| Tuesday's Headlines 1. US markets charge higher behind banks and industrials 2. Big banks are bolstering their balance sheets 3. Small cap stocks face a key trendline ahead of earnings 4. Private equity's Halcyon days 5. Holy oats! The non-milk crowd cashes in Markets Closed
 Image courtesy Artur Didyk/Getty
Markets Today If earnings were one of the big tests facing investors, the early outlook is pretty good so far. U.S. markets raced to strong gains, powering higher into the close behind better-than-expected earnings from JPMorgan. As one of the world's biggest banks, it is a bellwether for the financial markets, and it appears prepared for the worst but ready to capitalize if the economy improves.
We also heard less-bad news from the state of Florida, where COVID-19 has made a vicious return. Daily cases trended lower for the first time in two weeks. Any positive signs like this light up cyclical stocks like industrials, manufacturing, and energy companies. Indeed, those sectors rallied hard, with companies including Caterpillar (CAT) posting strong gains in today's session.
Tech stocks have not quite regained their momentum, but the rampant selling over the past few days has been quelled a bit. We are just in the beginning of this earnings season, which will be historically bad. But if companies tell us they are stabilizing and starting to grow, that enthusiasm can be contagious to all sectors of the market, helping companies of all sizes. Headlines:
 Image courtesy Ford Motors
The Broader Market From a Technical Perspective The DJIA, Nasdaq, and S&P 500 get all the headlines, but the Russell 2000, known as the broader market, provides a clearer all-around picture of the health of public companies. It's comprised of the bottom 2000 companies in the Russell 3000, which are small-cap companies, and although it is market weighted, like the Nasdaq and S&P 500, it is weighted by shares outstanding. This means that a member stock's last sale price as well as the number of shares that can actually be traded (rather than the company's full market capitalization) influence the index.  Chart courtesy Fidelity Investments
Think of small caps as the light-to-middleweight boxers of the stock market. A broad-based stock market rally is not complete without them. They participated in the March to June run-up with the rest of the market, but they have stalled in the past couple of weeks. Technical analysts, like Justin Timmer of Fidelity Investments, focus on the trend lines for major markets.
He notes that the Russell 2000 is clinging to its upward trend line right as earnings season begins. You won't hear a lot about most of these companies in the financial media, but they are key components to the overall market and to the economic health of the country since they are large employers.
If you want to track the Index, these two ETFs are useful to keep an eye on:
Here they are against the Russell 3000. It makes a difference when the FAANG stocks aren't in your index.  Where the Big Money Hangs Out Speaking of markets that don't get enough attention, the private equity market is enjoying its Halcyon Days. Extremely cheap debt, trillions in patient capital, and bargains everywhere are fueling a private equity feeding frenzy outside of the stock market.  It's actually been this way for awhile, but the pandemic and the government stimulus injected into the market has amped up the volume in the private money world. Firms led by Blackstone Group Inc. and Carlyle Group came into 2020 with $1.5 trillion in unspent capital, the highest year-end total on record, according to data compiled by Preqin. They own some of the biggest restaurant chains—many of which were recipients of PPP money. They are also big investors in real estate and in financial markets. Real estate, especially commercial real estate, is cheap and getting cheaper. Financial markets, if you haven't noticed, are on fire right now.
Private equity operates outside of the rules that govern public companies and under a different set of regulations. We don't get to see their books, and we have no idea what's going on inside their black boxes, until they decide to tell us.
As the chart above from JPAM reminds us, the returns for private equity have trounced the public markets for decades. It also reminds us that the universe of public companies is getting smaller, while the assets in the private markets are getting bigger.
If you want to learn more about how private markets are winning through this pandemic, read Bethany McLean's investigative report for Vanity Fair.  Image courtesy Oatly AB
Bull Market in Oats Speaking of healthy returns, Swedish oat-milk maker Oatly AB sold a $200 million stake to a group led by private-equity giant Blackstone Group, which includes Oprah Winfrey, Natalie Portman, former Starbucks Corp. Chief Howard Schultz, and the entertainment company founded by Jay-Z.
The sale of the roughly 10% stake values Oatly at about $2 billion, according to the WSJ. The move is a key step in its path toward a possible initial public offering sometime over the next 12 to 18 months or a sale to a major food conglomerate.
If you have yet to try Oat Milk, I recommend the chocolate.
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(chart courtesy YCHARTS)  Shares of Align Technology rose by nearly 11% following an analyst upgrade for the orthodontics devices company. Oil stocks, such as Noble Energy and Apache, are up after OPEC+ agreed to deeper production cuts than expected.  Wells Fargo's stock price fell by nearly 5% today following their first quarterly loss in over a decade. Shares of Mohawk Industries are down by 4.5% today. The flooring manufacturer's recent 8-K filing revealed it's now the subject of a civil lawsuit and has received subpoenas from the U.S. Attorney's Office for the Northern District of Georgia as well as the Securities and Exchange Commission. Word of the Day Trendlines are easily recognizable lines that traders draw on charts to connect a series of prices together or show some data's best fit. The resulting line is then used to give the trader a good idea of the direction in which an investment's value might move.
 photo courtesy: MOAF.org
Today in History July 14, 1966: The New York Stock Exchange Composite Index, a basket of blue-chip stocks that reflects the return of America's biggest stocks, is launched.
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Tuesday, July 14, 2020
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