Market Roundup
Dow -78.57 to 16,201.32
S&P -6.52 to 1,932.24
NASDAQ -18.27 to 4,734.48
10-YR Yield -0.02 to 2.12%
Gold +$20.30 to $1,151.90
Oil +$0.34 to $46.17
American icon Caterpillar (CAT) is a giant in the world of heavy equipment. The company’s yellow and black dump trucks, loaders, and bulldozers — not to mention turbines, locomotives, generators, and engines — can be found all over the world at mines, ports, construction sites, and elsewhere.

And boy, did “CAT” ever drop a hammer on the markets today! The firm said business is so bad that it will have to lay off as many as 10,000 workers through 2018, as well as close or consolidate several manufacturing plants. The moves are designed to save $1.5 billion per year in costs.

Caterpillar also said sales would miss previous targets by a billion dollars in 2015. They’re likely to drop an additional 5% in 2016, too. That means sales could fall from year-ago levels for the fourth consecutive year in a row – the first time that has EVER happened in the company’s 90-year history!

CEO Doug Oberhelman didn’t sugarcoat how bad the environment is, either, saying:

“We are facing a convergence of challenging marketplace conditions in key regions and industry sectors – namely in mining and energy. While we’ve already made substantial adjustments as these market conditions have emerged, we are taking even more decisive actions now.

“We don’t make these decisions lightly, but I’m confident these additional steps will better position Caterpillar to deliver solid results when demand improves.”

Caterpillar is far from alone. I wrote on Sept, 16 that earnings trends were deteriorating across a wide swatch of Corporate America, leading to warnings from the likes of FedEx (FDX), Hewlett-Packard (HPQ) and others.

I also warned that an unhealthy buildup of inventories could lead to falling orders and economic growth down the road. Sure enough, durable goods orders sank 2% in August. Non-defense capital goods orders excluding aircraft also dipped 0.2%. That’s an important data point because it shows how willing (or not) companies are to invest in their businesses.

The list of challenges for both the global economy and the stock market is getting longer by the day.

Bottom line: The list of challenges for both the global economy and the stock market is getting longer by the day. Everything that is happening now validates my decision a few months ago to aggressively cut down on stock exposure, raise cash, and add positions designed to rise in value when stocks fall.

That’s paying off for subscribers to my Safe Money Report. They just had the opportunity to bag an additional gain of up to 23.8% on one of their few remaining conservative stock positions, despite the difficult market. They’re also seeing open gains build on the inverse ETFs I’ve been recommending.

If you’re on board and successfully riding this turmoil out, great. Sit tight. If you’re not, you still have time … though not much … to prepare for what’s to come. All you have to do is click here to get started.

In the meantime, I’m eager to hear your thoughts on the warning Caterpillar just dropped. Is this a major threat to stock prices? Or do you think strength in other industries can make up for weakness in heavy equipment?

Who else might warn about business in coming weeks? And what are you doing in response to that? Please do share your views on these important topics over at the Money and Markets website.

Our Readers Speak

I found some great comments over at the website in the last 24 hours, covering China, U.S. stocks, and iconic baseball legend Yogi Berra. So let’s get right to them.

Reader Sal said the following about the outlook for stocks: “The market’s first big move will be down. I love the flash crashes, because we quickly recover. But now we know what the algos are programmed to do. When VIX goes down, I load up on hedges and let the inevitable profits roll in!”

When it comes to China, Reader Mike S. offered this take: “All we are witnessing is the realization in America that manufacturing in China is a threat to our survival. Our country is turning back to the Left as many have also realized that the panderers to the Ultra Wealthy have crushed the Middle Class and in turn, our economy.”

Reader Big M. added: “This is what happens when people from all over the world get tired of buying and replacing your low-cost goods that are of substandard quality and have a planned obsolescence of functionality.”

And Reader J.P.F. said: “I am not impressed with the ‘quality’ of most Chinese-made electronics. Rather than buying another poor TV or cheap stereo, I decided to have my ‘old’ U.S., German, and Japanese products refurbished for about the same $$ as the throw-away Chinese stuff.

“I have the queasy feeling the same will apply to a lot of the other Chinese stuff, like plumbing items, electrical switches, etc. I AM willing to pay more for quality, but not the same price for an inferior product. Since their stock markets and banks hold few protections for the investor, why bother until they grow up?”

Finally, on the lighter subject of baseball, Reader James C. said: “Rest in Peace, Yogi. You will surely be missed by those of us who were kids when you were playing in all of those World Series.”

And Reader Jim said: “A few years ago, Yogi was asked what kind of batting average Ty Cobb would have if he was playing now. He replied that it would be around .220. The reporter objected that Cobb had a .350 lifetime average, surely it would be higher than .220. Yogi said no, if he was playing today, he would be 90 years old.”

Thanks for sharing – on both the serious and more light-hearted topics. Sometimes we could all use a smile … especially in topsy-turvy markets like these.

I remain pessimistic about China’s economy, and believe we probably haven’t seen all the negative fallout yet here in the U.S. So stay safe, stay cautious, and stay tuned to Money and Markets for more updates on how to preserve and build your wealth even in this lousy market.

Haven’t weighed in yet? Then don’t keep your thoughts bottled up. Share them with me and your fellow investors here.

Other Developments of the Day

● The fallout from the Volkswagen emissions scandal continues to grow. In particular, owners of the company’s cars have been left to wonder what will happen to the resale value of their vehicles and how they will get the problems fixed. The German firm has 650 U.S. dealers that sold 238,000 vehicles in the year through August.

●  Remember Glencore Plc (GLNCY), the global commodities giant I warned about earlier this week? Well, its shares tanked another 6% in London trading today amid fresh fears it can’t make enough from its mining and other operations to service its massive debt load. That helped put pressure on global markets.

●  Tragedy struck the annual Hajj pilgrimage in Mecca. More than 450 people were killed and more than 719 injured when a crowd stampeded at the annual gathering of Muslims in Saudi Arabia.

●  European officials are continuing to struggle with the influx of refugees across the Continent. Officials in Brussels are trying to implement a quota system that will spread migrants across several European Union nations, but events on the ground are rapidly overtaking the best-laid plans.

Had you ever heard of Glencore before, and now that you know the story there, are you worried about the potential fallout from its struggles? What do you think about Europe’s struggle to deal with the migrant crisis, or the ripple effects of Volkswagen’s emissions scandal? Share your thoughts on these or other topics at our website when you get some time.

Until next time,

Mike Larson