The session was doomed from the start, even though there was early strength in big Technology names and Communications Services. There was simply never any oomph. Instead, it was just a steady diet of negative headlines.
Stimulus hopes are fading, which is no longer an assumed slam dunk. Let’s face it, back in July when Wall Street ignored the expiration of Federal aid, conventional wisdom held that Congress would get its act together sooner rather than later. August saw the stock market rally higher on that assumption. Then came the September epiphany that this is Congress. Yes, the lawmakers finally got something right with speedy bipartisan Cares Act, but then retreated back to their ideological foxholes.
The election became the next stumbling block, but Wall Street still believed that no matter who won an agreement would be reached. I hate to say this, but stimulus is not guaranteed next year. That is, stimulus is not guaranteed until there is one more September-like temper tantrum.
Investors dealt with non-stop news of more coronavirus cases, and more and more cities, including New York and Chicago, looking at lockdowns, stay at home measures and increased restrictions. I still do not think this was the main reason for stocks stumbling along yesterday.
That distinction goes to central bank presidents.
Too Much Talk Not Enough Action
Jerome Powell and Christine Lagarde sharing the stage virtually yesterday offered nothing to illicit investor optimism. Actually, I cannot pin this on the head of the European Central Bank. They have their printing presses running overtime and promise even more aggressive accommodation next month.
Its Federal Reserve Chairman Jerome Powell who is getting on my nerves and triggered the most swelling pressure. He keeps pontificating on how bad the future will be because it’s happening right now instead of later. He talks about the plight of lower income workers and those in vulnerable industries.
Powell has become a social justice warrior, and he is ready to let inflation surge past two percent long enough to get unemployment rates for Black and Hispanic Americans well under four percent maybe under three percent.
To see the chart, click here.
Lagarde has been priming the pump while Powell has been rhapsodizing and complaining about Congress. Maybe he’s afraid to add more stimulus because it would give Congress an excuse to add less. Under normal circumstances, I would like to see them all cap the pumping and try to reduce their balance sheets. But under the current circumstances, enough with the talk already.
The Fed has said Covid19 was its biggest concern. With cases soaring, they are going to have to live up to their promises, because Congress has a poor track record of living up to theirs.
Earnings Parade Led by The Mouse that roared
Disney (DIS) beat on revenue and beat on earnings by $0.45, as the company lifted its paid subscriber tally to 73.5 million.
Other big upside earnings movers after the close:
- Cisco (CSCO) +9%
- Autodesk (ADSK) 6%
- Applied Materials (AMAT) +3%
- Farfetch (FTCH) +16%
- Palantir (PLTR) +2%
Come on Get Happy
Hello world, here's a song that we're singin'
Come on, get happy
A whole lotta lovin' is what we'll be bringin'
We'll make you happy
Theme Song Partridge Family
Must be the vaccine news. Individual investor bullish sentiment erupted higher, eclipsing 50% for the first time since January 18, 2018, on the eve of President Trump hitting Davos like a rock star and wrecking ball and two months before the United States started fighting fire with fire using tariffs to beat back unfair trade relationships.
You know what this means, right?
On Wall Street it is considered the "kiss of death" when individual investors get excited and too optimistic or too deeply involved in the market.
I love it.
I will begin to worry when my buddy that gets in at the top of every asset top (from beanie babies to Iraqi currency) calls to brag about all the money he’s making.
To see the chart, click here.
Hotline Model Portfolio Approach
We kept our powder dry yesterday. This morning, we are adding a new position in Technology on our Hotline Model Portfolio. If you are not a current subscriber to our Hotline service, contact your account representative or email Info@wstreet.com to get started today.
Today’s Session
The major indices are looking to rebound at the start of trading. Investors will be awaiting the release of the University of Michigan Consumer Sentiment due out at 10 am. For now, hopes of a vaccine are outweighing the rise in Covid19 cases.
Producer prices final demand for October rose 0.3%, topping expectations for a 0.2% gain, and gaining on September’s 0.3%. Cost of Goods rose 0.5%, due to an 2.4% increase in food prices, following September’s 0.4% increase. Service prices rose 0.2%, slower than September’s pace of 0.4%, as transportation and warehousing cost rose 1.1%.
Year over year, producer prices rose 0.5%, the largest gain since February. PPI core index, excluding food and energy, increased 0.1% from the prior month, but fell below September’s 0.4%, and was 1.1% from 1.2% year over year.
To see the chart, click here.
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