Houston, We Have A : No, apparently we do not. This is becoming the spat that cried wolf, at least in terms of market reaction; which could turn out to be a big mistake. Word of the US closing the Chinese consulate in Houston (the first one when relations thawed way back when) caused a tiny ripple but equities have shrugged it off. Mega-cap techs are doing ok but nothing resembling Monday’s move. Talk of a stopgap deal from Washington that maintains the $600 weekly benefit has kept equities afloat, while Pfizer and BioNTech provided today’s vaccine hope after agreeing with the US gov’t on nearly $2bn worth of doses before its even been approved. The lack of broader market reaction suggests some skepticism may be creeping (speaking of boy that cried wolf!). Energy is a drag after crude stockpiles far surpassed expectations. S&P futures broke to the upside of the range and former resistance holding as support; encouraging if it continues to hold. What’s less heartening is small-medium cap names aren’t being favored as the big 3 seemingly take the day off.

When in Doubt… – Buy large-cap tech; that’s playing out again today. Amazon is today’s torch bearer of a still red-hot space after taking a bit of a breather last week. For those counting, the “retail” giant has increased its market cap more than $550bn YTD – even after hearing on a daily basis the strength of the FAAN(M)G’ers, the #’s are staggering. A slate of tech (MSFT, Intel) and retail (Tesla) earnings are set to come later this week. Today’s highlight and subsequent lowlight came via an initially promising report on the efficacy of AstraZeneca’s Oxford vaccine. The news was promising but data remains small as does the test cases – the stock faded but the overall market has held up ok, although the troubling divergence between the Nasdaq and Russell 2000 persists.

A Horse Walks into a Bar – And the bartender asks, why the long face? Seriously though – on its face, you’d think the market would be enjoying a positive day with the balance of news being in the words of Gaylord Focker, strong to quite strong. Economic data on balance read well, with retail sales the star of the show, coming in well above expectations and nearing pre-pandemic levels. (Although a leg is about to be kicked out from this support) Jobless claims came in slightly above while continuing were below. We got a mix of sectors reporting today, with healthcare and banks being the highlights, the latter rounding up the week for the IBs. Again, the thrust of reports were positive, yet all indices sit in the red. One reason for the dour reaction? Despite a massive windfall for the reporting banks this week, they’re still prepping for a deluge of bankruptcies to come. The worst part? They don’t really have a clue how bad that’s going to be. Because of this, investor sentiment remains bearish (everyone hates this mkt remember?), but remember this usually serves as a contrarian buy indicator.

Topsy-Turvy: While the last number of weeks have experienced an overriding trend or momentum throughout, this week has been a bit harder to pin down. It’s alternated gains and losses, largely dominated by a tech space that knows no quit. Reports that China’s state funds were SELLING overnight after a clarion bullish call earlier in the week caught some off-guard. Add in some concerning market internals and US markets seemed preordained for a soft finish to the week. But a positive report out of Gilead on its much-heralded Remdesivir treatment helped markets reverse course. The dynamic at play seems to be, concerns about a recovery + increased COVID = buy the mega-cap techs. Hints at a possible cure/treatment/resolution/life back to normal-ish? Buy the value/underperformers. Ahead of what could be a severely ugly reporting quarter, banks were bid for, as were autos and energy. Carnival provided an update that if not supremely positive was bereft of negative and those names cruised on calmer waters. But these days of rotation have been less frequent and could be leading to an unhappy ending.

Seriously? – As Johnny Mac would say, you cannot be serious. Well if you haven’t been paying attention, in 2020, anything and everything is possible (see today’s Meme for further proof). Equities went higher than the fireworks that colored the sky over the weekend. Reason? A not so subtle headline out of China suggesting a bull market is more important than anything is one. Essentially another euphemism for stimulus, again foregoing any genuine fundamental reasons to be buying/chasing. There is the expectation of a 5th fiscal bill in the weeks to come and QE could be ramped even further at the September meeting so…if it ain’t broke..? Low volumes will result in exacerbated moves and data suggesting outflows from money markets suggests some of that sidelined cash is coming in to fill that summer vacuum. Put it all together and indices are looking to carry on from last week’s momentum.

It Was the Best of Times… – After the worst of times; surely it’s been a tale of two cities quarters. For the S&P, the last 3 months have been the best in 22 years but it’s hardly felt that way for most; context is key! We know what happened to precipitate this, but it’s nothing a healthy dose of hope, optimism and more than $4 trillion couldn’t cure. Today reverted to a pattern we’ve become accustomed to over the last few months – growth over value with tech reigning supreme. Micron (MU +4%) gave semis a boost on +ve earnings news (people might not be going places but their data is) and Conagra (CAG +4.9%) did the same but these sectors have been the COVID ‘winners’, so not something that should massively influence market sentiment as we continue down a 2-speed economy. Boeing (BA -6.1%) gave Industrials a boost yesterday; after losing a key customer, it’s doing the opposite today.

Nasdaq Attack: You cant keep a good index down. It helps when your components include you know who and so good, bad or otherwise for the overall markets, the Nasdaq keeps calm and carries on, now +ve for 8 of the last 9 days. Defensive and reliable tech sectors are setting the pace while volumes have been relatively light. Thank Chairman Powell’s pending appearance. Stimulus is the number one reason we are where we are, bulls and bears can at least agree on that much. And with concerns about the pending fiscal cliff as unemployment looks set to end next month and no future relief coming from Congress, Powell is the only one that controls the purse strings right now. Speaking of, the market rebound has far overshot the amount of $$ put into the system – does the below look right/feel good to you? Markets are priced for perfection – a scary thought given they are most definitively not…

Scissors > Paper – And right now optimism > pessimism. The official kickoff to the summer season has released animal spirits, as equities rip higher from the start. This echoes moves across the globe, with the S&P going above the psychologically important 3k level, which also coincides with the 200dma. This enables us to target the early March “first recovery high” at 3136, about 4.5% from here with 3200 not out of the question – absent any guidance, the trend and charts are your friends (see below). Talk of skyrocketing infections in emerging markets (Chile/Brazil) as well as pockets of waves throughout the US have been nudged aside, worst-case scenarios yet to play out. Instead the focus remains on stimulus, lockdown lenience and vaccines – welcome Novavax to the party!

More Anything? More Everything! – Today’s buying binge was reminiscent of Jerry Seinfeld in first class, when the attendant asked if he’d like more of anything – more everything indeed. News was already being spun positively early in the morning – the Moderna vaccine results (on EIGHT patients mind you) sent the market into a full blown Tasmanian devil tornado. We hadn’t seen value/cyclical names get bid for but that narrative shifted a bit today, with banks, autos, energy, travel/leisure and certain consumer disc names north of 5% gains, and plenty of names within those sectors into double-digits. The R2K, also failing to keep pace with the bigger indices, was lapping the field at +5.5%. The burst in optimism led to the biggest imbalance the TICK Index has ever seen at today’s open.

Disneyland (Shanghai) open, Fantasyland next? – There’s a growing chorus that many bulls already reside in this hypothetical amusement park. Yesterday a prominent US IB said stocks are due for an 18% pullback, today another says the bullish case for US stocks “left us about six weeks ago” and the always colorful (yet generally bearish) David Rosenberg said the United States is in the midst of the Great Repression – the commentary didn’t improve from there. Want something for the bull crowd? After GDP declines similar to what we saw in Q1, historically we’ve seen the S&P go better (see below)…we trade modestly in the red today as the market digests another historic albeit expected data point (consumer prices).