The Bear Den by Shortside Jonny
Monday, November 2, 2020 – DIA 269.20 +1.56%, QQQ 269.98 +.22%, SPY 330.19 +1.12%
ISM Manufacturing PMI came in strong @ 59.3 vs. 55.8 expected. The ISM Manufacturing Employment Index was a robust 53.2 compared to the expected 40.9 (above 50 shows expansion). ISM Manufacturing New Orders were ex index which came in exceptionally strong @ 67.9 vs. 45.9 expected. The Percolating inflation is continuing to take root and we saw evidence in the ISM manufacturing Prices Paid index coming in @ 65.5 vs, the 60 expected. The market gapped higher on the opening, with the Nasdaq100 (QQQ) underperforming as technology lagged. Industrial company Honeywell (HON) 173.61 +5.25% appeared to have a delayed reaction to better than expected losses on earnings and outlook on 10/30. Align Technology (ALGN) 458.44 +7.59% advanced out of a recent pullback/consolidation and was buoyed by a recent stellar earnings report. Mohawk Industries (MHK) 114.69 +11.14% advanced on an earnings beat $3.26 vs. $2.14 expectation and an upgrade by Raymond James. On the downside Twitter (TWTR) 39.47 -4.57% continued its selloff from its earnings call and growth guidance.
Tuesday, November 3, 2020 – DIA 274.65 +2.02%, QQQ 274.65 +1.73%, SPY 336.03 +1.77%
Election Day. US Factory orders came in slightly better than expected +1.1% vs. 1%. The markets gapped higher on the opening and made its session high by mid-morning then succumbed to some profit-taking but recovered and closed meaningfully higher on the day. Risk-on strategies were the order of the day. Walgreen Boots Alliance (WBA) 37.37 +4.41% (gapped higher for 2nd day in a row, having closed the end of October poorly) Goldman Sachs (GS) 197.93 +4.06%, Boeing (BA) 153.65 +3.4% also led the Dow. On the downside, PayPal (PYPL) 179.81 -4.23% beat estimates of $1.07 vs. $.69 but gave a weak outlook. The Mosaic Companies (MOS) beat estimates “Pro-forma” but analysts and traders were not impressed with continued underperformance. The day’s rocket shot was Aptevo Therapeutics (APVO) 11.23 +78.25% which announced a positive result in phase 1 clinical trial for Acute Myeloid Leukemia.
Wednesday, November 4, 2020 – DIA 278.51 +1.41%, QQQ 286.91 +4.46%, SPY 343.54 + 2.23%
ADP Employment Change failed to meet expectations with an increase of only 365K vs. 650K expected. ISM Services PMI came in light @ 56.6K vs. 57.5 expected. The market accelerated its rally off the October 30 pre-election low. The market appeared to celebrate the end of Government gridlock but with an expectation of a mixed government and no expensive progressive spending programs. United Healthcare (UNH) 345.56 +10.33% led the DJIA (DIA) followed by Salesforce.com (CRM) 250.74 +5.74%, and Microsoft (MSFT) 216.39 +4.82%. The day’s moon shot, leading the Nasdaq100 (QQQ) was Biogen IDEC (BIIB) 355.63 +43.97%, the company announced that an FDA panel recommended the approval of an Alzheimer’s drug Aducanumab. Other gainers included DocuSign (DOCU) 235.01 +12.75%, & NetEase (NTES) 93.68 +9.04%. Leading the S&P500 (SPY) after (BIIB) was Cigna (CI) 210.62 +14.54%, and Eli Lilly (LLY) 148.59 +13.44%. There were plenty of stocks on the downside, with concerns that government spending may run into a mixed senate, infrastructure stocks retreated led by Caterpillar (CAT) 155.23 -7.43%, & United Rentals (URI) 179.19 -11.05% which were sold aggressively, as well as regional banks, Comerica (CMA) 43.64 -10.59%, M&T Bank (MTB) 98.43 -10.53%, Zions Bank (ZION) 30.94 -10.21%
Thursday, November 5, 2020 – DIA 283.91 +1.94%, QQQ 294.39, +2.61%, SPY 350.24
The FOMC ended its meeting with no change to current accommodative policy noting a continued risk from COVID-19 to the economic recovery and signaling low rates would last for several years. Continuing Jobless Claims were slightly higher than expected @ +7.285M vs. 7.2M expected. Initial jobless claims came at +751K vs. 732K expected. Non-farm productivity was slower 4.9% vs. the 5.6% expected. Technology continued to lead the post-election advance with QUALCOMM (QCOM) 145.51 +12.75% beat earnings estimates of $1.45 vs. $1.17 and giving a strong outlook on 5G. Skyworks Solutions (SWKS) 149.12 +6.87% beat earnings coming in at $1.85 vs. $1.30 est., Applied Materials (AMAT) 69.95 +7.85% rallied, as earnings are being awaited November 12 after market close. On the downside, Biogen IDEC (BIIB) 328.90 -7.52% gave back some of its big gain from Wednesday. Incyte (INCY) 84.65 -7.19% missed estimates coming at $.23 vs. $.475.
Friday, November 6, 2020 – DIA 283.22 -.24%, QQQ 294.61 +.07%, SPY 350.18 -.02%
Non-Farm Payrolls were +638K vs. 600K expectations. The unemployment rate came in at 6.9% far better than the 7.7% expectation. U6 Underemployment also was better at 12.1% vs. the previous reading of 12.8%. (U6 is a measure of those people who cannot find full-time employment) Johnson & Johnson (JNJ) 142.25 +1.78% led the DJIA (DIA), but United Healthcare (UNH) 347.46 -1.96% gave back some of its post-election gains. On the earnings front, Microchip (MCHP) 125.28 +5.83% showing $1.56 vs. $1.27 exp. T-Mobile US (TMUS) 123.56 +5.37% had a strong day (merger with Sprint completed), came in with a big outperformance $1.00 vs. $.56. Electronic Arts (EA) 119.19 -7.12% reported far better earnings of $.63 vs. an estimated loss of -$.286, but took it on the chin as the company gave a weak outlook and as a result had a downgrade by Piper Sandler. In addition, the company declared its first dividend of $.17. Outlook aside it is not a rare event to see a stock decline on its first dividend declaration.
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