[Market Madness] Edition 0104
Hit The Breaks
New day, both the same and new problems
Well folks, it appears that headlines are taking a break from TikTok, and so are we.
We’ll get into this below, but the latest ADP private payroll report for July was a major shock, yet markets continued up into the green. The SEC yesterday announced they’re going to put their glasses on and look into Kodak for both their loan and the recent stock performance and their underlying issuing of options grants for top executives.
We are still waiting for Congress to make any action on pending stimulus. Some news sources are suggesting that concessions are being made, possibly in hope that we can stop the foot-dragging and get the stimulus out there. (We won’t get into the pains of passing a large-scale stimulus package in an incredibly divided two-party system here — but believe me, it’s in full effect)
Gold, for the first time ever, surpassed $2000/oz yesterday and that rally continued into today. Crude oil is also up on the day, and volatility has cooled off.
Overseas, Asian indices were mixed, while those in Europe moved up into the green. COVID 19 concerns still remain both here in the U.S. and overseas. The continued impact of the virus is showing the toll that it is taking on multiple aspects of the economy. Administration officials are suggesting a positive Q3 GDP after the worst quarter GDP ever, but the data is not quite there yet to definitely say ‘yes’ or ‘no.’
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Fundamentals
Wednesday’s Close:
Dow Jones: +1.39%
S&P 500: +0.64%
NASDAQ: +0.52%
U.S. Dollar Index: 92.88
US 10 YR: 0.552%
Crude OIL: $42.13
Spot Gold: $2037.90
Market Madness Portfolio: +0.35%
COVID 19 Global Cases: 18,624,056
Indices Overseas:
Nikkei 225: -0.26%
Hang Seng: +0.62%
FTSE 100: +1.14%
TEDRATE: 0.16
LIBOR (3 month): 0.24850%
ADP nightmares
The ADP private payroll number was scary. Private payrolls increased by 167,000 in July, compared to the Wall Street estimates of over 1 million. That difference, more specifically, is what has me and others scared. What this figure tells us is two-fold: one, the damage from March and April still lingers and two, the labor market is stalling dramatically in wake of the ongoing U.S. case surge. A silver lining with this report showed that previous months (May and June) saw significant upward revisions to their payroll numbers, which suggests that the past month’s recovery effort was better than previously reported. What stands in the balance now is what lies ahead of us.
Tomorrow, we just last week’s jobless claims report and on Friday, we get June’s BLS unemployment situation report (this is a much awaited report). The jobless claims report will tell us more recently how we are doing week-to-week, and the BLS situation report will tell us what gains/losses we had in unemployment last month. While both are stats that are backwards-looking, putting weeks and months of data together helps outline trends and make somewhat better assumptions and estimates about what the road ahead will look like.
Some experts are casting doubt on the level of reliability behind the ADP reports, due to their massive revisions up and the volatility with which the labor market is experiencing since basically the year’s start. The more trusted reports are the ones that were just mentioned. The volatility and revisions are both extremely fair points to make regarding the usability and viability of the data, but with such a large gap, many should be wondering what has gone wrong.
Just because the enhanced unemployment benefits have expired (at least until a new stimulus deal is reached) does not mean that those who were unable to work can go back now. There are still states where reopening has either been rolled back or paused, leaving workers without a place to go and businesses with the lights off. If all businesses were open for shop and there were no challenges with virus-closures, then it would be more fair to wonder why people are still filing/looking for unemployment insurance. Grated there is always an element of ‘cheating the system’ or ‘being overpaid to stay home’ but one must also consider if these workers actually have a job to go back to between businesses temporarily closed or closed for good.
More updates are to come on this as we get the data tomorrow and Friday.
Quick Takes
More on the tragic explosion that occurred yesterday in Beirut. (via FT and via WSJ)
The hurt continues as former unemployment recipients now dip into savings to pay bills. (via CNBC)
Kodak under scrutiny from lawmakers and the SEC over Donnie’s major loan agreement. (via WSJ and via BI)
Parent company of Quicken Loans prepares for IPO. (via WSJ)
New restrictions being set up for travel to/from NYC. (via CNBC)
General Banter
For anyone else interested in the full HBO Axios interview with reporter Jonathan Swan and Donnie, here is the full video. You really cannot make any of this up. Grab some popcorn.
Reader’s Corner
The reader’s corner is full of cheers for the SEC looking into Kodak for their recent shenanigans.
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Behind the Madness
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