Summer’s For Grillin’

Summer’s for grillin’.  Stocks fought an uphill battle of challenging news yesterday, selling into the close after hovering around breakeven all day.  Congressional wrangling over a new stimulus bill, disappointing earnings, and waning consumer confidence cast a shadow over the prior session’s optimism.

 

N O T E W O R T H Y

 

Sometimes it’s hard to be a bull… a bear.  We have been experiencing a bit of a heat wave here in NYC in recent days.  It is, after all summer, a time of year which is typically, uh… hot.  But this year is no ordinary year.Have you heard me say that a few times in recent months?  Summer is when folks recharge by heading to beaches, lakes, and mountains to take in nature, cool off, and have some fun with family and friends.  As you are probably well aware, visiting lakes and beaches is a bit challenging with crowd restrictions and “locals only” rules affecting most public venues. Want to head to a baseball stadium, soccer pitch, NASCAR track?  Nope.  You may want to head to a national park… wait they have been getting overcrowded as well.  Summer travel with the family?  Nope.  Where does that leave us?  Same place as we were back in early Spring in home offices looking out the windows at the streets and our yards while we sit on work calls, praying that the dog doesn’t decide to exercise her vocal chords while you happen to be off mute.  You could try to gain some entertainment by watching the equity markets, though that has not been easy lately either.  If you are just loosely following the financial markets, things may appear to be mostly normal, but below the surface there is a world of turmoil.  During most periods, especially in recent years, choosing whether to be bullish or bearish was relatively straight forward.  Of course, there are times when markets or economies are at inflection points, during which choosing gets challenging, but those periods don’t typically last long.  Since the Coronavirus was first declared a pandemic on March 11th things have not been so clear.  By that point, stocks had already tumbled by some -14% from recent highs hit in mid-February and New York, which was soon to become the epicenter in the US, only had 220 confirmed cases.  Many of us were wondering if markets would quickly rebound as they had in prior virus outbreaks.  Total lockdown was just an outside thought.  Cases in New York quickly spiked to 75,000 by the end of the month.  All non-essential businesses in New York were ordered closed on March 20th.  Being a stock bear at that point seemed pretty straight forward and in the next session, the S&P500 hit a new yearly low. It didn’t last too long… maybe one day, tops, as markets began to recover in the following session. Talks of a V-shaped recovery began to become the battle cry of the bulls.  Still, it was still OK to be skeptical about a market recovery. Volatility was still high and PTSD from the market’s precipitous rout had re-opened many long-healed wounds from the 2008 financial crisis.  As lockdowns in one form or another rolled across the US and the globe, economic forecasts began to get more and more grim as the days progressed.  Unemployment spiked and companies were scrambling for cash to stay afloat while some filed for bankruptcy. Still many solid reasons to remain bearish.  But the market was sending a different message.  It was going up… and up. Technology stocks soared, stocks which benefited from shelter orders took off, and pharma companies in the race for the cure sky-rocketed. Some states began easing lockdown restrictions which caused beaten down sectors to rise.  Technically speaking, we were not only out of a bear market but in a bull market… and in a recession.  This, as unemployment continued to rise and virus cases had a resurgence in the more lax states. The Nasdaq Composite soon found new all time highs once again… still in the midst of a global pandemic.  At that juncture, many bears had no choice but to convert.  Not so fast!  Just when it looked safe to buy tech, it pulled back.  Good news on the vaccine front drew investors back into cruise lines and airlines.  The jumps in those sectors rarely last more than a day before we get some bad results from one or another of the member companies, causing them to give up the prior day’s gains.  Now we are in the heart of earnings season.  We are not expecting much but that has been a bit of a challenge as well.  Stocks that miss the low bar are punished, which is sensible.  Stocks that exceed the low bar… well… that depends.  Sometimes they go up and other times they don’t, despite the good results. Unemployment benefits from the CARES Act officially ran out last weekend and Congress appears to be locked in a political mess as they attempt to pass a follow-on plan.  Wouldn’t you know it, stocks rose on Monday?  A bunch of good earnings releases came out yesterday morning and Pfizer announced that they are beginning Phase 3 trials on their fast-track to a vaccine.  Stocks? Down.  In these times where so much is up in the air, it is truly difficult to take one stance or another.  If you are having trouble deciding which side to pick, perhaps the best approach is to simply chose neither.  That is an option, you know.  If you have a diversified portfolio and long term approach, picking sides is not necessary, maybe even a wasted effort.

 

THE MARKETS

 

Stocks sold off late in yesterday’s session.  Investors are growing increasingly concerned over lawmakers inability to pass a new stimulus bill and consumer confidence waned with last month’s virus spike.  The S&P500 fell by -0.65, the Dow Jones Industrial Average fell by -0.77%, the Russell 2000 sold off by -1.00%, and the Nasdaq Composite Index gave up -1.27%. Bonds climbed and 10-year treasury yield slipped by -4 basis points to 0.57%.

 

NXT UP

 

– Pending Home Sales (June) may have risen by +15.0% for the month, up from May’s +44.3% spike.

– The FOMC will announce its policy decision at 2:00 PM EST and they are largely expected to keep rates steady.  The press conference that follows the announcement will be closely watched and many expect the Fed to get more aggressive with forward policy guidance.

– CEO’s from Amazon, Google, Apple, and Facebook will be grilled by lawmakers on antitrust allegations.  Fireworks are set to begin at Noon EST.

– This morning Bunge, Owens Corning, Boston Scientific, General Dynamics, ADP, and Wingstop beat estimates while GE, Six Flags, and Boeing missed. After the bell, we will get earnings from PayPal, O’Reilly Automotive, Archer-Daniels-Midland, ServiceNow, Sunnova Energy, Teledoc, United Rentals, and Annaly Capital Management.

 

daily chartbook 2020-07-29