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Morning Commentary

Employment Misery to Speed up Reopening?

By Charles Payne, CEO & Principal Analyst
5/8/2020 9:10 AM

Question of the Week

Some say there is a distinct difference between optimism and hope, as the former is usually accompanied with improving data or evidence, and the other is simply a feeling.

I disagree when it comes to the economy and stock market. Optimism often comes before there is evidence of a turn because the personification of optimism becomes the evidence others are seeking.  More broadly, I think the nation has been built on a perpetual state of hope.

What do you think?

Post your answer below.

Leaping out the Chute

Its sessions like yesterday that makes it easy to understand why investors call it a “bull” market or as they did back in 1714 when the phrase “bull baiting” was coined. As the antithesis of “bear baiting,” there is a certain ferocious determination when the market wants to move higher.   This market has wanted to go higher for a couple of weeks, but instead it has only been able to consolidate the impressive rebound from March lows.

Still, market breadth continues to be impressive and the rally continues to broaden out.  One thing is clear, the market cannot rally if Technology stocks are lower, but it can rally without Technology stocks leading the way.  That distinction is important, as investors should be focused on the broadness of these rally attempts.

Meanwhile, the clock is ticking as big equity indices either see major breakout or have to retreat a to regroup.

Market Breadth

NYSE

NASDAQ

Advancing

2,145

2,255

Declining

771

958

Unchanged

81

85

Total

2,997

3,298

52 Week High

27

66

52 Week Low

15

14

Up Volume

3.73B

2.64B

Down Volume

1.34B

1.10B

Unchanged

127.86M

23.11M

Total

5.20B

3.76B

Sector Watch

Energy was the best performing sector as crude continues to move higher, even shaking off mid-session weakness.  The Index is now only 2.65% of the S&P, only beating out Materials at 2.43%, which also enjoyed a solid session.  The wildcard could be Financials which are 10.93% of the index.  It’s important for these names to participate in the next leg higher because they serve as proxies to overall economic growth.

Rotation out of safer havens like Consumer Staples continues.

Communication Services is the newest sector. These names reflect a future society run on the Internet and remote communications, which are naturally well-positioned, as the future has been pulled forward during the global shutdown.  

S&P 500 Index

+1.15%

 

Communication Services XLC

+1.88%

 

Consumer Discretionary XLY

+1.57%

 

Consumer Staples XLP

 

-0.28%

Energy XLE

+2.60%

 

Financials XLF

+2.35%

 

Health Care XLV

 

-0.01%

Industrials XLI

+1.17%

 

Materials XLB

+2.05%

 

Real Estate XLRE

+0.89%

 

Technology XLK

+1.50%

 

Utilities XLU

+0.40%

 

Re-Opening Milestones

Tesla (TSLA) is opening its Fremont manufacturing plant with limitations to account for Covid-19.

Disney (DIS) needed minutes to sellout tickets for its Shanghai park, which opens on Monday at one third typical capacity.

Michigan’s Governor will allow that state’s auto plants to resume operations with restrictions.

Portfolio Approach

Yesterday, we added an idea to Real Estate and Technology in our model portfolio. This morning we are adding a Technology position.  Contact your account representative or Click here to get started on the Hotline today.

Today’s Session

Jobs losses for April rolled up to 20.5 million with 7.7 million in leisure & hospitality (5.5million restaurants and bars).  Its one for the record books and one that should spark a sense of urgency to re-open the economy. There is no way this kind of devastation can continue.

Unemployment Data

United States Non Farm Payrolls

We will go further in-depth with the jobs report on the afternoon note.

An early driver of market optimism comes from reports the US and China trade negotiators have calmed the waters, saying Phase One of the trade deal is still full speed ahead.  Stability in a very unstable global economy is important, especially as the risks could possibly shift from economic to military aggression.

Happy VE Day to our United Kingdom cousins, as today marks the 75th anniversary of the defeat of Nazi aggression.  Victory for Europe was victory for all of humanity.  This is something we can take solace in, as the world fights a different, but determined, evil foe in the form of the coronavirus, which has been unleashed upon the planet.

Key Technical Points

S&P 500

Dow Jones

Today’s Session

Jobs losses for April rolled up to 20.5 million with 7.7 million in leisure & hospitality (5.5million restaurants and bars).  Its one for the record books and one that should spark a sense of urgency to re-open the economy. There is no way this kind of devastation can continue.

Unemployment Data

United States Non Farm Payrolls

We will go further in-depth with the jobs report on the afternoon note.

An early driver of market optimism comes from reports the US and China trade negotiators have calmed the waters, saying Phase One of the trade deal is still full speed ahead.  Stability in a very unstable global economy is important, especially as the risks could possibly shift from economic to military aggression.

Happy VE Day to our United Kingdom cousins, as today marks the 75th anniversary of the defeat of Nazi aggression.  Victory for Europe was victory for all of humanity.  This is something we can take solace in, as the world fights a different, but determined, evil foe in the form of the coronavirus, which has been unleashed upon the planet.

Key Technical Points

S&P 500

Dow Jones

 


Comments
I agree very much

Chuck Burns on 5/8/2020 9:46:15 AM
I well remember the huge VE Day street parties here. Every City/Town had one.
I was 13 y/o.

Dr Richard Fisher on 5/8/2020 10:54:28 AM
As an optimist, I am convinced that optimism is contagious. I try to be a super spreader. I surround myself with people who, while not denying the negative, live in optimism and hope. This has allowed me to live a live walking on the bright side of the road.

Dan on 5/8/2020 2:39:16 PM
 

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