Perhaps we have entered the summer doldrums. July trading sessions have been filled with suspense. While there has been some gyrating, there has been nothing like the daily roller coasters that rewrote the record books in the first half of the year.
Another source of anxiety is the race between the coronavirus (COVID-19) vaccine and rising cases.
The thing is: outside of that monster down session on June 11th and the determined media efforts, the market has largely shrugged off higher case counts. But investors will take notice if an entire state goes back to full lockdown. It could happen with a state like California, but the news would be more negatively impactful if it’s coming from a so-called red state.
Yesterday, as a rumor was making the rounds that Texas would go back to full lockdown, the market began to edge lower. Texas Governor Greg Abbott squashed those rumors, and the market edged higher into the closing bell.
Overall, it was a light volume session, where buyers nibbled on dips, but major indices never got high enough to seduce money off the sidelines. The Dow Jones Industrial Average (DJIA) peaked into positive territory like Whack-A-Mole before getting ‘bonked’ and moving lower.
There was never any anxiety or fear. On the contrary, investors were bracing for more difficult sledding.
Light Volume & Okay Breadth
Volume was decidedly light, although it was on par with those idyllic summer sessions of the past. There were more decliners than advancers, but the up volume was better on the NASDAQ, even as the biggest names on that index were under constant pressure.
Market Breadth | NYSE | NASDAQ |
Advancing | 1,357 | 1,332 |
Declining | 1,598 | 1,977 |
52 Week High | 58 | 80 |
52 Week Low | 6 | 12 |
Up Volume | 1.45B | 2.51B |
Down Volume | 2.39B | 1.63B |
Value-Seekers
Value-seekers were not the biggest moves, but Materials and Industrials names kept churning higher. It’s clear a lot of investors decided to cool out in Utilities names, which was by far the higher percentage gainer of the day.
S&P 500 Index | -0.34% | |
Communication Services XLC | +0.17% | |
Consumer Discretionary XLY | -0.27% | |
Consumer Staples XLP | +0.21% | |
Energy XLE | -0.45% | |
Financials XLF | 0.00% | |
Health Care XLV | -0.16% | |
Industrials XLI | +0.03% | |
Materials XLB | +0.33% | |
Real Estate XLRE | -1.17% | |
Technology XLK | -1.24% | |
Utilities XLU | +1.27% |
After the Close
All eyes were on Netflix (NFLX) after the close. The company posted mixed results and offered subpar guidance:
- Revenue: $6.15 billion consensus of $6.08 billion
- Earnings: $1.59 consensus of $1.81
- Subscribers: 10.09 million consensus of 8.26 million
Guidance:
- Revenue: $6.33 billion consensus of $6.40 billion
- Subscribers: 2.5 million consensus of 5.0 million
Even if guidance was in-line with the Street, the fact is that Wall Street was looking for a lot more, which is why the stock was up 48% for the year and 77% from the March 16th low. Moreover, Goldman Sachs (GS) was looking for 12.5 million new subscribers. The stock will open lower, but at some point, it will be a buy.
Other Earnings
Every other company that posted results after the close saw their shares rally:
- Lending Tree (TREE)
- PPG Industries (PPG)
- Marten Transport (MRTN)
- J.B. Hunt Transport (JBHT)
Portfolio Approach
We are adding to Consumer Discretionary this morning and now Cash is a zero in the Hotline model portfolio. So, I continue to spy potential exits. There are a lot of opportunities, especially as value gets a bid.
Today’s Session
The futures are pointing to a higher open across the board. Housing continued to rebound in June. Housing starts gained 17%, or 1,186,000 units from May, topping expectations, while permits for new homes rose 2.1% to 1.24 million, slightly below expectations, and 2.5% below the same period last year when the rate was 1,273,000. Housing completion were 1,225,000.
To see the chart, click here.
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