Powell Has Spotlight Again Today

Bulls were large and in-charge Monday as futures came into the morning confident on Fed Chair Powell’s Sunday interview remarks. Then, during pre-market, MRNA announced it had positive results in an early-stage human test of a vaccine. That was all the bulls needed to hear to run full-speed ahead.  A 2.5% gap up was followed-up by a morning rally.  From about 11:30 am, prices drifted very slightly bullish right up to the last minutes.  However, in those last moments of the day profit-takers jumped in to pull price back down to the morning highs.  On the day, the SPY closed up 3.05%, DIA up 3.81%, and QQQ up 1.86%.  The VXX was down sharply to 34.24 while T2122 closed well into the overbought territory at 93.40.  The 10-year bond yield was up strongly to 0.726 as money flowed out of bonds and Oil (WTI) had another sharply higher day closing above $30 for the first time since mid-March at $32.74/barrel.

On the Virus front itself, the global headline numbers are 4,911,720 confirmed cases and 320,454 deaths.  In Europe, France and Germany jointly proposed a $550 billion fund, set up on loans secured by all 27 EU-member countries, to pay for grants to sectors and regions most economically impacted by the pandemic. Belgium, France, Poland, and Denmark also introduced legislation to prevent any company with a presence in a “tax haven” from receiving any state aid.  Separately, France reiterated that it will proceed with its “3% digital tax” regardless of what the rest of the world does (no delay from virus impacts).

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In the US, we have 1,550,539 confirmed cases and 91,985 deaths.  WMT earnings were way up on a massive e-commerce increase.  MRNA decided to capitalize on the good news cycle from announcing a “positive” vaccine trial by offering $1.34 billion in new stock (at $76/share).

Overnight, Asian markets were strongly green, as they followed the US on MRNA and Powell news from Monday.  In Europe, we see a different story, where markets are mixed, but leaning much more heavily to the red side (especially the 3 big indices).  As of 7:30 am, US futures are flat, sitting just on either side of break-even for the open.

The major economic news on Tuesday is limited to Apr. Building Permits and Apr. Housing Starts (bot hat 8:30 am), and Fed Chair Powell testifies and Fed Voter Kashkari speaks (both at 10 am).  Earnings are also very light with only AAP, HD, KSS, and WMT reporting before the open.  Only NTES reports after the close among majors.

Fed Chair Powell will likely call the tune again today.  His testimony before Congress is expected to confirm that the Fed has the bulls back.  He is also likely to reiterate that he feels Congress and the White House need to provide more stimulus on the fiscal side.  However, keep in mind that despite Monday’s strong day, the 3 major indices all sit right at a resistance/breakout point.  So, we are not quite free of the sideways range that has controlled markets the last few weeks.  Still, the bulls have the momentum now.  Watch the short-term chart in front of you.  Don’t chase or predict, and remain cautious about longer-term swing trades.

Ed

Trade ideas for your consideration and watchlist: SGRY, CREE, WW, CCXI, ST, XPER, EVOP, IMGN, JNUG, GLUU, IMMU, NFLX, TPTX, CHWY. Trade smart, take profits along the way and trade your plan. 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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