"Good, better, best. Never let it rest. 'Til your good is better and your better is best."
- St. Jerome of Stridon
Rough Roads?
Not that the performance is or has been bad. Far from it. What the road is, is bumpy, with twists, turns and intersections at crossroads with no road signs. Hate that. Still better than a straight punch in the mouth when you are looking the other way. Sunday night has long since said its goodbyes. Monday morning is official, yet, first we must traverse what most folks refer to as the "wee" or "zero dark-thirty" hours in military jargon.
I had expected the lead story this morning to be the plunge in bitcoin in dollar terms over the weekend, and that may still be the actual lead from a market centered perspective. However, public fascination with professional sport has catapulted the possible creation of a soccer "super league" into the headlines. The creation of a league that would include the 12 or so wealthiest clubs across Europe, apparently at the expense (at least in terms of prestige) of the leagues that these teams would be drawn from. These national leagues appear to oppose the idea. As a fan, I would love to see such an idea come to baseball. A true World Series. That would be cool.
Back to bitcoin. The world's most famous (and valuable) cryptocurrency plunged to levels below $52K at one point on Sunday dragging much of the crypto-sphere along with it. There were many opinions cast about surmising on why there had been such a plunge, perhaps the most obvious might be that a large holder or large holders had planned all along to take some profits after the Coinbase Global (COIN) public listing at the Nasdaq market site. There were also rumors bouncing around on social media that the U.S. Treasury might be looking into dark side usage of cryptocurrencies. Been expecting that shoe to drop since forever. There has been no comment from the department. There were also outages across China, western China in particular that cut back on mining for "cryptos", including an outright ban that was to go into effect across the Inner Mongolia region in April (announced back in late February/early March). One would think that might actually spike the value of such "virtual" assets, unless there were fears that such bans would spread beyond Asia. All that said, bitcoin itself appears to be stabilizing if not recovering overnight.
COVID-19
Pandemic related news over the weekend was quite the mix between the good and the bad. From a global perspective, the viral spread has never been more aggressive, as large nations such as Brazil and India notably struggle to flatten their respective curves, the rate of mortality is truly frightening in Brazil, not to mention the many smaller, poorer nations also left with little more than physical mitigation as a means of defense.
Unfortunately, even in mature economies, such as the U.S. where the vaccines are much more accessible and Canadian-based Numera Analytics now projects herd U.S. immunity within 1.9 months, should the SARS-CoV-2 coronavirus continue to spread anywhere, it will also mutate, eventually either rendering itself (best case) less deadly as a means of survival or (worst case) finding a way around currently available vaccines, and their successors.
That said, Dr. Anthony Fauci did the media circuit over the weekend, telling ABC News, "I would think that we're not gonna go beyond Friday, in the extension of this pause" when discussing the one shot, easier to handle Johnson & Johnson (JNJ) vaccine, a key to global distribution. Fauci is both the director of the National Institute of Allergy and Infectious Diseases (NIAID), but also serves as the chief medical advisor to President Biden... opined later in the interview that he was not interested in speaking for the regulatory agencies involved (the CDC and FDA), but he felt that the JNJ jab would be back with "some sort of indication a little bit different from before the pause." My interpretation? They had to pause this shot in order to inform the public as well as medical professionals of this previously unknown risk and how not to treat it where and when it does arise.
In addition, Australia and New Zealand launched the "Trans-Tasman" travel bubble, where travelers can move between the two nations without quarantine after more than a year of closed borders. Good, as someone who has adopted the world of on-line spin classes as a means of fighting through long haul post-COVID... and has gotten to the point of needing something a little more challenging that what Peloton (PTON) thinks is "advanced", this should breathe more life into New Zealand's "Les Mills On Demand" as perhaps some of their instructors might return to New Zealand. Now, I do not need the Peloton cult coming after me. It's a great streaming fitness app (I use my own equipment), with the deepest library I know of. Fantastic for warming up/cooling down, running and stretching. That said, for spin, LMOD is on a different level. I'm sticking with them both rather than returning to a gym.
Markets
The marketplace responded well to the first week of earnings season, or should we say what we saw beyond the banks that dominated week one. From 10,000 feet, the Dow Industrials, S&P 500, Nasdaq Composite, Nasdaq 100, S&P 400 and S&P 600 all showed off gains of 1% or more. The Russell 200 came close. Why? One, U.S. domestic macro for the most part... hit beast mode. March Retail Sales, March Housing Starts, and April regional manufacturing surveys all exploded higher while first time claims for unemployment benefits plummeted.
In addition, as these data-points hit publication, the Atlanta Fed took it's GDPNow estimate for Q1 GDP from 6% to 8.3% (where it will stay all week), as sell side analysts took projected S&P 500 earnings significantly higher for the period currently being reported. According to FactSet, over the course of just last week, estimates for Q1 earnings growth moved from 24.5% to 30.2%, while projected revenue growth moved from 6.4% to 7%. Estimates moved higher for all subsequent quarters of this (2021) year as well. Consensus for Q2 earnings growth now stands at an incredible 54.6%, while full year projections have moved to 26.3%.
Sweet Nothings
There's always a yet... yet all of your favorite large-cap indices either hit or neared new records (not a big deal anymore), there were visible dings and dents in the armor. The Dow Transports for one, closed unchanged, not just on Friday, but for the week. Using sector select SPDR ETFs as proxies for market performance, Utilities took over market leadership (XLU) , with Health Care (XLV) , and the REITs (XLRE) placing in third and fourth place of the 11 sectors. At least in the case of Utilities and REITs, this is an interest rates story. That's why, the Financials (XLF) , though in terms of profitability, having ripped the cover off of the ball, still finished in eight place. Where was growth? Technology (XLK) placed ninth, and Communications Services (XLC) finished dead last, down for the week, the only sector closing in the red for three of five days.
Defensive posturing does not usually lead to higher market highs. Yet (there's that word again), sentiment is cherry, almost euphoric. Hey, trading volume finally returned, but then again that was in support of a not so obvious rotation into defense. Oh, and we mentioned interest rates, as we did in this space on Friday. We know that foreign accounts pounded U.S. Treasury securities in February and March. Now we believe that foreign accounts have led the charge back into both the middle and long end of the yield curve. Flight to quality? No doubt, as the U.S. is ahead of most of the developed world in terms of vaccination and potential economic reopening. Still it becomes hard to believe in the growth/inflation story truly playing out organically (ex-government spending) beyond this immediate "transitory" stage if the cost of credit over time does not play along. Now, we believe that Japanese accounts plowed into U.S. Treasuries for a domestic, calendar based, technical reason. Does this foreign appetite spread? Probably as long as the nominal gap between foreign suppressed rates and U.S. not as suppressed rates remain hedgeable large after adjusting for currency exchange rates.
What if I explained to you - most of you already know - that historically, a RSI (Relative Strength) reading of 70 indicates a technically overbought condition, a reading of 30, the threshold of being technically oversold, and a reading of 50, being precisely neutral. What if I then told you that among our 11 sector select SPDR ETFs, five now show readings in the 70's, while two more are just below at 69 and change? What if three more are in the middle 60s and just one... Energy (XLE) at a reading of 47 is even close to neutral? Knowing that posture has turned defensive and the Treasury yield curve has flattened, you might expect the same kind of profit taking that hit bitcoin over the weekend to extend to equities... even if earnings continue to impress. Even if the macro stays hot. Remember, the FOMC has gone into their "blackout period" ahead of the April 28th policy statement.
What does that mean? It means that every time investors get jumpy this week, there won't be a Williams, or an Evans, or a Barinard around to whisper sweet nothings into the market's ear.
Reminder
Just an FYI, because most of you are long the name in one way or another, tomorrow (Tuesday, April 20th) Apple (AAPL) will hold their "Spring Loaded" event in order to showcase and market new or updated products. Hard information has been scant, but anything is possible. An Apple Car? More realistic... an Apple pencil. Here's a crazy idea. How about bringing back a small iPod, there has never been a sufficient replacement for joggers who prefer to run outdoors.
I would think that we hear something based on the service side's further expansion into healthcare. That said, I have no more info than anyone else.
Economics (All Times Eastern)
No significant domestic macroeconomic data-points scheduled for release.
The Fed (All Times Eastern)
Fed Blackout period.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (KO) (.50), (MTB) (2.96)
After the Close: (CCK) (1.39), (IBM) (1.62), (UAL) (-6.82)
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