A September to Not Remember… It’s a Bloody Monday to start the week, with the market suddenly viewing a slew of “old” risks (the upcoming election, US-China tension, eco-data slowing) in a much more concerning light, but the primary driver of today’s dour mood is the threat of renewed lockdowns in the UK as the virus reemerges (just look at ZM +5%, GRUB +1%, PTON +5%). Tech/Semis are holding up relatively well amid the uneasiness as investors look to the old lockdown favorite for shelter (more below), and defensives Utilities and Food Retail are faring better. On the flipside, more Cyclical sectors Autos, Cap Goods, and Materials are handing back some of their rotationary gains. Energy is also lower as DXY strength and Libya resuming some oil exports delivered a blow to crude. And then there’s Banks… the perennial punching back is being bruised again on back of the ICIJ suspicious transactions report involving several global players.

Tick Tock, Tick Tock… The clock is slooowly counting down to the weekend, which can’t come soon enough for US stocks as Tech keeps tick-ticking lower and tick-taking everything else with it. Early on it looked like the sector might use the quad-witching Friday as a chance to bounce out of a busy Fed week, but instead it has steadily slid as the session’s gone on. News that Tik-Tok’s own clock is ticking isn’t helping: the Commerce Dept announced it will block US downloads of the China-founded app starting Sunday, stirring doubt over Oracle’s (ORCL – 0.9%) deal with parent ByteDance will be approved. Second wave virus concerns are also weighing, with data from Europe showing the largest jump in daily cases in months from countries like France and Germany spilling cold water on Travel/Leisure and Airline names (CCL -4.5%, MGM -2.6%, UAL -3.8%). Still signs of rotation are around, with Autos clinging to green and Banks/Financials and non-airline Transports outperforming as well. US indices have attempted to put in a bottom over the last 30 mins (S&P went through 3300) but  it could be a bumpy ride into expiry at the close…     

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!

After Merger Monday Comes… Tech Tuesday? Ok not the cleverest bit of alliteration but the usual gang of Tech, Media, Semis & co are leading the charge once again, though Apple (AAPL +1.4%) is off its highs as its September product event has yielded few surprises. It should be noted the optimism continues to spill over into to pretty much every sector too (besides Banks/Financials), including reopening/recovery spaces (XLB new all-time high, TRAN index nearly the same, SML back above the 50-DMA). Many labeled the early September Tech wreck as an inevitable removal of froth, and the somewhat broader rally of the last 2 sessions provides some hope that the market isn’t simply “re-frothing”, but still a look at FANG concentration shows that the short-term plunge was barely a blip on the longer-term radar. There’s a long way to go before it can be said that investors are spreading the love…

Monday to Funday in 3 Seconds Flat…This week wasted absolutely no time in getting after it. Aside from the fact that the Fed, the ECB and BoE will all make announcements later this week, and there will be a slew of meaningful economic data throughout, there is also quad witching on Friday. Thus, this week was already geared up for some hype before this morning came in extra hot with 2020’s busiest weekend of deals worth upwards of $69bn. The biggest headliners: Oracle (+4.3%) beating out Microsoft (+1%) for the US operations of TikTok,  Immunomedics (+100%) doubling after Gilead (+2.6%) agreed to by the cancer drug maker for $21bn and Nvidia (+4.5%) buying Softbank’s Arm in a $40bn chip deal. Further, UBS is apparently studying the feasibility of a Credit Suisse tie-up. No doubt much focus will be on these deals and all of the aforementioned data, as well as the “skinny stim” plan and how slim it’s actually going to get. But for now, the path of least resistance is still up. One caveat: volumes are average at best – S&P 10-day AVAT -15% today thus far.

In Like A Lion, Out like A Lion…This morning it seemed as though all of the action for the week had already taken place. Never count your chickens or your options. Today’s volatility has continued this week’s trend as megacap tech has now led markets lower for the sixth day out of the last seven. The S&P tech sector is currently subtracting 9 points from the index (without them it would be green) and the Nasdaq is about to close out its worst day since March. All of the maj favorites are down over 1% with Apple and Amazon down another 2% today. Ironically, things ended where they began —with Softbank. Softbank reported mid-morning that it might change its options strategy (now that the world knows it). $9bn in losses could do that to a fund. In the meantime, the dollar has seen a small recovery on the day after inflation data and materials and industrials aren’t feeling a thing. This week began with a bang and is now finishing with a whimper as we all go off to lick some wounds. Our charts team notes however, that the 50-dma are holding– for now. (let us know if you want to see their piece).

Buy the Dip Just a Blip?… US stocks got off to a strong start in trying to add to yesterday’s big bounce but since then it’s been a bumpier ride. The usual suspects FAAMG / Tech / Semis were hot once again out of the gate but have stumbled as investors are struggling to forget the recent correction. Indices are have spent the afternoon in the red but are hovering near the lows of the day; the DXY rising back near positive territory on the day as the Brexit worries crush the GBP hasn’t helped their cause. Still there are bright spots, including Casinos names (LVS +4.2%, PENN +12%) which are benefitting from broker upgrades and Apparel names, with Nike (NKE +0.8%) making fresh all-time price and relative highs. Autos, which fared relatively well through the Tech plunge, and Energy are the laggards (crude lower once again following surprise US inventory builds). It seems investor confidence in buy-the-dip strategy is only so strong at the moment. Comparisons to Tech bubble of 1999 are all the rage these days, so interesting to note just how many dramatic 10% drops the that S&P Information Tech sector experienced that year before the bubble popped…

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.

No S&P For You! – The cult-like following (see below) of Tesla and its fearless leader had the car-maker mimicking a rocket shop with the unrelenting ascent of the company’s stock price. Out of the money calls (we’ll get to that), stock splits, a possible inclusion in the US benchmark index; all contributed to a stock gone wild. Fret not however, a 20% retreat this month alone still has it +317% YTD. With summer over, investors are skimming some of the market froth and again it’s mega-cap tech leading the way lower. Technically speaking there hasn’t’ been any significant damage to the FAAMG crew and if you’re using 2009 as a proxy, these last few days are a mere flesh wound. In fact, we’ve had numerous funds come into us expressing a sentiment of when, not if they’ll get back in. Not the case for value stocks as they give growth a run for their money, energy nearing a new all-time relative LOW vs SPX while banks are 2nd worst on the day.