[Market Madness] Edition 0092
Midweek bumps
Buckle up
Well folks, it has been an interesting 36 hours. There is a lot of news coming from the politics side as U.S.-China tensions flare up again with the order to close the Chinese consulate in Houston. The White House also granted new grant money to more big phara firms to help the dash to a vaccine by the end of the year. Donnie also had a change of faith last night in his press conference, suggesting the ‘American way’ is to wear a mask and practice social distancing. He’s also gone on the wire saying that things here in the U.S. are going to get much worse before better, also a major change of pace from his past comments and statements. My best guess would be that these two movements together come as a strategy to catch up in the polls. Like I said before, it will be a long and winding road to November.
The markets opened in the green, but soon hovered between slightly negative and slightly positive as we moved into midday. Actionable news comes from Dr. Fauci suggesting that the virus will not ever be fully eradicated and the continued battle to bring more stimulus to the economy.
Elsewhere, the major indices overseas tumbled last night. Gold and oil are up on the day. Snapchat got chewed up by the market after a sour earnings report, and many are eagerly awaiting the earnings release by Tesla after market close.
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Fundamentals
Wednesday Close:
Dow Jones: +0.62%
S&P 500: +0.57%
NASDAQ: +0.24%
US 10 YR: 0.595%
Crude OIL: $41.80
Market Madness Portfolio: +0.36%
COVID 19 Global Cases: 15,033,861
Indices Overseas:
FTSE 100: -1.02%
Nikkei 225: -0.58%
Hang Seng: -2.25%
TEDRATE: 0.12
LIBOR (3 month): 0.25550%
Global tensions and risk
It looks like the U.S. and China are going into the ring and it will likely go all 12 rounds. In an interested and unexpected escalation in tensions, the U.S. has ordered the closure of the Houston Chinese consulate. Late last night the order was issued, giving the workers inside 72 hours to clear out. Also last night, reports came from the city’s fire department of a large scale burning was taking place, which has been assumed to be all classified documents. This is still a developing story, so I assume that much more to come from this. In the meantime, China has vowed retaliation for this action.
From an outsider’s perspective, this action may be the straw that puts the camel on its knees. For the past weeks, different U.S. departments and agencies have been taking pot shots at China’s government, agencies, and corporates from everything to TikTok and Disney to internet hacking and the coronavirus. Other nations have also sought actions against China for their security act imposed on Hong Kong.
Tensions in the region have largely deteriorated since the onset of the virus. It appears that we take one step forward (positive trade deal rumors) and about five steps backward (H.K., COVID 19 finger pointing, arrests for hacking, sanctions, requests for reelection assistance) and now the closure of the consulate. The scary part is that we are far from seeing the other side of these tensions and any possible calm resolutions.
NY Fed’s weekly economic index
“The New York Fed's Weekly Economic Index (WEI) is reversing course, showing real-time, high-frequency economic data is again turning negative after climbing back from April and May's coronavirus-driven swoon.” (excerpted from article)
This data and news is something that many were not looking for nor happy to see. As many have been hearing about rising cases and how that will present itself in the future — well, this is it. The WEI encompasses 10 daily and weekly datasets that track across consumer actions, the labor market, and production.
Looking across the time series outlined in the graph, we can see the clear inline in economic indicators from May to early July, but now we are seeing the impact of the massive new case surge here in the tail end of July and soon into August.
This new trend is not pretty. Market participants will have to factor in this release of data (although it is likely either already priced in, or soon to be priced in) into their investing decisions along with the potential for economic stimulus either from the folks on Capitol Hill or from Mr. Powell and the Fed.
Information that came out late in the day yesterday suggested that the interested parties, including the Treasury and Donnie, are all far apart with respect to what they are looking for in this next round of stimulus.
For now, we can only hope that those who were not already wearing masks and staying socially distant choose to do so, now that it is officially the ‘American way.’ Left, right, or indifferent, it is all of our responsibilities to ensure that we take care of our neighbors, friends, and fellow citizens in each small way we can.
Read more here.
Quick Takes
The vaccine dash continues with Pfizer getting $1.95 billion to produce a vaccine by the end of the year. (via NY Times)
U.S. orders China to close Houston consulate. China vows retaliatory moves. (via FT)
Existing home sales boom in June, up 21% — the highest monthly gain. (via CNBC)
In a major change of rhetoric, the once anti-masker himself, Donnie, asks all Americans to wear a mask. Suggests COVID 19 wave is going to get worse before better. (via NY Times)
Ex-CEO of Wirecard arrested again, suspect of nearly $4 billion fraud. (via FT, CNBC and WSJ) — this is looking to be the modern Enron and WeWork.
More on Donnie’s payroll tax cut desire. Experts suggest there are better ways to deliver the same outcome. (via WSJ)
Transfer of data delivery from CDC to HHS from the hospitals has caused data blackouts, losing crucial COVID 19 data. (via CNBC)
Reader’s Corner
The reader might enjoy reading some more about the mega caps that are growing in % share of the S&P 500 benchmark. (via FT)
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