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Morning Commentary

Ideal Session

By Charles Payne, CEO & Principal Analyst
7/23/2020 9:22 AM

As the rally moves from erasing 2020 losses, and distancing from the fast bear market in history, buying continues to broaden. This is exactly what must happen.  In many ways, I think yesterday was the ideal session at this point in time. 

There are still sufficient reasons for concern and anxiety, including near-term valuations, coronavirus trends, growing debt levels and the US presidential election.

S&P 500 Index

+0.57%

 

Communication Services XLC

+0.10%

 

Consumer Discretionary XLY

+0.86%

 

Consumer Staples XLP

+0.80%

 

Energy XLE

 

-1.23%

Financials XLF

0.00%

 

Health Care XLV

+0.90%

 

Industrials XLI

+0.80%

 

Materials XLB

+1.16%

 

Real Estate XLRE

+1.21%

 

Technology XLK

+0.80%

 

Utilities XLU

+1.54%

 
 

Yesterday saw tepid moves in Technology and Communications Services while the relatively solid performance in Consumer Discretionary was not because of Amazon (AMZN).  Instead, it was all about auto dealers, brick and mortar retail standouts and homebuilders.

Top Gainers

Investors picking up on investment themes revolving around Covid-19 look likely to be rewarded today, as a couple of those big winners in Consumer Discretionary have posted strong earnings.

Pulte (PHM)

AutoNation (AN)

Category

Portfolio Approach

Today’s Session

It is a mixed bag on Microsoft (MSFT) and Tesla (TSLA)

MSFT

Azure, the cloud business, grew 47% from +59% in the preceding quarter and +79% average in 2019.  It’s the first time the cloud business grew less than 50% for a single quarter.   X-box +65% for its best quarter ever.

TSLA

Beat on top and bottom lines, although bears are up in arms over earnings (as usual). Company reported $418 million in free cash flow and $104 million net profit.  Note: company benefited from selling $428 million in credits to other automakers.

Airlines

Southwest Airline (LUV) beat on revenue and earnings while cutting daily cash burn to $18 million from $23 million in 2Q.  Current liquidity stands at $15.0 billion.

Initial Jobless Claims

After sixteen straight weeks of declines, initial jobless claims edged higher last week.  An increase was expected, although, the number came in slightly higher than consensus.

Continuing claims did decline for the eight consecutive week.


Comments
Charles it seems to me( the Novice ) there is no new money entering the market, its just the same money moving around seeking a few bucks out of each company.

David Howley on 7/23/2020 11:59:25 AM
Great observation  tens of billions has been flowing out of equity funds especially those that invest in domestic stocks and tens of billions have been pouring into bonds.  The good news is there is $2.4 trillion in mutual funds and ETFs and even more in other vehicles.  I don't mind the money shifting around - it makes our skill set more valuable (finding and anticipating where that cash will go).  But I think the $4.0+ trillion in sidelines and trillions in bonds will eventually find its way into stocks and we want to be positioned to ride that wave.  CP

Charles Payne on 7/23/2020 1:36:20 PM
 

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