I continue to urge investors to be careful when making investment decisions using financial media headlines and talking points.

The rising cases of Covid-19 is a general concern, but no one is rushing to implement mass lockdowns in the United States. Even actions being taken in Europe do not match the incendiary headlines and breathless reporting in this country. And while it’s likely some states with draconian rules might be enticed to go into a full lockdown and make economic survival even harder, it’s unlikely most states will go into a full lockdown.

What’s interesting is the companies and stocks that benefited the most from work & learn and stay at home haven’t been acting like another wave of lockdowns is imminent. Maybe there was some profit-taking, but it would be odd for an event so powerful that it could smack the stock market, but not be an upside driver of the best-positioned beneficiaries.

Covid-19 Stock Winners	Oct 29th Close	Recent Peak Date	Recent Peak Price
Zoom Video (ZM)	$489	Oct 19th	$568
Pelton Interactive (PTON)	$115	Oct 15th	$136
Etsy (ETSY)	$132	Oct 13th	$153
GrubHub (GRUB)	$74	Oct 16th	$84
Teladoc Health (TDOC)	$218	Oct 13th	$231

Still Shaky

When the market makes sharp swoons, like the kind we saw Monday through Wednesday, the best thing that can happen is the market regains its footing and equilibrium rather than see a sharp rebound that gives a false sense the worst is over. On that note, I am not happy with the way the market slumped into the closing bell.

It’s obvious the stock market continues to be vulnerable here, and I continue to think it’s mostly from the election, valuations, and the absence of a fiscal stimulus. With that in mind, I have said this before, but I like it when we get to the downside point that must be tested before turning sooner rather than later.

It’s easier to feel comfortable when the market firms and gyrations settle. That was not the case after the close when the biggest publicly traded companies in the market posted financial results.

Breadth and Leadership

Market breadth was a major reversal of what we had been seeing, but there were still a lot more stocks closing at new 52-week lows than highs. I was impressed with the up-to-down volume, especially for the New York Stock Exchange.

Market Breadth	NYSE	NASDAQ
Advancing	2,016	2,250
Declining	1,029	1,193
52 Week High	20	40
52 Week Low	87	87
Up Volume	3.42B	2.07B
Down Volume	1.42B	1.08B

Leadership

We know three sectors have done the yeoman’s work, carrying the entire market during large swathes of time over the last couple of years, but other sectors have outperformed since the March 23^rd low.  Consumer Discretionary is getting help from Amazon (AMZN), but it’s been about brick-and-mortar names many investors had written off.

Materials and Industrials have been coming on strong, rewarding value investors that began to diversify over the summer. Consumer Staples was the initial Covid-19 winner, as consumers made runs on supermarkets and toilet paper (I know that does not sound right), but it peaked early. The biggest disappointment continues to be Financials – they suck – even though everyone on Wall Street loves them.

S&P 500 Sector Performance	Year to Date	Since March 23
Consumer Discretionary XLY	+15.8%	+67.0%
Materials XLB	+0.85%	+64.9%
Technology XLK	+21.5%	+61.0%
Industrials XLI	-8.10%	+55.8%
Communications Service XLC	+8.53%	+49.4%
Utilities XLU	-2.82%	+40.2%
Health Care XLV	+0.66%	+36.3%
Real Estate XLRE	-12.1%	+35.0%
Energy XLE	-53.9%	+34.7%
Consumer Staples XLP	-0.76%	+21.2%
Financials XLF	-23.3%	+17.7%

Earnings Parade

There was an avalanche of earnings posted after the close that all shared the same characteristics.

Beat on revenue & Beat on earnings

But we know that is not enough, especially for the most valuable stocks in the market with giant shareholder bases. There is always intense scrutiny over the results, and none of these juggernauts were immune to nitpicking.

Most of them initially rallied, but all stumbled after initially popping, and only Alphabet (GOOG) and Facebook (FB) held onto gains.

(AAPL)  Apple

• Revenue: $64.7 billion consensus $63.7 billion
• Earnings: $0.73 consensus $0.70

(AMZN) Amazon

• Revenue: $96.2 billion consensus $92.7 billion
• Earnings: $12.37 consensus $7.41

(FB) Facebook

• Revenue:$21.47 billion consensus $17.65 billion
• Earnings $2.71 consensus $1.19

(GOOG) Alphabet

• Revenue: $46.2 billion consensus $42.9 billion
• Earnings: $16.40 consensus $11.29

(SBUX) Starbucks

• Revenue: $6.2 billion consensus $6.1 billion
• Earnings: $0.51 consensus $0.31

(TWTR) Twitter

• Revenue: $836 million consensus $777
• Earnings: $0.19 consensus $0.06

(TEAM) Atlassian

• Revenue: $459.5 million consensus $441.1
• Earnings: $0.30 consensus $0.27

I have to say there weren’t any results that screamed ‘sell the stock’ even if that was the knee-jerk reaction (save for Atlassian, which guided its current quarter lower). It’s important these names hold key trend levels.

Hotline Model Portfolio Approach

We put on a new position in the model portfolio yesterday, but still have 10% cash in the Hotline Model Portfolio.

Today’s Session

Overnight selling moved into sheer panic even after amazing earnings, but that has been the script since the start of earnings season.  I continue to believe the bigger issue for the stock market is a potentiual Biden presidency, failure to get stimulus, and the finacial media overplaying coronavirus cases without discussing rates for positivity and death.  There will be an enconomic impact of additional restrictions, but they will not match breathless reporting.

Looking Past Current Unknowns

The American consumer is well-positioned to drive the economy much higher – needs more confidence. Consumer income and spending came in higher than expected.  The spending increases outpaced income resulting in a slight decline in savings to $2.51 trillion lowering the rate to 14.3% from 14.8%.

State of Consumer: September
Personal Income	$170.3 billion	+0.9%
Personal Spending	$217.5 billion	+1.4%
Personal Savings	$2.51 trillion	-2.6%

https://www.bea.gov/sites/default/files/2020-10/pi0920.pdf

_{Personal Income}

Personal Spend

 

Comments

Charles, thank you for being honest and helpful to ALL , especially FBN fans whom need FACTS, not fear& emotions PROPAGANDA. You are a blessing and we pray for you and your wife and family MEMBERS, good health, great grandchildren, and excellent life. J on 10/30/2020 11:00:11 AM

The reason the covid winners are not going back to their highs is because that price was never justified even if we stay locked in till the world ends in about 12 years (source AOC) The big investors (the once charles dosent like because they always miss) didint have a problem pushing up the pricing because they needed to show something to their clients, they are the once that keep pushing the market down as they have to make such big moves to make up for missing on Charles strategy on how to make money. Mike Oberlander on 10/30/2020 12:04:37 PM

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