The Market Sum | Insight after the bell Friday, August 21, 2020 Headlines 1. Markets rally to close record-breaking week 2. US home sales surge to record highs 3. US operating cash withdrawals tighten as stimulus fades 5. ETFs that have lapped the market 6. What to expect next week Dow
27,930.33
+190.60
(+0.69%) | | S&P
3,397.16
+11.65
(+0.34%) | | Nasdaq
11,311.80
+46.85
(+0.42%) | | | | | | Bitcoin
$11,718.13
−172.89
(-1.45%) | | US 10-Yr Yield
0.64
−0.0040
(-0.62%) | | | | | | | Nasdaq
11,311.80
(+26.07%) | | | | Russell 2000
1,552.48
(-6.95%) | | Crude Oil
$42.30
(-26.43%) | | US 10-Yr Yield
0.6400
(-67.06%) | | | | Construction Photography/Avalon / Contributor Markets Today U.S. markets rallied into the weekend with the DJIA jumping 190 points as the Nasdaq and S&P 500 both closed at new record highs. Apple led the gains, as it has all week, and homebuilders climbed aboard as existing U.S. home sales posted their best month ever in July. That sector has been sneaky hot since the Spring. It was a week of record breaking and company milestones. We saw: - Record highs for the S&P 500 and Nasdaq
- Apple crossing the $2 trillion in market cap
- Tesla crossing $2,000 per share
- The shortest bear market in history coming to an end
It's been a year of extremes, and this week was par for the course. Outside the stock market's record breaking frenzy, global economies are still struggling to gain their footing. The U.K. posted strong manufacturing numbers for the first two weeks of August, but Brexit talks are at an impasse. The rest of the Eurozone saw services growth fade in the past two weeks, while manufacturing improved. Here in the U.S., unemployment has been, and will continue to be a huge overhang on the economy, especially in the absence of more stimulus. [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: -
Sales of existing U.S. homes climbed 24.7% in July from June, according to the National Association of Realtors. That's the strongest monthly gain in the history of the survey, going back to 1968, and the highest sales pace since December 2006. Sales were 8.7% higher from July 2019. The increase in transactions came as supply fell, prices rose, and mortgage rates stayed low. -
EU chief Brexit negotiator Michel Barnier said a trade deal with the U.K. before the end of the year "seems unlikely" at this stage. If the two sides fail to sign an agreement by December 31, WTO rules will apply. David Frost, who is leading the negotiations from the British side, said recently "there has been little progress." -
Tesla's (TSLA) five-for-one stock split will apply to all shareholders of record by the close of business today. Existing shareholders will receive four additional shares after the market close on August 28, and trading will begin on a stock split-adjusted basis on August 31. The stock crossed the $2,000 mark for the first time yesterday and climbed another 2% today. -
General Electric is extending CEO Larry Culp's contract by two years, giving him at least through August 2024 to demonstrate his turnaround strategy. The board of directors has also approved a one-time equity performance award that will make it easier for him to take home as much as $230 million at the end of his contract, according to Bloomberg. -
Apple responded to Epic Games' lawsuit accusing it of anticompetitive behavior in how it controls the App Store, claiming that the Fortnite maker violated Apple's rules and shouldn't be placed back into the store temporarily while they are in litigation. In its filing, Apple alleges that Epic Games asked for an individual arrangement with Apple. Apple's first significant legal response comes the week after Epic Games released a direct payment mechanism inside Fortnite designed to bypass the App Store's payment system, from which Apple takes a 30% cut. Apple subsequently removed Fortnite from its store for violating its policies. -
Palantir Technologies, the data analytics software company, lost $580 million in 2019, according to reports from The New York Times and TechCrunch, which had access to financial documents sent to investors earlier this week. The New York Times said Palantir's 2019 loss was on a par with 2018, even though its sales were 25% higher for a total of $724.5 million in revenue for the year. It had more than $1 billion in expenses, according to the report. Palantir confidentially filed to go public back in July, although its IPO date has yet to be made public. -
U.K Flash PMI Composite rose to an 80-month high of 60.3 in August, up from 57 in July, and retail sales surged past pre-pandemic levels in terms of volume and value in July. When compared with February 2020, total retail sales were 1.7% and 3% higher in value and volume terms, respectively. Clothing store sales were the worst hit during the pandemic, and remain 25.7% lower than February in terms of volume.  Chart courtesy BofAResearch The Cash Drain After record government spending through stimulus measures, the U.S. economy is trying to crawl its way out of the deepest recession in the post-war period. The problem, is that the money is running out, even though the U.S. economy is less than halfway back to full health. Looking at the Federal Reserve's Daily Treasury statement, which measures everything from deposits and withdrawals of operating cash, public debt transactions, federal tax deposits, short-term cash investments, and income tax refunds (basically the ledger for the U.S. Treasury) operating cash withdrawals have been dwindling since the end of July. That's right when the extra $600 unemployment insurance checks stopped going out. It's also right after economic momentum in the U.S. hit a speed bump as the virus surged in reopened cities. With Congress still at an impasse and President Trump's executive orders in limbo, the next month could see a steep economic drop in overall U.S. economic activity.
 Outperformers Technology and work-at-home stocks have been the standouts of 2020, without question. But there have been other sectors that have racked up substantial gains since the late March lows. - Ultra-low mortgage rates and low inventory in the real estate market have been a boon to the homebuilding sector. The ITB ETF, which contains the largest publicly traded home construction and developers, is up 122% since late March, 3x the return of the S&P 500.
- Social media stocks, as seen through the SOCL ETF, have also been on a tear despite antitrust concerns, a decline in digital advertising, and boycotts.
- ARKG, which is a genomic research ETF that focuses on companies developing next generation medical treatments, has delivered triple-digit returns since the March lows. The companies in the ETF are not necessarily focused on COVID-19 vaccines, so the outperformance is notable.
What to Expect in the Markets Next Week After a record breaking week for U.S. stocks and milestones for some very popular companies, next week has a tough act to follow. Both the earnings and economic calendars are fairly light, but there are some notable events worth paying attention to. Here's how major assets have performed year-to-date: Events This Week
Tuesday, August 25: - German Gross Domestic Product (GDP) (Q2)
- German Ifo Business Climate Index (Aug)
- U.S. New Home Sales (July)
- U.S. S&P/Case-Shiller Housing Price Index Composite - 20 n.s.a (June)
- U.S. Conference Board Consumer Confidence
- Toll Brothers Inc. (TOL) Reports Earnings
Wednesday, August 26: - U.S. Core Durable Goods Orders (July)
Thursday, August 27: - U.S. Weekly Initial Jobless Claims
- U.S. Preliminary GDP (Q2)
- Jackson Hole Symposium
- U.S. Pending Home Sales (July)
- Dollar General Corporation (DG) Reports Earnings
- Dollar Tree, Inc. (DLTR) Reports Earnings
Friday, August 28: - Brazilian Unemployment Rate
- French Preliminary GDP (Q2)
- Jackson Hole Symposium Continues
- U.S. Personal Consumption Expenditure Price Index (July)
- Canadian GDP (Q2)
- U.S. Michigan Consumer Sentiment (Aug)
Jackson Hole
Good news for all you monetary policy junkies out there, the Jackson Hole Symposium is still happening despite COVID-19. While no one is going to Wyoming in person, the big central banking shindig is being held virtually. You can tune in here virtually starting this coming Thursday to hear all the hottest news and theories about that most exciting of topics. This year's theme is "Navigating the Decade Ahead: Implications for Monetary Policy." U.S. Preliminary GDP
The stock market has already topped its pre-COVID-19 levels this past week, but what about the economy as a whole? With unemployment still in the double-digits, it's certainly not looking like things have fully recovered. However, to get a clearer picture, look out for when the U.S. reports preliminary Q2 GDP numbers this upcoming Thursday. Keep in mind that preliminary numbers are often revised, often by significant margins, but it should still give a general idea of how, or if, the economy is recovering. Conference Board Consumer Confidence and Michigan Consumer Sentiment Indexes
With about 70% of the U.S. economy based on consumer spending, another major indicator of recovery is consumer sentiment. Conference Board releases its consumer confidence index this upcoming Tuesday, and the final Michigan Consumer Sentiment Index is released this upcoming Friday. Preliminary readings for August on the Michigan Index were down from July as expanded unemployment payouts expired at the end of July and the COVID-19 pandemic continues unabated. Shares of heavy-equipment manufacturer Deere rose after it reported earnings far above what analysts had predicted. Apple's continued to surge upward ahead of its split later this month after hitting $2 trillion in market valuation earlier this week. Chipmaker Nvidia's stock continued to climb after a decisive earnings beat earlier this week. Electronics manufacturer Keysight Technologies' stock gave up its gains from yesterday's strong earnings report today. Shares of Marathon Petroleum fell along with the price of oil Word of the Day Money Supply The money supply is all the currency and other liquid instruments in a country's economy on the date measured. The money supply roughly includes both cash and deposits that can be used almost as easily as cash. Governments issue paper currency and coin through some combination of their central banks and treasuries. Bank regulators influence money supply available to the public through the requirements placed on banks to hold reserves, how to extend credit and other regulation. photo courtesy nyse.com Today in History August 21, 1999: A record price (in dollars unadjusted for inflation) is paid for a membership seat on the New York Stock Exchange: $2.65 million -- quite a rise from the record low price for a seat, set in 1942, of $17,000. Five years later, seats will be trading for around $1 million. Source: www.nyse.com CONNECT WITH INVESTOPEDIA |
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