Damn the Torpedoes, Full Speed Ahead!

Commentary

The narrative driving this market consistently remains hope for additional stimulus aid passed by Congress and optimism that a viable vaccine treatment is imminent by year-end or early next year. Progress for both has been incrementally positive. The “B-side” to these hopes are fears centered on the CDC forewarning that cases may be much greater than reported which implies prolonged economic disruption; and division between Republicans and Democrats with regard to the amount and manner in which stimulus aid will be administered. Still not concerned? Then perhaps the escalation of geopolitical tensions between the Washington and Beijing will curb your appetite for risk after China was forced to close its consulate office based in Houston.

In lieu of all this, it was only enough stall the markets with choppy trading and failed to push it into negative territory. Both the SP-500 and Nasdaq-100 managed to retain most of their gains. At the moment, it appears that investors can make money anywhere so long as it is not the US Dollar. This should not be a surprise given the trillions of dollars in stimulus and more than explains the asset inflation being witnessed in bonds, the Euro, Crude Oil, precious or industrial metals and real estate.

Market Summary

Market Moving Events

Bullish

  • Inflation / Canada: Y/Y Core CPI for June-2020 increased @ 1.1% vs estimates @ 0.9% and previous @ 0.7%. M/M Core CPI @ 0.4% vs estimates @ 0.3% and previous @ -0.1%. Core CPI (m/m) @ 0.8% vs 0.4% and previous @ 0.3%.
  • Healthcare / Coronavirus: US government health officials announced intentions to buy up to 600mm doses fo a Covid19 vaccine from Pfizer (PFE) and hits partner BioNTech (BNTX) upon FDA approval. The companies are entitled to receive $1.95bn upon delivery of the first 100mm doses and grants the US an option to buy up to 500mm more dose.
  • Earnings Surprises / Financials: Keycorp (KEY) actual EPS @ 0.16 vs estimates @ 0.09. MarketAxess Holdings (MKTX) actual EPS @ 2.20 vs estimates @ 2.10. Nasdaq Inc (NDAQ) actual EPS @ 1.54 vs estimates @ 1.44. Northern Trust (NTRS) actual EPS @ 1.46 vs estimates @ 1.36.
  • Earnings Surprises / Healthcare: Bigogen (BIIB) actual EPS @ 10.26 vs estimates @ 8.03. HCA Holdings Inc (HCA) actual EPS @ 3.23 vs estimates @ -0.23. Iqvia (IQV) actual EPS @ 1.18 vs estimates @ 1.06. Thermo Fisher Scientific (TMO) actual EPS @ 3.89 vs estimates @ 2.78.
  • Earnings Surprises / Information & Technology: Checkpoint Software (CHKP) actual EPS @ 1.58 vs estimates @ 1.43. Amphenol (APH) actual EPS @ 0.81 vs estimates @ 0.62.

Bearish

  • Geopolitical / US vs China: The US State Dept accused China’s government of hacking and ordered its Houston based consulate office to close in an effort to mitigate a risk of breaching intellectual property on coronavirus research. China has threatened retaliation if the order is not revoked. This obviously impedes progress on Phase 2 of the negotiatied trade deal between the two countries.
  • Commodities / Energy: EIA Crude Oil Inventories reported actual build @ 4.892mm vs estimates @ -2.088mm and previous @ -7.493mm.
  • Real Estate / Residential: US Existing Home Sales for June-2020 @ 4.72mm vs estimates @ 4.78mm and previous @ 3.91mm. M/M Home Sales up @ 20.7% vs estimates @ 24.5% and previous @ -9.7%. Despite being up, sales are down still down 11.3% from last year which saw an annual pace of homes sales @ 5.32mm.
  • Earnings Surprises / Energy: Baker Hughes (BKR) actual EPS @ -0.05 vs estimates @ -0.01 and previous @ 0.11.

Summary Analysis

I cannot predict with certainty when and if we will get confirmation of an effective vaccine or treatment for Covid, but I do know that the Fed, Trump administration and a divided Congress will continue to do everything possible in the way of stimulus to thwart the economic recession/depression staring at us. Stock market trends remain bullish with investors, government officials and unmasked citizens all are yelling in unison: “Damn the torpedoes, full speed ahead!”

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