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Morning Commentary

Buyers Are Hesitant

By Charles Payne, CEO & Principal Analyst
6/18/2020 9:43 AM

Yesterday, the market limped out the gate without any gusto after several days of violent gyrations, including many intraday sessions that saw major declines erased with late rebounds.

It was just the opposite yesterday, as early negligible gains faded into the close and accelerated lower.  I’m not sure what the catalyst for that was – could have been a famous market investor bashing the US stock market on TV or the indicting of a former Atlanta police officer involved in the deadly shooting. 

Maybe, the market is weary of any more unrest and does not want to be reminded of the turmoil gripping the nation.  It’s not farfetched that algorithms read the headline and triggered even a tiny sell program.

The session did underscore the notion of swift rotation into value at the expense of growth might be more hype than fact.  Growth names took off and the NASDAQ finished higher, while the S&P 500 and Dow Jones Industrial Average struggled.

The Opposite of Tranquility

The VIX volatility index began to spike again this month after a slow and steady decline from near-record high levels.  The moves remind me of the market during the Great Recession where volatility skyrocketed in 2009, and then it steadily drifted lower with the occasional flare.

Portfolio Approach

Today’s Session

In the absence of scheduled news, buyers are hesitant, which means even light selling can push the market lower.  It also means intrigue can have a greater influence on trading.

For instance, a lot of this morning’s weakness comes from the Delta (DAL) shareholder call when CEO David Bastian was asked how many employees have contracted Covid-19.  His reply was that 500 contracted the virus and ten have died, which sent ripples through airline stocks.

This as the media continues to hammer away on a resurgence in positive Covid-19 testing often without additional context.  In my interview with Vice President Pence yesterday, he pointed out there will be 110,000 ventilators in addition to a growing abundance of additional protective gear to assist in an inevitable rise in cases.

The most important aspect of reopening and a potential rise is how well hospitals can handle an increase in cases.   By the way, just like there is little mention of how many people have overcome Covid-19, there isn’t much talk about states seeing declining cases and hospitalizations.

Image

As for periodic weakness, the truth of the matter is, when it comes to the current situation, big buyers want to see periodic pullbacks, as buying dips is working better than ever.

Initial Jobless Claims

The number out this morning came in slightly higher than estimates, but it declined for the eleventh straight week.  Still, I would have liked to have seen a better number; although, there are lots of factors that go into these numbers.

I think states that have dragged their feet, and those with extremely strict and limited phase one reopening, are a major problem.  The financial media frantically tried to tie the numbers into their Covid-19 narrative.   That fell flat:

Increased:

Decreased :

Initial Jobless Claims

United States Initial Jobless Claims

Meanwhile, the Philly Fed Report crushed consensus, soaring from the prior month (I bet it’s a record monthly improvement).

Monster Manufacturing Report

Philly Fed

Manufacturing

June

May

June

May

General Business

27.5

-43.1

66.3

49.7

New Orders

16.7

-25.7

67.9

54.7

Shipments

25.3

-30.3

65.0

46.0

 


Comments
I share your optimism and look forward to your daily FoxBusiness program. It's the most informative, non-repetitive hour on Fox, or anywhere.

Joseph Noga on 6/18/2020 11:23:43 AM
Hi Charles,
Speaking of corrupt19 BS was out driving around in south suburbs of chitkawgo looking for garage sales & the pickin was good. Not many shoppers & prices were OK. Went by a few covid19 free test locations & all were EMPTY. Media snakes are slithering lookin to bite us with their fear bite but most of us got the tall boots on. CV Payne the best there is on fox thank you for you're straight talk

fred wiese on 6/18/2020 12:03:29 PM
 

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