Rally or Concern At this Juncture?

Commentary

The SP-500 delivered another breakout performance while the Nasdaq-100 took a much needed rest. However, both indexes displayed weak relative strength by closing near the lower level of their daily trading ranges. The fact that equity assets were unable to maintain some semblance of correlated trading patterns also indicates a market in chaos without the leadership of its generals, i.e. bluechip technology companies which have been dominating the bullish reversal since the March-2020 bottom. For example, at one point the Nasdaq-100 was @ -1% intraday while Russell-2000 @ +1.8%. and both SP-500 and DJ-30 Industrials slightly positive but under 0.5%.

Others have attributed today’s overall posiitve performance to Monday’s number of Covid cases being below the average daily gain. However, since this followed two weekend days when testing tends to be less, this data should be discounted. Positive earnings surprises from some household names and Europe’s announcement of a major stimulus package are what really impacted today’s session.

Market Summary

market performance summary for equities, bonds, currencies, commodities and real estate benchmark indexes
SP-500 ETF sector performance summary

Market Moving Events

Bullish

  • Economy / Europe: EU leaders agreed to provide emergency stimulus of 750 billion euro ($860 billion) of which 390 billion euros in grants and 360 billion euros of low-interest loans.
  • Earnings Surprises / Consumer Staples: Coca-Cola (KO) actual EPS @ 0.42 vs estimates @ 0.40. Phillip Morris (PM) actual EPS @ 1.29 vs estimates @ 1.10.
  • Earnings Surprises / Financials: Comerica (CMA) actual EPS @ 0.80 vs estimates @ 0.20. Synchrony Financial (SYF) actual EPS @ 0.69 vs estimates @ 0.13.
  • Earnings Surprises / Industrials: Lockheed Martin (LMT) actual EPS @ 5.79 vs estimates @ 5.72. Paccar Int’l (PCAR) actual EPS @ 0.43 vs estimates @ 0.30.
  • Earnings Surprises / Real Estate: Prologis Inc. (PLD) actual EPS @ 0.56 vs estimates @ 0.47.

Bearish

  • n/a

Summary Analysis

The trends for equities remain bullish but momenutm is has clearly begun to decelerate. My guess is that an announcement of additional US stimulus aid and further progress on development of coronavirus vaccine would be a welcome catalyst. After all, these are the only two things investors can truly hope for as it is becoming more apparent that expectations for a V-shaped economic recovery are unrealistic.

(As sidebar note I would like to acknowledge President Trump’s tepid endorsement to wear masks. I’m not exactly sure if this should be a cause for rally or concern at this juncture.)

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