The bulls rallied all day Thursday (they love those big Jobless Claims numbers), right up until it was announced the President will hold a Friday press conference on China. At that point, markets fell off the cliff the rest of the afternoon, closing lower. For the day, SPY closed down 0.20% on a Shooting Star type candle, DIA was down 0.56% on a Dark Cloud Cover candle, and QQQ was flat at down 0.13% while leaving a high upper wick. The VXX gained a bit to 34.48 and T2122 fell, but remains in overbought territory at 90.27. 10-year bond yields rose slightly to 0.697% and Oil (WTI) also climbed to $33.56/barrel.
During the day, the President signed his Executive Order targeting social media (after being fact-checked by Twitter). His appointee Atty. Gen. Barr attended the press event to also say his Dept. will also sue social media firms (the timing must be purely coincidental). While the President’s threats will have no practical short-term impact without legislation and court cases, the message did hit TWTR (- 4.5%) and FB (-1.6%) stock on the day. These events may also restart an interesting conversation in America on freedom of speech vs. censorship, facts vs. deception, viewer ignorance vs. editorial responsibility, and the use of government power for personal purposes.
Meanwhile over on Capitol Hill, the House passed a bill to ease the loan forgiveness rules of the PPP program. The bill lets companies put less of the loan amount into payroll, extends the window when they can use the loan funds, and pushes back the date by which they must rehire workers in order to qualify for loan forgiveness. The Senate has discussed similar measures and will likely pass a very similar bill.
On the Virus front, the global headline numbers are 5,931,867 confirmed cases and 362,613 deaths. Spain began further easing on Friday. France and Turkey also announced comprehensive openings to take place the first two days of June. The UK joined the chorus as well, announcing it will begin opening bars and restaurants “under strict conditions” as of Monday.
In the US, we have had 1,768,608 confirmed cases and 103,341 deaths reported to date. Texas reported a 3.2% increase in new cases this week, twice the previous week’s rate and the increase was higher than the 2.9% increase in testing over the period. Elsewhere UAL followed AAL, but taking a different tactic. UAL will offer early retirement and buyouts to reduce their workforce, but similar goal of around a 30% staff reduction. It is also noteworthy that US corporations have raised $1 Trillion in the bond market in the last month with the Fed backstop reassuring corporate bond buyers.
Overnight, just like yesterday, Asian markets were mixed again as the US-China tension leads to trade war fears. However, Europe stocks are red across the board so far today. As of 7:30 am, US futures are flat and mixed, with the President’s China press conference later today. 10-year bond yields also plunged overnight on trade fear related to the China press conference.
Major economic news on Friday includes Apr. Core PCE, Apr. Trade Balance, Apr. Personal Spending, and Apr. Retail Sales (all at 8:30 am), May Chicago PMI (9:45 am), Michigan Consumer Sentiment (10 am), and Fed Chair Power speech (11 am). Major earnings reports are limited to BIG, CIR, CGC, and SOL all before the open.
A lot of economic data comes before the open again today. However, it is likely to be the China press conference (likely sanctions and raised rhetoric) that impacts markets most. The bulls continue to have the momentum and trend, but intraday swings continue and Thursday’s candles show that there is uncertainly about the rally. So, keep your eye on the short-term chart and don’t hesitate to lock in profits. Remember, it’s Friday so put some gains in your pocket and consider weekend hedges. Above all, don’t chase or predict, and remain cautious about longer-term swing trades.
No Trade ideas for your watchlist on Friday. Trade your plan, take profits along the way, and smart. Also, don't forget to check for upcoming earnings. Finally, remember that the stocks/ETFs we mention and talk about in the trading room are not recommendations to buy or sell.
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