Once again, it was close, but no cigar. The S&P 500 came within shouting distance of closing at an all-time high but stumbled to a slight loss on the day.
The NASDAQ looked good, although an intra-day warning from Micron Technology (MU) took some of the starch out of semiconductors, which were enjoying a fantastic session. After the close, Applied Materials (AMAT) beat on revenue, earnings, and offered upside guidance. Also, those Software-as-a-Service (SaaS) cloud names have begun to turn around and seem poised for big upside moves.
Keep an Eye on Steepening Curves
Steeper yield curves are generally positive indicators for the economy and give a boost to Financials and Industrials. I like what I’m seeing, and there will be more commentary to come.
Positive Fund Flows
Well, it turns out there was positive fund flow into equity funds this week, although mutual fund flows remain negative.
I bristle when I hear market mavens say the only place to invest money is in the so-called TINA (There Is No Alternative) trade when money continues to pour into bonds - and lately, commodities funds.
Ironically, lately, when investors have put in more money than they have taken out, the next day the market goes down. In June and July, this was more than a gentle nudge (see table).
Snake Bit? | Next Day Performance | ||
Positive Fund Flows | S&P 500 | Dow Jones Industrial | NASDAQ Composite |
June 10 | -188 | -1,862 | -528 |
July 22 | -40 | -354 | -245 |
Aug 12 | -7 | -80 | +30 |
This week, there were net inflows into equity funds of $5.7 billion, and perhaps if the S&P breaks out, and other indices continue to rally, we could actually see more cash.
To see the chart, click here.
Last One Out, Turn Off the Recovery
Well, Congress is going all the way in the ultimate game of chicken and allowing the economy to survive on its own even as large swatches are handcuffed by an assortment of rules, including social distancing and local prohibitions.
I am still dumbfounded.
Portfolio Approach
Yesterday, we took profits in Consumer Discretionary in our Hotline Model Portfolio.
Today’s Session
Congress has left America high and dry. I spent the morning reading story after story of banks increasing lending standards, including mortgage requirements while other parts of the nation are doing very well. I wonder if our elected officials care about that half of the nation that do not have the luxury of a recess, but are instead stuck at home with no jobs and no hope.
Retail Sales
- Headline +1.2% from +7.5% in June and below consensus +2.3%
- Ex-autos +1.9% above consensus +1.2%
- Ex- autos and gasoline +1.5%
- Control number +1.4% this is a powerful number that is fed into GDP calculation
- Observations
- Electronics through the roof
- Restaurants grew faster than grocery
- Department stores eke out a gain
- Auto decline surprising
Retail Sales July 2020 | M/M | Y/Y |
Headline | +1.2% | +2.7% |
Ex-Motor | +1.9% | +1.9% |
Motor | -1.2% | +6.1% |
Furniture | 0.0% | -0.7% |
Electronics | +22.9% | -2.8% |
Building Materials | -2.9% | 14.8% |
Grocery | +0.4% | 10.6% |
Health and Personal Care | +3.6% | +3.2% |
Gasoline | +6.2% | -15.6% |
Clothing | +5.7% | -20.9% |
Sporting Goods | -5.0% | +17.8% |
Department Stores | +0.1% | -13.4% |
Internet | +0.7% | +24.7% |
Restaurants | +5.0% | -18.9% |
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