Following a positive response to earnings from Alphabet/Google (GOOGL) , the S&P 500 gapped higher for the sixth day in a row. The positive action gained further steam on news that Gilead Sciences (GILD) had positive data on remdesivir, its drug for the treatment of Covid-19, and then continued even higher when Fed Chair Jerome Powell reassured the market that the central bank would do whatever is necessary to help the economy.
The indices have been going almost straight up since March 23 and are acting as if they will not stop. Many market participants are struggling with the logic of this market and don't know what to do. The price action suggests that this powerful momentum will not end, However, simple logic suggests that we won't be able to deny the significant economic damage that is being done forever.
The bulls are confident that the coronavirus crisis is on the downswing and that the economy will roar back quickly on a flood of liquidity. The bears do not understand how the tremendous economic damage that is being done won't have a more significant impact.
Earnings reports are hitting and Facebook (FB) , Tesla (TSLA) and Microsoft (MSFT) are seeing positive initial response that may be sufficient for the S&P 500 to gap up Thursday morning for the seventh day in a row.
When companies like Microsoft and Facebook are not seeing any major negatives from the Covid-19 it is easy for market players to project that thinking on to the broader market. Most of the impact of this crisis won't occur until the second quarter so it is difficult to foresee what will happen. Facebook says there is a "significant reduction" in demand for advertising but that doesn't seem to matter.
We'll see how this extended market digests these significant earnings reports. So far, though, it looks like the "sell the news trade still is not working.
Have a good evening. I'll see you Thursday.