Thursday was one of those sessions that was perhaps overdue, but it mostly reinforced what we already knew. In the process, it gave something to everyone.
Bears
- The market dropped swiftly out of what should have been an innocuous Supreme Court decision.
- Market breadth remained negative throughout the session.
- Would-be buyers remained on the sidelines, even when it looked as if major indices were turning around.
Bulls
- All major equity indices closed off the lows of the session.
- Some buyers showed up on weakness.
- Selling came on light volume.
Deep Divide
Chasm: a marked division, separation, or difference
It feels as though every aspect of the nation is at a chasm from politics to wealth, so why not a massive division in the stock market between winners and losers?
Overall, the market is mostly marketing time, but it’s not standing still. Either stocks are up big or down big, and there is extraordinarily little middle ground. I cannot remember a time when winners were up this much, while losers were down this much.
S&P 500
- 143 winners: +19.7%
- The top 20: +58.8%
- 362 losers: -25.0%
- The bottom 20: -62.8%
I continue to wonder if the winners could somehow eventually offer coattails for the losers, but since June 10th, there were fewer winners (191 previously) and greater gains (14.5% previously).
Dueling Headlines
Gyrations kicked up into the close from dueling headlines:
- CALIFORNIA REPORTS 149 NEW VIRUS DEATHS, BIGGEST ONE-DAY JUMP, 3:40 PM
- TRUMP SAYS ON TRACK TO LAUNCH VACCINE `VERY SOON,' 3:50 PM
We knew death counts associated with COVID-19 would rise on par with increased case counts. However, I’m watching how much they rise compared to spikes in cases over the prior two weeks.
Message from the Bond Market
I continue to fret about the demand for treasuries, which continues to force yields to record low levels. The yield curve isn’t suggesting a recession, but a demand for bonds, including 30-year maturities that sum up certain anxiety among investors.
Investors snapped up $19.0 billion for 30-year bonds. The 10-year were yielding 0.63% before the auction - after closing at 0.652% on Wednesday - and swooned to 0.605% at the close.
On Wednesday, investors bought $20.0 billion in 10-year bonds. I’m optimistic, and I know the nation will prevail, but I will pound the table when the 10-year is above 1.00%. Perhaps, that’s what sparks widespread equity buying.
Portfolio Approach
We took profits on a Healthcare position in our Hotline model portfolio to raise some cash.
Today’s Session
Gilead Sciences (GILD) announced that in clinical trials, Remdesivir can reduce the risk of mortality in Covid-19 patients by 62% versus those receiving standard care. The company stated this "an important finding that requires confirmation in prospective clinical trials." The study also shows continued improvement in recovery times, for those patients taking the drug. GILD is up 2% on the news and the upbeat news has helped the broader market go positive.