Resuming Speed

U.S. markets rebound as tech stocks rally back into the green, lifting the major indexes with them.

Read in Browser   The Market Sum | Insight after the bell By Caleb Silver, Editor in Chief Tuesday, September 22, 2020 Headlines 1. US markets rebound as tech stocks take charge 2. Canada's small businesses still struggling 3. Bull market slows six months since it began 4. What trailing P/E ratios are telling us 5. Economic surprises are less common Markets Closed Dow 27,288.18 +140.48 (+0.52%) S&P 3,315.57 +34.51 (+1.05%) Nasdaq 10,963.64 +184.84 (+1.71%) VIX 26.86 −0.92 (-3.31%) Bitcoin 10,510.56 +72.83 (+0.70%) US 10-Yr Yield 0.664 −0.007 (-1.04%)     Image courtesy GettyImages/Christopher Morris - Corbis/Contributor Markets Today U.S. markets snapped back today after Monday's sell off as big technology stocks resumed their leadership, with shares of Amazon (AMZN) and Apple (AAPL) posting gains and lifting the indexes higher. In a reversal from yesterday, most sectors saw strength today, as did metals like gold and silver, as well as oil.   Investor sentiment is fickle these days and investors have been through a lot in the six months since this new cyclical bull market began. It has slowed down in recent weeks, especially for the hottest sectors of the market. That is bringing valuations down to more reasonable levels, which may explain the strength of today's rally.   It could evaporate tomorrow, as we have seen in recent weeks. The economy is strengthening, but the big gains may be behind us for awhile. PODCAST ALERT! The latest episode of The Investopedia Express is LIVE. On this week's podcast: What the leading economic indicators are telling us with Lakshman Achutan Who will be the next tech winners with Howard Lindzon Behind the sector rotation that has turned the markets 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: Delta Air Lines has agreed to delay the decision to furlough close to 2,000 pilots until Nov. 1, giving more time to negotiate cost-cutting measures and lobbying for additional federal aid, their union said Tuesday. Delta had planned to furlough more than 1,900 of its 13,000 pilots as early as Oct. 1, when the terms of billions in federal coronavirus aid that prohibit airline job cuts expire. Shares of Tesla (TSLA) dropped 5.6% after CEO Elon Musk said in a tweet that the electric carmaker's "Battery Day" event would not reach "serious high-volume production" until 2022, which disappointed investors and analysts. The company held its 2020 shareholder meeting today. Facebook claims it will pull out of Europe completely and lose 410 million users over a rule that stops it from transferring data to U.S. servers, according to a court filing in Dublin. The preliminary order from the Irish Data Protection Commission has been challenged by the social media firm with a lawsuit. Hong Kong Disneyland Park will officially reopen on Sept. 25 after closing in July for the second time during the pandemic. The statement promises reduced capacity and limited days, health and safety measures, and a visit reservation system for all guests.  Activist investor Trian Fund Management has bought 7.16 million shares in Comcast, which it believes is undervalued. In a statement, the hedge fund said it has begun "constructive discussions" with the management team. It now owns an $870 million stake or about 0.4% of the total company, said WSJ. Nike reported fiscal first quarter results that beat analysts' expectations. Net income climbed to $1.52 billion, or 95 cents per share, compared with $1.37 billion, or 86 cents per share, a year earlier. Sales in China rose 6%, it said, while sales in North America were down 2%. Six months after the COVID-19 shutdowns, more than two-thirds of Canadian small businesses still haven't returned to full sales, according to a new report. Only one in three, or 29%, of small- and medium-sized companies surveyed by the Canadian Federation of Independent Business said they're back to "normal or better" sales as of Sept. 16. That number is largely unchanged since mid-July.     Bull Trip Yesterday, we talked about secular bull and bear markets and why many believe the bear market in late March was a cyclical bear market inside a secular bull market. If that's the case, then the cyclical bull market that started in late March off of those bear market lows turned six months old today.      Chart courtesy LPL Financial Not the Strongest Start, Anymore While it has been strong, it is no longer the best start to a new bull market, according to Ryan Detrick at LPL Financial. The 1992 and 2009 cyclical bear markets started off much stronger, especially as this rally has faded lately.   Records like this don't mean much to average investors, on the surface. But identifying when cycles start and stop can help us make our own portfolio decisions. Do we want to own sectors that outperform in the early stages of a bull market, or do we want to play the long game and own the sectors that do better as a bull market matures? What Trailing Price to Earnings Are Telling Us A lot of investors like to look at the forward price to earnings when evaluating a stock. What will the company's profits look like in the future, and am I willing to pay for those earnings today given the stock price?   The trailing price-to-earnings (P/E) ratio can also be informative, especially in uncertain economic times. Trailing earnings show us a company's price given the last 12 months of actual earnings. It is calculated by taking the current stock price and dividing it by the trailing earnings per share (EPS) for the past 12 months.    We can also do this with indexes like the Nasdaq and the S&P 500.     Chart courtesy Yardeni Research The S&P 500 and Trailing Earnings Are Converging As you can see from the chart above, the S&P 500 and trailing earnings for the index are starting to converge again. When they split like they did over the summer, the S&P 500 looked very overvalued, especially given the drop in corporate earnings.   Now that the S&P 500 has sold off since the beginning of September, and corporate profits have improved, valuations are starting to come back in line.  No More Surprises The global economic recovery has been gathering strength over the summer, without question. But the degree of upside has been more muted in recent weeks, which makes sense. Economic indicators like manufacturing surveys and industrial production accelerated off of very low levels in the teeth of the recession in May. The gains were robust through August as new areas of global economies started coming back to life as countries opened up their factories and industries.     Chart courtesy Yardeni Research/Citi The Citi Economic Surprise Index, which measures the pace at which economic indicators are coming in ahead of or below consensus forecasts, is still at multi-year highs, but it has come down in recent weeks, suggesting that the big gains are behind us.    Most economists are in agreement that the recession is over and economic growth will be robust in the third and fourth quarter of the year. After that, all bets are off given the uncertainty around vaccines and the 2020 elections. But the big economic gains may already be in the rear-view mirror. More News: Investing in Microsoft Stock (MSFT) Investing in Apple Stock (AAPL) 5 Things You Need to Know About Kamala Harris 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 Nike are up by nearly 11% amid the footwear manufacturing company reporting Q1 income and sales results that surpassed analyst expectations. Amazon's stock price rose by 5.5% after a Bernstein analyst upgraded the e-commerce company from "market perform" to "outperform."     Five out of the eight companies that fell furthest today are bank stocks, with Citizens Financial Group taking the biggest hit at over 5%. The remaining three are in the healthcare sector, which are down amid concerns of the Affordable Care Act (ACA) potentially being repealed. Word of the Day Trailing Price-to-Earnings Ratio Trailing price-to-earnings (P/E) is a relative valuation multiple that is based on the last 12 months of actual earnings. It is calculated by taking the current stock price and dividing it by the trailing earnings per share (EPS) for the past 12 months. Trailing P/E can be contrasted with the forward P/E, which instead uses projected future earnings to calculate the price-to-earnings ratio.      Today in History Sept. 22, 1985: Finance ministers and central bankers of the U.S., France, Germany, Japan, and the U.K., meeting at the Plaza Hotel in New York City, announced coordinated measures to reduce the foreign-currency value of the U.S. dollar, which was near all-time highs. Amazingly, the "Plaza Accord" worked, as the dollar began a decade-long decline, spurring U.S. exports and creating a windfall for U.S. investors in foreign stocks. http://www.library.utoronto.ca/g7/finance/fm850922.htm 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 » How can we improve the Market Sum? Tell us at marketsum@investopedia.com Enjoy the Market Sum? Copy and share the link below to invite friends to sign up https://link.investopedia.com/join/53o/00-fwd-marketsum CONNECT WITH INVESTOPEDIA Email sent to:  mondemand.forex@blogger.com To update your newsletter preferences or unsubscribe, click here.   114 West 41st St, floor 8 New York NY 10036 © 2020, Investopedia, LLC. All Rights Reserved | Privacy Policy