As the Washington standoff for a new coronavirus relief bill continues, the markets marched higher yesterday. There is hope that an agreement will be reached by the end of the week. Small caps were the best performers with the Russell 200 up 0.7%, followed by the Dow, +0.6%, and the S&P 500 and Nasdaq both gaining 0.4%. For the year, the Dow and Russell are still down and may be intriguing to value investors:
- Nasdaq Composite +21.9% YTD
- S&P 500 +2.3% YTD
- Dow Jones Industrial Average -6.0% YTD
- Russell 2000 -9.1% YTD
Nine of the eleven S&P 500 sectors finished in positive territory, with Energy rising 2.5% as oil rose to $41.68 per barrel. Healthcare and Real Estate were down.
S&P 500 Index | +0.58% |
|
Communication Services (XLC) | +0.64% |
|
Consumer Discretionary (XLY) | +0.80% |
|
Consumer Staples (XLP) | +1.25% |
|
Energy (XLE) | +2.43% |
|
Financials (XLF) |
| -0.41% |
Health Care (XLV) |
| -0.44% |
Industrials (XLI) | +0.25% |
|
Materials (XLB) | +1.42% |
|
Real Estate (XLRE) | +1.49% |
|
Technology (XLK) | +0.26% |
|
Utilities (XLU) | +1.10% |
|
Breadth was positive and the up volume outpaced the down over 2:1.
Issues: | NYSE | NASDAQ |
Advancing | 1,901 | 2,054 |
Declining | 1,082 | 1,297 |
52 Week High | 101 | 207 |
52 Week Low | 9 | 18 |
Volume: |
|
|
Advancing | 3.14B | 2.85B |
Declining | 1.37B | 1.30B |
Portfolio Approach
We are taking profits on 4 positions this morning in Consumer Discretionary, Healthcare and Technology and raising Cash to a 4 weight or 20% in our Hotline Model Portfolio.
Today’s Session
It was a very disappointing ADP employment report for July. Private sector added 167,000 jobs, while estimates were for an increase of 1.9 million. Hopefully, this will get the attention of the folks on Capitol Hill to get a coronavirus relief bill passed. In June 4.3 million jobs were added and 3.3 million in May, after the horrific loss of 19.4 million in April.
To see the chart, click here.
Midsize businesses were hit the hardest, down 25,000 jobs
Business Size | Change |
Small 1-49 Employees | 63,000 |
Midsize 50-499 Employees | -25,000 |
Large 500 or more Employees | 129,000 |
Good producing companies added only 1,000 jobs, while service producing added 166,000.
Good Producing | Service Producing |
Mining -1,000 | Trade, Tran & Utility +41,000 |
Construction -8,000 | Information -3,000 |
Manufacturing +10,000 | Financial Activities -18,000 |
| Professional & Business +58,000 |
| Education & Health +46,000 |
| Leisure & Hospitality +38,000 |
| Other +3,000 |
The U.S. dollar is continuing to weaken, and is down a tad again this morning, with the index trading at $93.27. The 10-year treasury trading down to $0.52, nearing its record low of $0.50. Meanwhile, precious metals are soaring, and Gold has topped $2000 per ounce and is at an all-time high of $2020/ozt.
On the earnings front, Walt Disney (DIS) is up 6.7% this morning after reporting earnings that beat the estimates. In addition, DIS announced it will release the long delayed “Mulan” in theaters on August 21, and it will be available on Disney+ for $30 on September 4, 2020.
Novavax (NVAX) is also rising +23% on positive news from the data of its Phase 1/2 Covid-19 vaccine trial.
Speaking of Covid, Alex Azar, U.S. Health and Human Services Secretary, is going to Taiwan for discussions on how they handled the pandemic. This will likely add more strain on the U.S. – China relationship.
Tropical Storm Isaias made its way up the east coast killing five and hitting North Carolina and in my home state of New Jersey, 1 million people are without power, me included. Meanwhile, in Beirut, Lebanon, over 100 are dead and thousands injured after a massive explosion of 2,750 tons of ammonium nitrate, which is used in fertilizer and making bombs. Our thoughts and prayers go out to the people of Lebanon as well as those hit by the storm.
The major indices are up, and earnings are trumping the ADP disappointment.
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