Take It Slow

Take it slow.  Stocks suffered another drawback on Friday as investors noticed the surge in new daily virus cases.  Friday’s pullback capped off a losing week for equities as newly present surges dash hopes for a quick recovery.




Letting the good times roll.   Wow… this has been a tough six months!  How many times have you caught yourself saying that these days?  I admit, I certainly have.  Being cooped up at home with little or no social interaction has been difficult for many of us.  I don’t know about you, but virtual happy hours over Zoom are not exactly fun, but I suppose they are better than nothing.  For my part, I am lucky to be surrounded by my family (and a crazy Yorkie named Noodle) which has afforded me lots of social interaction and quite a bit of fun as well.  For the younger generation though, things are not that simple.  In-person socialization for them is a way of life.  As one would expect, once quarantine restrictions began lifting, they were the first to head back out to well… socialize, which is unfortunately the root driver for the spread of COVID. The states which had looser guidelines and opened the quickest have seen the biggest surges and, as you have probably already heard, the average age of those infected has dropped dramatically.  Younger folks were the first to head out and they are also more likely to be asymptomatic, spreading the virus without even knowing it.   Many recently released reports show a correlation between surges in confirmed cases and restaurant reservations.  It is true, researchers have looked at online booking rates on apps like Open Table, and a surge in new reservations has often been followed by a surge in virus cases. Now, I know you are probably thinking this is all obvious.  So why is the market so surprised when reports show a rise in virus cases in states where restrictions were lax?  We have been watching news reports of people congregating on beaches and in bars for some time now, so naturally one would expect there to be some sort of cost.  Before we get to that, let’s look at some areas of progress.  Economic numbers have been improving and in many cases exceeding economists expectations.  Many, including the Fed, believe that we are past the worst of things, and trends suggest a slow, but continuous recovery.  The Fed has been quite busy and was possibly the single largest driver of the markets’ (both stock and bond) recovery from their lows.  The Federal Government passed the CARES act, which is also responsible for backstopping the economic slide.  We have learned how the disease is transmitted, how to render it less deadly (using existing antiviral drugs), and we have flattened the curve in the once-considered ground zero of the virus here in the NYC area. China, the first hotspot appears to be mostly back in business (public numbers show China at roughly 80% of pre-virus capacity) and the EU is coming back to life.  These were the positive drivers that have buoyed the markets recently.  On Friday, we learned that Florida and Texas rolled back their re-openings by closing down bars.  Disney announced earlier that they would be delaying their re-opening and Apple announced that is was re-closing 14 of its South Florida stores.  Banks, which have been at the center of the recovery received some bad news after Thursday’s close.  In their routine banking stress test, the Fed was concerned that a drawn-out recovery would put some banks at risk of dipping into their reserves in order to cover bad loans.  This risk prompted the Fed to mandate that banks halt all stock buybacks and cap dividends, though most of them had already cancelled their buyback programs.  Still, the news was responsible for causing traders to rethink their hopes of a V-shaped recovery and Friday’s selloff capped the second down week of stocks in June.  So what will drive the markets in the weeks ahead?  First, we must turn to Capitol Hill.  Lawmakers have been bickering over the next round of stimulus.  Roughly 20 million Americans are receiving unemployment insurance and the current version of stimulus is due to expire at the end of July. Stephen Mnuchin and Jerome Powell will head to Capitol Hill tomorrow to work with lawmakers in their debate.  Hopefully, a solution can be crafted soon.  On the virus front, all eyes will be on emerging hotspot states like Florida and Texas to see whether a targeted shutdown approach can stem the latest outbreaks without having to employ the draconian lockdown measures used earlier in the year.  In July, an increasing number of companies in the race for a cure will begin the next phases of their FDA approval trials and some are showing very encouraging early results.  Market volatility has picked up with the Vix Index back in the mid 30’s, though none of the developments in the past week are surprising. This just means that it is going to be a long, hot… and bumpy summer for the markets.




Stocks sold off on Friday as Bank risks are deemed to be on the rise along with confirmed COVID cases in many states.  On Friday, a group of large Facebook advertising clients like Unilever, Verizon, and Patagonia announced a boycott of the site. The reason for the boycott was Facebook’s promotion of hate speech and polarizing politics. The news caused the stock to fall by -8.32% and more companies joined the list of “former clients” over the weekend.  Bonds rose and 10-year treasury yields slipped by -4 basis points to 0.64%.




– Pending Home Sales (May) are expected to have jumped by +18% after falling by -21.8% in the prior month.

– Dallas Fed Manufacturing Activity (June) may have risen to -22.0 from the prior reading of -49.2.

– Fed Presidents Mary Daly and John Williams will speak today.

– Micron will announce earnings after the bell today.

– This will be a 4-day week with markets closing on Friday for Independence Day.  We will get a number of economics releases in the abbreviated week, including Chicago PMI, Consumer Confidence, Markit and ISM manufacturing PMI’s, Construction Spending,  FOMC Meeting Minutes, and the monthly employment situation. Please refer to the attached economic and earnings release calendars for details.


daily chartbook 2020-06-29

econ numbers 6_29

earnings releases 6_29


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