Bad Timing

U.S. markets mixed as industrial stocks fall along with oil prices despite OPEC+ agreement.

Read in Browser   The Market Sum | Insight after the bell By Caleb Silver, Editor in Chief Monday's Headlines 1. US markets mixed as industrials fall while tech shines 2. OPEC+ agrees on 9.7 million barrel/day cut 3. The historical relationship between bear markets and jobless claims 4. Equity outflows intensified last week 5. These stocks hit 52-week highs today Markets Closed Dow 23,390.77 −328.60 (-1.39%) S&P 2,761.63 −28.19 (-1.01%) Nasdaq 8,192.42 +38.85 (+0.48%) VIX 41.17 −0.50 (-1.20%) Bitcoin $6,779.37 −$171.67 (-2.47%) US 10-Yr Yield 0.749 +0.02 (+2.74%)     image: Peter Dazeley/Getty Markets Today U.S. markets battled uphill all day, unable to continue last week's trend. The Nasdaq managed to close in positive territory with Netflix and semiconductor stocks leading the gains. The Nasdaq has rallied back to where it was at the end of last Thanksgiving as investors clearly have an appetite for tech stocks. Industrial stocks faltered and so did oil prices, even after OPEC+ announced a historic cut to daily production to pump up prices. While that may help supply, demand for oil and any kind of industrial production has cratered.   With new cases and fatalities starting to peak, and even decline in some countries, the countdown to the end of the economic decline and the beginning of growth is on in force. Some countries, like China and Spain, have already begun getting back to work. But with so many unknowns facing businesses, workers, and entire industries, precise timing for a global economic recovery will be impossible.   The stock markets may have jumped the gun last week, but that's what they usually do.   **Survey alert: We are running another survey of our U.S. newsletter readers to learn more about your views on these volatile markets and moves you may or may not be making in your portfolios. We do this because we think you are fascinating and wildly intelligent, and we like to put our finger on the pulse of individual investors like you to understand sentiment. We don't do anything creepy or untoward with the information you provide... I promise. If you would, please take this brief survey, and we'll let you know what we learn. Thanks!** Headlines: Mortgages backed by Ginnie Mae showed the largest weekly growth and had the biggest share of forbearances at 5.89% of total servicing portfolios. The number of borrowers now in forbearance topped 2 million. The share of total loans in servicing portfolios in forbearance rose from 2.73% to 3.74% of total bank and non-bank servicing portfolios. Ford will begin producing new powered air-purifying respirators this week to assist in protecting healthcare workers from COVID-19. The automaker said Monday that production of the respirators, which were developed by Ford in collaboration with 3M, will begin Tuesday at one of the automaker's plants in suburban Detroit. The work will be done by about 90 paid volunteers from the United Auto Workers union. Smithfield Foods is temporarily closing its pork-processing facility in South Dakota, which accounts for 4% to 5% of U.S. production, the company said in a statement Sunday. The move comes after state officials reported more than 200 cases of COVID-19 for plant employees, adding to a spike in infections that's seen hundreds of American meat workers get sick. "The closure of this facility, combined with a growing list of other protein plants that have shuttered across our industry, is pushing our country perilously close to the edge in terms of our meat supply," said CEO Kenneth M. Sullivan. Apple and Google have partnered on bluetooth-enabled contact tracing tools to curb the spread of COVID-19. The technology will help people know if they've come in contact with someone infected through a phone app. The companies have promised strong protections of user privacy. On April 11th, the IRS deposited the first Economic Impact Payments (stimulus checks) into taxpayers' bank accounts. Those expecting checks are advised to turn off auto-payments to lenders if they need the cash. Boeing plans to recall about 2,500 employees in the Seattle area and eastern Washington starting today to work on defense programs and tend to the parked 737 Max aircraft. Work will resume on the P-8 and KC-46 military aircraft programs, according to Bloomberg. National Association for Business Economics panelists believe that the U.S. economy is already in recession and will remain in a contractionary state for the first half of 2020. The median forecast says real GDP declined 2.4% in the first quarter of 2020 and will shrink 26.5% in the second quarter. Global PC shipments fell 8% in Q1 2020 YOY, the largest drop since Q1 2016, due to supply chain issues, says Canalys. The research firm noted soaring demand during this period as people worked and studied at home. Of the top five vendors, Apple was hit the hardest and saw shipments fall 21% to 3.2 million units. (see chart below)     image courtesy Canalys Oil Price War Is Over OPEC+, the group of 23 oil producing countries, have agreed to a 9.7 million barrels per day cut, starting on May 1st, 2020, for an initial period of two months that concludes on June 30th. This amount will taper to 7.7 million barrels per day for the remaining six months of the year and 5.8 million barrels per day for 16 months after that. The next meeting will be held on June 10th, 2020, to discuss further actions that may be needed to balance the market.    This historic deal marks the end of the price war that upended energy markets and exacerbated the impact of the coronavirus outbreak. Oil prices have fallen 40% since early March, when Russia and Saudi Arabia broke a three-year alliance that propped them up, and hit an 18-year-low on March 30th. While prices have collapsed over the past several years, especially in recent months, production has actually risen.     The production cut may still not be enough to stop the wave of oil and gas bankruptcies expected over the next year. According to a Federal Reserve Bank of Dallas survey conducted March 11th–19th, firms need WTI price of $49 per barrel on average to profitably drill a new well. At $40 per barrel, 15% expect to remain solvent for less than one year and 24% expect one to two years.     chart courtesy Goldman Sachs Why Some Are Calling a Bottom for Stocks Last week's historic rise for the S&P 500 has more than a few investment strategists calling the bottom for U.S. stocks. It's impossible to know if they are correct. However, if you look at past recessions and the correlation between equity markets and unemployment spikes, there may be a good case to make that the worst may be over for stocks.   In a research note, Goldman Sachs notes that in past recessions, except for 2001, the bear market hit bottom several weeks before there was a peak in weekly jobless claims. But that time frame shrank dramatically in 2008–09 as the Federal Reserve enacted extreme monetary policy measures, and the U.S. Treasury launched a massive bailout package to rescue the economy.    That playbook is being run again this time, and given the severity of the economic shutdown, Goldman and several other banks expect weekly jobless claims to peak this month. The stock market has already responded to that impending news. chart courtesy Bespoke Investments     Investors Ran From Stocks Last Week Even as U.S. markets posted historic gains last week, data from ICI Lipper shows outflows from equities of more than $60 billion. That's around 0.7% of the total asset base.   According to Bespoke Investments, it's 50% more extreme than any outflow in almost 20 years, during the best week for stocks in almost 50 years.   Clearly there were plenty of buyers for all of those sellers, but data like that shows us how bad we really are at timing the market.     Netflix Is Chilling Netflix (NFLX) is among just a few stocks that investors aren't running away from. Shares hit a 52-week high today as the company is benefitting from this stay-at-home economy. Cypress Semiconductor (CY) also hit a 52-week high as Chinese regulators approved its merger with Infineon Technologies, and Dollar General (DG) joins that group as it is well positioned for an economic downturn as a discount retailer. More News: Oil Price War Ends As OPEC+; Agrees to Record Cut 3 Regulated Utilities Stocks Powering Higher Still Too Early to Buy Apple Stock SPONSORED BY FIDELITY INVESTMENTS How do taxes fit into your overall investment strategy? Our advisors can provide you with personalized, tax-efficient strategies. LEARN MORE  > (chart courtesy YCHARTS)     Shares of Gap are up by nearly 16% after the clothing retailer initiated a 40% off sale on all of its products, in addition to a few "mystery deals." United Airlines' stock price rose by 14.50% today; the company recently began discussing the possibility of selling miles to raise cash in order to weather the ongoing pandemic.     Following Saudi Arabia and Russia reaching an unprecedented oil production cut deal, shares of hydrocarbon exploration companies, including Diamondback Energy (7%) and Pioneer Natural Resources (6%), fell as the price war came to a close. Other companies relevant to the oil sector, such as oil field servicer Halliburton (6%) and industrial machinery supplier Flowserve (5%), are also down. Word of the Day Market Timing Market timing is a type of investment or trading strategy. It is the act of moving in and out of a financial market or switching between asset classes based on predictive methods. These predictive tools include following technical indicators or economic data, to gauge how the market is going to move.   Many investors, academics, and financial professionals believe it is impossible to time the market. Other investors, notably active traders, believe strongly in it. Thus, whether market timing is possible is a matter of opinion. What can be said with certainty is it is very difficult to successfully time the market consistently over the long run.     image courtesy: IrishPost.com Today in History April 13th, 1928: German pilot, Hermann Köhl; Irish aviator, James Fitzmaurice; and Baron Ehrenfried Günther Freiherr von Hünefeld, the expedition's financier, completed the first Europe-to-North-America transatlantic flight. They took off from Ireland and landed safely on a small Canadian island. Source: https://www.history.com/this-day-in-history/first-nonstop-transatlantic-flight-europe-to-north-america How can we improve the Market Sum? Tell us at marketsum@investopedia.com Enjoy the Market Sum? Share it with a friend.   Click to Share   Or share the link below to invite friends to sign up. https://link.investopedia.com/join/53o/00-fwd-marketsum CONNECT WITH INVESTOPEDIA Email sent to:  mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here.   114 West 41st St, floor 8 New York NY 10036 © 2020, Investopedia, LLC. All Rights Reserved | Privacy Policy