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Morning Commentary

THE CHASM WIDENS

By Charles Payne, CEO & Principal Analyst
7/10/2020 9:22 AM

Thursday was one of those sessions that was perhaps overdue, but it mostly reinforced what we already knew.  In the process, it gave something to everyone.

Bears

Bulls

Deep Divide

Chasm: a marked division, separation, or difference

It feels as though every aspect of the nation is at a chasm from politics to wealth, so why not a massive division in the stock market between winners and losers?

Overall, the market is mostly marketing time, but it’s not standing still. Either stocks are up big or down big, and there is extraordinarily little middle ground. I cannot remember a time when winners were up this much, while losers were down this much.

S&P 500

I continue to wonder if the winners could somehow eventually offer coattails for the losers, but since June 10th, there were fewer winners (191 previously) and greater gains (14.5% previously).  

Dueling Headlines

Gyrations kicked up into the close from dueling headlines:

We knew death counts associated with COVID-19 would rise on par with increased case counts. However, I’m watching how much they rise compared to spikes in cases over the prior two weeks. 

Message from the Bond Market

I continue to fret about the demand for treasuries, which continues to force yields to record low levels.  The yield curve isn’t suggesting a recession, but a demand for bonds, including 30-year maturities that sum up certain anxiety among investors.

Investors snapped up $19.0 billion for 30-year bonds. The 10-year were yielding 0.63% before the auction - after closing at 0.652% on Wednesday - and swooned to 0.605% at the close.

On Wednesday, investors bought $20.0 billion in 10-year bonds. I’m optimistic, and I know the nation will prevail, but I will pound the table when the 10-year is above 1.00%. Perhaps, that’s what sparks widespread equity buying.

10-year yield

Portfolio Approach

We took profits on a Healthcare position in our Hotline model portfolio to raise some cash.

Today’s Session

Gilead Sciences (GILD) announced that in clinical trials, Remdesivir can reduce the risk of mortality in Covid-19 patients by 62% versus those receiving standard care. The company stated this "an important finding that requires confirmation in prospective clinical trials."  The study also shows continued improvement in recovery times, for those patients taking the drug. GILD is up 2% on the news and the upbeat news has helped the broader market go positive.

 


Comments
Charles, thank you for the information. Thought provoking.

Ellie on 7/10/2020 10:22:11 AM
Wondering if the market will stay this way until the election.

David G Howley on 7/10/2020 10:35:56 AM
The telling number on Covid19 is death count per 100,000. Texas is 9, Florida is 17, New York is 166, New Jersey is 179. These numbers came from a German company, Statista. Keep pounding the table Charles!!

Dave Daubard on 7/10/2020 11:08:02 AM
Charles, thank you for being a light. Thank you for being you. May be that the bond market is signaling a move by the Federal Reserve to negative interest rates. Keep up the greatness! Randall

Randall L. on 7/10/2020 1:02:39 PM
Real Life has risks --many risks. So glad my Mother (92 yrs.) & Father (94 yrs.--WW11 Vet.) do not live in NY. or MI. or any other State that sends the COVID. into old FOLKS homes.

john on 7/10/2020 5:49:07 PM
 

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