Enjoy your evening? I actually missed a bit of the fun, myself.
Monday was a good day. The markets worked, at least to my satisfaction. I felt pretty good. The bell rang. I was up to it, so I got myself outside and did a little of what passes for physical exercise these days. (Admittedly not what it used to be, but hey, there was effort, there was some sweat, and I got yelled at by my wife because it was hot and humid outside.) I watched a rerun of Adam-12. I made dinner for the family. Boiling spaghetti and heating jarred sauce can simply be grueling work. All good.
Wait.. what did he just say? Who? White House economic/trade advisor Peter Navarro, that's who. Oooh. We know he has the president's ear. We also know that while often publicly mocked for a lack of understanding of how modern, globalist economics actually works, Navarro was indeed far more correct about the dangers associated with having lengthy supply chains at a time of crisis than anyone (especially those very same detractors) ever gave him credit for. The media does not like him. Other economists do not like him. The president, however, must. He has been there from the start, and he is if anything, a China hawk.
In an interview at Fox News, Navarro implied that the Phase One trade deal signed by the U.S. and China last January was "over," or so it seemed.
Markets reacted sharply. Equity index futures markets reacted violently to the downside. Dow futures were at one point down more than 400 points. S&P futures were trading down more than 50 points from where they stood on Monday afternoon. Traders bought gold futures and U.S. Treasury securities. It would all reverse just as sharply. (Hope you got out quickly.)
Later on, Navarro would try to walk back that comment in new comments made to the Wall Street Journal, saying he was taken out of context earlier and was referring to a lack of trust between the two nations. President Trump also chimed in on Twitter... posting "The China Trade Deal is fully intact. Hopefully they will continue to live up to the Agreement."
The overnight rally was on, and even improved beyond earlier levels as Flash PMIs for both the manufacturing and service sectors poured in from across Europe. It was clear that these surveys had largely beaten consensus expectations across the board with actual expansion on both fronts for France in particular.
Under the Bookshelf
Peter Navarro was not the only one making headlines overnight.
I looked high and low. I knew it was around here somewhere. Then there it was. Under a bookshelf. (I have a lot of bookshelves.) Strat-O-Matic Baseball. The greatest board game of all time. Inside? None other than the 1973 season cards. A complete set? I have no idea. Enough New York Mets to play a few games and have some fun. That's for sure. Tom Seaver, 1973 National League Cy Young Award winner. He was there. That was important. I'm not even getting started without Seaver.
So, I asked the cards, I asked the die. I asked the little red pegs that serve as base-runners. I asked the cardboard field. They all say that they're ready when I am. Ed Kranepool did not have such a good year that year. I would have more fun playing with the cards from a year where the local kid from New York had a good season. Such is life. If only it was so easy at the big league level.
While there is no actual deal in place, and while both the owners and the players' union still have the right to grieve, it would appear that Major League Baseball will at least try to have some kind of season. The owners on Monday night, voted to implement a 60-game season, just hours after the players had rejected a 60-game schedule with expanded playoffs and some ancillary salary bumps as there will be no fans in the stands, and thus even at prorated salaries, less revenue at the top.
The idea will be to get the season done by Sept. 27, or hopefully prior to flu season and/or an expected increase in the spread of Covid-19 going into autumn.
A number of teams have in recent days, reported positive cases of the virus and shut down facilities. The players still would have to sign off on a protocol relative to preserving health and safety, as well as pledge to arrive at their team's home stadium by July 1 in order to "play ball" by July 24.
Do I think this happens?
I know that as a fan, actual baseball on the radio would improve my quality of life. That said. I can not speak for the players, nor the owners. The 1973 Strat cards though? Now that those cards have seen the light of day, I would think that they will not go quietly back into that box, and then back under the bookshelf.
Equity markets flipped from negative to somewhat significantly positive as Monday wore on. Statistics relative to the spread of the public health crisis continue to appear problematic across a large portion of the nation, not to mention the planet. There was not a lot of domestic macro to ponder. New Home Sales for May disappointed.
What investors had dancing in their heads on Monday, though, was more about rumors on the size of a next fiscal support package likely to be agreed to and then passed later this summer -- not the disease, nor the macro that appears to be strengthening in spots and less so in others.
On Monday, Credit Suisse upped the firm's year-end target for the S&P 500 to 3200 from 2700, which is largely meaningless in this environment, with the index closing above 3100 on June 22. Credit Suisse cites what all of us have been citing for weeks. The low-hanging fruit has been picked. Debt-loads, and a reversed globalization will slow growth in GDPs, the election raises tax uncertainties. Basically, everything we have all been talking and writing about for some time. The firm is recommending overweight allocations covering technology, internet retail, and communications services (gee whiz, like... no kidding.) Credit Suisse left one foot in the safety camp as well also recommending Staples sand Utilities. Sorry, I just get a kick out of the "news" sometimes.
I will tell you what I have noticed of late. Yeah, tech stocks were back on top on Monday. All three higher profile industries were hot -- software thanks to Microsoft (MSFT) , Adobe (ADBE) , Veeva (VEEV) , and Shopify (SHOP) ; semiconductors thanks to Broadcom (AVGO) and Nvidia (NVDA) ; and hardware, thanks to Apple (AAPL) . Trading volume for Monday ended significantly lower at both of New York's primary exchanges than it had on Friday, but that comparison would be misleading. Friday was different for a number of reasons. Volume returned to trend.
The fact is that the Nasdaq Composite has painted the tape green for seven consecutive sessions, 11 of the past 12, and for 15 of the past 17. This has largely come on rising trading volume as the 50-day simple moving average for volume attributable only to member firms constituent to that index in aggregate has been increasing steadily since pausing back on June 2. Three weeks of rising prices on rising volume. That's how you impress Sarge.
Conversely, the S&P 500 peaked on June 8. There have been 10 sessions completed since, Of those 10, the S&P 500 has closed in the red five times. Aggregate trading volume (as measured by its own 50 day SMA) for constituent membership across this, the broadest of our large-cap indices, has been in an almost constant state of decline since April 30. Really. Meaningful? Probably.
Are equity markets still in what I would refer to as a confirmed uptrend? Sectors more heavily concentrated at the Nasdaq most certainly are. The rest of the market is less certain. Far less certain.
You may have noticed American Airlines (AAL) filing on Monday to raise $3.5 billion through mixed offerings, including senior secured debt, common stock, and convertible notes. Bloomberg reports that United Airlines (UAL) is preparing to issue some $5 billion in new debt this week.
Question? Would you fly right now? Your answer, if you are like me, would be something like: "If I had to for work." In other words, "if you pay me to take the risk, then maybe." Certainly not for recreation, or with my family. Not a chance.
So, if for at least some, there is going to be decreased demand for recreational travel beyond the limits of the interstate, and if there is going to be less demand for business travel and many businesses have discovered that they not only do not not need to travel so much, they don't even need their people to come into the office as much, then what would attract an investor into the airline space? Valuation? It's maybe not quite what you think it is.
As I wrote last week, Southwest (LUV) is the only airline I am even interested in, as the business is largely domestic in nature. That said, I have been in and out of that name since. Trade it, don't own it? Probably the right idea for the airlines right now.
Warren Buffett may have been off on his timing. His thought process was spot on.
Anyone Else Notice This?
Pricing for gold futures is correlating to rising confirmations of new coronavirus cases. The new hedge? Maybe a bet against the U.S. dollar. Probably a bit of both.
We've got some new firm on the Walmart (WMT) bandwagon. That's fine. Everyone is welcome. On Monday, Michael Lasser of UBS caught on. Lasser, who is very highly rated, upgraded his rating for WMT from "Hold" (where it was for years) to "Buy." Lasser also took his price target up to $135. (Just FYI, at Market Recon, our price target is $151.)
Walmart earned my eternal loyalty during the public health crisis in New York when essentials and even food became scarce for a time, and the company answered that bell when it rang. Lasser cites Walmart's "enhanced productivity loop," increasing e-commerce business and accelerating use of technology as drivers for earnings growth moving forward. Huzzah.
Economics (All Times Eastern)
08:55 - Redbook (Weekly): Last -8.3% y/y.
09:45 - Markit Manufacturing PMI Flash (June): Expecting 46.1, Last 39.8.
09:45 - Markit Services PMI Flash (June):Expecting 44.9, Last 37.5.
10:00 - New Home Sales (May): Expecting 632K, Last 623K SAAR.
10:00 - Richmond Fed Manufacturing Index (June): Expecting -9, Last -27.
16:30 - API Oil Inventories (Weekly): Last +3.9M.
The Fed (All Times Eastern)
No public events scheduled.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: (INFO) (0.67)