The Bear Growls – Market Recap – Do Markets Start Correction?
Week of July 20 – 24, 2020
News/Flows:
Monday, July 20, 2020
Large-cap technology shares outperformed on the day with NASDAQ 100 - (QQQ) advancing +2.84% Before the market opened COVID-19 data was released which was later determined to be less than impressive. Stocks that would have benefited by more impactful news were sold off in response to the disappointment. Airline and hotel stocks were down on the day. After the close of regular trading hours, IBM reported earnings that were significantly lower than the same quarter a year earlier, as legacy businesses suffered from the pandemic induced slowdown. There was a significant bright spot that the firm has focused on driving for future revenue and earnings. Cloud computing was up 30% from the prior year. Shares traded up 4.5% in aftermarket trading. In a significant transaction that may improve the outlook for energy shares in general, Chevron (CVX) closed a deal to buy Noble Energy (NBL) for $5 billion dollars and the assumption of debt. In a sign that investor sentiment may be overly bullish, billionaire investor Bill Ackman was reported to be closing a 4 billion dollar "blank check" SPAC fund (purposes of the capital raise are not disclosed). It is rare to see such special acquisition vehicles at lows in markets, but more likely to coincide with tradeable market tops.
Tuesday, July 21, 2020 - DIA 325.01 +.57%, QQQ 264.00 +-1.04%, SPY 325.01 +.21%
A shift from large-cap growth stocks to value and cyclical stocks was evident throughout the day. Stories abounded in previous sessions of massive capitulatory buying in the Amazon (AMZN) stock and may have been the trigger (Bezos made $13 Billion market value in one day's session). NDX Index ETF (QQQ) was down 1.04% while the Dow Jones Industrial ETF (DIA) was up .57%, S&P 500 ETF (SPY) was up a scant .21%. Action like this brings caution to mind. LinkedIn (LNKD) warned that it would cut its workforce by 6%. Boeing (BA) warned of continuing delay on the 737-Max.
Wednesday, July 22, 2020 - DIA269.98 +.61%, QQQ 264.93 +.35%, SPY 326.86 - +.57%
The U.S. ordered China to close its consulate in Houston over industrial spying charges. Tesla (TSLA) completed its 4th straight quarter of reported profits which qualifies it for admission to the S&P 500 index. One has to wonder how that was achieved in the middle of pandemic induced worldwide recession/depression. Existing home sales increased by 20.7% for June. This begs the question, was this pent-up demand or the result of pandemic and violence induced flight from major cities? (As an aside according to cell phone data 15% of those living in Manhattan have left).
Thursday, July 23, 2020 - DIA 266.69 - 1.22% QQQ 258.01 -2,61%, SPY 322.96 -1.195%
Equity markets were hit across the board. Leading large-cap stocks and the equity markets, in general, succumbed to the emerging shift from Growth to Value. New applications for unemployment rose to 1.4 million, the highest level in 4 months. The bloom of market prices often dissipates in late July to early August. Airlines. Southwest (LUV) and American (AAL) both warned again on COVID-19. Load factor estimates now fall once again for the 4th quarter.
Friday, July 24, 2020 - DIA 264.73 - .735, QQQ 255.34 -1.03%, SPY 320.86 -.65%
China retaliates and orders the U.S. consulate out of Chengdu. Tit for tat, or is this start of escalation? Keep an eye on this, and the oncoming election cycle. Schlumberger (SLB) cuts jobs by 21,000. This is not the news we typically see at the tops in markets. Look at energy.
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