Within distance – It’s been a great week for stocks and the broader indexes are getting close to hitting new highs.  If markets get a late push (anything can happen in the last 15 minutes), both the Russell and SPX could eclipse their previous bests.  All sectors are in the green, with Energy (shrugging off Oil weakness) in the top spot.  Banks are also trading well today, with the BKX up 2.16%.  Retail is the laggard, held back by Etsy (-1.3%) and Amazon (-52bps).  The WFH beneficiaries (including mega tech) are actually trading lower (Zoom -10%, Peloton -6.7%, Wayfair -5.2%), but that impact is not making it to the indexes.  If indexes close at current levels, the S&P will finish +1.7% for the week, Nasdaq -1.07%, and Russell 2K +5.3%.  A new trend forming there?

Everyone into the pool – Votes are still being counted, and lawsuits are flying, but markets are still reacting as if a quick outcome will occur.  What is known though is that no Blue Wave is coming.  That realization yesterday forced a quick move away from those perceived winners (Industrials/ Banks/ Material), and back into the YTD leaders (mega tech/ Semis). The approach today is more all-encompassing, with yesterday’s losers leading.  Materials/ Metals are +5%, Banks +4.1% and Transportation +3.3%.  Homebuilders are lagging (ITB +16bps), but they were up 5% Wednesday.  As the Value guys play a little catch up, mega teach and Semis are also performing.  Earnings from Qualcomm (+13.4%) and Qorvo (+7.7%) reminded the market again why the sector is +34% this year.  If the major equity indexes were testing their technical levels Monday, they are above them now, and even the Russell 2000 is at an 8 month high. 

Risk off! Stimulus negotiations seem to be done for now (without an agreement), earnings are in full swing, the Presidential election is five days away, and two of Europe’s largest economies are moving towards lockdowns.  One of those generally can halt investors, but all occurring at the once are making investors rethink their risk profile.  Risk assets are getting hit hard across the board, with Oil -6%, Silver -4.7%, Equities -2.8%, and “safe” havens Treasuries/ Dollar moving higher.  In equities, the pain is across the board.  Insurers are the best sector (only down 1.2%), while industries exposed to lockdowns are underperforming (Hotels -3.4%, Airlines -4.3%).  While the tape is very red, it is interesting to see the Value down less than Growth, by about 72bps (SPYV -2.53%/ SPYG -3.23%). 

All about the stim – Negotiations are still occurring on stimulus, and while the range narrows between Pelosi and Mnuchin, traders need to be mindful of Congressional approval. Stocks are trading with each headline, but a deal is not likely before the weekend, so the uptick in volatility will remain. The Beige Book showed that the economy improved across the board, so positives are there. Media is outperforming as it gets a lift from Twitter (+7.5%), Facebook (+4.9%) and Interpublic (+3.1%). With an uptick on UST yields (see below), Homebuilders (ITB -3.1%) are seeing some profit taking. Plus, a fresh Existing Home print is tomorrow morning (another high btw).

Money talks – Markets once again trading in the green. Yes, stimulus talks were stopped Tuesday afternoon via a tweet, but that was only until President Trump threw out his own bid. So now both sides are talking again, and stocks are still watching (Pelosi said no to a stand alone airline bailout, which hit markets earlier, only for them to recover). Stimulus is coming. When is the tough answer. With a new hurricane about to hit the South, Oil has moved back above $41 today, and this has put the Energy names in the outperformance category. But all of the indexes are faring well, and this has most sectors higher. Banks will be in the news next week as they start the earnings season (see below), but Morgan Stanley (MS +1.1%) got ahead and announced they would be buying Eaton Vance (EV +48.2%), and this just after the closed the E*Trade deal. Treasuries have seen their yields rise this week, but the 30-year was trying to break that trend today ahead of the 30-yr auction (yield current 1.56%). The auction had a lower bid-to-cover (2.29) versus the previous 12 (2.35), and had a higher dealer participation (23%). This will likely keep a lid on any more yield improvement for the day. The S&P needs to stay above Tuesday’s high of 3431.56 to keep the short term turn around positive, but the advance/decline line on the S&P 1500 is also encouraging for the bulls.

“Run away, Run away” – Well, not today.  The S&P 500 continues to hold the June high (3233) support and investors are using the opportunity today to buy some of the names that have been working this year (decade).  Tech once again is leading with help from Apple (+2.4%) and Microsoft (+1.8%), and FANG is up 1%.  Overall breadth in the SPX is positive, with 400 names trading higher.  The sector lagging?  Energy (XOP -1.2%).  Even though participants are adding to their favorite stocks, US Treasuries are still in the green (10-yr yield 0.656%) as well as the Dollar (DXY +34bps), so it’s tough to say today is a risk on day.

Still not sold – The familiar theme of a tech led rebound has been the narrative today.  While the FANG is seeing a nice bounce (+1.8%), Media is getting more attention after Trian announced a stake in Comcast (+3.3%) yesterday.  Retailers are also enjoying the green, but today its Carvana (+23%) positive guidance rather than the Covid winners leading.  Banks unfortunately are still lagging, with the BKX (-2.3%) remaining below all of its main technical moving averages.  All major equity indexes remain under their short-term 50 day ma’s (SPX 3347, CCMP 11,009, RTY 1529), and until they reclaim those level, downside to their 100’s remain a possibility. 

A cautious Fed means Red – Chairman Powell yesterday moved out his low rate scenario to the end of 2023 when they expect inflation to finally hit 2%.  But in the new let it run hot inflation targeting, does that mean rates could be lower for even longer than 2023?  Powell has always been the pragmatist in regards to Covid, listening to doctors, and acknowledging the economic impacts, but that does not mean the markets want to hear it.  Stocks, and bonds, are both under pressure again today in a broader risk off mood.  FANG is down 2.4% and this is keeping Nasdaq below its 50 day moving average (10982).  Value (-0.37%) is outperforming Growth (-1.4%), as well is the Russell (RTY -0.62%).  Tomorrow is quad witching expiration, and this will start to drive index/ single stock action into the weekend. 

Post Fed – With little inflation and high unemployment, the Fed was not expected to do much to change their stance, especially after Chairman Powell unveiled the new inflation criteria in Jackson Hole last month.  The Fed did not change rates, and actually moved their expectations for low rates through 2023, when they see inflation moving towards 2%.  That extra year (rate low through 2022 was the original view), showed that Powell intends to help heal the economy with low rates, even if that may push certain assets higher.  Also in its statement, the Fed will continue with their asset purchases.  Pre-Fed, the S&P 500 was trading around 3404, Nasdaq -57bps, and Treasury yields at 0.67%, but after the more dovish stance, Tech has traded up from its lows, and this has helped Nasdaq off its lows (now down 10bps), and the 10-year is yielding 0.70% (day’s high).  This can all change of course in the last hour!

JOLTED – After dropping for three days, US equity indexes were hovering at or just above their 50 day moving averages.  But a job opening reading from JOLTS showed that the datapoint rose to 6.628mn in July, better than the 6mn expected, and above June’s 6.001mn.  The S&P 500 gapped higher on the print, and is back above 3400.  Instead of buying the re-opening stocks though, investors are focusing on the YTD winners (see below).  Granted the JOLTS data is from July, so tomorrow’s weekly claims number will be a better gauge to job/ jobless growth.