How smart can one be if, while staring at a blackened office window at zero dark-thirty on Wednesday morning, one thinks of old Looney Tunes cartoons? I think a lot. That I know. Yet, in my heart, I also know that I am but a simple man. One who is grateful every single time he wakes up on this side of the dirt. Such bounty. Such an abundance of love and good will. Hard times come. Hard times are trials. It is in suffering and endurance that we find out who we are. A pandemic. A wounded economy. Perceived outrage, even artificially created outrage on both sides in Washington. All requiring perseverance. So, who are we? We are more. More than this. Listen to the other side, both of you. Learning is as important as teaching. So, learn. There are some things that neither of you are hearing. So, Hear.
The traps were elaborate. One must admit. The engineering, the specificity. Yet, every time, and I mean every time, Wile E. Coyote's far less thoughtful target, the Road Runner, would not only fall for whatever this particular trap might be, but somehow take advantage of it, and then walk away. Seemingly satisfied. It was then that quite often, Wile E. Coyote would fall victim to his own set-up. Paint a tunnel on the side of a cliff? Road Runner runs right through the tunnel. Our friend, Mr. Coyote tries to follow the bird into that darkness, and either runs right into solid rock, or worse... an oncoming train. An oncoming train? A reversal of fortune may not be what is called for. There are, however... traps, and some of these traps could be of our own doing. What am I saying? The investor may or may not get "run over', still that investor must be prepared to adapt. Mentally. The Fed Chair speaks on Thursday. The election will likely be close and highly contested. No way to price that in. Yet. Walk with vigilance.
The S&P 500 put a fourth consecutive winning session to the tape on Tuesday, gaining less than 0.4%. For the Nasdaq Composite, the rally was somewhat more aggressive looking, at an increase of 0.76%, also a fourth straight "W." Both of our broadest, major, large cap indices closed not only at all-time record highs, but very close to their intraday highs. Kind of hard not to like that action. Unless one had bought into the broadening of the market rally theme that seemed so real just a day earlier. Tuesday's action favored internet names, favored biotechs, and favored both software (cloud), and to a lesser degree, semiconductors.
Tuesday's action did not find so much love for the energy sector. My guess would be that exiling Exxon Mobil (XOM) from the prestigious Dow Jones Industrials to be replaced specifically by not just a "cloud king", but perhaps the Cloud King in Salesforce (CRM) counts for a lot more than a couple of tropical storms tearing their way through the Gulf of Mexico. By the way, Salesforce reported last night, and hit the ball out of the park. Too much to unpack in Market Recon. I will go into that name later this morning for Real Money and Real Money Pro.
The catalyst for Tuesday's "rally" was a phone call between U.S. and Chinese trade officials that appears to have not ended in anger. From a macroeconomic perspective, housing data remains relatively excellent (as individuals with means escape the cities), the manufacturing survey released by the Fed's regional district in Richmond looked better than expected. For those in the need to know, Richmond is considered important. However, the Conference Board's measure for Consumer Confidence for the month of August, surprised rather badly to the downside. I find it hard to believe that a consensus of professional economists expected to see a rise in this confidence from July into August. Was there really a view that consumers would get more aggressive as the jobless experienced a decrease in fiscal help, or as many states have been forced to make sharper turns than expected on their road to a full recovery in activity?
What This Means
Plainly, it means that many just don't know. It means to me, that while certain industries or certain groupings of equities based on market capitalization or business model will be more susceptible to the whims of algorithmic, high speed price discovery. The chosen ones remain those more dynamic type businesses that have become either publicly necessary or have found ways to make business possible in this environment. Basically, the market keeps making at least some attempt to rotate into value. It either takes, or in most cases over a number of years now, or it does not. Then managers rotate back into growth.
Is it "growth" that they rotate back into? Or is it what works that they seek? What works not only in the environment provided, but most likely in any environment. It should surprise none of us that losers beat winners at the New York stock Exchange on Tuesday. It should also not surprise that while winners beat losers decisively up at the Nasdaq Market Site, that trading volume declined fairly significantly day over day.
Quiet Day Ahead?
I don't know. Federal Reserve Chair speaks virtually from the symposium tomorrow (Thursday) morning. That could bring the action to a crawl absent breaking news. Traders sold the US 10 Year Note on Tuesday, and have continued to do so overnight. What yielded less than 63 basis points roughly 48 hours ago, now yields (as I write) more than 71. The US dollar index has not really moved much over this time. Gold has actually sold off small. What does this all signal?
Likely that Powell may try to change the way the Fed targets inflation, and what the public expects going forward. Keeping real rates from going more deeply negative? Inflation with or without growth? Painted tunnel on the side of a cliff? Maybe.
Anyone Else Notice This?
Facebook (FB) had a great day on Tuesday. The stock ran 3.5% to $280.82. The catalyst? The firm had announced an expansion of e-commerce capabilities on its social media websites. "Facebook Shop" will be added to "Facebook Marketplace", which is more individual to individual, and "Instagram Shopping", which debuted earlier this summer. The idea would be that users can browse on-line stores set up by businesses. Seems like a slam dunk to me, especially in times like these. Just one thing. For those concerned about Facebook taking market share... Shopify (SHOP) ran more than $37 on the day to $1,037.19, and Amazon (AMZN) kept up, moving more than $39 higher to $3,346.49. Seems there's room in the swimming pool for everyone, and the water is fine.
Economics (All Times Eastern)
08:30 - Durable Goods Orders (July): Expecting 4.2% m/m, Last 7.3% m/m.
08:30 - ex-transportation (July): Expecting 2.0% m/m, Last 3.3% m/m.
08:30 - ex-defense (July): Expecting 3.0% m/m, Last 9.2% m/m.
08:30 - Core Capital Goods (July): Expecting 1.7% m/m, Last 3.3% m/m.
10:30 - Oil Inventories (Weekly): Last -1.632M.
10:30 - Gasoline Stocks (Weekly): Last -3.322M.
The Fed (All Times Eastern)
No Public Appearances Scheduled.
Today's Earnings Highlights (Consensus EPS Expectations)