The Pull Back

U.S. markets trade lower as tech stocks drag indexes down with them.

Read in Browser   The Market Sum | Insight after the bell By Caleb Silver, Editor in Chief Tuesday's Headlines 1. US markets sell off as multi-day rally fades 2. US COVID-19 cases continue to spike 3. The EU downgrades Eurozone growth forecasts for 2020, again 4. Two drugmakers get "warp speed" US funding for vaccines 5. Big stocks just get bigger Markets Closed Dow 25,890.18 −396.85 (-1.51%) S&P 3,145.32 −34.40 (-1.08%) Nasdaq 10,343.89 −89.76 (-0.86%) VIX 29.37 +1.41 (+5.05%) Bitcoin $9,233.37 −$90.12 (-0.97%) US 10-Yr Yield 0.65 −0.034 (-4.97%)     Image courtesy Alex Grimm/Getty   Markets Today U.S. markets fell today for the first day in several as the big tech stocks (except Facebook and Tesla) traded lower, bringing the indexes down with them. The selling amplified into the close as investors pulled back on the reins, halting a six-day rally for the Nasdaq and the S&P 500. Chinese markets rallied, as the government is encouraging citizens to buy stocks.    Oil prices also traded lower, while gold continued to be the safety play, rising as stocks lost steam. The EU cut its forecast for the region again. It now forecasts an 8.7% GDP decline in 2020, followed by a 6.1% rebound in 2021. That all depends, like everything, on keeping the virus on the decline while reopening economies in a safe way. The U.S. is failing at that (see chart below).   On these shores, the battle is brewing over the bailouts. The release of 660,000 firms who took Paycheck Protection Program (PPP) loans from the U.S. Treasury on Sunday prompted outrage as public companies, private equity firms, and the most successful law firms on the planet all received millions of dollars amid the crisis. With more stimulus measures needed to save small businesses and provide the unemployed with much-needed income, questionable behavior like this will make the next bill even harder to pass.     Headlines: About 9% of workers at meat and poultry processing facilities across 14 states have been diagnosed with COVID-19, according to the Centers for Disease Control and Prevention. In April and May, the country's largest meat producers, such as Tyson Foods and Cargill, were forced to close some facilities due to outbreaks. Total production of federally inspected red meat and poultry fell 8% in April and 13% in May, according to data from the U.S. Department of Agriculture. Delta, United, JetBlue, Southwest, and Alaska are the latest major airlines who have signed letters of intent for emergency loans from the U.S Treasury Dept. Last week, American, Frontier, Hawaiian, SkyWest, and Spirit Airlines also struck agreements for the aid. The CARES Act set aside $25 billion in loans for U.S. passenger airlines. Walmart will introduce a subscription service this month to compete with Amazon.com's Prime program, according to ReCode. Walmart+, as the service is known, will cost $98 a year and include perks like same-day delivery of groceries and general merchandise. Bytedance Ltd., the Chinese maker of the popular short-video platform TikTok, said Tuesday it would pull its app out of Hong Kong amid concerns about a new national-security law, its second market exit in as many weeks. U.S. Secretary of State Mike Pompeo hinted the Trump administration was considering limiting U.S. users' access to the app. The European Commission has downgraded its economic forecasts since "the lifting of lockdown measures is proceeding at a more gradual pace than assumed." It now projects that the euro area economy will contract by 8.7% in 2020 and grow by 6.1% in 2021. The EU economy was forecast to contract by 8.3% in 2020 and grow by 5.8% in 2021. Commissioner Paolo Gentiloni is pushing for the approval of the Next Generation EU €750 billion recovery fund.  Palantir Technologies has confidentially filed for a much-awaited IPO. Co-founded by Peter Thiel in 2004, the secretive startup was valued at over $20 billion in 2016 and has raised $2.6 billion in 26 funding rounds. The big data analysis company's customers include the U.S. government, with over a billion dollars in federal contracts. Samsung estimates its operating profit for Q2 rose 23% year-over-year to 8.1 trillion Korean won ($6.8 billion). This is much more than the 6.4 trillion won analysts predicted. Samsung expects consolidated sales will be 52 trillion won, down from 56.13 trillion won in 2019. The U.S. government awarded drugmaker Novavax a $1.6 billion contract to develop a coronavirus vaccine, the biggest amount yet granted under the White House's "Operation Warp Speed." Regeneron Pharmaceuticals has received a $450 million contract. Novavax (NVAX) shares spiked 34% today.     What the TICK Is Telling Us Even though the U.S. stock market has been powering higher since its March lows, despite the economic challenges everywhere around us, the breadth of the market has been paltry. In other words, only a few stocks have been pushing the indexes higher, and we all know who they are.    Another way of looking at the strength of the individual components of the indexes is to track what is known as the TICK Index. The TICK Index is a gauge of how many stocks were up or down on their last tick of the day. It's a proxy for "all or nothing" conviction by investors or traders and the stocks they own. According to Instinet, which tracks the NYSE TICK Index, eight of the 12 lowest readings in history have come in 2020.    That's not a lot of conviction.     The Big Get Bigger We shouldn't be surprised, then, to see that just six stocks in the DJIA are actually positive in 2020. Microsoft and Apple, of course, have led the gains for the price-weighted index, but the 24 other components, led by Boeing, are all lower for the year. The DJIA is down more than 9% year-to-date, but imagine where it would be without the biggest stocks driving all the gains.   If anything, 2020 has been a ringing endorsement for index investing. Somewhere, Jack Bogle has a big smile on his face.     To put a final point on the matter, Ben Carlson of Ritholtz Wealth Management notes that the stocks with the biggest market caps have been the best performers of the year. They also have the highest price-to-earnings ratios and the highest price-to-book ratios, but that's what comes with outperformance.    While we can't deny the velocity of the stock market rally from the March lows, it is clearly thin and only supported on the shoulders of a handful of companies.    chart courtesy YCharts     More News: PPP Program Details Reveal Surprising Recipients Bulls in China Markets Spark 2015 Fears 5 Companies Owned by Altria SPONSORED BY INVESCO The Complete Guide to ETFs ETFs are becoming increasingly popular and soaring to new heights among investors. Invesco's insights can help you determine if these investment vehicles are right for you. LEARN MORE  > (chart courtesy YCHARTS)     Shares of Rollins are up by over 7.5% following an optimistic revenue outlook in the pest control company's Q2 2020 business update. Walmart's stock price rose by 7% amid the announcement of its Amazon Prime competitor, Walmart+, which will launch in July.     Oil stocks, such as TechnipFMC, Devon Energy, and Diamondback Energy, are down today as the U.S. government forecasts gasoline stockpiles increasing. Both United Airlines and American Airlines fell on the news that bookings are dropping as COVID-19 cases spike. Word of the Day Paycheck Protection Program The main stimulus for small businesses in the CARES Act is the Paycheck Protection Program (PPP). The $659 billion funded under the Small Business Administration (SBA)—Business Loans Program Account is intended to provide loans to businesses to guarantee eight weeks of payroll and other costs to help those businesses remain viable and allow their workers to pay their bills.     Today in History July 7, 1993: Charles W. Knapp is found guilty on three counts of conspiracy after his savings & loan empire collapses, costing the U.S. taxpayer $2 billion. Knapp's American Savings & Loan Association was once the nation's largest thrift, but it was seized by Federal regulators in 1984 and later settled a U.S. Securities & Exchange Commission lawsuit charging it with fraudulent overstating of earnings.   The Wall Street Journal, July 8, 1993, p. A3. Want more Investopedia market news? Sign Up for 'Chart Advisor' Investopedia's expert analysts present market performance for the day and discuss with in-depth charting and technical analysis, a must read for traders. Subscribe » How can we improve the Market Sum? Tell us at marketsum@investopedia.com 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