| Tuesday's Headlines 1. US markets sell off as vaccine hype fades 2. Walmart reports strong sales, but not strong enough 3. The Fed promises more, and eggs on Congress 4. Fund managers are skittish 5. Stocks hitting 52-week highs Markets Closed
 Image credit: South_agency/Getty
Markets Today Yesterday's strong rally appears to be short-lived as investors sold stocks into the close today, driving all major U.S. markets into the red. The enthusiasm over Moderna's (MRNA) successful vaccine test yesterday gave way to skepticism today about its efficacy. Reports also surfaced that a former top executive was appointed to co-chair the White House coronavirus vaccine project and still owns more than 155,000 options in the company's stock. That didn't cause today's sell-off, of course, but it does dampen yesterday's news a bit. Shares of Moderna fell 10% today.
Fed Chair Powell and Treasury Secretary Mnuchin both testified to the U.S. Senate Committee today. Powell reiterated that the Fed is ready and willing to do more to prevent an economic collapse. Mnuchin said the U.S. government is fully prepared to take losses on hundreds of billions of dollars in loans it has authorized to businesses and industries. More government spending and steep losses ahead.
That may explain a lot of the reticence around the recent stock market rally. While the S&P 500 is up more than 32% since its March 23rd lows, it's been kind of stuck in a range for the past month. Yesterday's surge seemed like a new foundation, but many big fund managers see a bigger pullback ahead.
chart courtesy TradingView  Headlines:
 chart courtesy visualcapitalist.com
Powell to Congress: "Step Up!" Fed Chair Jay Powell testified to the U.S. Senate Finance Committee today and reiterated his script of late, promising more monetary stimulus to support the economy. He also took another swipe at Congress, goading representatives to pass more fiscal stimulus measures.
"We are committed to using our full range of tools to support the economy in this challenging time even as we recognize that these actions are only a part of a broader public-sector response," Powell said Tuesday in remarks to the Senate Banking Committee.
The Fed has pumped $1.5 trillion into the capital markets through quantitative easing measures, buying corporate bond ETFs, funding the overnight repo market, and is in the beginning stages of making loans to states and cities. It is still trying to launch four of the nine facilities, including one aimed at Main Street that will buy bank loans extended to mid-size businesses.
It still has more ammo, and its effect on the stock market cannot be underestimated. Since the lows of March 23rd, the S&P500 has risen 32%. March 23rd was the same day the Fed announced a broad range of measures to prevent the economy from going over a cliff.
chart courtesy YCharts  Fund Managers Remain Bearish That 32% run for stocks has prompted some bearishness among institutional fund managers. According to Bank of America's most recent fund manager survey, 68% say the recent run for stocks has been a bear market rally. Three quarters of those surveyed expect a U- or W-shaped recovery, while only 10% expect a V-shaped bounce.
As we've noted, many investors have been hiding in cash and money market accounts. There's a record $4.8 trillion in money markets, according to the Fed. Cash balances, otherwise known as "sideline cash," is at levels we haven't seen since 9/11.
That shows the fear factor among investors, but it also means there is a war chest full of cash waiting to be deployed to stocks when the coast looks clearer.
chart courtesy BofA Research  Stocks at 52-Week Highs Amid the fretting, there are stocks making 52-week highs, as we note each week. Besides Amazon (AMZN) and Netflix (NFLX), which made new annual highs today, a few other notable companies joined the club.
chart courtesy YCharts 
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(chart courtesy YCHARTS)  Shares of HP are up by nearly 4% after the information technology company's bullish options activity was pointed out on CNBC. Advance Auto Parts' stock price rose by over 3.5%. Although the automotive parts provider's Q1 profits and sales missed expectations, it still gave a positive outlook for the second-quarter.  Shares of Kohl's fell nearly 8% after the department store chain reported a higher-than-expected loss of sales for the first-quarter. Oil company stocks, such as Hess (over 6.5%), TechipFMC (over 6.5%), and Devon Energy (over 6%), are down despite a surge in oil prices due to an increased demand for gasoline. Word of the Day Bear Market RallyA bear market rally describes a period inside of a bear market in which stock prices temporarily increase, sometimes quite sharply, before returning to new lows. This rise in prices is typically a short-lived increase, sometimes lasting anywhere from days to months, amidst an overall long-term downward trend in the market.  image courtesy of Wikipedia Commons
Today in History May 19th, 1568: One of the earliest known junk bonds is issued, as the Russia Co. borrows 4,000 pounds, eight shillings, and 10 pence from the British exchequer. The loan is priced to yield 13.5%, and the company must repay it not with cash, but with hundreds of tons of cables and rope—making it one of the earliest "asset-backed" loans as well.
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Tuesday, May 19, 2020
Pulling Back
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