Welcome to the Grand Re-Opening! US markets continue to embrace the “light at the end of the tunnel” as States slowly re-open their economies.  While the V, U or Nike swoosh rebound remains to be seen, any economic re-start is a short term positive.  Ford, GM and Fiat Chrysler all look to get their plants going, as Simon Property will open 49 sites in early May.  The shift has helped the economic sensitive SmallCaps outperform once again.  The Russel 2000 has gained 5% this week, and is once again above its 50 day moving average.  As a harbinger of the economy, this index will be the one to watch for any future economic disruption. 

Remember When… the S&P didn’t close up or down more than 1% for 70 consecutive sessions between October and January? Feels like ancient history, but even still it’s uncanny that despite the SPX trading up as much as +1.5% today, it still feels like a “boring” start to a busy week for US markets. Cyclicals / Value are leading the way as Tech takes a relative breather, and Small Caps are enjoying a much needed outperformance day (IWM +4.4%). Still certain measures of Growth vs. Value show that on a technical basis, Growth’s relative outperformance doesn’t appear to be ending anytime soon (JPM chart below)

It’s a Friday! Fridays have not been kind to equities this year, with indexes closing in the green only 26% of the time (tough to take risk during the virus outbreak).  Currently though, stocks are trying to beat those odds.  Led by Tech/ Semis, the S&P is hovering near its 50 day moving average (2807). Underperforming? Energy names are giving up some of their 15% gains seen this week (even in the wake of the Oil implosion).  US Treasuries are also stable today, with the 10-year yield currently sitting at 0.60%  Next week is busy for the Central Banks, and the Fed meets Tuesday and Wednesday. Plus, earnings will be in full swing (especially from the FANG gang).

On Your Toes… If you wanted to know how much the market is pricing in the success of Remdesivir, you got your answer. A headline from the FT claiming the drug “flopped” in its first trial in China immediately sent Gilead (GILD -5.7%) plunging to a volatility halt and sank the S&P into the red. However stocks quickly rebounded as details emerged that the trial was actually halted due to “low patient enrollment”, and as Gilead assured the data didn’t show any meaningful conclusions. Oh, and to make things more confusing, the data wasn’t supposed to be released in the first place, and was only picked up by news outlets after the WHO mistakenly posted it to its website. The S&P now once again heading towards negative territory goes to show just much the investors have riding on an effective treatment

Oil’s Well That Ends. There’s a 0% chance we have seen the end of the oil storage saga that has plagued the globe of late. Crude +21% today means nothing when the price is still below $15 and the buildup continues to hit new records (and USO continues to plummet) . If this continues, the loss of revenue is likely to create widespread financial and political pain for countries reliant on petrol production.

‘I’n a ‘B’ad ‘M’ood – If you were able to pick up on those not so subtle clues, the market looked to recover from Monday’s slide lower and pinned some hopes on the first big tech name to report. Granted this earnings period will be a giant finger in the air (not that one although by the time the season is over…) but IBM’s report didn’t live up to the challenge. One particular comment about a ‘a shift in client priorities toward the preservation of capital’ seemed to spook investors and cause a selloff in a crowded trade that had been relatively immune. No longer, at least not today. FANG has been caught up in the momentum unwind but with a whole lot of Netflix and Chilling going on over the last 5 weeks, the streaming service gets a chance to turn the tide as they report post the bell.

Hold Your Horses… 3:50pm on Friday: the initial imbalances for close are posted, providing the extra boost to push the SPX back above its 50-day avg in an orderly +2.7% up-day led by Value sectors. Sounds like the perfect platform for the stocks to continue their rebound, right? Unfortunately not, as markets open the week by once again digesting a harsh dose of reality. Front-month WTI crude futures nearing complete collapse will certainly suck the air out of the room, but all things considered the damage is not too bad. Luckily headlines on the virus front continue to shows signs of easing as well, with the growth of cases decelerating in New York, Italy, and France (amongst others).

Glass Half Full of FOMO… In such uncertain times nearly every set of headlines is up to interpretation, and today is no different. Caveats are required as President Trump unveiled the bones of a plan to re-open the US economy (but left a lot of questions left unanswered) and health officials released some positive treatment results from Gilead’s remdesivir (which the co itself cautioned is anecdotal), but investors are choosing to look on the bright side (as they have more often than not as of late). Unlike much of the week however, Tech and Healthcare are taking a back seat to Value sectors like Energy, Banks, and Autos as optimism and certainly a healthy serving of FOMO take hold on a Friday. 

Eye of the Tiger… Stocks have refused to give up today. Despite two selloffs –the first after 22m Americans reportedly filed for unemployment (erasing all jobs created since The Great Recession), and the second after Gov Cuomo announced an extended lockdown until at least May 15th  , the S&P continues its desperate fight for green. Retailers and Healthcare are providing some of the muscle, but lest we forget Netflix (+3.5%) and Amazon (AMZN +4%), who continue to take over the world with new highs again today. Another stock of note — Morgan Stanley (-0.4%) bucking the bank trend (JPM -4%, GS -2.2%). The company saw good underlying performance and has limited its ongoing exposure to credit risk, allowing it to outperform its counterparts. It will be interesting to watch the rest of today play out – Energy  and Banks dragging the clawing S&P.

Reality Check…. If last week felt like the market was cherry-picking the good in headlines, today’s sell-off is a logical response to an inevitable dose of reality. Optimistic attitudes allowed the S&P to quickly retrace half of its losses, but that’s only created an opportunity to pause and more carefully assess the underlying damage done to the economy (and earnings), and the picture isn’t looking quite so rosy. Perhaps it’s just a temporary pullback, but unnerving signs like DXY pushing back toward 100 and small caps sitting out from the recent rebound (RTY -29% ytd) leave the unfortunate impression that the damage done beneath the surface hasn’t fully come to light