Dancing On Bytes

Dancing on bytes.  Stocks rose in yesterday’s session on continued positive earnings surprises and ongoing hopes that talks in Washington will lead to a new stimulus package.  The tech-heavy Nasdaq closed above 11,000 for the first time, led by rises in the usual suspects.

N O T E W O R T H Y

It’s a digital life.  On Tuesday, Tropical Storm Isaias sped over the New York City area after having slammed into the Carolinas as a hurricane just days earlier.  We don’t usually get those types of storms on the Northeast coast, though we get plenty of harassment by Mother Nature in the Winter months… that I can assure you.  Isaias was a fast moving storm which appeared to pass over NY in a matter of a few short hours, but she certainly left her mark.  Power outages in residential areas appeared to take local utilities by surprise as the buzz of air conditioners were suddenly silenced.  Tuesday was a hot day, so a lack of air conditioning would surely be unwelcome.  But, as it turns out, the heat and lack of cable TV did not top the list of complaints.  It was a lack of internet access that really set things back.  Overheard in one suburban home (which shall remain unnamed) was “The heat is bad, but without internet, I feel so unproductive… this really *#expletive@#!”  No email, no Google, no market data, no news… no ENTERTAINMENT.  Our reliance on technology in all aspects of our daily lives has been ever increasing.  It was thrown in sharp focus after the pandemic hit when many of us created virtual offices, made possible only through the latest advances in computer and networking technology.  Zoom became a way for us to video conference with our colleagues and customers during work hours. After work hours, video conferencing enabled us to connect with families and friends with virtual holiday meals and happy hours.  Social media allowed us to keep track of what was going on in the world and provided a well-needed diversion from the stress of the pandemic. With all of the lockdowns, digital entertainment took front and center.  Netflix is surely the first thing that comes to mind when all live entertainment cancelled and movie theaters are shut down. With gyms closed, physical fitness was acquired through Peloton, which features virtual spin classes.  If you don’t want to pop for the expensive bike, there are hundreds of paid and free virtual exercise programs available online.  The fact is, technology has become pervasive in all aspects of our lives.  We work online, we make purchases online, we bank online, we work out online, we communicate online, we order transportation online, and we get our entertainment online.  Now, I just want to say that there is nothing better than human interaction and that will never go away, but we cannot ignore the importance of technology today and in the future.  So, if you are wondering why the Nasdaq continues to power to new daily highs in the midst of a massive economic downturn, or why the S&P500 is topped by five technology companies which make up over 20% of the index’s weighting, all you need to do is look down at your hands, in which there is most likely a smartphone. Technology is here to stay and it will only become more ubiquitous in the future of all sectors.  Caveat emptor: not all technology companies are created equally and not all are good investments, but the ones that get it right have certainly delivered returns.

THE MARKETS 

Stocks rose yesterday on a continued earnings beat and the belief that a new stimulus package will be agreed upon in DC.  A better than expected weekly employment figure also helped boost the indexes.  The S&P500 rose by +0.64%, the Dow Jones Industrial Average climbed by +0.68%, the Russell 2000 Index slipped by -0.10%, and the Nasdaq Composite Index jumped by +1.00% to ANOTHER NEW HIGH. Bonds rose and 10-year treasury yields shed -1 basis point to 0.53%.  Gold jumped once again to a new high adding +1.25% in yesterday’s trade.

NXT UP

- Change in Nonfarm Payrolls (July) is expected to come in at +1.480 million compared to last month’s +4.800 million additions.

- The Unemployment Rate (July) is expected to have slipped from 11.1% to 10.6%.

- Boston Fed President Eric Rosengren will testify on Capitol Hill.

- Next week, we have more earnings in addition to inflation readings, Retail Sales, Industrial Production, and University of Michigan Sentiment.  Check back on Monday for calendars and details.

daily chartbook 2020-08-07