Our “Batten Down The Hatches” call proved timely as the market sold off by about (10 percent) before staging a partial recovery

Third-quarter earnings confirmed the worst-case scenario — plunging oil prices are whacking almost the entire industrial sector. The theme is hardly new, as the pattern of our headlines has revealed over the past fifteen or so months:

Third-quarter earnings are confirming the worst-case scenario, i.e. — not only are energy related end markets in a downturn, but conditions continue to worsen.

We anticipate no substantive improvement in manufacturing activity. Not in the U.S. or internationally. If anything, headwinds may have become slightly more pronounced because a U.S. — Iran “deal” that everybody hates except a) the Iranian government and b) the Obama administration will result in the release of Iranian oil supply back onto the global market. Oil had rallied from about $50 to $60 over the past month (I like round numbers), but has since roundtripped. Expect further, deeper capital spending cuts in the U.S. oil sector to continue affecting demand for large capital equipment.

First quarter results confirmed our view. Capital expenditures are being slashed in the oil sector, the stronger U.S. dollar is enabling Japanese machinery competitors to gain share in the Middle East and Latin America, and lower soft commodity prices translate into a continuing North American decline in demand for farm equipment.