S&P 500 Snaps 3-Week Winning Streak as Big Tech Runs Out of Steam By Investing.com


© Reuters.

By Yasin Ebrahim

Investing.com – The S&P 500 broke its three-week winning streak on Friday as rising U.S. and China tensions and a stumble in tech and health care weighed on sentiment.

The lost 0.62%, while the fell 0.94% and the slumped 0.68%.

Mega-cap tech – with exception of Amazon.com Inc (NASDAQ:) – struggled to find their footing as Apple (NASDAQ:), Alphabet (NASDAQ:),  Facebook Inc (NASDAQ:) and Microsoft (NASDAQ:), making up about 20% of the S&P 500 index, ended lower.

A 16% drop in Intel (NASDAQ:) shares exacerbated the decline in tech after the chip maker’s better-than-expected results for the second quarter were overshadowed by delays in the roll out of its next-generation chips. Intel rival Advanced Micro Devices Inc (NASDAQ:), however, surged 16.5% as the chipmaker is set to benefit from Intel’s production woes.

Health care was also among the biggest declines as investors shunned Covid vaccine-related drug makers that have been bid up recently.

Moderna (NASDAQ:) fell 2.8% after failing to scrap a U.S. patent owned by Arbutus Biopharma (NASDAQ:) that threatens its efforts to develop mRNA-based vaccines. 

Pfizer (NYSE:) and Biontech Se (NASDAQ:), which are jointly developing a coronavirus vaccine, fell 1.9% and 5%, respectively. Novavax (NASDAQ:) fell 3.8% and Gilead Sciences (NASDAQ:) was down 2.5%.

In financials, Goldman Sachs was in the spotlight after the bank reached a $3.9 billion settlement with Malaysia concerning the multibillion-dollar sovereign wealth fund 1Malaysia Development Bhd (1MDB) scandal.

Shares of Goldman Sachs (NYSE:) fell 0.75%. The bank benefited from an upgrade from JPMorgan (NYSE:) to buy from neutral.

The broader market kicked off the session on the back foot as investor sentiment was soured by rising U.S. and China tensions.

China ordered the closure of a U.S. consulate in Chengdu, hitting back against the United States’ move earlier this week to close a Chinese consulate in Houston.

On the earnings front, investors had to contend with mixed results that highlighted the impact of the pandemic.

Honeywell (NYSE:) fell 2.8% as a warning of sales headwinds offset better-than-expected earnings and revenue in the second quarter.

Boston Beer (NYSE:), meanwhile, produced blowout second-quarter results as earnings were more than double the consensus estimates, sending its shares 25.6% higher.

On the economic front, home buying activity remained as new homes in June markedly beat economist estimates.

New home sales rose by 13.8% in June to an annualized run-rate of 776,000 units, the highest level since 2007.

“The tightness in the housing market suggests significant upside for home building activity, provided demand can be sustained at current levels. We believe it can, with upside,” Jefferies (NYSE:) said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Mexico’s auto industry restart gathers steam, Ford still waiting By Reuters


© Reuters. The corporate logo of Ford is seen at Brussels Motor Show

By Sharay Angulo

MEXICO CITY (Reuters) – Mexico’s auto industry reopening picked up pace on Tuesday, with Fiat Chrysler (MI:) and BMW AG (DE:) joining peers in gradually dusting off operations even as the wait for approvals slowed the return of Ford Motor Co (N:) and other companies.

In mid-May, officials said the industry could exit a mandatory coronavirus lockdown before June 1 if safety measures were approved.

However, some Mexican governors have urged caution as new coronavirus infections and deaths ticked higher, in a sign of what is expected to be a bumpy return as complex North American supply chains are linked back together.

Fiat Chrysler on Tuesday began reopening two facilities in the central Mexican city of Toluca after a gradual restart of its operations in the northern city of Saltillo a day earlier, said a company spokesman.

“We are opening up with only 40% of personnel at each plant. It’s an orderly and secure reopening, following all the protocols the Health Secretary has given us,” he said.

The announcement means two of Detroit’s Big Three automakers have begun restarting Mexican operations. The third, Ford, said on Tuesday it was working closely with the government to comply with health protocols.

“We’re hoping we can get its approval to operate,” the company said in a statement.

BMW said it would restart operations at its plant in the central Mexican state of San Luis Potosi on May 27.

General Motors Co (N:) began opening production lines at its Mexican plants in Ramos Arizpe in the northern state of Coahuila and in the central city of Silao on Thursday.

Japanese automakers Toyota Motor Corp (T:), Nissan (OTC:) Motor Co Ltd (T:) and Honda Motor Co Ltd (T:) are also restarting in Mexico.

German carmakers Volkswagen (DE:) and Audi are still awaiting authorization for their plants in Puebla state, whose government said on Friday conditions “do not exist” yet for a restart.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Cash is king as U.S. quarterly reporting season gains steam By Reuters


© Reuters. FILE PHOTO: Four thousand U.S. dollars are counted out by a banker at a bank in Westminster

By Noel Randewich

(Reuters) – As the U.S. quarterly earnings season picks up steam next week, investors will get an early glimpse of how companies are weathering the coronavirus outbreak, including the strength of their balance sheets.

Reports from major corporations including International Business Machines (N:), Coca-Cola (N:) and Union Pacific (N:) will reflect the initial effects of the crisis in the United States, and investors will pay close attention to their liquidity and ability to weather a steep economic downturn caused by the COVID-19 pandemic.

With little clarity on when the U.S. economy will reopen, companies of all sizes have been bracing for months of limited revenues.

At least 13 S&P 500 companies have cut or suspended their dividends, while several corporations have slowed capital spending and cut jobs and wages to save money.

Companies have also raced to raise as much credit as possible and preserve liquidity. AT&T (N:), which reports its results on April 22, recently announced a $5.5 billion term-loan agreement to provide “financial flexibility”, and last month it shuttered 40% of its stores nationwide as a result of the health crisis.

Major airlines, including JetBlue Airways Corp (O:), Southwest Airlines Co (N:) and Alaska Air Group Inc (N:), which could report in the coming days, have said they would accept U.S. government aid to help them ride out the sharp drop in travel demand caused by the massive lockdowns. JetBlue and Alaska Air have not announced reporting dates.

The following graphic shows companies slated to report in the week of April 20, along with their cash and short-term investments in recent quarters.

(GRAPHIC: Companies’ cash – https://fingfx.thomsonreuters.com/gfx/mkt/bdwvkmxjvmn/Companies%20Cash.png)

(This story corrects sixth and seventh paragraphs to remove reference to specific reporting dates for JetBlue and Alaska Air Group. Corrects dates column in graphic)

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Wall Street Rally Gains Steam By Investing.com


© Reuters.

By Geoffrey Smith 

Investing.com — U.S. stock markets climbed in morning trading Wednesday on fresh hopes that the worst of the Covid-19 pandemic will soon be past.

At 11:40 AM ET (1540 GMT) the was up 588 points, or 2.6% from Tuesday’s close, putting it on course for its highest close in over three weeks. The was up 2.3%, while the was up 2%.

Sentiment was lifted by a new projection of a much lower death toll from the Covid-19 virus than previously thought. While the Trump administration had warned of over 100,000 possible deaths in the U.S. last week, researchers at the University of Washington estimated that the actual number may be limited to about 60,000. It had earlier predicted over 80,000.

The growth rate of new infections nationwide fell to only 8.1% on Tuesday, the latest in a string of daily declines, even though both caseload and mortality statistics continue to hit new highs in absolute terms. 

For some at least, that means that the market bottom is near enough to warrant increasing exposure to stocks. Oaktree Capital founder Howard Marks told investors that he was no longer inclined to “play defense” but rather to buy stocks that offered value at their current levels. Goldman Sachs is also upbeat.

“Our own advice to clients is that right now is a good time to get back into markets and take advantage of the decline in equity markets to position for the rebound,” Bloomberg quoted Silvia Ardagna, managing director in the investment strategy group within Goldman Sachs (NYSE:) Private Wealth Management, as saying.

Short-term economic numbers still look miserable, however. The Mortgage Bankers Association’s purchase index slumped 12.2% in the period ended April 3. That rounded off its sharpest monthly drop since mid-2010.

Also, France’s central bank said it expects first-quarter GDP to have shrunk by 6% while Germany’s leading research institutes predicted a 9.8% contraction in their country in Q2.

McDonald’s (NYSE:) stock fell 1.8% despite saying comparable sales fell 22% in March, and 3.4% for the first quarter. Analysts had expected quarterly sales to fall 0.9%.

Short-seller Carson Block announced a short position in online health marketplace eHealth (NASDAQ:) stock, puhsing it down 12.2%. Block’s Muddy Waters Research said the company uses aggressive accounting techniques to hide a lack of underlying profitability. 

Muddy Waters had announced a short position on Tuesday in Chinese Netflix (NASDAQ:NASDAQ:) wannabe iQIYI. iQIYI (NASDAQ:) stock rose 3.2%Tuesday but was down 7.9% after early trade on Wednesday.

United Parcel Service (NYSE:NYSE:) stock was up 5% and FedEx (NYSE:NYSE:) stock rose 7% after reports that Amazon.com (NASDAQ:NASDAQ:) is suspending a third-party delivery service that competed directly with them.

Zoom Video  (NASDAQ:ZM) stock was up 8.4% after the video call software maker hired Facebook (NASDAQ:NASDAQ:) veteran Alex Stamos as an advisor to help it address concerns about its privacy policies.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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S&P 500: The 20% Bear Market Rally Is Running Out Of Steam – S&P 500 Index (:SP500)


Image Source

The S&P 500/SPX (SP500) has appreciated by roughly 20% since I mentioned that a short-term bottom in stocks was likely in. In addition to introducing a watch/buy list of 50 stocks, I also identified the recent short-term bottom in group chat about a week ago, putting emphasis on deeply oversold names like Boeing (BA), defense contractors, and stock markets in general.

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Good News, Bad News

The good news is that many stocks on our watch/buy list moved up by 30,40, 50% or more in recent sessions. However, the bad news is that this short-term rally may be coming to an end.

SPX 1-Year Chart

S&P 500 chart

Source: StockCharts.com

The reasons why we got this extremely sharp countertrend rally appear quite clear:

  • First, stocks were deeply oversold. It’s unprecedented to see major averages drop from the top in a bull market by 35 or 40% in a month or so.
  • Second, we received huge, like never before seen monetary and fiscal stimuli from the Fed and the U.S. government.

Coronavirus Trumps All

Nevertheless, the ongoing global coronavirus pandemic coupled with the unparalleled global economic standstill trump everything in my view. We are still in the early stages of this battle with the virus, and there is a lot of horrid news ahead. The Fed cannot simply introduce trillions of dollars and quickly fix the global economy, thus, I don’t think that we’ve seen the bottom to this bear market yet.

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In fact, the bottom could be quite a bit lower from here and lower than the 2,200 SPX low as well. Therefore, I am using this opportunity to sell into recent strength. It is quarter rebalancing time, and it seems like stocks could go lower from here. Also, it is very unlikely in my view that the recent bear market will be over just like that, in about 5 weeks or so, because the Fed is throwing an unprecedented amount of money at the problem.

Should We Thank The Fed?

Perhaps we should thank the Fed for the endless money printing operation that will likely at least double the Fed’s balance sheet going forward, because where would markets be without it. Without the seemingly limitless backstop for governments and large corporations, extremely low interest rates, $2 trillion fiscal stimulus, and other initiatives made possible by the Fed, the SPX would likely be down by 50% or more right now.

Instead, the S&P 500 is down by just around 22%. Still, these are unprecedented times, and it is unlikely that the Fed can simply fix “everything” by throwing endless money at the current economic problem.

Furthermore, Fed actions could lead to some very unpleasant unintended consequences such as very high inflation, an increasingly weaker dollar, enormously high government and corporate debt, as well as extremely low future economic growth.

Fed printingImage Source

Naturally a doubling of the Fed’s balance sheet should dramatically increase the monetary base. This will very likely create quite a bit of inflation going forward as well as weaken the dollar against certain currencies. Furthermore, as the Fed was not able to significantly unload its balance sheet following the 2008 crisis, there is no reason to presume that it will be able to do so following this crisis.

In fact, we are likely entering a “new normal” where zero or near zero rates coupled with additional monetary stimulus will be required to produce even very low 1-2% GDP growth in the U.S. economy. It is much about the debt, as the U.S. national debt is so high (109% debt to GDP) that it is going to be exceedingly difficult to see any growth in the U.S. economy under “normalized” conditions.

Let’s not forget that we have not even begun to see the ramifications for the global economy. We could see 30% unemployment in the U.S. in the months ahead. Consumer spending is going to crash. We are clearly going into a recession, hopefully not a depression, although there is so much uncertainty due to the coronavirus spread that anything is possible.

coronavirus

Image SourceAlso, I want to draw readers’ attention to the alarmingly high death rate of 19% in closed cases. This is much higher than the 1-2% or 3-4% mortality rate we hear and see about in many sources.

Let’s Focus on What is Probable

In my view, it is probable that the situation with the virus is going to get worse in the U.S. as well as around the globe and it could take several months if not longer to get this extremely contagious pandemic under control. Moreover, it is unclear when or where secondary waves could occur and what kind of impact they will have on the economy.

Will this shutdown last for another month? Two months? Three? Will there be other shutdowns in the fall? Winter? How about next year? All of this is unclear, but plausible. What is clear in my view is that corporate profits are going to get slammed. We are going to see an earnings depression like nothing we’ve seen in at least 11/12 years, possibly worse.

Therefore, yes, I believe now is a good time to reduce positions in stocks, hedge, diversify into gold, and digital assets, and possibly even short the market, because SPX and stocks in general have the potential to go much lower from here.

Technical View

Right now SPX is battling to breakout above 2,650 resistance. If it can manage to do so, stocks will likely extend gains to around the 2,700-2,750, which was the initial top-end range for the current bear market rebound. However, if 2,650 and then 2,700 cannot be penetrated, look for initial support at around 2,550-2,500, then at the 2,300-2,200 point, then at 2K, and finally at around the 1,800-1,600 level.

The Bottom Line

We’re doing end of quarter rebalancing and stock positions are being reduced essentially across the board right now. With WTIC oil likely going below $20, I don’t see much of an advantage to have holdings in anything but a few greatly oversold energy names.

Also, with corporate profits likely to continue their decline in future months due to coronavirus shutdowns, many stock segments will be reduced. I see potential in the gold, silver, mining/GSM space, bond instruments such as TLT and others alike, as well as in some digital assets due to unprecedented central bank easing in the U.S. and around the globe. I even see a better opportunity to be in cash right now than in stocks as cash reserves can be deployed to buy stocks at lower levels. Generally, I expect that the SPX can fall to at least the 2,000, but likely lower. I expect a true bottom to be attained at roughly the 1,600-1,800, possibly lower if stocks overshoot to the downside due to continued coronavirus disruptions.

Want the whole picture? If you would like full articles that include technical analysis, trade triggers, portfolio strategies, options insight, and much more, consider joining Albright Investment Group!

Disclosure: I am/we are long TLT, GOLD, SILVER, MINERS AND OTHER ASSETS NOT MENTIONED IN THIS ARTICLE. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article expresses solely my opinions, is produced for informational purposes only and is not a recommendation to buy or sell any securities. Please always conduct your own research before making any investment decisions.





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