The 50-DMA Holds and the Market Rebounds
Posted by Eddy Elfenbein on July 20th, 2021 at 11:10 am

Yesterday, the S&P 500 dipped below its 50-day moving average but importantly, did not close below it. The market is rebounding nicely today.

Some of the big losers yesterday were airlines and cruise stocks. In other words, companies tied to lockdowns. That’s the fear hanging over Wall Street.

This week is all about earnings. We’ll get our first two Buy List earnings reports on Thursday.

This morning’s housing starts report showed an increase for June. Housing starts increased 6.3% to a seasonally adjusted annual rate of 1.643 million. Economists had been expecting an increase of 1.590 million.

The other report was for building permits. That dropped by 5.1% last month. Since May, lumber futures are down 70%.

Morning News: July 20, 2021
Posted by Eddy Elfenbein on July 20th, 2021 at 7:03 am

U.S. Recession Ended in April 2020, Making It Shortest on Record

Inflation Is Here — These 35 Metrics Tell You How Much to Worry

As Stablecoins Explode in Popularity, Regulators Prepare A Response

‘A Lot of Very Young People’ Are Going to Buy the Dip in Stocks

The Battles to Come Over the Benefits of Working From Home

‘Game Over’: Food Carts Adjust to a Changed City

Top Brewers Toast Easing of Pandemic Curbs with Zero Alcohol Beer

The Invisible Hand Behind the Tokyo Olympics

Running Low on Battery Power: Brexit Britain Faces an Acid Test

In Push to Supply Tesla, Piedmont Lithium Irks North Carolina Neighbors

Israel Warns Unilever Chief Over Ben & Jerry’s Boycott

Ben & Jerry’s Will Stop Selling Ice Cream in Palestinian Territories

LVMH Gives Designer Virgil Abloh Bigger Role, Buys Stake in Off-White

SPAC U-Turn Mars Ackman’s Hedge Fund Pivot

Another Senior Goldman Sachs Executive Is Leaving – And Colleagues Are Vexed

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NBER Calls the Official Recession Dates
Posted by Eddy Elfenbein on July 19th, 2021 at 2:44 pm

The National Bureau of Economic Research is widely considered to the be the official standard for dating economic recessions.

They just called the most recent recession. The peak was in February 2020 and the trough was in April 2020. This was the fastest recession on record.

The Business Cycle Dating Committee of the National Bureau of Economic Research maintains a chronology of the peaks and troughs of US business cycles. The committee has determined that a trough in monthly economic activity occurred in the US economy in April 2020. The previous peak in economic activity occurred in February 2020. The recession lasted two months, which makes it the shortest US recession on record.

The NBER chronology does not identify the precise moment that the economy entered a recession or expansion. In the NBER’s convention for measuring the duration of a recession, the first month of the recession is the month following the peak and the last month is the month of the trough. Because the most recent trough was in April 2020, the last month of the recession was April 2020, and May 2020 was the first month of the subsequent expansion.

You’ll often hear that a recession is two or more quarters of negative economic growth. That’s not exactly right. From their website:

In determining the dates of business cycle turning points, the committee follows standard procedures to assure continuity in the chronology. Because a recession must influence the economy broadly and not be confined to one sector, the committee emphasizes economy-wide measures of economic activity. It views real gross domestic product (GDP) as the single best measure of aggregate economic activity. This concept is measured two ways by the US Bureau of Economic Analysis (BEA)—from the expenditure side and from the income side. Because the two measures have strengths and weaknesses and differ by a statistical discrepancy, the committee considers real GDP and real gross domestic income (GDI) on an equal footing. It also places considerable weight on total payroll employment as measured by the Bureau of Labor Statistics (BLS).

The Peak of the Presidential Cycle
Posted by Eddy Elfenbein on July 19th, 2021 at 11:16 am

We’re coming up on the traditional peak in the four-year presidential cycle.

I took the entire history of the Dow Jones back to 1896 and crunched how it performs in four-year segments.

On August 4 of the post-election year, the Dow has historically peaked. This mini-bear market lasts until September 30 of the mid-term year.

Over that time, the market loses about 2.58%. That may not seem like a lot—and it’s not—but for a 14-month segment in a 125-year data series, it stands out.

For the other 34 months, the Dow has had an average gain of 38.73%. There’s another slow period from the middle of the pre-election year to the middle of the election year.

I don’t put faith in these types of stats. I think they’re interesting in a general sense. I would never make a market decision based on this.

Still, it’s interesting that incumbent presidents probably have had an effect on the stock markets. They work to make the economy peak by election day. The rally lasts for a few months before it stalls out. The market eventually bottoms around the mid-term elections.

Dow -700 on Covid Fears
Posted by Eddy Elfenbein on July 19th, 2021 at 10:26 am

Covid is scaring the stock market once again. The Dow is currently down over 700 points. At its low, the S&P 500 was down 1.84%. This could be the worst day for market in two months. Some of the airlines are down over 5%.

Also this morning, we learned that homebuilder confidence is still high, but it’s down a bit.

A monthly sentiment index from the National Association of Home Builders dropped 1 point to 80 in July. The index stood at 72 in July 2020. Anything above 50 is considered positive. The index hit a record high of 90 in November of last year.

“Builders continue to grapple with elevated building material prices and supply shortages, particularly the price of oriented strand board, which has skyrocketed more than 500% above its January 2020 level,” said NAHB Chairman Chuck Fowke, a homebuilder from Tampa, Florida.

Robinhood is looking to sell 55 million shares between $38 and $42 per share. The ticker symbol is HOOD. It will probably go public towards the end of next week.

Here’s a look at the growing gap between High Beta and Low Vol stocks.

Morning News: July 19, 2021
Posted by Eddy Elfenbein on July 19th, 2021 at 7:10 am

As Lebanon Collapses, the Man With an Iron Grip on Its Finances Faces Questions

OPEC Plus Agrees on Oil Production Increase, Easing Pressure on Supplies and Prices

Record Steel Prices Inject Life Into Long-Suffering Industry

The Pandemic Safety Net Is Coming Apart. Now What?

Yellen Expresses Doubts on Results of Trump’s China Deal

What China Expects From Businesses: Total Surrender

China Frictions Steer Electric Automakers Away From Rare Earth Magnets

The Failure of China’s Microchip Giant Tests Beijing’s Tech Ambitions

Biden’s Antitrust Initiative Threatens a Big Railroad Takeover

Bill Ackman Rejigs Universal Deal After Regulators Probe SPAC Plan

Robinhood Seeks Up to $35 Billion Valuation in Mega U.S. IPO

Bored Ex-Lehman Trader Builds a $6.7 Billion Fortune With a Hot App

Tesla Unveils $199-A-Month Full Self-Driving Subscription Plan — But There’s A Catch

Malaysian Police Destroy 1,069 Bitcoin Mining Rigs With Steamroller

J&J Exploring Putting Talc Liabilities Into Bankruptcy

Americans Sentenced to Prison for Helping Carlos Ghosn Flee Japan

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Retail Sales Unexpectedly Increased in June
Posted by Eddy Elfenbein on July 16th, 2021 at 12:56 pm

The stock market is down again today. This could be our third loss in the last four days. The S&P 500 is on pace for its first back-to-back losses since June 17-18. The S&P 500 is trading 2.6% above its 50-day moving average, but 252 stocks in the index are trading below their 50-DMA.

This morning’s retail sales report showed an unexpected increase for June of 0.6%.

Receipts at auto dealerships fell 2.0% after declining 4.6% in May. Sales at clothing stores increased 2.6%. Consumers increased spending at restaurants and bars, leading to a 2.3% rise in receipts. Sales at restaurants and bars increased 40.2% compared to June 2020.

Receipts at electronics and appliance stores rose 3.3%; sales at furniture stores fell 3.6%. Sales at sporting goods, hobby, musical instrument and book stores dropped 1.7%. Receipts at food and beverage stores gained 0.6%. Sales at building material stores fell 1.6%.

Online retail sales rose 1.2%, likely lifted by Amazon’s Prime Day, which was emulated by other retailers.

Excluding automobiles, gasoline, building materials and food services, retail sales increased 1.1% last month after a downwardly revised 1.4% decrease in May. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product. They were previously estimated to have dropped 0.7% in May.

Here’s a great stat from Ryan Detrick. In May, lumber was up more than 130% YTD. It’s now down 20%.

Check out the growing gap between High Beta and Low Vol. The S&P 500 High Beta Index is in red and Low Vol in blue.

Morning News: July 16, 2021
Posted by Eddy Elfenbein on July 16th, 2021 at 7:01 am

Japan Beefs Up Diplomatic Efforts on Regulating Digital Currency

ECB Policymakers Set for Showdown on Policy Path

U.S. Warns Investors on Hong Kong, Citing China’s Pressure

China Opened a National Carbon Market. Here’s Why it Matters.

Building Solar Farms May Not Build the Middle Class

More OPEC+ Crude is Needed, How Much Depends on Who You Believe

U.S. Jobless Claims, Benefits Payments Fall to Pandemic Lows

Yellen Sees ‘Several More Months of Rapid inflation’ Before Easing, Worries About Housing Impact

Biden to Reappoint Jerome Powell as Fed Chair, Say Economists

Fed Chair Jerome Powell Says Cryptocurrencies Are A ‘Failed’ Payment Mechanism and Stablecoins Need to Be Regulated

Jack Dorsey’s Square Is Building A Bitcoin-Inspired Financial Services Business

‘The Market Is Insane’: Cars Are Sold Even Before They Hit the Lot

Xiaomi Overtakes Apple as World’s No. 2 Phone Maker

Intel Is in Talks to Buy GlobalFoundries for About $30 Billion

‘Shuttle Diplomacy Gone Bad’: How Japan’s Investing Star Became Embroiled in Toshiba Board Dispute

Rolling Stone Names Top Daily Beast Staffer as New Editor-in-Chief

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Jobless Claims Fall to 360,000
Posted by Eddy Elfenbein on July 15th, 2021 at 10:18 am

The stock market is down so far in early trading. We gapped up early yesterday and gradually drifted lower as the day wore on. By the closing bell, we had a slight gain.

This morning’s jobless claims reported came in at 360,000. That’s the lowest since March 2020.

Jay Powell is testifying again today. Yesterday was the House’s turn. Today, it’s the Senate.

A number of years ago, I trekked down to Capitol Hill to watch the semi-annual testimony. The prepared remarks are interesting. The rest of the time is grandstanding by members of Congress. I got the seat right behind Bernanke. Sorry for the blurry picture, but that’s how you know I really took it.

Morning News: July 15, 2021
Posted by Eddy Elfenbein on July 15th, 2021 at 7:07 am

China’s Economy Is Still Growing. But the Recovery Is Slowing Down

Inflation? Not in Japan. And That Could Hold a Warning for the U.S.

Wall Street Has Surrendered to the $500 Billion ETF Rush

The ECB Starts Work on Creating a Digital Version of the Euro

Why Wall Street Is Afraid of a Digital Dollar

Hong Kong Arrests Four in Alleged $155 Million Crypto Scheme

JPMorgan Hoards Cash as Dimon Expects Rates to Rise

How CEOs Think the Covid Crisis Will Shape Flying

Inside Facebook’s Data Wars

Twitter’s Disappearing Snapchat Clone…Disappears

Startup Revolut Hits $33 Billion Valuation

TSMC Eyes Expansion in U.S., Japan to Meet Sustained Chip Demand

Mastercard Has Been Banned From Issuing New Cards in India

What Happens When a Private Club Goes Public?

The Unlikely Road to Riches for Russia’s Newest Billionaire

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