Great Expectations

Great expectations.  Stocks slipped yesterday on disappointing economic data, giving the bulls a chance to rest their hooves.  Tech remained weak in yesterday’s session, still near record valuations.

N O T E W O R T H Y

Sense amidst senselessness. 

Back in the day… … you know what you are in for when I start with that line.  Anyway, way back when I got my start on Wall Street, things were drastically different. CNBC was FNN (Financial News Network) and many investors got their stock information from newspapers.  I have always been the early bird and used to be one of the first to show up to the office.  I recall having to literally climb over the pile of Wall Street Journals, Moody’s ratings books, and pink sheets in order to get into the front door.  Once in, as I crossed the trading floor, I had to navigate around the massive amounts of rolled fax paper which hung out of the array of faxes that were busy all night, buzzing out stock charts, offerings, and recommendations.  Once I got to my desk, I could prepare for the upcoming trading session.  In front of me were a pile of green screens with quotes of all kinds. The one big screen in front of me (by big I mean 13 inches, square) was the most important one… at least for the morning.  That screen had a news feed which scrolled the most important news events of the day.  It featured just 2 or 3 news sources.  At 8:20 AM Wall Street time, US treasury futures began to trade in Chicago and markets- bonds at least- were underway.  Wondering what the significance of 8:20 was?  Most of the important, primary economic data was released at 8:30 AM EDT and a 10-minute head-start gave traders a chance to prepare for the release.  We knew that the release was coming because it could be looked up in our glossy paperEconoday appointment books which came out once a year.  On my desk was a mechanical pencil, a graph paper pad, an unruly pile of price graphs, a ruler, an HP 12-C calculator (which I still use today), a Monroe Trader calculator, and a telephone with lots and lots of buttons.  The phone was an important tool because it allowed us to communicate… via voice… with not only our clients, but also our peers.  Communicating with peers was important to ensure that we knew what was happening in the news, the trading floors, and at other firms. That is how we got color on the markets.  We had to process all of that information in order to make informed decisions for our firms and clients.  There were no elected officials, TV personalities, or pundits telling us what stocks to buy or sell.  There were no twitter feeds or blog posts clamoring to be the first to uncover some sort of conspiracy. Also not present… in case you noticed… was a keyboard and mouse on my desk… in other words: no Google or Yahoo Finance.  If you wanted more information about stocks you had to wait for a weekly delivery of your Kiplinger Letter or for Barrons to be on newsstands Saturday morning.  At this point you are either smiling or wondering why I wrote all of this… or both.  I wrote all of this to make a point.  Things have obviously changed since my early Wall Street days.  Today we are bombarded with information and it is nearly impossible to know what is actually news in a sea of opinion and divisive editorialization.  Some things have not changed in those years. Primary economic data still comes out at 8:30 AM!  No recommendations, no editorializations, no politics… just numbers.  Yesterday morning, the Department of Labor released its weekly Jobless Claims series at… wait for it… 8:30 AM, just as it has every week since the 1960’s.  It was important then, it was an important number when I started on Wall Street, and remains important today.  It is clearly more closely watched during challenging economic times as an improving labor situation is essential to recovery.  The pandemic has wrought havoc on the lowest unemployment run since the 1950’s causing joblessness to spike at a record pace.  Though the rate of new week layoffs (Initial Jobless Claims) has been slowing, it still remains high.  Yesterday’s number showed that 1.3 million Americans filed first-time jobless claims last week.  The number was roughly the same as the prior week and economists were expecting the number to be lower by 50k.  Though the number was not encouraging, it was not altogether surprising, considering a recent increase in virus cases which caused some looser restrictions to be rolled back.  The bright point in the release was the number of Continuing Claims, which appear to be getting smaller, albeit slowly.  This is a result of some Americans returning to work.  I wrote all of this not to necessarily highlight the labor number, which was not great, but rather to highlight the importance of getting the facts. Given all of the various sources of media and information we have available to us these days, one would think that getting the facts would be as simple as a click. Unfortunately, it has only gotten more challenging.

THE MARKETS

Stocks slipped yesterday on disappointing economic data from China and the US.  The S&P500 fell by -0.34%, the Dow Jones Industrial Average sold off by -0.5%, the Russell 2000 Index dropped by -0.72%, and the tech-heavy Nasdaq Composite Index gave up -0.73%.  Bonds climbed and 10-year treasury yields went down by -1 basis point to 0.61%.

NXT UP

- Housing Starts (June) are expected to have popped up by +22.2% compared to May’s +4.3% rise.

- University of Michigan Sentiment (July) is expected to show a slight increase to 79.0 from 78.1.

- Former Fed Chairs Ben Bernanke and Janet Yellen will testify to congress today.

- This morning BlackRock, Citizens Financial, Ally Financial and State Street beat expectations while Regions Financial fell short.

- Next week, we will get lots more earnings, more housing numbers, regional Fed reports, the Leading Index, and Manufacturing/Services PMI’s.  You can get the facts here, along with detailed calendars on Monday.

daily chartbook 2020-07-17