| Friday's Headlines 1. US markets fall for the first week in four 2. Gold hits another new record high 3. Options traders are in a frenzy 4. Lumber futures outshine gold 5. What to expect next week Markets Closed
Year-to-Date
 Image courtesy Taiyou Nomachi/Getty Markets Today U.S. markets sold off again to end the week, marking the first weekly decline in four. Tech stocks led the slide as some investors may have decided to book their gaudy gains from the past several months, doubting that momentum will return to 2020's mega-cap companies.
China-U.S. tensions also flared again after China ordered the U.S. to close its consulate in the southwestern city of Chengdu. This follows the Trump administration's unprecedented decision to shut down the Chinese mission in Houston earlier this week. Chinese equity markets plunged on the news, and gold climbed to yet another record high.
Volatility made a surprise return over the past two days, just as I said it was on summer vacation. That is bringing options traders out to play, and new traders want to get in on the game. That's usually a clear cut danger sign that the stock market has gotten too frothy, and it's a good time to be extra vigilant. Here's where global markets stand year-to-date:  chart courtesy YCharts Headlines:
 chart courtesy Goldman Sachs Options Bonanza Options traders are like bees to honey these days. For the first time ever, based the on amount of shares tied to derivative contracts, the average daily value of single-stock options volumes are bigger than share volumes themselves. In other words, the amount of money being traded in single stock options surpassed the dollar amount being traded for the actual stocks. Put yet another way, traders are betting more on the direction of a particular stock over a fixed period of time than they are just buying the stock itself.
Options are an important alternative to equities, and they play a key role in the market ecosystem. But they are not for beginners. The fact is, a lot of beginners have been experimenting with them, according to online brokers like E*TRADE and Robinhood. They have been signing up new accounts at a record clip as more new investors and traders enter the market.
It's very easy to lose a lot of money trading options unless you have the proper risk protocols in place and you know what you are doing. Even then, they pose a lot of risk.
If you are interested in learning more, start with these helpful articles and classes:  chart courtesy YCharts Timber! We've written a lot about the rally in precious metals, but the last three months have seen a surge in lumber and forest product prices that has actually outpaced that of gold and the stock market. Lumber futures have doubled since early April and are outpacing silver as the top-performing major commodity this year.
While we were in lockdown here in North America, many thought demand for lumber would sink. Instead, many homeowners decided to spend money and renovate their homes just as aggressive production cuts tightened supplies. Low mortgage rates have also spurred new construction and renovations.
Lumber is not a heavily traded commodity like gold or silver, but similar to those metals, it is having its moment, too. What to Expect Next Week: Here's how different asset classes have returned this year:  Events This Week Monday, July 27:
Tuesday, July 28:
Wednesday, July 29:
Thursday, July 30:
Friday, July 31:
Four of the FAANG companies report earnings this upcoming week as Facebook reports on Wednesday the 29th, and Amazon, Apple, and Alphabet all report on Thursday. These companies are four of the top five largest companies in the S&P 500, with a combined market cap of more than $4.7 trillion dollars, so their earnings will likely do quite a bit to affect the benchmark index.
Facebook has been suffering from an increasingly large boycott as advertisers refuse to purchase ads on the site, alleging that Facebook spreads hate speech and misinformation. Facebook will likely try to address this in its earnings conference, which may make that one worth listening in on. That said, most of the companies boycotting Facebook joined the boycott after the end of the last financial quarter, so the biggest factor affecting its financial results will be how much advertisers cut their ad spending during the COVID-19 downturn.
Google is also likely to see declining revenue due to lower ad spending.
Amazon, the e-commerce and cloud-computing titan, has been well positioned during the pandemic. Analysts are predicting its revenue to actually increase, but earnings are still expected to decline. Keep an eye on its high-margin Amazon Web Services Business, which might be a key factor in how much Amazon may be able to surprise with earnings. Microsoft and IBM both posted higher-than-expected revenue from their own cloud businesses, helping to bolster those firms earnings, so Amazon may be able to manage a surprise as well.
Apple will need to see whether or not its continued pivot to services revenue can help to mitigate the quarantine-caused closures of its retail stores around the world.
One wild card going forward with all these companies is the FTC antitrust investigation, started last year, into whether or not their acquisition strategies have been anticompetitive.
Federal Reserve Interest Rate and Press Conference On Wednesday, the U.S. Federal Reserve's Federal Open Market Committee will announce U.S. interest rates and hold a press conference on monetary policy. With interest rates at or near zero, and the current Fed chair having forsworn negative rates, it's unlikely the rates will change, but we will be listening for Fed Chair Powell's take on the recovery.
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(chart courtesy YCHARTS)  Shares of Advanced Micro Devices are up by nearly 16.5% following rival semiconductor company, Intel, delaying its next-generation chips. FirstEnergy's stock price rose by over 7.5% today. During the quarterly earnings call, CEO Charles Jones stepped up to defend the electric services company amid the ongoing bribery scandal.  Shares of Intel fell by over 16% following news that the company's next-generation chips will be delayed by six months. Qorvo's stock price fell by over 5% after a Susquehanna analyst maintained a Hold rating on the semiconductor company. Word of the Day A derivative is a financial security with a value that is reliant upon or derived from an underlying asset or group of assets—a benchmark. The derivative itself is a contract between two or more parties, and the derivative derives its price from fluctuations in the underlying asset. The most common underlying assets for derivatives are stocks, bonds, commodities, currencies, interest rates, and market indexes. These assets are commonly purchased through brokerages.  photo courtesy SanFernandoValley blogger Today in History July 24: 1987: The corporate assets of ZZZZ Best Co. were sold at bankruptcy auction in Los Angeles for $62,000. Less than four months earlier, the carpet-cleaning company run by 21-year-old whiz kid Barry Minkow had a stock-market value of roughly $300 million, and the stock had more than quadrupled since an initial public offering in 1986. But ZZZZ Best (pronounced "ze best") had virtually no customers, revenues, or assets, and Minkow had set up an elaborate system of phantom offices and phony account records, even bribing a building owner to pretend in the presence of an outside auditor that ZZZZ Best was cleaning his carpets. Minkow learned a lesson, serving five years in federal prison, but it's not clear whether his investors did. FBI Law Enforcement Bulletin, vol. 68, no. 7 (July 1999)
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Friday, July 24, 2020
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