About That Earnings Clarity… Earnings season is officially underway and stocks can’t seem to make up their mind on what do, though that’s somewhat understandable given that yesterday’s confidence shaking afternoon fade remains a fresh memory and Banks have elicited a roller coaster response from their Q2 results this far. JPM (-0.1%) and Citi (-3.4%) initially looked to lead the space higher after Investment Banking revs came in clutch to save the banks’ profitability (WFC -5.8% not so lucky…) but both have since turned red and the sector is now the worst performer (more on that below). Otherwise though today’s action has a “rotation” theme to it with Autos and Materials outperforming along with Energy getting a bid ahead of an OPEC meeting tomorrow. Throw in China retaliating against Lockheed Martin (LMT -0.4%) over a Taiwan deal and the ever-flowing stream of virus news and you understand why uncertainty / fear have US indices treading water for the time being

[Not Quite] Bloody Thursday… June 11th was almost a month ago, but the S&P’s -5.9% plunge that day has been on many traders’ minds (bears especially) ever since. While it’s felt like the rally has gotten back on track and the Nasdaq has successfully put that “Bloody Thursday” in its rearview (thanks Tech!), the S&P has not been able to regain the 3180-90 ground it treaded on June 10th. A fresh failed attempt today (intraday high 3179) momentarily spurred some fears of a repeat sell-off, but equities have regained their footing to trade modestly lower (Nasdaq green now). It’s no doubt a defensive day with Costco’s positive update (COST +2.9%) putting Food Retail on top and favorite hiding spot Tech in tow, while Banks, Autos, and Energy receive their daily beating. Semis are also turning higher in the afternoon after the CEO of Microchip (MCHP +3.5%) noted recent order growth.  But it’s hard to be too bearish when 4 of the “Big 5” are making new highs, and if/when the S&P does get over that technical hump it may be the green light the bulls are looking for to take on the ATH

Going Streaking… 5 up days in a row for the S&P, 15/17 for the Nasdaq… stocks have been on quite a run of late despite all the virus threats to reopening, so a bit of a stumble today isn’t causing too much of a stir. Still it’s interesting to note the S&P keeps bumping its head around the 3182 level that marks where the index was before its downward gap on June 11. For all of the grinding higher that’s been done we have still yet to get back to the early June highs – though with FOMO still very much at play for those who missed the boat and summer volumes typically light, it sort of feels like it’s only a matter of time…

New Quarter, Same Themes… H1 is in the books, and with a long holiday weekend approaching for many, the subsequent light volumes are making it feel more like a halftime pause then a definitive start to H2. That’s also partially because the storylines that have kept the S&P relatively rangebound over the last month haven’t suddenly changed of course. The eternal struggle between hope (PFE +4.5%, BNTX +7.5% on vaccine optimism) and fear (virus cases growing in 30 states) drags on, with the former getting an extra boost these days in the form of “whatever it takes.” Still with every sign of re-opening rollback making a little dent in investor sentiment, it may not be long before the virus realities pile up to cloud out even the sunniest of outlooks…the chart below of Houston restaurant reservations sure is a funny-looking “V”

Unease on Display… After yesterday’s seemingly optimistic approach to rising virus cases fizzled into the close, the real sense of worry underlying the market is on display front and center today. The latest virus headlines have delivered a fresh dose of reality too heavy to shrug off, with the situation continuing to worsen in Texas / Florida / California and NY / NJ / CT completing the karmic circle by announcing a mandatory quarantine for visitors from higher risk states. Indices attempted to rally off the low midday but are on their way back down again as sellers continue to puke out Value / reopening names (JETS -5.9%, RCL -12%, BKX -4.7%) and with FANG opting not to ride to the rescue today.

Summer is Officially Here… and it’s trading like it too. Expiry is in the rearview mirror, meaning equities should be free to trade with fewer constraints, but once again a lack of new news has resulted in a lack of conviction that saw the S&P get off to a slow start the week. Indices are now attempting to push higher midday on back of the tech mega-caps: Apple (AAPL +2.2%) is leading the charge as its Worldwide Developers Conference kicks off… given Apple’s store re-closing announcement on Friday, it’s a fitting illustration of investors trying to shrug off 2nd wave fears in the name of sticking with what’s worked

Witching for the Weekend… It’s been a busy week of headlines but none have really packed enough punch to point to whether stocks’ next big move will be up or down (or spark a pickup in volumes the last few days). Regardless quad-witching is the story of today, with quarterly expiry meaning it’s not worth reading too much into today’s trading action as a gauge of sentiment. Still, pesky 2nd wave fears continue to pop up, with word Apple (AAPL -1.0%) will be re-closing some stores in states with growing virus cases sending indices into the red within the last 2 hours.

A Familiar Routine… When World War 3 is literally trending on Twitter and futures are in the green, you know stocks are back in their groove of “focus on the good, ignore the bad.” But while reopening remains apple of the market’s eye, signs of progress (NYC Phase 2 coming Monday!) don’t seem to be eliciting as much exuberance as they did previously. The scars of last Thursday’s plunge are visible: the VIX and gold remain elevated, USD has stopped going down, and the S&P is back to counting on FANG mega-caps to drag it higher today (AAPL new ATH). So while the narrative is the same, the grind higher feels different…

Doctor Jay… Picky Fed-watchers apparently wanted to hear only about the medicine, not the illness. Dr. Powell checked all the boxes on reiterating the Fed’s policy prescriptions, but his less than peppy prognosis for the sickened US economy’s recovery was enough to make jittery investors to lose their patients. Certainly some profit-taking is warranted given the rush higher (recently hot rotation sectors are the biggest underperformers), but taking a wider view FOMC + FOMO remains in place as a dangerous combo to pick a fight with.

More Value Violence… Rotation rolls on after Friday’s fierce move into Value/Cyclicals/smalls caps as investors scramble to avoid missing out on the bounce of the beaten-downs coming on back of the reopening narrative. The usual Value suspects (Energy, Banks, Autos, cruisers, airlines) are leading the way while FANG weakness makes it clear where the funding $ are coming from and keeps the wider indices somewhat at bay (flexing their concentration risk muscles).