Second Round Of Stimulus Behind Schedule

Now it may be cold on the east coast

But on the other side of town it never rains

It never rains in southern California

It never rains in southern California

It never rains in southern California

-It Never Rains (In Southern California) byTony! Toni! Tone!

Everyone knows it never rains in Southern California, aside from the average amount of precipitation, on average, totaling 34 days per year. While that’s substantially lower than the 106 days on average for the rest of the nation, it belies the folklore. I’m not trying to ruin all those love songs and tourist posters, but I am just making a point. For a while, it felt as if the stock market, especially the NASDAQ, never went down.

Well, the rainfall has poured losses for years. While the losses were not enough to spread panic, there were several messages among the raindrops.

Message to Washington

I have been warning for weeks that Washington has been too lax when it came to the next round of stimulus. Now, it looks as though we could see some gamesmanship delay the much-needed help.

Senator Mitch McConnell leaped at the chance to shepherd the next round of stimulus through. He has a  great track record of pushing through confirmations of judges and finding compromises when observers have had their doubts. However, Senator McConnell is already behind schedule. He signaled some kind of outline that would be ready this week, and now it will be in the offing on Monday.

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The theme will be “Kids, Jobs, & Healthcare.”  

There is serious debate over the additional $600 in the federal government unemployment benefit layered onto the typical state insurance. It’s a ton of money that has 60% of folks making more money than they would if they were at work. This has created a conundrum because those Americans without job prospects will need more than state benefits.

Wall Street wants to see the largess continue, as a big chunk of that cash goes immediately back into the economy.  It seems to me that, especially in an election year, politicians would love such largess.  

Anticlimactic

There are a lot of key earnings results that turned out to be anticlimactic after monster rallies. Now, investors will have to grapple with the old axiom of selling on the news, or ponder if the runaway train has come to a screeching halt. 

Profit-Taking

Yesterday was also all about profit-taking beyond those Mega-Cap growth names:

• (MRNA) Moderna -11% on the session +277% on the year
• (NVAX) Novavax -6% on the session +3,354% on the year
• (CTXS) Citrix Systems  was the biggest loser in the S&P 500, but it’s still up by 35% for the year
• (THO) Thor Industries has erupted, as America rediscovered RV, shares still up by 50% for the year

Most of the selling was in the NASDAQ, but the overall volume was light, while the NYSE breadth was more or less even.

Portfolio Approach

We are closing out five positions in the Hotline Model Portfolio to redeploy funds and raise the overall cash level.

Today's Session

The major indices are negative.  Fear of U.S.- China tensions are rising. Technology is getting hit in part to disappointing earnings from Intel (INTC).  Profit taking is adding to the pressure.  Further, FAANG is pulling back yet again.  Damning articles in the Wall Street Journal on how Amazon (AMZN) lured start ups with the promise of funding only to steal their ideas is adding increased concerns.  AMZN is currently down about 4.5% on the week. NASDAQ is currently down close to 2%, followed by the S&P 500 -0.90%, and the Dow -0.60%.