Friday’s session was much more convincing than Thursday, which was ugly and cautious, despite major indices finishing higher. The market breadth was impressive, and major indices finished the session very close to their intra-day high points.
The NASDAQ still saw more lows than high milestones, underscoring the tough reality of momentum stocks. High Beta names are great on the way up, and gut-wrenching on the way down. These names become overbought, but it’s hard not to chase, as behavioral analysis replaces fundamental and technical work.
The same is true when they stumble.
NYSE
- Advancers: 2,344
- Decliners: 622
- Up volume: 3.13 billion
- Down volume: 388.7 million
- New 52-week highs: 156
- New 52-week lows: 65
NASDAQ
- Advancers: 2,491
- Decliners: 675
- Up volume: 1.65 billion
- Down volume: 348.3 million
- New 52-week highs: 67
- New 52-week lows: 111
The Stock of the Day: John Deere
Friday, John Deere (DE) posted a monster earnings missed, and the initial reaction suggested an awful session for the beleaguered company and stock.
The stock’s reversal and strong bounce could be a proxy for the entire stock market. Major indices held at key support points, as buyers emerged over the last couple of sessions and became aggressive, going into an August weekend.
During the session, news that President Trump met with several bank CEOs added to the latest shift in the conventional wisdom. The administration was ready to temper angst over trade, and more specifically, find a way to delay other tariffs still in the cue for September 1.
One of the bank CEOs Trump spoke with was Bank of America’s CEO Brian Moynihan, who also opinioned to press on a variety of topics, including:
- U.S.-Mexico-Canada Agreement (USMCA): Congress must pass it.
- Recession: “we have nothing to fear about a recession right now except for the fear of recession.”
- China Trade: the biggest question market for businesses which means stalled investments and projects.
Bottom Line
The market is still range-bound, bouncing around in huge clips that would eventually eat away at investors’ confidence and even negatively influence Main Street beyond sentiment.
President Trump will decide on the near-term fate of Huawei before the opening bell. Even though equity futures were strong over the weekend, this news could change everything.
Approach
Health Care and Technology are now a 2 and cash is at 4, or 20%, of the total intermediate term investing portfolio, as we added another technology position this morning. If you are not currently a subscriber to our Hotline service, click here to get started today.
Communication Services | Consumer Discretionary | Consumer Staples |
1 | 2 | 1 |
Energy | Financials | Healthcare |
1 | 1 | 2 |
Industrial | Materials | Real Estate |
2 | 3 | 1 |
Technology | Utilities | Cash |
1 | 0 | 5 |
Today’s Session
This morning, the markets are feeling better about the US – China trade war, as the administration is looking to extend a waiver for companies selling to Huawei and giving Apple a special carve out. More importantly, there is a sense communication between the two presidents was cordial toward the end of last week.
I think there is a chance the remaining September 1 tariffs are suspended, but it’s going to take serious work, and some give from China.
Recession Talk
When all the Sunday morning talk shows breathlessly talked about recession, it was clear there was a lot of wishful thinking (out loud) while ignoring facts. This table on Axios underscores the fact business economists’ anticipation of 2020 recession actually declined since February, but this isn’t a headline you will read anywhere today.
In addition to less saber-rattling, the yield inversion between the two- and ten-year treasury bonds has widened.
- 2 Year 1.515%
- 10 year 1.601%
The major indices are poised to open significantly higher. The key upside test for the Dow is 26,249.