Bargain buy. Stocks bounced higher as investors rushed in to buy the dip after Monday’s COVID induced rout. Homebuilders may be feeling the heat as permit applications for new homes pulled back by -5.1% in June.
N O T E W O R T H Y
Nowhere to go but up uP UP. I have to admit that I was mesmerized for a few minutes (10 to be more exact) as I watched Jeff Bezos in his Blue Origin rocket New Shepard blast into outer space yesterday. I thought “how cool is that?” But my thoughts soon drifted into what might be the investment possibilities opened after 2 billionaires within days of each other launched into the blue, powered by rockets that they essentially built by themselves and for themselves. I have to say that I couldn’t immediately come up with anything more than just great entertainment for the ultra, ultra… ultra-wealthy. I was certainly entertained for 10 minutes at a significantly lower cost than the $250k per ticket anticipated by Virgin Galactic. That doesn’t mean that the technology created won’t impact spaceflight in future generations, but for now I am happy that the cost of launching “something” into, perhaps, orbit has been drastically reduced and received a much-needed refresh. That could, indeed, have a positive, and more immediate, impact on more utilitarian aspirations, such as launching satellites into orbit or shuttling astronauts to orbiting science labs.
The stock market seemed to take note of the launch by rocketing higher yesterday as well. After Monday’s ugly trading session in which stocks, uncharacteristically of late, sold off on renewed COVID fears, a successful space launch was just what the Dr. ordered to get stocks back on their feet. At one point on Monday, I looked over at my screen and saw the Dow Jones Industrials down by almost -950 points. I thought to myself, that seems a bit much given that we are actually in an economic recovery with plenty more room to grow. Apparently, I was not the only one thinking that and traders rushed in pushing the index off its lows to close down by only -725 points. I use “only” in a tongue-in-cheek way because a -2.09% fall is actually sizable given recent gains in stocks. Yesterday morning, the mood was quite different. Investors rushed in to buy the dip after weighing the weekend’s negative news against the upside. Infrastructure, cyclical, and value stocks that were on sale at Monday’s close became the biggest winners yesterday. All-weather tech stocks also got a boost but took second seat to recovery-themed stocks. So now what?
We know about the potential for inflation. It is here, there are some signs in the commodities markets that it may be easing, the Fed is convinced that it is temporary, and most importantly, it is already factored into the market. We know about the Fed. The Fed is actually discussing bond purchase tapering and some members would like to see rates lift off next year. That is also factored into the market. The market, however is still struggling with what might be peak earnings growth or peak economic growth. It is clear that both earnings and the economy are growing. Last year’s economic plunge was so extreme that the ascent of the economy, earnings, and the market was, in fact, extraordinary. We like extraordinary growth in the economy and earnings as stock investors, so naturally we want to know when those extraordinary growth figures will return to… well, just plain ordinary. We are at the beginning of an earnings release onslaught which warrants attention as we will surely get some signs about the magnitude of future growth. With yesterday’s rally back from Monday’s selloff, investors will now have some breathing room to take in these very important releases.
The von Kármán Line is the internationally accepted line between the Earth’s atmosphere and outer space. Though it is more like a human-defined property line than a physical demarcation, it has become somewhat of a target for would-be space travelers. In fact, yesterday’s Blue Origin flight was carefully planned to exceed the boundary to outer space. The capsule achieved an altitude of 62 miles (100 km), which just happens to be the von Kármán Line. The astronauts experienced temporary weightlessness as the capsule reached its zenith and began to free-fall back to earth where it successfully landed. Many investors are now wondering whether the markets have hit their own boundary, wondering when this elated feeling of positivity will end. We need to remember that although there is a point, a boundary if you like, at which extraordinary growth ends, on the other side of it is ordinary growth and not necessarily a free fall back to where we started. There are no guarantees in the markets, but making sound and informed investments always puts you in better positions whether in a pullback, extraordinary growth, or just plain ordinary growth. Stay focused.
Stocks staged a comeback yesterday as investors bought the dip in the wake of Monday’s ugly selloff. The S&P500 rose by +1.52%, the Dow Jones Industrial Average ascended by +1.62%, the Nasdaq Composite Index launched by +1.57%, and the Russell 2000 Index rocketed up by +2.99%. Bonds pulled back and 10-year treasury yields climbed by +4 basis points to 1.22%. Cryptos fell by -2.45% held back by Bitcoin which dropped below 30k, considered a key support level. Continued Chinese crackdown on Bitcoin use and mining combined with Janet Yellen’s commitment to regulate stable coins put pressure on the crypto markets.
– EIA Crude Oil Inventories (July 16) are expected to have dropped by -4.5 million barrels after falling by -7.896 million barrels in the prior week. Last night a preliminary report suggested that crude inventories may have grown.
– This morning Lithia Motors, Anthem, Johnson & Johnson, Coca-Cola, Nasdaq, Harley-Davidson, and Verizon beat estimates, while Baker Hughes missed. After the bell we will hear from SL Green, Tenet Healthcare, CSX, Crown Castle, Equifax, Kinder Morgan, Texas Instruments, and Las Vegas Sands.
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