WOOF WOOF: US indices greeted the dog days of summer with a new 5-month high yday, but today’s less enthusiastic open makes it clear this isn’t going to be a cakewalk for stocks No doubt the recovery’s come a long way, but the stubborn growth of virus cases is stalling further progress (just ask airlines, restaurants, etc…) and more co’s every day seem to flag coming job cuts (BKNG the latest this morn). COVID cases seem to have come off their peak however (for now), factory orders followed up yesterday’s good PMI # with a solid figure itself and June home prices had its largest monthly gain in 7 years. Cyclicals are having a day (banks notwithstanding because, why would ya) with travel names better on talk of improving trends. REITs are taking the Facebook-Vornado news well and Ford is going better on a CEO change. Despite some singular moves, the overall indices are in a holding pattern, albeit slightly in positive territory.

National Watermelon Day and Other Essentials….Despite the notable drop in volumes to start the hottest month of the year, the FANG work horses have been at it again today, pushing the Nasdaq to a fresh record (chart below). However, it’s not only Apple (at an all-time high) and Microsoft (+4.8%) doing work today. A handful of other software and tech helpers have stepped in to take a turn with the baton. Qualcomm (+3.7%), Zoom (+6%), Upwork (+9.3%) and Shopify (+6.2%) are all adding impact thanks to a handful of decent earnings and a friendly upgrade. Even small-caps have shown some life (chart below). However, it won’t take much this week to roil a market that remains at levels that feel out of touch with reality. Investors will be watching Booking, Hyatt, Sabre and Norwegian’s latest trends when they report later this week (as well as Marriott and RCL next week). Further, with jobless claims remaining high and job openings stalled, NFP’s will be hard pressed to maintain the narrative the economy is improving. This is not to mention the risk of renewed lockdowns, political posturing and the potential loss of TikTok (cue millions of 12-15 and 40-50 year olds marching on Washington in a coordinated dance routine).

When’s the Bell Again?…  An uneasy slide into the weekend for US stocks, as even a monstrous earnings showing from the four FANG horseman of the Tech-pocalypse (FB +7.5%, AMZN +3.7%, AAPL +7.2%, GOOGL -5.2%) hasn’t been enough to stem the nervousness that began to creep in yesterday. With Congress unable to reach a deal on unemployment relief on the day current benefits are set to expire, Florida posting a fourth consecutive day of record virus deaths, and jobless claims suggesting the unemployment rebound may be slowing, there’s plenty to have investors looking to take a little risk off on a Friday. The sector table is a tale of two economies, with Tech, Retail, and Media all outperforming thanks to you know who, and pretty much everything else in the red with Autos / Transports / Energy in the basement. For all the talk of S&P concentration in FAAMG, it seems the mega-caps can’t save the day if everything else is pulling the other direction….

LOUD NOISES! Couldn’t we spread things out a bit? FOMC and Tech CEOs on the BBQ yesterday (oh they sure got grilled! Think they slept ok) that led into a potpourri of earnings last night and this morning, with a delectable dessert awaiting post the bell today with Apple, Alphabet, Facebook and Amazon set to report. (A group that testifies together, reports together?) Net-net, there’s a lot going on and while futures and action in Europe suggested today would be an ugly one, that’s not the case as things currently stand. Powell held the line while the earnings narrative has stayed consistent. That being an average EPS beat rate of around 15% with reports of improvement, although some talk of plateauing in July could be cause for concern. Semis specifically strong (making ATHs), Lam Research and Qualcomm posting reports last night that read well, especially the latter’s unexpected licensing deal with Huawei. People haven’t been going to stores that much and so they need stuff delivered – UPS followed FedEx’s lead last month with blowout figures.

Drumroll Please…  A special “late” edition of the View at Two as the FOMC just released their policy decision. After all the anticipation, the statement came in pretty much as expected: the 0-0.25% benchmark rate was of course maintained (and will stay that way until the committee is confident in the economy has recovered) and the Fed will continue to increase its asset holdings at the current pace. Overall a dovish statement, with plenty of caution around the virus determining the course of recovery and acknowledging economic activity / unemployment are well below Jan 1 levels. The announcement hasn’t garnered much market response at all: stocks remain near the highs of the day, and Treasury yields and gold are all little changed from earlier levels though the dollar is slipping a bit – perhaps the upcoming press conference will spur more reaction, but for now the statement is being taken as “inline”

Are You Loving It? – We had some heavy hitters that make up the Industrials index reporting this morning, some familiar names that could provide some insight into the health of some international conglomerates. Pfizer gained after raising its earnings forecast while everyone’s favorite dinner as a kid and late night meal as an adult, McDonald’s, retreated on worse same-store sales than expected. International demand showed signs of recovery, a potentially helpful harbinger for those with a large % of sales overseas, a still underperforming USD furthering the overseas case. Today begins the busiest week for earnings and the oncoming deluge currently has investors at bay. While Q2 may have been a write-off, some companies continue to forego guidance and valuations (forward price-earnings was as high as 22 on Friday; above the cyclical peak in mid-February!) can’t be comforting as concerns about the economy plateauing persist. At the moment more indicators than not suggest the crowd is feeling less optimistic.

New Week, Who Knew…After last week’s minor stumble whence the S&P ended down 50bps (ish), US indices reinstated the move higher today, erasing last week’s move entirely (thus far). Aside from some earnings, there is no clear reason for today’s chosen path, especially since nothing has really changed. China tensions are still looming and rising coronavirus infections (Oz, China, HK) are in the headlines, giving the doves some added expectations for the Fed’s message later this week. Also, the $1T stimulus package is still being held up in lack of communication land, though Kudlow has already mentioned a $1200 check and reducing the unemployment bonus down to $200 from $600. The main support for today’s strength is tech, which is back in investor’s good graces. Apple is +2%, despite being removed from JP Morgan’s focus list, followed closely by it conglomerate companions – F, A, N and G. As mentioned, we have The Fed this week, as well as China PMI and US Q2 GDP. Not to mention, a cool 167 S&P names reporting just in case you need something to do.

The Weak Week that Wasn’t…Bit of a stumble the last few days (how dare you, equities!) and we would argue it’s more or less meaningless in the scheme. US indices have continued to slide lower today as China tensions are now garnering attention again, jobs numbers are erratic (if not underwhelming), and some of the most beloved tech blue chips (Amazon, Microsoft and to a lesser extent, Intel) got a little smack on their bottoms. However, Mr. Powell is holding a press conference next week and he has every reason in the world to lean overly dovish. Further, there has been a good deal of chatter around how the ‘next’ US stimulus plan is struggling to cross the line. However, no parties want blood on their hands ahead of an election, thus more stimulus will be forthcoming – talk is now August. To that end, an S&P week -60-70bps isn’t really a weak at all (spelling intended).

Summer Stumble… US indices have continued to slide lower heading into the afternoon as the S&P is on track to break its streak of 4 consecutive green sessions. China tensions still aren’t drawing much concern, but with Microsoft (MSFT -3.4%) leading Tech lower and without any fresh vaccine news to lean on, the weakness has picked up a bit over the last hour. Signs of sputter in the labor market have also put a dent in sentiment after initial jobless claims rose for the first time since March, reminding that stocks’ successful V-shape recovery isn’t necessarily mirrored in the real economy.

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.