May 19, 2020
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After an impressively strong start to the week yesterday, where equities opened higher and kept going from there, today is looking like the wrong kind of turnaround Tuesday for bulls. Futures are modestly lower as investors digest the big gains from yesterday. Walmart (WMT) reported much better than expected results as consumers stocked up on the essentials during the lockdown sending comp sales up by 10%! While there are still a number of reports left on the calendar, WMT’s report marks the unofficial end to what was a much better earnings season than most expected.
On the economic front, Housing data was mixed as Housing Starts were weaker than expected while Building Permits topped expectations.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, economic sentiment around the world, the latest global and national trends related to the COVID-19 outbreak, and much more.
In yesterday’s rally, there were two positive developments from a charting perspective spanning both the large and small-cap universe. Starting with large caps, after two tests of the 2,950 range, the third time was the charm yesterday as the S&P 500 appears to have cleared resistance from late April and early May.
The pattern for small-caps doesn’t look quite the same. The Russell 2000’s early May rally didn’t test the highs from late April, and when it pulled back it actually made a lower low. After yesterday’s rally, though, that downtrend from the April high appears to have broken. With a market cap that is much less the combined market cap of Microsoft (MSFT) and Apple (AAPL), it won’t take much for small caps to catch a bid when sentiment finally does start to shift.
May 18, 2020
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Futures were already higher coming into the morning following last night’s 60 Minutes interview with Fed Chair Powell, where he noted that “There’s really no limit to what we [Fed] can do.” In the last hour, we have seen the premarket gains more than double following news from Moderna (MRNA) that phase one results from its COVID vaccine study showed promising results and was tolerated well by subjects. There’s still a long road to travel before this vaccine would be available even if it proves to be effective, but any light at the end of the tunnel is welcome.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, economic data out of Singapore and Japan, the latest global and national trends related to the COVID-19 outbreak, and much more.
While it was a negative week for equities, it ended on a positive note with the S&P 500 trading down over 1% on an intraday basis on both Thursday and Friday but managed to finish in positive territory both days. It may not sound all that out of the ordinary, but the last time we saw back to back intraday rebounds of that magnitude was all the way back in January 2009, and there have only been seven other times in the history of SPY that it has happened. Each of those occurrences are highlighted in the chart below. As shown, they were all bunched around 2002 and 2008/2009, and with the exception of the occurrence on 9/12/08, they all typically occurred around bear market lows.
May 15, 2020
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We mentioned that today was probably going to be the weakest day for economic data ever, and the results have so far lived up to expectations. Retail sales dropped -16.4% on a headline basis which was weaker than expected (-12.0%) and also the weakest on record. Empire Manufacturing, however, wasn’t quite as disastrous. While economists were expecting a reading of negative 60.0, the actual reading was ‘only’ -48.5. Still on deck, we have Industrial Production, Capacity Utilization, Business Inventories, and Michigan Confidence. All of these will be bad too.
While the data is horrible, it shouldn’t be a surprise. When you shut down the economy, activity comes to a halt.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, Chinese economic data, the latest global and national trends related to the COVID-19 outbreak, and much more.
The 10-year yield is probably one of the more important charts to watch these days. Despite the market’s rally off the lows and the flood of new debt being issued, the yield on the 10-year US Treasury is still stubbornly low. With a move down of 4 basis points (bps) this morning, the yield is currently sitting at 0.60, which is just six bps above its record closing low. With strong demand for the 10-year even at these low yields, investors are still exhibiting a good degree of concern.
May 14, 2020
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It looks like it’s going to be another bad day for the bulls today. Futures have been deteriorating quickly this morning as jobless claims came in significantly higher than expected (2.98 million vs 2.5 million estimates). After a period of weeks where optimism over re-opening took the spotlight, sentiment has shifted to the idea that even as the economy re-opens, the road to recovery won’t be a smooth one.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, Japanese economic data, the latest global and national trends related to the COVID-19 outbreak, and much more.
After the second bad day in a row for US equities on Wednesday, all we’ve been hearing today is how Fed Chair Powell’s comments and David Tepper’s interview with CNBC regarding the market’s valuation were responsible for the decline. It sounds like a good explanation, but in the words of Warner Wolf, “Let’s go to the videotape.”
The chart below shows the S&P 500’s intraday performance on Wednesday. In looking at this chart, keep in mind that Powell’s speech started at 9:00 AM, or 30 minutes before the market open. With that in mind, we can see that the S&P 500 opened lower but rebounded in the first hour of trading. Within an hour of the open, however, the S&P 500 was actually up on the day.
The S&P 500’s time in the black didn’t last long, though, because, at 10:33 AM, the President tweeted some bellicose comments regarding China and the trade deal. At that point, the rally was stopped in its tracks, and the S&P 500 immediately moved lower. Tepper’s comments at noon didn’t help matters, but by the end of the day, the S&P 500 finished right where it was trading before Tepper appeared on CNBC.
In other words, even though yesterday’s declines were attributed to Powell and Tepper, the S&P 500 actually traded higher after Powell spoke and finished the day right where it was trading before Tepper made his comments regarding the market’s valuations. The most significant turning point of the morning, though, came right after President Trump tweeted about the China trade deal, but that has barely been mentioned as a catalyst for the decline.
May 13, 2020
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After a sharp sell-off in the final hour of trading yesterday, US futures were tentatively higher this morning but have just dipped into negative territory. There haven’t been a lot of major headlines so far, but Fed Chair Powell’s 9 AM speech where he is expected to push back on negative interest rates will lately make headlines. PPI was just released and came in much weaker than expected with headline falling 1.3% m/m (expectations -0.5%) and the core reading dropping 0.3% (expectations unchanged).
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, UK GDP, the latest global and national trends related to the COVID-19 outbreak, and much more.
Equities were already weak heading into the last hour of trading yesterday but got much weaker in the final sixty minutes of trading. With a decline of 1.51% in the final hour, it was the S&P 500’s worst last hour performance since March 27th, just a few days after the March low.
So, what is the short-term takeaway of a sharp sell-off to end the day? Is it positive or ominous? Based on recent history, it’s neither. Of the eight prior 1% declines in the last hour of trading, the S&P 500 has traded higher the following day four times and lower the other four. At least today will break the tie! With average and median gains that are both over 1%, though, the magnitude of the positive days did outweigh the negatives.
May 12, 2020
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Futures have been rallying off their overnight lows and are now indicated 0.30% higher. CPI for April was just released and came inline with expectations (-0.8%) at the headline level and weaker than expected on a core basis (-0.4 vs -0.2%). Inflation data will certainly be interesting to watch over the coming months, but for now, the impact of the pandemic on consumer prices (besides groceries which is the only place consumers are really spending these days) is definitely lower.
Be sure to check out today’s Morning Lineup for a rundown of the latest stock-specific news of note, the Fed’s plans for buying ETFs, the NFIB Small Business Sentiment Survey, the latest global and national trends related to the COVID-19 outbreak and much more.
It’s been a rough year for the banks. Despite coming into this crisis much better capitalized than they were during the last, the sector still hasn’t been able to avoid the pain. Year to date, the group is down about 40% which is worse than any other industry group in the S&P 500.
The Bank group had been trending nicely off ifs March lows and even closed above its 50-DMA for a day on 4/29. That didn’t last long, though. In recent days, the KBW Bank Index has not only given up its 50-DMA, but it has also broken below its uptrend line from the lows. Just yesterday, while the S&P 500 was up fractionally, the KBW Bank Index was down over 3%. While the major banks increased their loan loss provisions in their most recent earnings reports, just like a gallon of milk, the longer the economy stays ‘on the shelf’ the more likely it is that loans on their books will start to spoil.
