Philly Fed at multi-year high. 

http://us.econoday.com/byshoweventfull.asp?fid=510022&cust=us&year=2020&lid=0&prev=/byweek.asp#top

Leading indicators jump.8%  in Jan.

https://www.marketwatch.com/story/leading-indicators-surge-in-january-point-to-steady-economic-expansion-in-early-2020-2020-02-20?siteid=bigcharts&dist=bigcharts

Hi Tim

I agree. From what I can find this was a welcome sign of increased mfg activity, if I understand things correctly

Now today we have a sell off on USA exchanges and also EU exchanges with Asian markets mostly mixed but no noticeable sell off, that I can find.

I will also admit that markets do sell off or correct from time to time but it seems the tech stocks are under pressure from uncertainty about the china virus and  parts supply

Speaking from real life down on the floor manufacturing, in our family

We sell  parts to a major USA manufacturing Co that is heavily involved in manufacturing heavy equipment

In fact we value the business they send us very highly. We manufacture parts for this Co. and ship to their assembly factories

The worry for us is how long can they continue to make machines with a parts chain supply from all over the Asian part of the world

Will a supply shortage cause the factory in the USA to shut down for lack of parts

Of coarse we have no idea what their supply of parts may be etc. We also have our own worry

We have a large shipment of steel due to arrive. We checked on that steel delivery and it is on a boat headed our way

So: I must caution that nobody knows much about the supply chain. How long will china remain shut down. Will other Asian countries start to see an increase in the virus and decide they need to shut down the same as china did to contain the virus

There are a lot of unknowns and here in the USA and Canada, we are at the mercy of just in time supply

Some are asking if todays sell off was a normal correction or a worry about future problems with parts supply

In all likely hood a parts shortage would not show up very soon, in the USA/Canada as the boats are loaded and coming this way. The worry is will the next boat load of parts, be made, loaded and delivered, from all over asia

If not, then we have a problem, even if the virus does not affect hardly any body in the USA

It is the supply chain that could cause reduced revenue for USA/canada Co.

 Appl has already said they will not meet their Q1 sales/revenue forcast

I expect the market to follow every headline and volitility will be much more of an every day experience as the algos will rule the market

If the market runs into a lack of selling liquidity then we have to hope the Fed will step in and add to their assets, or essentially give us a market put.

You ask some good questions and make some good points and the market is reflecting your concerns.  No one knows for sure what the impact of the virus will be and it's difficult for me to speculate on what the impact will be to individual companies without getting into their books and doing some hard analysis.  But for now, markets are erring on the side of caution, as they often do.

Couple things.  

I've worked with a lot of companies over the decades, including MFG using JIT.  Back in the late 80's, early 90's when we were 1st learning JIT from the Japanese,  my team and I helped some carpet manufacturers in N. Ga incorporate JIT supply chain.  It worked very well as carpet mfg is very adaptable to JIT. We moved a lot of their inventory storage to the shipping bays, (Truck Trailers) and opened the previous allocated warehouse space to production dramatically reducing carry costs and increasing production.  The results were stunning.  And, (this is important), they, and all companies I've worked with have contingency plans for supply disruption.  Not optimal in all cases, and likely to hit their bottom line, at least to some degree,  but all designed to allow them to live to fight another day. 

2nd, and this is total speculation...    I'm of the opinion that the corona virus is being overblown. I think the flu is a much bigger threat, but we're used to the flu.  Time will tell,   but I'm pretty sure that in a few months we'll again be thinking of Corona as a beer that is good with lime.   

Side note.    Truck companies loved JIT.  The tractor would bring in a trailer with raw materials and leave with a trailer loaded with finished carpet.  Perfect from a logistical standpoint. 

Our motto back then....  "JIT Happens". Even had t-shirts  :-)