some capital to pay back UM the way that they funded it UM, but whether or not it's all about earnings growth is the challenge, because again, part of the play here was probably to help China boost its food security.