[Market Madness] Edition 0084
Big Weeks Ahead
A little recap
Well folks, the early morning pre-market trading got a nice optimistic bump from some more bigpharma companies getting ‘fast track’ status for their vaccine development. We are pretty much seeing the most aggressive movement toward pushing any and all developments on this side. Countries all around the world are either dealing with new surges themselves, or doing everything in their power to enact policies and procedures that will curb the potential for a second wave.
Earnings season is also upon us once again, kicking off this week and happening across the next 4 weeks. Many are watching with anticipation to see how these earnings calls will compare to that of Q1, factoring in any progress made to reopening. So far, the markets have reacted optimistically toward the impending earnings season, with the major indices boosting well into the green in the early trading day. By the late afternoon, on news from California closing back down some indoor businesses, the indices gave up all gains and took losses, with the exception for the DJIA, holding onto miniscule gains on the day.
Overseas, the major indices were also seeing green, giving some positive sentiment to the overall gloomy global condition currently, between the continued spread of the virus and rising tensions between countries. Crude oil dipped back below $40 per barrel and volatility is trending back up.
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Fundamentals
Monday Close:
Dow Jones Industrial Avg: +0.04%
S&P 500: -0.93%
NASDAQ: -2.13%
US 10 YR: 0.623%
Crude OIL: $39.61
Market Madness Portfolio: -0.97%
COVID 19 Global Cases: 12,995,037
Indices Overseas:
FTSE 100: +1.33%
Nikkei 225: +2.22%
Hang Seng: +0.17%
TEDRATE: 0.16
LIBOR (3 month): 0.26813%
As we look to earnings
It has become a little redundant from a “let’s find really interesting breaking stories to write about” perspective, but it is important to keep a tab on where we are and what we have to look forward to.
We saw today what has become another classic market move; investors shrugged off the Coronavirus and continued buying. Select biopharma companies are seeing a boost off of positive COVID 19 news for fact-tracking vaccine developments. Other industries are seeing a boost as investors are betting on better earnings news in the next couple weeks. Given how much production and work has stepped up in Q2, it wouldn’t be all too surprising to see some revisions on the year’s outlook. Companies, however, will like to remain conservative and cautious when looking ahead, particularly due to the continued rise in spread of cases. The more states that have to revert to lockdown conditions, the less likely earnings goals for the year and the rest of H2 will be met, driving share prices back down again.
Other analysts and market-watchers are seeing this round of earnings calls to be a wake up call to investors who have been doing too much speculation, and riding share prices much higher than they arguably should be. Worries about financial - economic disconnect continue to ring in the background and largely fall on deaf ears. The continued support of the Fed on the bond market is helping keep companies liquidity up. As always, earnings time is a great health check on these companies, checking their projections with reality and making the necessary adjustments moving forward. Similar sentiment is being noted in China, as some investment managers there are warning that the financial market recovery has taken place too quickly and is not standing on firm economic ground; a recipe for disaster in the future. Overseas markets also cite growing COVID 19 spread in the U.S. as a limiting factor to their respective market’s potential growth and recovery.
Continued global tensions will not help anything either. The commuting of Roger Stone by Donnie has resurfaced interest in Muller’s Russia collusion reports and prospects for future testimonies. The Taliban-Russia bounty scandal still remains unsolved, with the administration seeking to punish the informant who leaked that intelligence, rather than getting to the truth of the alarming news. Donnie took credit for a 2018 hack that was aimed at the Russians back during the midterm elections. China and Hong Kong tensions, which is also getting the U.S. and global community involved, is continuing under the headlines, and Donnie has all but disbanded efforts on phase 2 of the trade negotiations. Here in the states, political tensions continue to rise between parties as we draw closer to November with each passing day. Also, breaking news today reveals that the U.S. plans to reject a series of claims China has made to maritime in the South China Sea.
“The U.S. plans to formally oppose a swath of Chinese territorial claims in the South China Sea, according to people familiar with the matter, as Washington takes a harder line against Beijing’s efforts to assert control over the strategic waters.” (excerpted from article)
All the above mentioned tensions pose risk to the financial markets that are likely not fully, or correctly, priced in at this time. Many of these risks will continue to present themselves for the months to come, and most likely well into the new year.
Read more here and here and here.
Quick Takes
Google looking to invest $10 billion into India, as part of ‘India Digitization Fund’. (via FT)
TSLA to join the S&P 500? (via CNBC)
China bites back, imposing new sanctions on specific U.S. lawmakers. (via FT)
Diversity discussions target the IPO market. (via CNBC)
McKinsey report on the future of U.S. infrastructure. (read report here)
Chipotle is further trying to adjust their menu to the changing preferences of consumers. Cauliflower rice is soon to be tested and added — for $2.00 more, of course. (via CNBC)
Wall Street is betting big on continued subscriber growth at Netflix. (via WSJ)
Earnings season could deflate recently inflated stocks. (via FT)
Tesla stock continues to jump, feeding more fuel to the speculation fire. (via CNBC)
What’s going on up North in Canada? (via CNBC)
Reader’s Corner
The editor found this twitter account, @FactorInvestor, the other day and really enjoys their “Daily Look” tweets. They give a good snippet of what to expect on that day during the trading hours. Take a look here below:
General Banter
I found this image on the Financial Times website, and I really love it:
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