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The Market Sum | Insight after the bell

By Gabe Alpert

Monday, August 17, 2020 Headlines

1. The S&P 500 just misses a new record

2. Berkshire goes for the gold, and ditches Boeing, banks

3. Commerce Department puts more limits on selling to Huawei

4. Chevron in talks to invest in Iraqi oil field

Markets Closed

Dow
27,844.91
−86.11 (-0.31%)

S&P
3,381.99
+9.14 (+0.27%)

Nasdaq
11,129.73
+110.42 (+1.00%)

VIX
21.43
−0.62 (-2.81%)

Bitcoin
$12,263.77
+$359.28 (+0.06%)

US 10-Yr Yield
0.683
−0.0260 (-3.67%)

Photo courtesy GettyImages/Ezra Bailey

[Gabe Alpert will be guest writing Market Sum, because Caleb is taking some much-deserved time off]

Markets Today

The S&P 500 rose by a modest 0.27% today, just barely missing a new record today, while, as has happened so often recently, the tech-heavy Nasdaq Composite sped ahead, gaining an entire percentage point. The Dow Jones Industrial Average sank slightly, falling by -0.31, as Boeing and banks dragged it down, as news broke that Warren Buffett dropped those stocks from his portfolio (see more below). The effect was enough that as Buffett bought a stake in a gold miner, Barrick Gold, the benchmark gold miner ETF, GDX, jumped 6.4%, while Boeing (BA) and the benchmark financial sector ETF, XLF, dropped -1.4% and -3.4% respectively. As Buffett goes, so goes the market.

Chart courtesy YCharts

[NEW READER SURVEY: We are running another two-week survey of our U.S.-based readers to gauge your sentiment and see what moves, if any, you have been making with your money given the market recovery and current economic conditions. We'll share the results, as always, and we thank you for your time and participation.]

Headlines:

The U.S. Commerce Department issued new rules that ban companies from selling chips to Chinese electronics maker Huawei Technologies. The new rules would stop even non-U.S. companies from selling chips made outside the U.S. to Huawei without a special license. These new rules broaden the restrictions put into place in May.
Oil giant Chevron is currently negotiating a deal with the Iraqi government to invest in one of Iraq's biggest oil fields. The deal is likely to only be in the hundreds of millions of dollars, small for a company of Chevron's size, but likely a confidence booster for other investors in that unstable country.
The world's third largest economy, Japan, shrank a record -7.8% (-27.8% annualized) in the April-June quarter. This was worse than expected and exceeded the previous record of -4.8% set in Q1 2009. The last time Japan saw three consecutive quarters of contractions was in 2011, when it was recovering from the strongest earthquake in its recorded history and the resultant tsunami.
Warren Buffett dumped banking and airline shares and took a $564 million position in gold miner Barrick Gold in Q2, according to the latest 13F filings. Berkshire Hathaway's latest moves are sparking concerns that the famed investor doesn't have much faith in the economic recovery. The stocks sold include JPMorgan, Wells Fargo, Bank of New York Mellon, and Goldman Sachs. Read more details here.
President Trump has extended the time TikTok has to find a U.S. buyer to 90 days from 45 days and said he may ban other Chinese companies too. The new deadline for the Chinese app to change ownership of its U.S. operations is Nov. 12. It has also been ordered to destroy all data on its 100 million U.S. users and any copies.
French drugmaker Sanofi is buying Principia Biopharma for $3.7 billion in an all-cash deal. The transaction gives Sanofi full control of relapsing multiple sclerosis drug SAR442168, which "removes complexities for this priority development program and simplifies future commercialization." It previously had a license agreement with Principia.
Google Australia's managing director has penned an open letter to the public, warning them about a proposed law that would force the firm to share advertising revenue with newspapers. Users would receive a dramatically worse Google Search and YouTube, their data would be handed over to big news businesses, and free services would be at risk in Australia, according to the letter, which the country's consumer watchdog said "contains misinformation."
Canadians spent around $900,000 on tickets to see Paramount's The SpongeBob Movie: Sponge on the Run over the weekend in 300 theaters. It was the first and biggest major studio release in North American multiplexes since March. Americans will have to watch at home since it's headed straight to CBS All Access. 74% of U.S. adults said they are unlikely to go to a movie theater in the next month, according to Morning Consult.

More News:

Heavy Foot Traffic Bodes Well for Home Depot (HD) Quarter

Barrick Gold (GOLD) Gains After Berkshire Discloses Stake

Divergence in LHC Group Stock Points to a Pullback

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(chart courtesy YCHARTS)

Shares of General Motors are up by over 8% following a Deutsche Bank analyst determining that the automaker would benefit greatly from spinning off its electric-vehicle business. Newmont's stock price rose by over 6% amid Berkshire Hathaway acquiring a 1.2% stake in another gold miner, Barrick Gold.

Shares of Occidental Petroleum fell by over 5% following Berkshire Hathaway selling its stake in the oil company. Airline stocks, such as American, United, and Alaska Air, are down today as new COVID-19 cases continue to rise.

Word of the Day

Consolidation

Consolidation is a term referring to security prices oscillating within a corridor and is generally interpreted as market indecisiveness. Said another way, consolidation is used to describe the movement of a stock's price within a well-defined pattern of trading levels. Consolidation is generally regarded as a period of indecision, which ends when the price of the asset moves above or below the prices in the trading pattern.

Image courtesy GettyImages/PaulBiryukov

Today in History

Aug. 17, 1982:

The Russian government devalued the ruble and declared a moratorium on paying its foreign debt—a de facto default that sent the global bond markets crashing, triggered the collapse of prominent U.S. hedge fund Long-Term Capital Management, and sent shockwaves through the world's financial system.

Henry Kaufman, On Money and Markets (McGraw-Hill, New York, 2000), p. 155; William G. Shepherd, "Dark Days on Wall Street," The New York Times, Aug. 15, 1982, Section 3, p. 1; http://averages.dowjones.com/http://www.nyse.com/