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“This was a monster quarter” – Harley Finkelstein

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

Paul Hickey will be on CNBC this morning at 11:40, so make sure to check it out. To see Monday’s segment from Fox Business, click on the image below.

After four straight days of 1%+ daily gains for the Nasdaq and 1%+ gains in three of the last four days for the S&P 500, pre-market gains of 0.14% and 0.46, respectively, may not sound like much, but it’s better than the alternative. Treasury yields continue to decline, with the 10-year yield down 2 bps to 4.60%. Crude oil prices are fractionally higher, but that comes after two straight days of 5%+ daily declines. Gold is up 2.5%, and Bitcoin is up slightly.

Asian markets followed the US lead from yesterday. Japan and South Korea both rallied over 3.5%, while China jumped 1.5%, and Hong Kong was up a more modest 0.2%. In China, a July PMI reading came in significantly weaker than expected, falling to 50.4 from 54.1 and forecasts for a much higher reading of 53.7.

European stocks are taking a much more muted tone in early trading. The STOXX 600 is basically flat with UK stocks marginally lower (-0.3%) and Spain up 0.5%. PMIs for the services sector in that region’s economy generally surprised modestly to the upside, with the overall European economy showing modest growth (52.0).

In the US this morning, the ADP Payrolls report came in weaker than expected at 44K versus forecasts of a 65K increase. Still on deck, the July Service sector PMIs from S&P and ISM will hit the tape at 9:45 and 10 AM.

The above quote from Shopify President Harlet Finkelstein was a comment he made referencing his company’s earnings, but it could be equally applicable to the entire earnings season as EPS and revenue beat rates have been very strong, and the pace of upside guidance has been much higher than average. Those results have been one leg of a monster four-day rally where the S&P 500 returned to new highs yesterday and did so in style. After rallying for three days in a row in which two of those gains were over 1%, the S&P added an encore of 1.8% to finally take out the prior high from 6/2. The S&P 500 is now more than 1.8% above that June high, so look for $7,600 to act as potential support in any pullback.

Similar to yesterday’s discussion about the Nasdaq, while no one was expecting a rally like the last four days after the close last Wednesday, it started as the index successfully tested support at the low end of its trading range. Here again, you could say that the rally came right on cue, and yes, it’s a lot easier to say in hindsight!

While the S&P 500 has rallied nearly 6% since last week’s Fed meeting, sector performance has been uneven. Leading the way higher, Technology and Consumer Discretionary have been the two strongest sectors with gains of more than 19% each, while Communication Services is the only other sector that has outperformed the S&P 500. At the other end of the spectrum, nearly half of all sectors have declined since that high. Health Care, Consumer Staples, Utilities, and Real Estate have all declined 1.8%. Three of those are traditionally defensive in nature, so their underperformance is understandable. That being said, with five sectors in the red since last Wednesday, the tide hasn’t been lifting every boat.

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