Technical difficulties? In a way.
I have no problem reading the charts, but on Wednesday afternoon, I actually had problems with my internet server. Service went in and out over several hours, forcing the trader (that's me) to take a couple of hours off from work. After retaking control of the bridge (my desk), I quickly noticed that the Dow Jones Industrials were lower, but that both the S&P 500 and Nasdaq Composite were higher, as was my P/L. Oh happy day. But was it really? My verdict would be... no, not really.
Equity markets had a tougher day on Wednesday than immediately meets the eye.
Yes, as we just stated, the two broadest, and most closely followed large-cap indices put together "up" days. The S&P 500 returned half of one percent, and the Nasdaq Composite nearly twice that. Huzzah.
Not only did the blue chip index (DJIA) shade into the red, but a whopping eight of the average's 30 component members gave up more than a full percentage point for the session. They were not alone. At the other end of the market capitalization spectrum, the Russell 2000 surrendered 0.97%, while the S&P 600 was routed to the tune of 1.45%.
Hmm. So the elites gave up ground and so did the small-caps, while the broader market appeared to find upward support. What the heck does that mean?
The transports shaded red as well. Despite an 11% romp to the plus side for FedEx (FDX) . United Parcel Service (UPS) had a nice day too. The underperformers across the realm of the transports certainly did not come from the world of delivery services. Transports losing 2% or more for the day included Kansas City Southern (KSU) , Norfolk Southern (NSC) , CSX Corp. (CSX) , Ryder (R) , J.B. Hunt (JBHT) and Kirby (KEX) . Truckers, railroads and marine transport. Basically, the economy away from demand created by a "stay at home" or "work remotely" reality.
So it was that while internet stocks supported the Communications Services sector, and Software kept the Information Technology sector afloat, the market was otherwise led by the REITs, the Utilities and Health Care. A mix of overly defensive types with what looks like growth. Oh, and trading volume was on the light side.
Dazed and Confused
The Nasdaq Composite hit a new all-time high in a market that at least on Wednesday seemed to be one feeling around in the dark for direction. That being said, investors will take in a whole lot of employment related data on Thursday. The numbers released by ADP for private sector job creation for June were indeed impressive when combined with an incredible upward revision to May. June manufacturing surveys looked strong, at least relative to May. The improvement was right where you need to see it when asking questions of purchasing managers -- in New Orders and in Production. One would think such data bodes well. If it were not for the darned virus.
On that front, there was some positive news in regards to very early data concerning a candidate for a Covid-19 vaccine that Pfizer (PFE) has been collaborating on with BioNTech (BNTX) . Very small sample size. Going into a larger study this summer. Still a long way off (as in several months, probably more... at the earliest). Here's what I had to say about Pfizer yesterday.
What probably mattered more to the flow of capital through the equity space on Wednesday more so than some mildly positive macroeconomic data, or forward progress on getting to a vaccine were further rollbacks of recently reopened economic restrictions across several states as well as voluntary corporate pushback on these reopenings by well-known American brand names.
This and That
First it was Apple (AAPL) announcing the re-closing of an additional 30 stores across a number of states. This brings the number of Apple's retail locations that have had to close after reopening to 77, out of a total of 271 U.S. stores. Then it was McDonald's (MCD) .
McDonald's had started allowing limited "dine-in" services in jurisdictions where such activity has been permitted back in May. The chain had been operating -- as has for the most part, the entire restaurant industry -- strictly as a drive-through, take-out, and delivery type operation. The Wall Street Journal reports that roughly 2,200 of the chain's 14,000 U.S. locations had welcomed customers back inside. Plans to continue reopening the inside of these stores will now be paused for three weeks. The company did not add the words "at least," but something tells me that those words could have been added.
It's not just McDonald's. New Jersey Gov. Phil Murphy has delayed that state's reopening of "inside dining," while Gov. Andrew Cuomo has done the same for New York City, while leaving the "dine-in"option open elsewhere in the state where the policy had already been in place.
Me? I'm OK with a bologna sandwich in front of the TV. That's my "dine-in" option. On a crazy day, I'll even do a drive through, or curbside pick-up... with a mask and latex gloves, as long as I know that the establishment is similarly equipping employees.
There were no big surprises seen in Wednesday afternoon's release of the FOMC's minutes for the central bank's most recent policy meeting. Basically the committee is committed to supporting the economy for as long as it takes. If there was any topic for discourse it would be along the lines of yield curve control, but it would appear to me that we are more than halfway there already if not in word, at least in deed.
The surprises may have been in President Trump's interview on the Fox Business Network late Wednesday afternoon. When I was a kid, I used to love the whoop, whoop sound that the old UH-1 Bell Iroquois (Huey) used to make upon approach. We were young, but to our sergeants who had been deployed to Vietnam, that sound represented either help on the way, or a way out of there. They taught us young pups to love the Huey as much as they did. Well, it appears that there are more helicopters on the way for the masses.
We all know that House Democrats passed an additional fiscal support package back in May that would include another round of $1,200 payments to individuals, as well as extend the $600 weekly federal boost to state jobless benefits through this January. The president, when asked about supporting the possibility of another round of stimulus checks, stated "I do, I support it, but it has to be done properly." Trump added, "I support actually larger numbers than the Democrats." The president also spoke of creating an incentive to work.
What does that all mean?
Stimulus checks with tapered weekly unemployment payments? Or maybe a "back to work" bonus? We'll know more when we know more. We'll know more in about four weeks.
Just a Thought
With all of the news swirling around Boeing (BA) , one wonders just where this name becomes a "buy." Or when it becomes a "buy." Certainly a lot depends upon the activity of the coronavirus. As the virus spreads, demand for air travel will continue to lag. As fiscal budgets become even more stretched, increased defense spending becomes less certain, for the U.S. and for other western style nations that might purchase Boeing's hardware.
Speaking just for me, I really do not become interested above the area between the 40-day simple moving average at $158 and the 505 retracement level of the March-through-June rally, which has already been tested once. Otherwise this name can run back and forth without me. I don't need the volatility.
June Employment Situation (08:30 ET)
Non-Farm Payrolls: Expecting 3M, Last 2.509M.
Unemployment Rate: Expecting 12.4%, Last 13.3%.
Underemployment Rate: Last 21.2%.
Participation Rate: Last 60.8% .
Average Hourly Earnings: Last 6.7% y/y.
Average Weekly Hours: Last 34.7 hours.
Other Economics (All Times Eastern)
08:30 - Initial Jobless Claims (Weekly): Last 1.48M.
08:30 - Continuing Jobless Claims (Weekly): Last 19.522M.
08:30 - Balance of Trade (May): Last -$49.4B.
10:00 - Factory Orders (May): Last -13% m/m.
10:30 - Natural Gas Inventories (Weekly): Last +120B cf.
13:00 - Baker Hughes Oil Rig Count (Weekly): Last 188.
The Fed (All Times Eastern)
No public appearances scheduled.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (KFY) (0.39)
After the Close: (JEF) (-0.03)