It happened at some point after 8 p.m. on the East Coast, or at least that's when I noticed it. President Trump hastily addressed the American people in a four-minute video posted to Twitter. In case you thought he was about to concede the election, you thought wrong. Instead, the sitting president attacked the distribution of federal funds laid out in the massive Covid Relief / Federal Spending bill totaling close to $2.4 trillion that itself had been hastily and overwhelmingly passed by both houses of our nation's legislature.
Toward the end of the video, the president threatens to veto this bill. U.S. equity index futures immediately took a fairly sharp hit, but have fully recovered since, and I write this basically in the middle of the night, so there are still several hours to go until the opening bell chimes at 11 Wall Street.
Why the wiggle in futures markets?
The story is far more complex than most fully understand. What got the president's ire was all of the unnecessary pork stuffed into this bill that, of course, will require increased deficit spending, while aiding the struggling American people appears to be a low priority. "Congress found plenty of money for foreign countries, lobbyists, and special interests, while sending the bare minimum to the American people who need it," said the president. In his anger, President Trump mentions hundreds of millions of dollars earmarked for the Egyptian military, Cambodia, Burma, Pakistan, as well as other seemingly foolish "priorities," such as the Kennedy Center in D.C., which is not even open to the public right now.
So, why are futures markets recovering as late-night melts into early morning? Perhaps because it also appears that both houses have the votes to override any veto. Nope. That's not it. Perhaps it would also be because the president asked for more helicopter money to be sent to these struggling Americans. The president said, "I am asking Congress to amend this bill and increase the ridiculously low $600 (graduated individual distribution) to $2K, or $4K for a couple, I am also asking Congress to get rid of the unnecessary and wasteful items in this legislation."
What happened then, might surprise you, but is likely the cause for what overnight support did show up for financial markets. Speaker Nancy Pelosi responded very favorably to the president's comments, at least as far as increased payments to struggling Americans is concerned. She offered to bring the matter to the House floor by unanimous consent this week.
My Thoughts
I think about economics, and markets all the time. What I think is glaringly clear right now, is that economic growth has decelerated. Narrowing the focus, the recovery in demand for labor has not only stopped, but has started to show new signs of disrepair.
Doing nothing for those impacted is not an option this week. I have stated and written for months that this Covid-related support package , which comes to less then $900 billion of the $2.4 trillion in spending agreed to in total, must be twice as large as it is (if not more), or else there will have to be another fiscal support package put together very early in the Biden administration.
President Trump and Speaker Pelosi are correct. The helicopter portion of this spending package needs to be the priority. The $600 per individual making less than $75,000 per annum needs to grow. Either the $300 per week stipend to those on the receiving end of state-level unemployment benefits needs to grow, or its 11-week life span does. The PPP money is fine, but the moratorium on evictions needs to be pushed out beyond the new Jan. 31 expiration date, and the $25 billion marked to rental assistance and $10 billion in grants for child-care providers seems to me to be a bit small.
Now, I understand why the U.S. does "foreign aid." That said, all of these items that will impact real people here at home, and the entire U.S. economy in aggregate must be prioritized well ahead of the first penny borrowed from U.S. taxpayers is sent overseas for any reason, or even on what we refer to as "pork barrel" spending on non-essentials domestically. Remember, this bill passed easily in both houses of Congress. Enough elected officials passed this bill without reading it. That's bad enough. Now, a certain few of these individuals actually thought buying attack helicopters for the Egyptian military was a higher priority for spent borrowed money than making U.S. households whole. That, my friends, is not only a problem, it is unethical, and it is indeed, a disgrace. There are six year olds in every state across this Union who did not have enough to eat last night.
Congress should heed the words of the outgoing U.S. President and the Speaker of the House, and amend this bill immediately. The government runs out of dough on Dec. 28. They may have to work through Christmas. Tough. I think those hungry six year olds would appreciate the effort.
As for my level of anger, I have done my best to keep this note professional. It does not accurately represent how "ticked off" I feel. Today would have been an excellent day to have appeared on the "Claman Countdown" at the Fox Business Network. I might have waved my hands around just a bit.
Exclamation Point
On Tuesday morning, the Conference Board posted its December reading for Consumer Confidence. The word "ugly" does not do the report justice. The index in December dropped to 88.6 from 92.9 in November. Economists were looking for a rebound to something in the area of 97. So much for economists. Maybe there's a reason that most PhD economists avoid using the word "doctor" as a title.
Within the report, the sub-component labeled "The Present Situation" dropped all the way from 105.9 to 90.3 from 1059. The percentage of consumers that think jobs are "plentiful" decreased from to 21.8% from 26.3%. (Who the heck are these 21.8%? Must be folks that don't have to hunt and gather for a living.)
Those who claim that jobs are "hard to get" increased to 22% from 19.4%. What I think is this, is there are certain jobs available. But most are at the lower end of the wage spectrum and will expose the individual to the public and with it, increased risk of contracting SARS-CoV-2, so just what are these folks to do?
This is why what the president said last night, and the support at least on the domestic side shown by Speaker Pelosi is so important. Now, Congress, get this done. You are awakening my inner NCO. He is not the nice guy you know.
Markets
There were two markets visible on Tuesday. Was Tuesday a "down day"? Not really. I mean... kind of. Let me explain.
The blue chips were weak, as the Energy and Financial sectors took a minor beating. The broader S&P 500 closed slightly lower while there was visible strength seen across the Nasdaq Composite, as well as small-to mid-cap stocks.
Technology led the way, and Renewable Energy led Technology. This was largely due to the passage, as part of the above mentioned spending bill, of the "Alternative Fuels Tax Credit" and the "Alternative Fuel Vehicle Refueling Property Credit." This is why a number of names that some may have have never heard of led markets on Tuesday. Stocks such as Plug Power (PLUG) , FuelCell Energy (FCEL) , Sunrun (RUN) , SunPower (SPWR) and First Solar (FSLR) all made violent moves to the upside. Given that this will probably be an ongoing theme over the next four (or 40) years, investors may want to start accumulating a few of these names on days where they go on sale (sell off).
Interestingly, at the Nasdaq, winners beat losers, while advancing volume trounced declining volume by better than 2 to 1, all on increased trading volume. This is bullish behavior. Now, downtown, at the NYSE, losers beat winners, as declining volume easily bested advancing volume. Bearish, right? Not necessarily. Trading volume absolutely dwindled across NYSE-listed names on Tuesday. There was simply zero conviction in that sell off. How worried are professional investors? Apparently not very. Take a look at this:
The CBOE Options Total (includes equities and indices) Put/Call ratio drops to its lowest level in quite some time at just 0.6. Just how far back do we have to look to see less interest in the purchase of protection through the options markets?
Apparently, this Put/Call ratio hit 0.6 once earlier this year, and once in 2016, but not below that since 2015. That's incredible. The 50-day simple moving average stands at 0.8. No, "they" are not nervous, at least not yet. Let's see what the Trump/Pelosi headlines do to this ratio today.
Yes...
I did add to my Walmart (WMT) long on Tuesday's federal response to the retail giant's preemptive lawsuit filed against the DOJ and the DEA on Oct. 22. My price target remains $180.
No...
I did not add to my Apple (AAPL) long on Tuesday's strength after news broke that the consumer electronics giant has been working on an electric vehicle program. I will do so, however, on the selloff that potentially follows.
What's important now is not that Apple actually develops electric or autonomous vehicles by 2024. What is important will be whether or not Apple can develop technologies that will then make it a necessary supplier to the auto and electric vehicle industries.
You think Apple Music is a driver for recurring revenue? You ain't seen nothin' yet. My price target remains $165.
Economics (All Times Eastern)
08:30 - Personal Income (Nov): Expecting -0.3% m/m, Last -0.7% m/m.
08:30 - Consumer Spending (Nov): Expecting -0.2% m/m, Last 0.5% m/m.
08:30 - PCE Price Index (February): Expecting 1.3% y/y, Last 1.2% y/y.
08:30 - Core PCE Price Index (February): Expecting 1.5% y/y, Last 1.4% y/y.
08:30 - Initial Jobless Claims (Weekly): Last 865K.
08:30 - Continuing Jobless Claims (Weekly): Last 5.508M.
08:30 - Durable Goods Orders (Nov): Expecting 0.6% m/m, Last 1.3% m/m.
08:30 - ex-Transportation (Nov): Expecting 0.5% m/m, Last 1.3% m/m.
08:30 - ex-Defense (Nov): Expecting 0.1% m/m, Last 0.2% m/m.
08:30 - Core Capital Goods (Nov): Expecting 0.6% m/m, Last 0.7% m/m.
10:00 - FHFA HPI (Oct): Expecting 0.7% m/m, Last 1.7% m/m.
10:00 - U of M Consumer Sentiment (Dec-F): Flashed 81.4.
10:00 - New Home Sales (Nov): Expecting 989K, Last 999K SAAR.
10:30 - Oil Inventories (Weekly): Last -3.135M.
10:30 - Gasoline Stocks (Weekly): Last +1.02M.
12:00 - Natural Gas Inventories (Weekly): Last -122B cf.
13:00 - Baker Hughes Oil Rig Count (Weekly): Last 263.
The Fed (All Times Eastern)
No public appearances scheduled.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (PAYX) (0.66)
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