Sometimes Enough Just Isn’t Enough

Commentary

Almost 2 weeks have elapsed since the coronavirus stimulus aid expired and yet Congress remains at an impasse. Channeling the Fed’s latest sentiment was Atlanta’s Fed President Bostic, who openly acknowledged the limitations of its monetary tools and policies and emphasized the need for more relief in the form of fiscal policy to “aid the US economy”. Sometimes enough just isn’t enough and, against this backdrop, today’s better-than-expected Jobless Claims under 1 million had little positive effect on the market.

Technology stocks were the only positive sector and like the Federal Reserve, these “players” could obviously use some help from the rest of the “team” (other major economic sectors) to push stocks higher. Yet, a relative strength rating @ 34 confirms the Information and Technology ETF (VGT) surrendered most of its gains from earlier in the day. Both the SP-500 and Nasdaq-100 exhibited buyer fatigue as they rallied twice within “spitting” distance of their previous all-time highs and failed each time.

Lastly, while the trends for Covid19 new cases seem to be gradually descending, the 2nd wave has been so powerful that any laspse in efforts to contain its spreading would probably exacerbate this current economic depression. As of 4:20pm PT, current USA numbers for Covid19 are as follow:

Total Cases: 5, 410, 938New Cases: 50,636
Total Deaths: 170,269New Deaths: 109
Source: Worldometer and CDC


Performance Summary

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

Market Moving Events

Bullish

  • Economy / US / Inflation: July-2020 Export Price Index (m/m) @ 0.8% vs estimates @ 0.4% and prior @ 1.2%; and Import Price Index (m/m) @ 0.7% vs estimates @ 0.6% and prior @ 1.4%.
  • Economy / US / Employment: Initial Jobless Claims @ 963k vs estimates @ 1.12kmm and prior @ 1.191mm.
  • Economy / Australia / Employment: July-2020 Employment Chg @ 114.7k vs estimates @ 40.0k and prior @ 210.8k; Full Employment Chg @ 43.5K vs prior @ -38.1k; and Unemployment Rate @ 7.5% vs estimates @ 7.8% and prior @ 7.4%.
  • Economy / India / Inflation: Core CPI (y/y) for July-2020 @ 6.93% vs estimates @ 6.15% and prior @ 6.23%.
  • Earnings / Consumer Discretionary: Tapestry (TPR) actual EPS @ -0.25 vs estimates @ -0.58 and prior @ -0.27.
  • Earnings / Information Technology: Netease (NTES) actual EPS @ 39.82 vs estimates @ 32.12 and prior @ 32.17.

Bearish

  • Central Banks / US: Comments from Boston Fed President Eric Rosengren highlighted that because states in the West and South opened up their economies too soon, it is impeding their economic recovery in contrast to the Northeast or even countries in Europe. He also believes that a failure to contain the virus will could “prolong the economic downturn”.
  • Economy / UK: Business Investment in Q2 (q/q) contracted @ -31.5% vs estimates @ -2.5% and prior @ -0.3%. Trade Balance for June-2020 @ -5.1bn vs estimates @ -4.75bn and prior @ -1.77bn.
  • Economy / Euro Zone / Production: June-2020 Industrial Production (m/m) @ 9.1% vs estimates @ 10.0% and prior @ 12.3%.

Neutral

  • Economy / Inflation / Europe: July-2020 –> Germany CPI (m/m) @ -0.5% vs estimates @ -0.5% and prior @ 0.6%; Spain CPI (y/y) @ -0.6% vs estimates @ -0.6% and prior @ 0.3%; and Spain HICP (y/y) @ -0.7% vs estimates @ -0.7% and prior @ -0.3%.
  • Central Banks / Mexico / Monetary Policy: Interest Rate Decision for August-2020 @ 4.5% vs estimates @ 4.5% and prior @ 5.00%.

Technical Analysis Summary

  • Equities: The SP-500 and Nasdaq-100 remain within bullish channels but are still encountering resistance as they approach all time highs. The VIX is trending below its 55-week moving average adn is holding support near the January-2020 highs.
  • Bonds: Bond yields for the 10-year 30-year treasuries are above 50-day averages but could experience resistance as they are now testing the upper range of their bearish channels. Only a breakout above their upper channels would signal a sell for bonds at present.
  • Currencies: By taking out yesterday’s low, the US Dollar is confirming a bearish reversal and may retest its August-2020 lows.The Euro is resuming its upward movement while the Yen consolidates.
  • Commodities: Gold made an emphatic bullish reversal and should more than likely revisit its August-2020 high. Despite experiencing a slight pullback today, Crude Oil is making a weekly breakout with little in the path of resistance until the 50-51 level.
  • Real Estate: To reiterate, the DJ Real Estate Index and Home Construction Index both remain in bullish trends. However, momentum still favors the latter.

Signing off….


After-Market Notes

*Check back periodically as this page is sometimes updated at the discretion of the editor.

Potential Market Moving Events

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Positive Earnings Surprises

  • Information & Technology: Applied Materials (AMAT) actual EPS @ 1.06 vs estimates @ 0.95 and previous @ 0.89.

Negative Earnings Surprises

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Earnings In-Line with Estimates

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