Happy Election Day.
Are you ready? I know I am so ready. So ready for the removal of some uncertainty.
Like everyone, I have political leanings. I am no zealot, though. What I am most ready for, is for the zealots in my life to pipe down for at least a little while. The ignorance expressed by supposedly educated individuals (yes, on both sides) is stunning. Social media is almost useless. That's where I stay in touch with my high school pals, my Wall Street pals, a couple of veterans' groups, and even the former crew of the McDonald's (MCD) that I worked at as a teenager. You can easily imagine how diverse and even extreme the points of view expressed are, on "my '' timeline.
I really want us just to go back to being a bunch of middle-aged to older folks who found joy in the fact that modern technology had put us all back in touch with each other. That's what social media did in the early days. Now, even if not the intention, the role played is one that winds up sowing dislike among folks who liked each other for decades, and would still enjoy seeing those old friends post pictures as their families age and new generations are created. Even feature the family pets. Tell me you got a great deal on chicken pot pies. Anything. Anything other than the constant drumbeat of trying to make the other side (and your old friends) appear evil or foolish.
So, Happy Election Day, and here's to the removal of at least the first level of uncertainty, though in reality, this may be too much to ask. Will we even know in 24 hours who has won the right to be tortured as our head of state over the next four years? Will we know in short order, how the U.S. Senate, and even the House of Representatives breaks down? Will we once again end up with what appears, when color-coded, to be two nations? Blue on the coasts, and mostly red in the middle. All, when I really only care about the green. Green is the only color that feeds my family.
Yes, my friends,. and even if we disagree on some of the issues, you are still my friends. Happy Election Day. Though we have never been a true democracy, representative government is, as it should be, a darned good way to govern a large number of diverse people. Let us all hope that when I sit at this very desk, and try to write Wednesday morning's Market Recon, that when I look at that man in the darkened window that there is a clarity in the eyes that look back. He better be quick. He disappears an hour earlier now.
As I have written, an election decided in the courts would be a worst case scenario for the nation, not to mention our marketplace. Oh, and here's to the removal of thousands of campaign signs on thousands of lawns in my neighborhood. I would rather see your holiday decorations as I walk my walk, and my little pal Moosh sniffs her sniffs.
Markets
Equity markets sold off fairly hard over the final week of October going into this election. The last week of what has traditionally been one of the two most volatile months of the year would become the worst week for equities across a number of metrics since the pandemic-induced meltdown last March as it became clear that globally, economies would be shuttered by mandate in an effort to slow the spread of this awful virus.
Monday was different. Very different. Some of that cash created last week, or over the past couple of weeks, flew back into the marketplace. Perhaps a gamble that electoral results will be more decisive than feared. Oh, there was some decent macro-economic news that added some fuel to that fire as well. Both from a global (China) and domestic view, manufacturing surveys blew away expectations.
Traders bought crude off of the lows, traders bought the Energy, Materials, and Industrial sectors aggressively, as if the economy were a swinging door that had just opened. Never mind that viral spread remains unacceptably high. Never mind that our incumbent leader tells us that we are "rounding" the corner when we clearly are not. Never mind that his challenger tells us that he will "shut down" the virus when that is clearly beyond the absurd. The take 'em crowd showed up and with them, the flow of capital did round the corner in response to a number of technically "oversold" short-term indicators.
Here's a Story
The Brady Bunch? No. The sector performance story.
Ten of the 11 sectors shaded green for the day. Most interestingly, the least enthusiasm was shown still for those stocks that had been the leaders for so long. The Communications Services Select Sector SPDR ETF (XLC) did close in the red, led lower by broadcast and internet type names. Most heavily sold stocks among that group included Twitter (TWTR) and Spotify (SPOT) .
Perhaps more telling was not in what led on Monday, nor what finished in last. I think the tech sector presents as Monday's complete story in the form of a microcosm. The Technology Select Sector SPDR ETF (XLK) finished the day in tenth place at +0.25%. This is why from a large-cap perspective, the Nasdaq Composite and Nasdaq 100, though higher on the day, still underperformed the broader market.
Unlocking the door, and peering into the Information Technology sector, one sees a Philadelphia Semiconductor Index that "ran" 0.62%, a Dow Jones U.S. Computer Hardware Index that basically finished flat on the day, and a Dow Jones U.S. Software Index that actually surrendered 0.21%. The interesting tidbit there would be that software is still where the largest profits are, and at least on Monday, capital was still moving out. On the other hand, semiconductors are the most sensitive among these three subcomponents of this sector to potential economic growth, and trade more like commodities than does the rest of technology. Hmm.
On top of this, bear in mind that trading volume fell on Monday from Friday at both of New York's primary exchanges, and though breadth was excellent, this does take at least some luster off of overall performance.
Shocking, Really
One might have thought that purchasing managers' surveys might have gotten sloppy for October. It has been months since Congress allowed the federal stipend for those remaining unemployed to expire. Nevertheless, our first look at third-quarter GDP last week still showed enough strength in household consumption of goods, even if that demand did dwindle for services. As mentioned, Chinese manufacturing PMIs were solid for October. In fact, so were most of Europe's and now much of that continent heads into a period of economic shutdown in response to an unwelcome return of the pandemic to an elevated level of spread. That could leave an observer looking at those European numbers as unsustainable, and perhaps even the ISM numbers here in the U.S., which were just outstanding, as perhaps an outlier?
Let's hope not. While the headline print of 59.3 easily bested expectations, and showed a sixth consecutive month of expansion of domestic manufacturing, the strength of the report was precisely where it needed to be. New orders simply exploded to the upside, while production, and deliveries looked to be quite hot as well. Perhaps even more important, both employment and inventory building finally moved from a state of contraction to one of expansion. This monthly performance will of course depend upon the ability of regional economies to remain open, but one thing is sure: the U.S. manufacturing base is currently, and undeniably showing tremendous upside momentum.
Trading Note
Remember, I did write that I felt that one could add to investments, but not commit capital toward new investments in the wildly volatile environment created over the second half of October. Well, that is exactly what I have done over the past couple of sessions. Wise? I have no idea. I guess I'll have to let you know how "wise" I have been later on. I'm no chicken, though. I will at least have that. (Now, I have to find a pot pie somewhere.)
In recent days. I have added to Apple (AAPL) , AbbVie (ABBV) Boeing (BA) , Duke Energy (DUK) , K12 Inc. (LRN) , Pfizer (PFE) , and lastly... as I told you I would if the shares dipped below $2,970... Amazon (AMZN) . That one was a particularly large add on Monday as I got a little aggressive (averaging $2,958) in response to a bullish Moving Average Convergence Divergence (MACD) crossover visible on the stock's intraday chart.
I don't like adding above net basis, but in stocks like this (large corporations that grow like small corporations that might be onto something), one may never get that chance if they have been around for a while. At this point, my Amazon long is now larger than it has ever been, and at this size (quite suddenly my largest position in terms of weighting), quite frankly, makes me a tad uncomfortable.
With the market and these shares trading higher overnight, I will likely take some short-term profits at least on a partial, well short of target. That's how traders protect themselves. That's how one gets down to playing with "house money."
Economics (All Times Eastern)
08:55 - Redbook (Weekly): Last 1.2% y/y.
10:00 - Factory Orders (Sep): Expecting 0.8% m/m, Last 0.7% m/m.
16:30 - API Oil Inventories (Weekly): Last +4.557M.
The Fed (All Times Eastern)
Fed Blackout Period.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (ETN) (1.04), (EMR) (0.94), (HUM) (2.78), (MCK) (3.88), (SYY) (0.27), (W) (0.83)
After the Close: (PRU) (2.61)
(Amazon, Apple, Boeing and AbbVie are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)
