| Thursday, August 13, 2020 Headlines 1. S&P 500 falls slightly, failing to breakout to new highs (again) 2. US sector scorecard since March lows 3. Initial jobless claims slide below one million 4. All that glitters Markets Closed
 Photo courtesy GettyImages/Westend61
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Markets Today U.S. markets started out the day Thursday in somewhat of a bullish mode, but the S&P 500 began to turn negative again by the afternoon, as we've seen many times in the recent past. By Thursday's market close, the S&P 500 had dropped slightly (-0.20%) along with the Dow (-0.29%), while the Nasdaq Composite had narrowly resisted a red day by closing 0.27% higher. Helping to buoy markets early in the day were better-than-expected weekly unemployment claims, but that wasn't enough to allow the S&P 500 to break out above its all-time high of 3393.52, as shown on the chart below. It's so close, and yet, so far.
Any real breakout for the benchmark index would be a highly significant event, as it would symbolize a full market recovery, even in the midst of an economy that is still very far from recovery. Such a breakout could potentially add even more fuel to feed market optimism, as we can see on the Nasdaq Composite. This tech-heavy index broke its February all-time high back in June and has hardly looked back since. By comparison, the Dow still has a way to go before coming anywhere near its own previous record.  Chart courtesy TradingView
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Headlines:
 chart courtesy TradingView
U.S. Sector Scorecard Since March Lows As markets have continued on a bullish trajectory amid a still-struggling economy, and the S&P 500 flirts with record highs, let's take a quick look at the scorecard for the different equity sectors since the March lows. The chart above ranks the 11 State Street SPDR sectors ETFs by performance from the late-March market low up to Thursday's market close.
Clearly, it's been a stellar five months for all major sectors, as shown by the percentage gains during this time period. The big winner overall has been the consumer discretionary sector, at a 64% gain since the March lows. This is no surprise, as the XLY ETF's largest holding, by far, is high-flying Amazon.com (AMZN). Aside from Amazon, the ETF has two market stalwarts, Home Depot (HD) and McDonald's (MCD), as second and third place holdings, respectively. Home improvers and investors helped push Home Depot to yet another all-time closing high on Thursday.
Trailing consumer discretionary, but by no mean struggling, are the materials and technology sectors. Technology could very well have taken the lead if not for a couple of speed bumps in the past few weeks that slowed its dominance somewhat. But with market outperformers like Apple (AAPL) and Microsoft (MSFT) as its largest holdings, the XLK technology ETF is far from suffering.
Bringing up the rear but still showing very respectable returns is the consumer staples sector. Aside from Procter & Gamble (PG), which has benefited substantially in both its business and stock price from increased demand for its products through the pandemic, the XLP consumer staples ETF also has a large portion of its holdings in PepsiCo (PEP) and Coca-Cola (KO), both of which continue to be stable with relatively flat stock prices. Still, the sector is up more than 30% since the March lows, which is nothing to sneeze at.  Chart courtesy U.S. Department of Labor
Initial Jobless Claims Slide Below One Million For the first time since March, initial weekly jobless claims in the U.S. fell under one million, though only slightly below. The number of first-time unemployment claims last week dropped 228,000 from the previous week down to "only" 963,000 initial claims. Prior consensus estimates from economists had forecast the number to be substantially higher, around 1.1 million. While this is a significant improvement from previous weeks and months, continuing jobless claims remained stubbornly high at 15.5 million, which is down only around 600,000 from the previous week.
Though the economy, in terms of unprecedented unemployment, certainly appears to be taking steps in the right direction, it's more like baby steps for now. In the U.S. Labor Department's chart (above) of seasonally adjusted initial claims for the past year (initial claims in dotted blue and moving average in red), the trend is clear. New unemployment claims are indeed falling steadily, but we still have a long way to go for both initial and continuing jobless claims to get anywhere near their pre-March lows.  Chart courtesy TradingView
All That Glitters You may have noticed the dramatic rise in gold and silver prices (especially silver) since March, as shown on the chart above. This surge accelerated sharply in mid-July but then hit a rather large speed bump on Tuesday, when gold dropped more than 5%, its worst one-day decline since 2013, and silver plummeted more than 13%, its worst day since 2008. As of Thursday's close, gold was able to bounce modestly from this rout, while silver made a more substantial recovery.
The sustained fall in the value of the U.S. dollar in the past few months, along with persistently low interest rates, have contributed to the rise of gold and silver, despite a stock market that has been surging almost continuously since March. Both metals may still retain some upside momentum in the current environment, albeit more muted now. But any significant rebound for the dollar or potential rise in interest rates down the road could put a damper on the sharp rally in metals.
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(chart courtesy YCHARTS)  Shares of Paycom are up by nearly 5% amid the online payroll provider reporting 7.2% revenue growth year-over-year. Keysight's stock price rose by over 3.5% following Goldman Sachs upgrading the electronic measurement equipment manufacturer from Neutral to Buy.  Shares of Cisco Systems are down by over 11% after the technology conglomerate reported less-than-impressive Q1 guidance. Invesco's stock price fell by 6% after Barclays downgraded the investment management company from Equal Weight to Under Weight. Word of the Day A breakout refers to when the price of an asset moves above a resistance area or moves below a support area. Breakouts indicate the potential for the price to start trending in the breakout direction. For example, a breakout to the upside from a chart pattern could indicate the price will start trending higher. Breakouts that occur on high volume (relative to normal volume) show greater conviction, which means the price is more likely to trend in that direction.  Image courtesy GettyImages/Handout
Today in History Aug. 13, 1981: President Ronald Reagan signed into law the Economic Recovery Tax Act of 1981, the biggest tax cut in American history, which streamlined the Federal income tax brackets, lowered the top rate to 36%, and created the universally-deductible Individual Retirement Account.
Jason Zweig. "This Day in Financial History." Aug. 13, 2020.
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Thursday, August 13, 2020
Tough Break
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