The rollover in the industrials is almost lock-step. It doesn't matter how well a company did, its stock is acting just like the others.
I didn't even realize how closely coordinated they were until I hit up the chart of Parker-Hannifin PH , the excellent industrial with tons of aerospace and thought for a moment that I had actually punched in Boeing BA . That's how much they looked alike.
But I might as well as hit up United Technologies UTX or Honeywell HON , they are that identical.
This is an important concept to grasp, because they didn't all report the same kinds of numbers.
Honeywell, for example, blew the numbers out, raised the range and took off, only to come flying back to earth in the last week.
United Technologies gave you a good, not great, quarter and sold off immediately. It continues to do so right now. Boeing gave you what looked to be an amazing quarter, one that caused the stock to gap up before the opening only to plummet pretty much daily. Everything, from execution on a big defense project to order degradation versus Airbus, rocked the stock. Neither Boeing nor United Tech gave you the kind of big operating cash flow numbers that make you feel they are standing there buying back shares because they are brimming with cash.
Parker-Hannifin was just mystifying. People simply couldn't figure out why the company didn't make more money, given across-the-board robust order growth.
Now you can make a case that PH, UTX, HON and BA were all hurt by one aspect of their businesses: defense. When I read through these calls, it is pretty clear that the sequestration hit all of these companies to varying degrees and the street just hadn't figured out the amount and was genuinely unpleasantly surprised by the numbers. Boeing compounded it by some errors in execution. PH seemed to be faulted for poor communication about its issues. I don't even think that UTX did that badly in defense, but nothing seemed to make up for it. Honeywell's was as expected.
But the common ground here seems to be one thing and one thing only: the buyers and holders of these stocks no longer believe that the aerospace cycle is a tailwind. Whether it be because of a fear factor -- MH-17, rockets over Israel or Ebola -- or because of increased insurance rates -- the airlines are being viewed askance, and that's translating into a belief that the cycle's not pausing, it's just over.
I have such a hard time believing that it's over, because the secular trend toward world travel is so powerful that there will be demand for every single big plane for years and years.
Doesn't matter. These stocks simply can't get out of their own way.
Now I am not including Eaton ETN and General Electric GE in the calculus here. Eaton's numbers are so confusing and the company's inability to either rein in the street on estimates or on big restructurings has made that stock a total non-stop pariah. What a remarkable fold that stock's been.
GE sat out the upside to begin with. It's not kept pace with any of these winners, so it might not have that big "what a winner it was last year and now we are tired of it" rap. That was pretty much the gist of the Bernstein upgrade yesterday.
Now, I remain a believer that these stocks can ignite if we get some international traction, namely a resolution in Russia-Ukraine that gives Europe some oxygen, or a turn in China that could lead to industrial orders, or perhaps a Congress that goes back to spending on defense the way it used to.
Otherwise, we are witnessing multiple compression right before our eyes, and it's not even worth distinguishing among them right now (not unlike what I see happening in oil service, by the way.)
I know things can't stay lockstep forever. These are all very good companies and they have to be unhappy with 2014 stock performance. They have levers to pull and cash to put to work.
It's just that right now they are all one big ne'erdowell virtual ETF, and that ETF can't seem to find its footing, no matter what is said or done.