Tech leads the way….but will the Dow Jones Index, a price-weighted average lag behind because AAPL splits?
New/Flows
Monday, August 3, 2020 - DIA 266.72 +.89, QQQ 269.38 +1.35%, SPY 328.79 +.69%
The Markit manufacturing index showed expansion at 50.9% below expectations, while the Institute for Supply Management (ISM) manufacturing index came in at 54.2% better than expected. Construction spending disappointed with a negative print of down .7%. Hopes for a stimulus bill from Congress and a virus vaccine remained as the top focus of traders, Apple (AAPL) and Microsoft (MSFT) continued to power ahead. Technology earnings newsflow from the prior week kept Amazon (AMZN), Facebook (FB) participating. Nasdaq 100 (QQQ) had close to a 2 point trading range giving traders a reasonable opportunity throughout the day. PM's and traders appeared to remain focused on Lockdown / Shutdown / Stay and Work from Home plays. In a brighter note for the automotive sector, annualized manufacturing came in at 14.5 million units a half-million better than expected.
Tuesday, August 4, 2020 - DIA +.63%, QQQ 270.38 +.37%, SPY 330.06 +.39%
Factory orders came in at a better than expected 6.2% growth rate. That was enough to bring the focus back to industrial stocks as technology shares took a pause from recent outperformance. There was no large or otherwise impactful news flow on the day. An old Wall Street professional friend made note that the Apple (AAPL) split news could affect the performance of the Dow Jones Industrial average which is a price-weighted and not a capitalization-weighted index. So, the committee that sets the index has its work cut out for it.
Wednesday, August 5, 2020 - DIA 272.00 +1.33%, QQQ 271.05 +.24%, SPY 332.11 +.62%
The trade deficit for July came in slightly worse than expected at -50.7 Billion US Dollars. The Markit Services PMI was at a flat reading for the economy at 50%. The ISM services index came in far better than expected at 58.1% showing a healthy growth rate. Stocks traders took that into consideration as the Dow Jones Industrial Average led the day with significant outperformance. The ETF for the DJIA (DIA) outpaced the other leading indexes on the day. The markets remained hopeful for an agreement on the stimulus package being worked out by the White House and Congress. COVID-19 underlying data on hospitalizations continued to improve, but there were many mixed headlines. News flow on a note from a major investment bank indicated that an early or upside surprise on the vaccine front could cause a major shift from technology into cyclical industries, such as Materials (XLV) and Financials (XLF) just to name a couple.
Thursday, August 6, 2020 - DIA 273.90 +.70, QQQ 274.64 +1.32%, SPY 334.33 +.67%
Initial Jobless claims came in at 1.19 million better than expected by 200K, Continuing jobless claims came in worse than expected a half-million at 31.3 million. Technology regained leadership on this mixed data. News on China / US relations continued to sour as Sec. of State Pompeo urged companies to discontinue using Chinese cloud providers such as Tencent (TCEHY), Baidu(BIDU), and Alibaba (BABA) for national and corporate security reasons.
Friday, August 7, 2020 - DIA 274.62 +.26%, QQQ 271.47 -1.15%, SPY 333.81 -.15%
Non-Farm Payrolls came in with an increase of 1.76 million, 800K better than expectations, the official unemployment rate dropped to 10.2% beating the expected level by .4% Average hourly earnings came in positively at .2% far better than the decline expected of -.5%. It was a quiet August Friday without much news flow outside economic releases. Value continued a recent trend of better performance as the large-cap growth stocks saw some profit-taking.
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