Waiting on Jobless Claims?

Stocks gave us another volatile day, but the bulls came out on top again.  All 3 major indices closed at or near the highs as AMZN, AAPL, FB, and MSFT led markets higher with new all-time high closes.  However, the large-caps did not eliminate the lower-high possibility.  On the day, SPY was up 0.76%, DIA up 0.65%, and QQQ up 1.32%.  The VXX sold off a little to 32.55 and T2122 climbed back into the mid-range at 51.65.  10-year bond yields rose to 0.666% and Oil (WTI) also rose slightly to $40.88/barrel.

In the aviation industry, late in Wednesday’s session BA competitor Airbus reported a third straight month of zero plane sales (new orders).  Earlier in the day, UAL had warned 36,000 front-line employees (more than a third of their staff) of potential layoffs and furloughs in 60 days (federal law requires that much notice). It was also reported (rumors, not announcement) that the 5 largest airlines had reached a deal with the Treasury Dept. for massive loans. So, aviation names may be worth watching.

After the close, St. Louis Fed President Bullard said in an interview that he is predicting unemployment will fall back to 7% by year-end.  (His previous estimate was over 10%.) This came as part of a mostly optimistic outlook that downplayed the problems facing the economy. (This stands in contrast to 3 of his counterparts who emphasized the risks facing the economy on Tuesday.)  He also said he expects another major fiscal stimulus bill, giving the economy “plenty of resources.”  So, there are diverging opinions of the economy among Fed members, perhaps as should be expected, but all of them are saying that more stimulus is needed and will likely happen.  Stocks will like that.

In the US, the virus numbers show we now have 3,159,514 confirmed cases and 134,873 deaths.  For Wednesday, the new case count was 58,000 and 820 deaths.  CA Governor Newsom said Wednesday that the state has the capacity to treat 50,000 virus patients.  (For reference the state now has a 7-day average of over 8,000 new cases/day, though obviously not all cases require hospitalization.)  In partially related news, BBBY reported they will close 200 stores over the next 2 years in an effort to get back toward profitability in the Covid-19 era. 

Globally, the number of cases has reached 12,196,923 confirmed cases and 552,771 deaths.  In Asia, Tokyo reported a record-high number of new cases and Hong Kong also reported a new outbreak (though still not the highest they’ve seen).  Australia’s case surge continues and, alarmingly, only a small percentage of new cases have been traced to a known case or location (implying the virus has spread more widely than previously thought).

Overnight, Asian markets were mixed but mostly green with only smaller markets like New Zealand, Singapore, Malaysia and Indonesia in the red.  In Europe, markets are even more broadly mixed, but on smaller moves either direction.  Among the major European bourses, FTSE is down, DAX is up, and the CAC is flat at this point.  As of 7:30am, US futures are also mixed and closer to flat, likely waiting on the Jobless claims to push one way or the other.

The only major economic news for Thursday is Weekly Initial Jobless Claims (8:30 am).  The only major earnings report for the day is WBA before the open.

Wednesday’s candles showed once again that the bulls have strength.  However, they did not signal a massive rally surge.  Instead, it still seems like the bulls have paused to take a breath after last week’s rally.  The short-term consolidation remains in place for the large-caps.  However, the mega-cap tech names have been pulling markets (especially the QQQ) higher for quite some time.  The "canary in the coal mine" is going to be those FAANG stocks.  If they break, so will the market.  If they maintain their rally, there is nothing the rest of the market can do but follow.  So, keep an eye on those tickers and don’t chase, don’t predict, and take profits as you go. 

Ed

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