| Tuesday, August 11, 2020 Headlines 1. US markets give up early gains as tech slides 2. Big Ten US college sports postpones fall season 3. Sector rotation lifts 2020 laggards 4. US bankruptcies on pace for most in ten years 5. Soft commodities surge Markets Closed
 Photo courtesy GettyImages/Andy Lyons/Staff
Markets Today U.S. markets gave up early gains that were powered by positive, but curious, vaccine news out of Russia as the S&P 500 fell into the red for the first day in eight. Big tech stocks like Microsoft (MSFT), Apple (AAPL), and Amazon (AMZN) led the index lower, but not before it came within a half a percent of hitting an all-time high. Gold prices plunged more than 5%, the worst drop for the metal in eight years, and silver prices fell 15%.
There is a sector rotation afoot in the U.S. equity market, and that is lifting some beaten-down stocks. As the economy shows signs of recovery, expect that trend to continue.
Speaking of trends, soft commodities like sugar and cotton have been on a tear since early May. Some of that rise is a bet that the global economy is coming back to life and demand is coming with it. Some of that rise is a bet that this virus will be around for awhile, and it could present some supply problems from the countries and companies that manufacture those commodities.
Nothing is predictable anymore. Headlines:
 chart courtesy Factset
Watching the Market's Trend Lines As the S&P 500 flirts with record highs, we can't ignore the rotation from growth stocks like big tech into cyclical stocks that are more sensitive to the economic recovery. As daily virus cases and deaths decline, and positive vaccine news is released, cyclical stocks have been rising as big tech has been declining. It's a natural part of the market cycle, but we feel it more now since five companies account for more than 20% of the S&P 500's market cap.  The All-Important A/D Line It's worth keeping an eye on what technical analysts call the Advance/Decline line for the index, which is an indicator that plots the difference between the number of advancing and declining stocks on a daily basis.
As Bespoke Investments points out in the chart above, the cumulative A/D line has broken out of its short consolidation range from the last couple of weeks. That's an encouraging sign for the direction of the market going forward, even as tech starts to take a back seat.  Chart courtesy S&P Global
U.S. Bankruptcies on Track for a 10-Year High Meanwhile, in a galaxy far, far away, known as the U.S. economy, corporate bankruptcies are on pace to hit their worst levels in 10 years. According to S&P Global, a total of 424 companies have gone bankrupt this year as of Aug. 9. This exceeds the number of filings during any comparable period since 2010 as the U.S. economy contracts and the pandemic takes its toll on numerous industries, especially those relying on consumer spending.
Overall, 35 companies that filed for bankruptcies year-to-date reported more than $1 billion in liabilities.  Chart courtesy TradingView
Soft Commodities Are Spiking While economists wring their hands about impending inflation, or the lack thereof, there has been a sharp rise in the past two months in the prices of the soft commodities that are part of our everyday lives.
Cocoa, coffee, and other soft commodities trading on the Intercontinental Exchange have bounced back from their lows earlier this year. Back in March and April, prices fell because the lockdowns brought on by the pandemic crushed demand.
But as economies recover, prices have surged. In the past month alone, cocoa futures have risen 17% to $2,488 a metric ton and coffee futures have climbed 14% to $1.12 a pound. Cotton and sugar futures have also surged in recent months and are up 10% and 19%, respectively, since May 1.
The other factor driving prices higher is that most of these commodities are produced in regions of the world that are highly susceptible to a resurgence in the virus. That could hurt supply, which also drives up prices.
This pandemic has turned economic forecasting on its head.
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(chart courtesy YCHARTS)  Casino stocks, such as Wynn Resorts and Las Vegas Sands, continue to rise following yesterday's announcement that China will resume the issuance of tourist visas for Macau. Shares of PPG Industries are up by 4.5% after the paint supplier increased its Q3 sales estimates.  Shares of gold mining company Newmont are down by 7.5% following a major drop in the price of gold. Occidental Petroleum's stock price fell by over 7% amid the oil company posting a greater-than-expected loss in the second-quarter. Word of the Day The term "sector rotation" refers to the act of shifting investment assets from one sector of the economy to another. Sector rotation involves using the proceeds from the sale of securities related to a particular investment sector for the purchase of securities in another sector. This strategy is used as a way to capture returns from market cycles and to diversify holdings over a specified holding period.  Image courtesy cnbc.com
Today in History Aug. 11, 1987: Alan Greenspan took office as Chairman of the Federal Reserve Board. Greenspan became the 13th chairman of the Federal Reserve, replacing Paul Volcker. President Ronald Reagan was the first to appoint Greenspan to the office, but three other presidents, George H.W. Bush, Bill Clinton, and George W. Bush, named him to four additional terms. His tenure as chairman lasted for more than 18 years before he retired in 2006 to be replaced by Ben Bernanke. Alan Greenspan now works as a private adviser and consultant.
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Tuesday, August 11, 2020
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