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WKLY ROUND-Up thru JULY 17th 2020; “All Aboard!”

Hey everyone, we are now going into the summer season where folks travel and enjoy time away from work yet this year with COVID-19 still causing conflicts in many countries people are staying near home. Get me take on the current markets below;

Weekly Sound Bites;

• US Indexes ended the week mixed with the S&P marking its 3rd consecutive week of gains and reached intraday levels not seen since the market sell-off began in late February…we also saw a shift out of higher-valuation growth shares into value stocks causing the tech-heavy Nasdaq to pull back from its all-time highs…The market rotation was also evident in the outperformance of smaller-cap stocks, which have lagged considerably in recent months. Within the S&P 500, industrials shares outperformed by a wide margin, while technology stocks lost ground…The gap in performance of NASDAQ and the S&P was 2.3% which is the widest we’ve seen since 2016…and the NASDAQ 100 this past Monday moved from 2% up before finishing the day down more than 2% which has not happened move than 9 other times…history has shown when this has happened the average loss of the NASDAQ over the following 3 months was 4.4% which shows some of the weakness and profit taking that is possible near term in the Tech sector…
• This past week we saw big banks report earnings and this coming week we’ll see 32 of the S&P 500 companies report…most banks reported steep drops in profits as they set aside billions of dollars in anticipation of writing down bad loans, but investors seemed encouraged in some cases by gains in underwriting and trading revenues…also analysts polled by FactSet currently expect overall profits for the S&P 500 to have contracted 44% in the quarter relative to a year before—if confirmed, it would be the worst performance since the 69% earnings drop amid the financial crisis in the final quarter of 2008…very low expectations makes beats easier to take…
• Good news on the vaccine front at midweek appeared to ease resurgence concerns and help markets move higher…After the close of trading Tuesday, Moderna announced that its novel messenger RNA vaccine had produced high levels of antibodies in all test participants in an initial safety trial which caused price action to gap higher…and then on Wednesday, Oxford University researchers announced that their vaccine candidate, which is under development with AstraZeneca, had produced not only antibodies in participants, but also “killer” T-cells that may offer prolonged immunity…all of which is very good for near term price action. Another wild card in the markets is the opening or lack there-of in the fall opening of the school season. It is estimated that over 33% of the workforce has a child in school and should many of them fail to reopen we could see many more stay-at-home parents which will reduce the overall back to workforce as we head into the end of this year. It would also effect the very large back to school retail season with less purchases and reduced sales further damaging the economy as it comes out of the Pandemic…
• Treasury yields decreased slightly through most of the week due, in part, to inflation readings that remained well below the Federal Reserve’s 2.0% annual target. Although a spike in gasoline prices in June contributed to a 0.6% increase in the headline consumer price index (CPI) for the month—the biggest jump in nearly eight years—the core CPI reading, which excludes food and energy prices, was only 1.2% for the 12-month period.
• We also saw that China’s economy grew a better-than-expected 3.2% in Q2 from a year earlier, reversing a historic 6.8% contraction in Q1…On a sequential basis, GDP rebounded by a rate of 11.5% quarter on quarter, following a 10.0% drop in Q1…In the release accompanying the data, China’s National Bureau of Statistics warned that “we should be aware that some indicators are still in decline and the losses caused by the epidemic need to be recovered.”
• If TSLA is added to the S&P 500 this year it would be a very big win for the car maker as more money would flow into the stock as mutual funds would need to add TSLA to its holdings in order to manager performance against the overall index…as large indexing firms add stocks to their respective tracking indexes fund managers must follow suit by adding shares of those companies included…
Weekly Market Watch;

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