foxex: All Aboard!

Read in Browser

The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Tuesday, September 15, 2020 Headlines

1. US markets rise but gains fade towards the close

2. FedEx reports blow-out quarter

3. Apple unveils new watch and iPad

4. Mutual fund managers see bulls and rotate out of tech

5. Transport stocks hitting all-time highs

Markets Closed

Dow
27,995.60
+2.27 (+0.01%)

S&P
3,401.20
+17.66 (+0.52%)

Nasdaq
11,190.32
+133.67 (+1.21%)

VIX
25.61
−0.24 (-0.93%)

Bitcoin
10,839.87
+147.96 (+1.38%)

US 10-Yr Yield
0.679
+0.008 (+1.19%)

Image courtesy GettyImages/BeyondImages

Markets Today

U.S. markets raced out of the gate this morning, but they lost steam towards the close as the Dow Jones Industrials gave up a 200-point rally to close flat for the day. Technology stocks kept their stamina, helping drive the S&P 500 and the Nasdaq to gains. While tech stocks have regained some momentum after correcting at the beginning of the month, investors, especially big ones, have been rotating out of tech and into transports and consumer discretionary stocks. We saw some all-time highs for stocks in both sectors, with McDonalds (MCD) and Nike (NKE) hitting new records, and a handful of railroads also reaching new peaks (more below).

Professional money managers are starting to sense that a new bull market has begun, according to a recent survey (read more below). Where they think it is coming from is not the same place as where it has been the past several months. Many of them have been pulling their clients' money out of the market over the past three months and may need to play some catch up. The rally in transport stocks might just be the signal they have been waiting for to climb aboard.

PODCAST ALERT! The latest episode of The Investopedia Express is LIVE.

On this week's podcast:

Why the markets will remain under pressure
Why American tech giants are cozying up to India's Reliance Industries
A few good minutes with Schwab's Liz Ann Sonders
Why you need to know about Quadruple Witching Day

Sign up below or wherever you get your audio podcasts and please give it a listen. We'd love you to rate and recommend it if you think it is worthy.

Headlines:

FedEx (FDX) posted a 13.5% rise in quarterly revenue on Tuesday, boosted by an increase in domestic residential shipments during the COVID-19 pandemic. Adjusted net income rose to $1.28 billion, or $4.87 per share, in the first quarter ending Aug. 31, from $800 million, or $3.05 per share, a year earlier. Revenue rose to $19.3 billion from $17 billion. Shares are up 10% after-hours.
Kraft-Heinz agreed to sell a big chunk of its cheese business to France's Groupe Lactalis for $3.2 billion, as the food company seeks to jump-start growth in its other businesses. Closely held Lactalis, a global dairy company based in France, produces brie, ricotta, and other cheeses in the U.S. and sells them under brands including Président.
The U.S. is dropping plans for a 10% tariff on certain types of Canadian aluminum that President Trump announced just last month. The U.S. said it was backing off after determining that imports were likely to decline after an earlier surge. If the shipments do not fall as expected, trade officials said they would apply tariffs to the excess. The reversal comes the same day that Canada was expected to unveil its plans for retaliation.
JPMorgan sent some of its Manhattan workers home this week after an employee in equities trading tested positive for COVID-19, according to Bloomberg. News of the infection, on the fifth floor of the company's 383 Madison Ave. building, was communicated to employees on Sept. 13. That was less than a week after more workers began returning to offices after the Labor Day holiday and just days after the biggest U.S. bank told senior traders they'd be required to return by Sept. 21.
BNSF Railway, one of the largest operating units of Berkshire Hathaway, named Kathryn Farmer as chief executive on Monday. Mrs. Farmer will become the first female CEO of a major railway operator in North America. She is also now one of the highest ranking women at the Omaha, Nebraska-based conglomerate run by Warren Buffett.
Retail sales in China accelerated in August, returning to pre-pandemic levels by showing their first month of growth this year. Sales were up 0.5% from a year earlier, a strong improvement from July's 1.1% drop. Other major economic indicators, including factory production, investment, and property activity, all strengthened in August as well, according to China's state-run statistics bureau.
Apple held a virtual launch event today and unveiled the Apple Watch Series 6 with additional health features and a new low-end model called the Apple Watch SE as it looks to extend its share of the smartwatch market. The Series 6, starting at $399, looks similar to last year's models but adds a faster S6 chip and a new sensor for measuring blood oxygen levels. Apple also unveiled an updated version of the iPad, in addition to a handful of other services bundles. The company is expected to unveil a new iPhone next month.

Photo courtesy BofAResearch

Mutual Fund Managers Say it's a Bull Market

The majority of mutual fund managers around the world think that a new bull market has begun, while nearly half say the recession has ended, according to BofA Research's latest survey. A 60% rise from the stock market lows of late March should've made the first point obvious, but that was a recovery rally. Those fund managers think a new bull market has begun. Remember, mutual funds have been pulling money out of equities for the past 13 weeks, so this reading is notable.

What Sectors and Countries Are They Favoring?

Unlike many of you who responded to our recent survey, BofA's fund manager survey showed a decrease in allocations to tech, healthcare, and large cap stocks. They are increasing their allocations to industrials (highest overweight since Jan.'18), small caps, and value stocks. (I guess they didn't get the memo from their colleagues that value investing is dead?). Regionally, global fund managers are favoring U.S. equities over Europe, the U.K., and emerging markets.

Chart courtesy BofAResearch

The Transports Roar Back

Amid the market rotation from tech to anything but tech, transport stocks have been steadily chugging higher. Improving economic activity is helping, to be sure, but the strength in the sector may also be good news for the overall market.

Dow theorists posit that the market is in an upward trend if one of its averages (i.e. industrials or transportation) advances above a previous important high and is accompanied or followed by a similar advance in the other average. That is starting to happen across sectors, especially semiconductors and some industrial stocks. Look at the outperformance of the Dow Jones Transports (purple line) over Technology as seen through the QQQ ETF (green line). Semiconductors via the SOXX ETF (orange line), have been rallying, and the Dow Jones Industrials (blue line) are trying to regain their momentum.

Chart courtesy YCharts

Transporters at Record Highs

We shouldn't be surprised to see several transport and cargo stocks making all-time highs. That's exactly what is happening. FedEx reported blow-out results for the last quarter and gave strong guidance for the current one. That's a strong sign for the entire sector. Look at the railroad and logistics stocks like CSX, Union Pacific (UNP), Norfolk Southern (NSC), and C.H. Robinson (CHRW) hitting record levels. All aboard!

More News:

Top Steel Stocks for Q4 2020

Canopy Growth Stock Nears 2-Month High After US Website Launch

Top Solar Stocks for Q4 2020

SPONSORED BY TIAA
Annuities: Insurance for Retirement
Annuities are financial products that pay out a fixed stream of payments. Find out more about annuities and how TIAA can help you create a secure retirement.
Learn More >

(charts courtesy YCharts)

Shares of Alexion are up by over 6% following a rumor that Biogen might be showing interest in acquiring the pharmaceuticals company. FedEx's stock price rose by more than 6% after the delivery company reported strong Q1 revenue results.

Shares of Carnival are down by over 10.5% after the cruise line reported a $2.9 billion Q3 loss and announced a $1 billion stock sale today in order to raise capital. Citigroup's stock price fell by 6.5% amid the investment banking company resuming job cuts ahead of loan losses and the risk-related reprimand announced yesterday.

Word of the Day

Dow Theory

The Dow theory is a financial theory that says the market is in an upward trend if one of its averages (i.e., industrials or transportation) advances above a previous important high and is accompanied or followed by a similar advance in the other average. For example, if the Dow Jones Industrial Average (DJIA) climbs to an intermediate high, the Dow Jones Transportation Average (DJTA) is expected to follow suit within a reasonable period of time.

Photo credit : Oli Scarff/Getty Images

Today in History

Sept. 15, 2008:

On Sept. 15, 2008, Lehman Brothers filed for bankruptcy. It was a tipping point in the Great Financial crisis and the bank was one of many to not make it through that era. It was a somber reminder that nothing is forever—even in the richness of the financial and investment worlds. With $639 billion in assets and $619 billion in debt, Lehman's bankruptcy filing was the largest in history, as its assets far surpassed those of previous bankrupt giants such as WorldCom and Enron. Lehman was the fourth-largest U.S. investment bank at the time of its collapse, with 25,000 employees worldwide.

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 »