That Was Interesting…

Commentary

Stocks began the day in positive territory and were on course to test February-2020 highs after President Trump announced potential tax cuts on capital gains and income. However, admission from Senator Mitch McConnell that stimulus aid talks were at a stalemate quickly curbed investor enthusiasm. If this was not enough, then surely Richmond Fed President Barkin’s comments blunted any advance by portraying the U.S. mired in an economic downturn of unprecedented proportions with expectations that a resurgence of Covid19 could negate any recent pickup in economic activity.

In a nutshell, sellers attacked technology stocks for a third consecutive session, carrying over from Friday. Rotational buying into Energy, Financials and Industrials continued. Strangely enough, treasury rates rose sharply enough to finally initiate a correction in precious metals e.g. Gold and Silver. The bullish reversal in the US Dollar may continue, but should only be temporary unless there a significant tapering of new coronavirus cases.

Being in the midst of an election cycle also tends to create more volatility as political biases and insights fluctuate leading up to the vote for a new presidential term. It should be interesting…

Performance Summary

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

Market Moving Events

Bullish

  • Economy / US / Inflation: Core PPI (m/m) for July-2020 @ 0.5% vs estimates @ 0.1% and prior revised @ -0.3%; PPI (m/m) for July-2020 @ 0.6% vs estimates @ -0.3% and prior @ -0.2%.
  • Economy / Canada / Real Estate: Housing Starts in July-2020 @ 245.6k vs prior @ 210.0k and previous @ 212.1k.
  • Economy / Europe / Business Sentiment: German ZEW Economic Sentiment for Aug-2020 @ 71.5 vs estimates @ 58.0 and prior @ 59.3.

Bearish

  • Economy / Europe / Business Sentiment: German ZEW Current Conditions for Aug-2020 @ -81.3 vs estimates @ -68.8 and prior @ 80.9.
  • Economy / China / Credit: New Loans for July-2020 @ 992.7bn vs estimates @ 1,200bn and prior @ 1,810bn.
  • Geopolitical / US vs China: Further escalating trade tensions is President Trump’s new rule stipulating in the U.S. Federal Register that imported goods made in Hong Kong are required to be labeled as made in China, effective as of Sep 25.

Neutral

  • Earnings / Consumer Staples: Sysco (SYY) actual EPS @ -0.29 vs estimates @ -0.29 and prior @ 0.45.

Technical Analysis Summary

  • Equities: The SP-500, DJ-30 and Russell-2000 are running into resistance and the Nasdaq-100 is confirming patterns of a key bearish reversal. The VIX is approaching a key resistance test @ its 200-day moving average.
  • Bonds: Treasury rates jumped sharply and halted the advance in bonds. High Yield (HYG) and longer-term treasuries such as TLT were the most sensitive and vulnerable to decline.
  • Currencies: The anticipated breakout in the US Dollar is unfolding, thus increasing the probability for bearish reversals in the Yen and Euro.
  • Commodities: Gold and Crude Oil are also showing signs of bearish reversal. Of the two, Oil should prove to be the strongest in relative price performance.
  • Real Estate: The DJ Real Estate Index continues to consoldiate while maintaining its bullish channel.

Signing off….


After-Market Notes

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

Potential Market Moving Events

  • Healthcare: Moderna (MRNA) reached an agreement worth $1.5bn to sell 100 million doses of its COVID19 vaccine to the US government as reported by MarketWatch.
  • Energy: API Weekly Crude Oil Stocks @ -4.400mm bbl vs estimates @ -3.200mm and prior @ -8.587mm.

Positive Earnings Surprises

  • n/a

Negative Earnings Surprises

  • n/a

Earnings In-Line with Estimates

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