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The Market Sum | Insight after the bell

By Caleb Silver, Editor in Chief

Thursday, September 10, 2020 Headlines

1. US markets sink as all sectors fade

2. Stocks on track for second week of declines

3. Weekly US unemployment claims stay stubbornly high

4. Reader survey results show anxious bullishness

5. Why you are moving your money

Markets Closed

Dow
27,534.58
−405.89 (-1.45%)

S&P
3,339.19
−59.77 (-1.76%)

Nasdaq
10,919.59
−221.97 (-1.99%)

VIX
29.69
+0.88 (+3.05%)

Bitcoin
10,335.57
+86.23 (+0.84%)

US 10-Yr Yield
0.685
−0.018 (-2.56%)

Image courtesy GettyImages/Dougfir

Markets Today

Souring sentiment washed out yesterday's gains as all major U.S. and European markets sold off today. There were no catalysts or breaking news behind today's moves—just a downdraft that took all eleven sectors of the S&P 500 lower, led by technology stocks once again. Tesla was a lone gainer in a sea of red, but the FANGMAN stocks, the stay-at-home stocks, and nearly all of the companies that were red-hot in August are as cold as ice right now.

The ECB made little to no changes to its monetary policy this morning, as expected. No one was expecting miracles, but there is a creeping sense that central banks and governments have done what they can, or what they are willing to do, to stimulate the economy. U.S. lawmakers got even further apart on the next round of stimulus measures with Senate Democrats killing the latest proposal from their Republican counterparts.

Meanwhile, new job losses continue to remain stubbornly high. 884,000 U.S. workers filed for first time unemployment claims last week. Tomorrow will be six months to the day the global pandemic was declared. While the U.S. unemployment rate may have fallen last month, the rise in total number of individuals claiming unemployment, which is up to 29.6 million, is not so far off from its recent peak of 32.4 million in mid June.

PODCAST ALERT! The Investopedia Express

On this week's podcast:

How to understand the recent market volatility with James Chen
Why the U.S. dollar and the euro are diverging
A few good minutes with veteran business anchor Ali Velshi
And why you need to know about the Put to Call ratio

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:

Jane Fraser will become the first woman to run a major Wall Street bank, succeeding Michael Corbat as Citigroup chief executive when he retires in February. Citigroup elevated Fraser to serve as the bank's president and to run its global consumer bank last year, a move that established her as the front runner to succeed Corbat. Corbat was expected to remain CEO into 2022.
U.S. Senate Democrats blocked Senate Republicans' slimmed-down coronavirus aid package from advancing Thursday, the latest in the political battle over stalled pandemic relief and economic stimulus. The new roughly $300 billion package would provide $300 in weekly federal jobless benefits through Dec. 27, establish legal protections for businesses and health providers, add an infusion of funding for testing and vaccines, and provide new money for schools and child care.
JPMorgan executives told senior employees of the bank's giant sales and trading operation that they and their teams must return to the office by Sept. 21, according to The Wall Street Journal. Before JPMorgan sent employees home in mid-March, a coronavirus outbreak sickened more than a dozen people on the fifth floor of its Madison Avenue office. By fully reopening its trading floor, the bank is sending a message to its employees—and its competitors—that it is now safe to return.
U.S. railroad operator Kansas City Southern has rejected a roughly $20 billion takeover offer from a group of investors, according to the WSJ. Global Infrastructure Partners and the infrastructure arm of private-equity giant Blackstone Group had reportedly offered $208 a share.
The European Central Bank, which covers the 19 countries in the Eurozone, kept its monetary policy unchanged as expected. The deposit rate will stay at -0.5% and the bank will continue purchases under its €1,350 billion emergency bond-buying program. "The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics," said the press release.
J.C. Penney has reached a tentative deal valued at $1.75 billion with lenders and landlords that will save the 118-year-old retailer from bankruptcy proceedings and liquidation. According to reports, U.S. mall owners Simon Property Group and Brookfield Property Partners will pay $300 million in cash and assume $500 million in debt. 650 stores and 70,000 jobs have been saved, according to its lawyers.
Peloton said its fiscal fourth-quarter sales surged 172%, as its stationary bike and treadmill have been in high demand amid the pandemic. The company swung to a profit of $89.1 million, compared with a loss of $47.4 million. Its earnings per share came in 17 cents ahead of analysts' expectations. Sales climbed to $607.1 million from $223.3 million a year earlier, topping a forecast for $582.5 million. Peloton is predicting fiscal 2021 sales of between $3.5 billion and $3.65 billion, which at the midpoint of that range, would be up 96% from a year earlier.

Chart courtesy Bespoke Investments

Global Sentiment Shift

We mentioned yesterday that several global stock markets have been outperforming the U.S. for several weeks, notably China, Sweden, and South Korea. In just the past week, however, China has seen a broad sell-off across its markets, led by its large cap technology companies. Along with the U.S., it is the worst performing market of all countries. Like the U.S., it had also risen the most, so the reversal has been particularly deep and abrupt.

The average global stock market of the 23 markets listed above is down 1.8% since Sept. 2. The U.K. stock market is the best performer over the past week, and that economy is facing extreme uncertainty around Brexit. Global investors are having a very strange year.

You Are Still Confident

After five months of blistering returns for equities amid the pandemic, you are still bullish, but bracing for another downturn. That's the overwhelming sentiment among our U.S. readers according to our most recent survey. You have been gracious enough to let us survey you since mid-March, which we deeply appreciate.

We told you yesterday that your biggest concern was the upcoming election. You are also concerned about COVID-19 and stock valuations. You are not alone. Still, more than three quarters of you are either bullish or neutral about your portfolio even as you expect markets to fall in the next three months.

Of those of you who are worried, nearly 80% of you, especially those aged 60 or more, are making adjustments to your portfolio.

Chart courtesy AAII.org

How Do You Compare to Other Investors?

As Sinead O'Connor used to sing, "Nothing compares to you...", and we agree. But you are also more bullish than other U.S. investors, according to the American Assoc. of Individual Investors sentiment survey. It updates every week, and this week's survey captured last Friday's abrupt sell-off in U.S. equity markets. Still, we've been tracking this all summer, and our readers have consistently been more optimistic than the AAII respondents.

We likely have a more mixed demographic of readers across age groups, which could explain your boldness. Our survey has indicated month after month that our younger readers are thoroughly more bullish than our older ones.

Who says youth is wasted on the young?

That Doesn't Mean You Are Doing Nothing

On the contrary ... you have been making moves in your portfolios throughout the pandemic. While nearly half of you say you are worried about your investments, which has been consistent for the past several months, nearly 80% say recent events are making you change the way you invest, mostly because you think that certain stocks have become overvalued.

We'll share your top holdings and your forecasts for winning sectors in tomorrow's Market Sum.

More News:

10 Biggest Chinese Companies

Investing in Apple Stock (AAPL)

How Robinhood Makes Money

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(charts courtesy YCharts)

Shares of Tyson Foods are up by 3.5% after an outbreak of African swine fever (ASF) was confirmed in Germany, Europe's biggest pork producer, providing Tyson with an opportunity to increase its international exports. Quest Diagnostics' stock price rose by over 3% following the clinical laboratory raising its full-year revenue and profit outlook.

Oil companies led the decliners today as oil prices dropped nearly 2% on news of an unexpected build in crude stockpiles last week.

Word of the Day

Bull Trap

A bull trap is a false signal, referring to a declining trend in a stock, index, or other security that reverses after a convincing rally and breaks a prior support level. The move "traps" traders or investors that acted on the buy signal and generates losses on resulting long positions. A bull trap may also refer to a whipsaw pattern. The opposite of a bull trap is a bear trap, which occurs when sellers fail to press a decline below a breakdown level.

Photo credit : OPEC.org

Today in History

Sept. 10, 1960:

Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela convened in Baghdad to form the Organization of the Petroleum Exporting Countries (OPEC), which nearly brought the industrial world to its knees in the 1970s by hiking the price of oil.

http://www.opec.org/