The Song Remains the Same

Commentary

 Extension of the much needed stimulus plan did not occur as Republicans and Democrats failed to reach an agreement. The market was not surprised and nor should anyone else be in this era of discord. Poor quarterly results from Exxon Mobil (XOM) and Chevron (CVX), both bellwethers for existing and future energy demand and economic growth, generated little concern. Nor did less than robust consumer sentiment and expectations raise red flags despite an increasing number of the labor force facing the prospect of unemployment as more businesses close or reduce operations under the surge in Covid19.

Against the backdrop of such a fundamentally weak landscape, market breadth was disturbingly narrow as advancers represented only a third of components in the SP-500 or Nasdaq-100. Thursday’s after-hours positive earnings reports and strong price gains from Apple (AAPL), Amazon (AMZN) and Alphabet (GOOG) generated enough momentum to make bears abandon any thoughts of selling this market. Prices bottomed half-way through the trading session and reversed sharply upward and that’s about all you need to know. The song remains the same: Technology stocks are defiantly making their last stand and Covid19 be damned!

Performance Summary

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

Weekly Summary: SP-500 +1.73%; Nasdaq-100 +4.03%; VIX -5.34%; 10-Yr Treasury -8.62%; 30-Yr Treasury -3.25%; US Dollar -0.94%; Euro +1.03%; Yen +0.19%; Gold +3.88%; Crude Oil -2.52%; US Real Estate Index +4.49%; US Home Construction Index +3.32%

Market Moving Events

Bullish

  • Economy / US / Consumer: Personal Spending June-2020 (m/m) @ 5.6% vs estimates @ 5.5% and prior @ 8.5%.
  • Economy / US / Business Conditions: Chicago PMI July-2020 @ 51.9 vs estimates @ 43.9 and prior @ 36.6.
  • Economy / Europe / GDP: France Q2 (q/q) @ -13.8% vs estimates @ -15.3% and previous @ -5.9%.
  • Economy / Europe / Consumer: Germany Retail Sales June-2020 (m/m) @ -1.6% vs estimates @ -3.3% and previous @ -12.7%; France Consumer Spending June-2020 (m/m) @ 9.0% vs estimates @ 3.2% and previous @ 37.4%.
  • Economy / Europe / Inflation: France CPI (m/m) @ 0.4% vs estimates @ -0.1% and previous @ -0.1%; France HCIP (m/m) @ 0.4% vs estimates @ -0.1% and previous @ -0.1%. EU CPI (y/y) @ 0.4% vs estimates @ 0.2% and prior @ 0.3%; EU Core CPI @ 1.2% vs prior @ 0.8%
  • Earnings / Consumer Discretionary: Newell Brands (NWL) actual EPS @ 0.30 vs estimates @ 0.18; Under Armour (UAA) actual EPS @ -0.31 vs estimates @ -0.40; VF Corp (VFC) actual EPS @ -0.57 vs estimates @ -0.66.
  • Earnings / Consumer Staples: Church & Dwight (CHD) actual EPS @ 0.77 vs estimates @ 0.63; Colgage-Pamolive (CL) actual EPS @ 0.74 vs estimates @ 0.70.
  • Earnings / Energy: Phillips 66 (PHX) actual EPS @ -0.74 vs estimates @ -0.93.
  • Earnings / Financials: Aon (AON) actual EPS @ 1.96 vs estimates @ 1.93; CBOE Global (CBOE) actual EPS @ 1.31 vs estimates @ 1.24.
  • Earnings / Industrials: Caterpillar (CAT) actual EPS @ 1.03 vs estimates @ 0.64; Illinois Tool Works (ITW) actual EPS @ 1.01 vs estimates @ 0.70; Johnson Controls (JCI) actual EPS @ 0.67 vs estimates @ 0.48; L3Harris Technologies (LHX) actual EPS @ 2.83 vs estimates @ 2.61; Snap-On (SNA) actual EPS @ 1.91 vs estimates @ 1.78.
  • Earnings / Healthcare: AbbVie (ABBV) actual EPS @ 2.34 vs estimates @ 2.20; IDEXX Labs (IDXX) actual EPS @ 1.72 vs estimates @ 1.17; Merck & Co (MRK) actual EPS @ 1.37 vs estimates @ 1.06.
  • Earnings / Telecom: Charter Communications (CHTR) actual EPS @ 3.63 vs estimates @ 2.52.
  • Earnings / Utilities: Dominion Energy (D) actual EPS @ 0.82 vs estimates @ 0.79; Public Service Enterprise Group (PEG) actual EPS @ 0.79 vs estimates @ 0.60.

Bearish

  • Economy / US / Inflation: Core PCE Index June-2020 (y/y) @ 0.9% vs estimates @ 1.0% and prior @ 1.0%; Employment Cost Index Q2 (q/q) @ 0.5% vs estimates @ 0.6% and prior @ 0.6%.
  • Economy / US / Consumer: Michigan Consumer Sentiment July-2020 @ 72.5 vs estimates @ 73.0 and prior @ 73.2; Michigan Consumer Expectations July-2020 @ 65.9 vs estimates @ 66.2 and prior @ 72.3.
  • Economy / Europe / GDP: EU (q/q) @ -12.1% vs estimates @ -11.2% and prior @ -3.6%; EU (y/y) @ -15.0% vs estimates @ -13.9% and prior @ -3.1%; Spain Q2 (q/q) @ -18.5% vs estimates @ -16.6% and prior @ -5.2%.
  • Economy / Europe / Inflation: Italy CPI July-2020 (m/m) @ -0.1% vs estimates @ 0.1% and prior @ 0.1%.
  • Earnings / Energy: Chevron (CVX) actual EPS @ -1.59 vs estimates @ -0.93; Exxon Mobil (XOM) actual EPS @ -0.70 vs estimates @ -0.61.
  • Earnings / Real Estate: CBRE (CBRE) actual EPS @ 0.35 vs estimates @ 0.40.

Neutral

  • Economy / US / Inflation: Core PCE Index June-2020 (m/m) @ 0.2% vs estimates @ 0.2% and prior @ 0.2%; PCE Price Index June-2020 (y/y) @ 0.8 vs 0.5 and (m/m) @ 0.4% vs 0.1%.
  • Earnings / Real Estate: Weyhauser (WY) actual EPS @ 0.11.
  • Energy / Baker Hughes Report: Oil Rig Count @ 180 vs previous @ 181; and Total Rig Count @ 251 vs previous @ 251.

Technical Analysis Summary

  • Equities: Finishing the day higher with bullish hammer patterns, the SP-500 and Nasdaq-100 reconfirmed short-term support.
  • Bonds: Treasury rates trended lower and have no fundamental reason to do otherwise as the spread of the coronavirus should perpetuate stimulus aid spending by Congress and quantitative easing by the Federal Reserve.
  • Currencies: Although the US Dollar caught a bid, it’s premature to call this a genuine bullish reversal. Today’s advance in the dollar was probably due to profit taking in the Yen and Euro which have overextended their advances.
  • Commodities: Gold is consolidating its gains, but maintaing its uptrend. Crude Oil continues to consolidate in the 40-handle region despite threats of demand destruction brought on by the spreading of Covid19.
  • Real Estate: The DJ Real Estate Index is consolidating after making a breakout at the beginning of the week. Consolidation in the Home Construction Index is much needed given that has doubled since its March-2020 lows in a low mortgage rate environment.

Signing off….


After-Market Notes

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Potential Market Moving Events

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Positive Earnings Surprises

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Negative Earnings Surprises

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Earnings In-Line with Estimates

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