| Friday's Headlines 1. US markets close flat to end the week 2. EU leaders meeting on new stimulus plan 3. Big tech stocks stall as cyclicals take over 4. Reasons why the recovery might be OK 5. What to expect next week Markets Closed
Year-to-Date
 Image courtesy Dan Kitwood/Getty
Markets Today U.S. markets meandered their way through a hot July Friday to close relatively flat for the day. Tech stocks continued to lag as shares of Netflix (NFLX) skidded 7%, given its lackluster forecast for the rest of the year. The big tech giants also had a rare week of underperformance, especially Amazon (AMZN). That company is fine, I assure you.
Gold and silver continue to break out but for different reasons. Gold has been one of the top-performing commodities all year as investors cling to its relative safety. Silver has surged on hopes for a continued economic rebound, as has copper. The metals are the key to manufacturing, so keep an eye on those through the summer.
Next week will be critical for unemployed Americans. The last of the extra $600 weekly unemployment checks go out on July 25. As of now, there is no plan to extend that, although the U.S. Treasury and Congress are debating whether to do so. It's been a key lifeline for many people on the economic fringe, but some argue that it has disincentivized the unemployed from seeking a new job because they may be earning more on unemployment. They may not have a choice, come August.
If we continue to see the trend below, jobs will be harder to come by since business closures are commensurate with daily case increases.
Masks, please.  Headlines:
 Photo courtesy: Maserati  Chart courtesy YCharts
Big Tech Tripped Up It was the first week in many months when all five of the major tech stocks traded flat to lower. Amazon, in fact, hadn't traded lower for more three consecutive days in several years, and there have only been four other weeks in the last five years when it fell more than it did this week.
Investors may be taking some profits from these tech giants, which have delivered handsomely for them. Cyclical stocks and healthcare have also emerged in the past two weeks, which makes sense given the anticipation for vaccines and treatments. But they don't weigh as heavily on the market cap weighted indexes, like the Nasdaq, and the S&P 500, like the FAAMG stocks.
We need them to recover, but the market moves with the major tech stocks, one way or the other. Reasons Why the Recovery May Actually Be Intact There are plenty of things not going in the right direction across global economies at this stage of the recovery, and we spend a lot of ink writing about them. New virus cases keep popping up in places like Spain, China, Hong Kong, India, and the U.S. The U.S. has not been able to control the spread, but while daily cases continue to hit record highs, hospitalizations and fatalities are trending lower. We are getting better at treating the virus, and we are testing more, which would explain the chart below.
Chart courtesy JohnsHopkins/MorganStanley  In addition, other economic indicators are holding up pretty well, despite the re-closings of several states:
There are no guarantees on either of those passing, especially in the U.S., given that we are in an election year, but both Democrats and Republicans need to do the right thing by their constituents, and they know it. What to Expect Next Week First, here's how different asset classes have been doing this year:  Events This Week
Monday, July 20:
Tuesday, July 21:
Wednesday, July 22:
Thursday, July 23:
Friday, July 24:
Earnings: Microsoft, Tesla, and Chipotle Earnings seasons has had some surprises so far. Big banks like Bank of American and JPMorgan Chase have done better than expected, even as profits have been pressured by high loan loss provisions and low net interest margins. Netflix, despite being an expected lockdown favorite, turned out to be a major earnings disappointment, so there may be more surprises ahead for us.
This Wednesday is a very big day for earnings with Microsoft, Tesla, and Chipotle all reporting results. Microsoft, which has been focusing on its cloud software platform Azure, seems poised to do well during the pandemic with the rise in people working from home. Quarantine means many more work functions will need to move to digital spaces, and if Microsoft can capitalize on that, it could see returns. Keep an eye on its "Intelligent Cloud" segment revenue.
Chipotle, like most restaurant businesses, has been struggling. With a second wave of the virus spreading throughout the country, it seems unlikely those struggles will be over anytime soon. Chipotle has been working to increase its digital sales, which rose substantially in Q1, but overall same-store sales still lagged.
Tesla also reports earnings on Thursday and is a reminder that, even with the pandemic, there are always other business concerns. While Tesla was once largely the only trendy electric auto company, new companies are appearing in the space. Nikola, the aspiring hydrogen-electric truck maker, went public last month, and its stock has skyrocketed. Fellow electric vehicle company, Rivian, raised over $2.5 billion in private financing, and yet another, Fisker, is currently planning on going public. Tesla is far larger and further along in its development than these companies, but it's worth listening in on the earnings call to see how Tesla execs respond to the new competition.
Twitter reports earnings on Thursday and it will be interesting to see how the company will respond to the security breach this week in which a large number of high-profile Twitter accounts were hacked in a scheme to steal bitcoin.
PBOC Prime Rate Announcement China's economy is recovering. Its recently announced 3.2% Q2 GDP growth showed a significant improvement from Q1, when GDP shrank by 6.8%, China's first quarterly YOY GDP decline since 1992. The People's Bank of China sets its benchmark prime rate on July 19. Further cuts may indicate that the Chinese government wants a faster recovery, while no further cuts may mean that Beijing is either happy with the current rate of recovery or expects it to improve.
U.S. Existing and New Home Sales (June) With U.S. mortgage rates hitting record lows, home sales have been strong. But with a second wave of the virus spreading throughout the U.S., that trend may be in jeopardy.
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(chart courtesy YCHARTS)  Shares of Align Technology are up by nearly 4% after a Stifel analyst raised the orthodontics devices company's price target to $350. BlackRock's stock price rose by 3.5% following news that the investment management corporation's quarterly profits rose by 21%.  Shares of Netflix are down by over 6.5% amid the streaming platform's Q2 EPS and projected subscription growth falling short of analyst expectations. Regions Financial's stock price fell by over 4.5% after the bank holding company reported a Q2 net income loss of $237 million, or 25 cents per share. Word of the Day Profit-taking is the act of selling a security in order to lock in gains after it has risen appreciably. While the process benefits the investor taking the profits, it can hurt other investors by sending shares of their investment lower, without notice.  photo courtesy: MOAF.org
Today in History July 17, 1861: The first paper money payable on demand, whose color gave our bills the nickname "greenbacks," was issued by the U.S. government.
https://www.treasury.gov/connect/blog/Pages/US-Currency-Brief-History-Part-1.aspx
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Friday, July 17, 2020
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