Hope is a Strong Four Letter Word


Hmmmm… Today’s trading session might be likened to just this side of a bad hit of acid. Yes, I am aware that this is a strange comparison, but everything about this market and the world in which it exists is beyond strange. Enough said. Shall we?

From a weekly technical perspective, despite the market ‘s decline, It’s premature to call a trend reversal. Lows are still higher than previous lows. Right now the market is consolidating which is normal after a breakout in the SP-500 or building a support base after achieving a record high for the Nasdaq-100. Of course, this can change without notice, especially on a weekend preceding next week’s expiration of the current stimulus package. Investors, businesses and individual Americans are all hoping that another round of stimulus aid is approved while waiting upon approval of a miracle vaccine to save us from economic gloom and tragic doom.

Meanwhile, earnings season is upon us and accompanied by the ongoing release of economic data. With respect to the latter, the pattern has been one of weakness and justifies the Fed’s expansion of its balance sheet. Earnings, not surprisingly, have been predominantly skewed toward positive due to the preponderance of downward revisions by analysts (Wall Street’s privilege and entitlement at its finest!).

Market Summary

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Market Moving Events


  • Earnings / Consumer Discretionary: PulteGroup (PHM) actual EPS @ 1.29 vs 0.86. Tractor Supply Co (TSCO) actual EPS @ 2.90 vs estimates @ 2.48.
  • Earnings / Consumer Staples: Hershey (HSY) actual EPS @ 1.31 vs estimates @ 1.13. Kimberly Clark (KMB) actual EPS @ 2.20 vs estimates @ 1.79.
  • Earnings / Financials: Alliance Data Systems (ADS) actual EPS @ 1.86 vs estimates @ 1.34. Fifth Third Bancorp (FITB) actual EPS @ 0.30 vs estimates @ 0.21. Hungtington Bancshares (HBAN) actual EPS @ 0.13 vs estimates @ 0.04. M&T Bancorp (MTB) actual EPS @ 1.74 vs 1.67.
  • Earnings / Industrials: Alaska Air (ALK) actual EPS @ -3.54 vs estimates @ -3.67. Allegion PLC (ALLE) actual EPS @ 0.92 vs estimates @ 0.84. Pentair (PNR) actual EPS @ 0.59 vs estimates @ 0.49. Union Pacific (UNP) actual @ 1.67 vs estimates @ 1.56.
  • Earnings / Healthcare: Danaher Corp (DHR) actual EPS @ 1.44 vs estimates @ 1.08. Quest Diagnostics (DGX) actual EPS @ 1.42 vs estimates @ 0.56.
  • Earnings / Materials: Air Products (APD) actual EPS @ 2.01 vs estimates @ 1.98. Freeport-McMoran (FCX) actual EPS @ 0.03 vs estimates @ -0.02. Nuecorp (NUE) actual EPS @ 0.36 vs estimates @ 0.09.
  • Earnings Surprises / Telecom: AT&T (T) actual EPS @ 0.83 vs estimates @ 0.79.


  • Employment / US: Initial unemployment claims jumped +109K to 1.416mm vs estimates @ 1.3mm.
  • Economic Outlook / US: June-2020 Leading Indicators @ 2.0% m/m vs estimates @ +2.1%.
  • Coronavirus Update: Realization and acceptance that the global pandemic will get worse before it gets better has finally arrived. In the US, the narrative has shifted to when and which states are going to re-impose lockdowns as record deaths and infections of Covid continue throughout the world.
  • Market Sentiment / Currencies: A breakout above resistance in the Japanese Yen may be indicating the end of the Carry Trade and shift away from the risk-on trade.
  • Earnings / Financials: Travelers (TRV) actual EPS @ -0.20 vs estimates @ 0.24.
  • Earnings / Materials: Dow Inc (DOW) actual EPS @ -0.26 vs estimates @ -0.23.
  • Earnings / Telecom: Twitter (TWTR) actual EPS @ -1.39 vs estimates @ -0.02 (reported new users up 34% y/y @ 186mm in Q2 to mark largest increase since first reporting the metric in 2016).

Summary Analysis

If the growth rate of new cases for this virus does not reverse or at least decelerate, then eventually no amount of stimulus in the world will reverse the downward economic spiral central banks are scrambling to avoid. To get a “V” shaped recovery, nothing will suffice but a vaccine as it will restore confidence in consumers to resume the mantle of making and spending money. Until then, it simply makes no sense for the market to push higher as analysts revise estimates downward. Under normal circumstances, PEs should adjust by compressing instead of expanding. Hope is a strong four letter word and as long as it is present, the trends shall remain bullish.

After-Market Notes

Potential Market Moving Events

  • President Trump canceled his GOP Republican National Convention in Jacksonville, FL whihc was scheduled for late August-2020. It is safe to assume when he looked at his team and said “the timing for this event is not right. It’s just not right”, that the reality of Covid19 is finally being acknowledged as a game changer.
  • The Republican Senate and Trump administration have reached an agreement on key components of the next coronavirus stimulus aid package as the existing one is set to expire at the end of this month. (My take? Making a sausage is not always the most pleasant thing to watch, but if the end result is something that is palatable to all who consume, then I suppose it’s worth it.)

Positive Earnings Surprises

  • Consumer Discretionary: Skechers USA (SKX) actual EPS @ -0.44 vs estimates @ -0.67.
  • Financials: E-Trade Financial (EFTC) actual EPS @ 0.88 vs estimates @ 0.75. SBV Financial (SIVB) actual EPS @ 4.42 vs estimates 3.01.
  • Healthcare: Edwards LifeSciences (EW) actual EPS @ 0.34 vs estimates @ 0.15.
  • Industrials: Robert Half Int’l (RHI) actual EPS @ 0.41 vs 0.37.
  • Information & Technology: Intel Corp (INTC) actual EPS @ 1.23 vs estimates @ 1.11. Skyworks Solutions (SWKS) actual EPS@ 1.25 vs estimates @ 1.13.
  • Utilities: Firstenergy Corp (FE) actual EPS @ 0.57 vs estimates @ 0.55.

Negative Earnings Surprises

  • n/a

Earnings In-Line with Estimates

  • Financials: People’s United (PBCT) actual EPS @ 0.24 vs estimates @ 0.24.
  • Information & Technology: Verisign (VRSN) actual EPS @ 1.32 vs estimates @ 1.32.

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