It’s too late for the Fed to rescue the stock market, if ever it could: The Dallas Fed’s Robert Kaplan Thursday morning argued that the Fed should stop increasing interest rates for the time being, and the Wall Street consensus expects a very dovish Fed for 2019.

It’s also too late for the Trump Administration to revive animal spirits by calling off the trade war with China. China is happy to strike a deal that allows Donald Trump to claim victory, as I first reported last October, and former Chinese trade negotiator Wen Jianguo predicted in an interview today.

With NASDAQ down 3% today and the S&P 500 down 2.35%, the market looks ready to test the year-end lows. A few weeks ago the combination of dovish Fedspeak and Trumpspeak would have buoyed stock prices.

That was then.

Economic data, as well as corporate earnings guidance, both point to more damage than most analysts anticipated from the trade war. Even worse, the trade war coincides with the unraveling of some important corporate narratives.

The two big events of the day were, of course, the miserable Purchasing Managers Index report this morning, which showed a fall in the reading from new orders in the US from 61 to 51, and Apple’s drastic reduction in its revenue guidance. This comes on top of a soft Caixin PMI reading for China over the New York break.

The world economy is slowing, profit perspectives are fraying, credit conditions are tightening. There’s nothing good about the situation except that stocks are a lot cheaper than they were (Apple is down nearly 40% from its peak). But they aren’t cheap enough.

Orders are plunging around the world.

New orders

China’s export orders have fallen below the 47 mark (which means that fewer than 47% of survey respondents see growth, and overall Chinese manufacturing orders are just below the 50 mark. The American index fell off a cliff in December.

Given the sloppy performance of semiconductors and semiconductor equipment makers, it seems likely that falling CapEx is to blame. Oil accounts for a disproportionate share of CapEx in the US, and the falling oil price probably explains a good deal of the weakness.

Apple blamed the weakness of China’s economy for its sudden backtracking on prospective revenue. There is some weakness in China; retail sales grew by 8.1% year-on-year as of November, compared to a 10%-11% range during 2017. But that’s still growth.

Apple’s biggest competitor in China, Huawei, is showing handset revenue growth of more than 20% year-on-year as of December. The trouble is that Apple makes money by charging more than anyone else for premium products, and its products don’t seem all that premium today.

There are a lot of other scary situations facing market leaders. Apple took the most points off the Dow-Jones Industrial Average today, but Delta Airlines was right behind it. Apple fell 10%, and Delta fell 9%, followed by American Airlines with a fall of 7.3%.

Delta adjusted its fourth-quarter revenue projection to a gain of 7% from a previous estimate of 7.5% and the market crushed the airline stock – and this despite falling oil prices, which help airline profits. Evidently, the market fears that US consumers will claw ticket prices down. Consumer resistance to airline ticket prices is another symptom of deflation.

Yesterday we noted that real estate investment trusts had fallen 3%-4% during the session despite a sharp drop in Treasury yields, which should have buoyed REITs. That reflected fear of falling rents (the REITs had a small bounce today as Treasury yields plunged again).

Among market leaders, Netflix was the only notable gainer today, up 1.4%. Netflix currently trades at 95 times trailing earnings, while Disney – which now competes head-to-head with Netflix – trades at 15 times earnings. That makes no sense. Netflix is fighting for a share of the streaming-media market in a crowded field, against better-financed competitors with bigger content inventories.

Amazon still trades at $1,500. I think it’s a $1,200 stock on a good day (see What is Amazon Worth, Oct. 27, 2018).