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Stocks Bounce, Tech Giants Report Solid 3Q Earnings; Market Braces For Month End

Friday, October 30, 2020, 8:54 am ET

Wednesday's market drops - the worst since June of this year - were followed by a cut-and-paste type of relief rally, with dip-buyers jumping into some of the more beaten down names, and even more buying up of the tech stocks which fueled the rally after March and are being counted on to bring the US equity markets back to summer levels.

Following Thursday's close, Apple, Amazon, Facebook, and Alphabet all reported quarterly results. Each of these companies beat estimates handily.

Interestingly, Apple ended Thursday up four points, but was selling off into the close and is down another four points (roughly 4%) in pre-market trading. Amazon was higher on Thursday by 48.23 points (+1.52%), but has given all of that back Friday morning, down 51.01 (-1.59%), to 3,160.00.

Facebook plowed ahead 13.16 points (+4.92%) Thursday, but is trending lower, down 4.03 (-1.44%), at 276.80, 90 minutes prior to the opening bell. Alphabet, parent company of Google bucked the early morning trend. It was up 50.62 (+3.34%) in Thursday's cash market session and has tacked on 96.51 (6.16%) in the pre-market. Its share price of 1,663.75 is closing in on the all-time high of 1728.28, marked on September 2, coincident with all-time highs of the S&P and NASDAQ indices.

Through Wednesday's close, the FAAMNG stocks, Facebook (FB), Amazon (AMZN), Apple (AAPL), Microsoft (MSFT), Netflix (NFLX), and Google (GOOG, parent company Alphabet), are up 7.19% this year, against a 5.44% drop for the rest of the S&P 500, a 12.63% performance spread between the FAAMNGs and the rest of the market.

Obviously, there are a good number of companies in the market's 500 largest companies that have not done so well through the coronavirus crash and into the election season. This kind of crowding into select market darlings has pushed the market caps and stock prices of this group of tech giants to stratospheric levels, leaving the rest of the market in the dust.

The market has been weighed down by victims of the coronavirus, predictably led by elements of the travel and tourism industry. Cruise line, airlines, and energy firms take up most of the top spots in the 50 worst-performing S&P stocks of 2020.

Investors seeking bargain-basement plays can find stocks on this list that are down between 48 and 81 percent on the year, many of them household names, like Carnival Cruise Lines, American Airlines, Boeing, Slumberger, Marathon Oil and financial firms Wells Fargo, Citizens and Discover. These stocks, and many in the tiers above them, down between 20 and 48 percent continue to pressure the market, forcing more money into the tech giants, increasingly seen as the only game in town.

This sets up a dangerous situation. Should the six stocks that are leading on the year stumble or investors decide that they've made enough for 2020 and consider them overvalued, the discounting in the market would set off a cascading effect to the downside. A slew of funds are closing their books for the year today, the final trading session of October, and many more will simply hold through the end of the year.

Without active gains by the leading stocks, US equity markets ar staring straight into an abyss leading up to the election and beyond. Funds with gains on the year will want to lock them in, leaving little choice for smaller market participants who may become holiday bag-holders of some of he top names.

Overnight, Asian shares were off sharply, though none of the main exchanges down more than two percent. US market futures were in a slaughterhouse, but have pared some of the declines leading into the cash open. European stocks are flat, but under pressure.

Unless stocks rally magnificently on Friday, this week will look like a bloodbath, already sporting losses in from three to five percent in the worst weekly decline since early June. Any further deterioration will exceed that, though it would take near capitulation to rival the losses from February and March. Dow stocks have been particularly hardest hit, with that index down nearly six percent.

Putting pressure on the entire market, oil prices have been hammered. WTI crude futures are hovering just above $36, breaking down from the steady-state $40 level than has been in place since June. The current level is a five-month low, the result of a continued glut of product globally and threats of a second wave of widespread shutdowns, such as has already been put into place in France and parts of Britain and some Eurozone countries.

It's worth noting that even with the recent declines, the NASDAQ and S&P are still above September's lows, though the Dow appears to be falling off a cliff.

At the Close, Thursday, October 29, 2020:
Dow: 26,659.11, +139.16 (+0.52%)
NASDAQ: 11,185.59, +180.72 (+1.64%)
S&P 500: 3,310.11, +39.08 (+1.19%)
NYSE: 12,502.29, +86.87 (+0.70%)

Wednesday's Stock Rout May Be Just The Beginning As Politics Overwhelms Markets

Thursday, October 29, 2020, 5:12 am ET

Wednesday's massive stock beatdown was not without warning. Stocks had been trending lower since the beginning of September, when all of the indices made new highs, for the NASDAQ and S&P these were all-time highs.

After significant drops in September, markets stabilized and made gains from late in the month through October 12. After that, it was all downhill. For the past eleven sessions stocks had been trending lower, the losses accelerating over time. The media's incessant focus on the failure of congress to pass a stimulus bill surely had impact on trader sentiment, but chartists saw a clear double top had formed and lower lows and lower highs were obvious danger signs.

Now in the midst of third quarter earnings season, reports aren't doing much to inspire investor confidence. In fact, the first batch of reports - from the nation's major banks - were met with elevated levels of skepticism, as the largest issuers of consumer debt - credit cards, mortgages, personal loans - such as Bank of America, Citi, Wells Fargo, and JP Morgan Chase massively under-reserved for credit losses, a policy endorsed by the Federal Reserve and codified into the first coronavirus stimulus bill, the CARES Act. (Money Daily will have a more in depth look at the accounting trickery banks employed to boost their third quarter earnings in Sunday's WEEKEND WRAP.)

What stood out to investors and interested onlookers of the banking industry was the overwhelmingly negative response. Instead of seeing their stock prices boosted by what were, for some, blowout earnings reports, bank stocks were among the weakest trades in the immediate aftermath of their reporting. Astute money managers were simply not buying the story the banks were peddling.

Beyond some disappointment in the earnings space and the slapstick stylings of congress and the administration in the failed negotiations over stimulus - which had persisted since late July - presidential politics and mainstream media's constant, over-the-top bias also added a degree of uncertainty to the mood of the market. A narrative that a Democratic sweep, a "blue wave" theory, had made the rounds in recent weeks, and that somehow, socialist, free-spending policies of a president Biden and a left-leaning senate and house, would usher in an era of utopian prosperity.

Hard-core capitalist economists and seasoned political pundits dismissed such a scenario as pipe-dreaming even as polling numbers - largely reporting that Biden and some Democrat senate candidates had built large leads - were being questioned and President Trump was drawing his usual overflow crowds at rallies in swing states.

When bombshell reports on the exploits of Hunter Biden, Joe Biden's son, began to emerge via the New York Post and Rudy Giuliani, suggesting that serious improprieties by the candidate had been committed while he was Vice President under Obama, involving not just dealings in Ukraine, but also in Russia and China, the blue wave theory began to unravel. When, on Tuesday evening, Tucker Carlson devoted his entire show to a Biden business partner by the name of Tony Bobulinski and more damning revelations, it became clear that Biden's campaign was in serious trouble. Making matters worse were the outright bans on referencing these allegations and news stories on Twitter and Facebook and complete silence from TV networks and major newspapers such as the New York Times and Washington Post.

The media made the choice to ignore a story that should have been front-page, special report material, instead focusing more on President Trump's flaws and policies with which the media disagreed and consequently disparaged, endlessly.

Politics doesn't often influence stocks, but in this case, it was the tipping point. Beyond a weakened economy with dim prospects to escape from a deep recession, the Biden revelations and media reaction was beyond the pale, shaking confidence in government and the revered fourth estate. The confluence of economic forces, overvaluation (if anyone can even decode what "value" means in today's markets), and frightening political prospects culminated in a colossal spasm of lost confidence and global retching.

Despite the suddenness of the selloff, stocks still have not even fallen beyond the levels seen in late September, so more of the same is to be expected. It's not out of the question that by the end of next week regardless of political winners and losers, stocks could be another five to eight percent lower than current levels.

Already, stocks are close to correction levels. The Dow, S&P 500 and NASDAQ are uniformly down nearly nine percent from September 2nd's highs. All are trading well below their 50-day and close to their 200-day moving averages. The next step lower will confirm a correction and the follow-up should result in resumption of the bear case, regardless of Fed jawboning, bond-buying, and special dispensations to distressed publicly-traded companies.

There's simply nothing to inspire a positive attitude. Dip-buyers, those who haven't already been reamed by the recent movement, are heading for slaughter. Put-call ratios are elevated, as is the VIX, to say nothing of the inner seething of the general populace. People will put up with a lot, but there is hardly an individual who can stomach liars and cheaters. All together, the mood is ugly and about to devolve into complete disarray and that's not good for anything, especially your investments.

At the Close, Wednesday, October 28, 2020:
Dow: 26,519.95, -943.24 (-3.43%)
NASDAQ: 11,004.87, -426.48 (-3.73%)
S&P 500: 3,271.03, -119.65 (-3.53%)
NYSE: 12,415.42, -402.45 (-3.14%)

Tony Bobulinski Torpedos Biden Campaign; Media Silent; America At Crucial Crossroads

Wednesday, October 28, 2020, 9:04 am ET

Unless you're living under a rock or only watch mainstream media (ABC, NBC, CBS, CNN, FOX) or read the Washington Post and New York Times exclusively, you should be aware of the bombshell interview conducted by Tucker Carlson Tuesday night with a business partner of the Biden family, Tony Bobulinski.

If you haven't seen it, you should. It's embedded below. It may be the most important video you'll see all year, maybe in your entire life, because it exposes the depth of corruption surrounding the Democratic candidate for president, Joe Biden, and his dealings not just with Ukraine or Russia, but with the Chinese Communist Party, and how he used his name through surrogates - mainly his brother Jim and sone, Hunter - to peddle influence and enrich himself and his family.

What's likely even worse is the complete mainstream media blackout of this story, which began last week in an expose by the New York Post. This is the most important story of the year and of the election and the mainstream media cabal is completely ignoring it as though it never happened.

The trouble with this tactic media censorship is that it cannot be kept secret. The media cabal does not own Tucker Carlson. Nor do they own Tony Bobulinski, or Rush Limbaugh, Sean Hannity, Laura Ingraham, Michael Savage, Red Eye Radio, or any of the talk shows with hundreds of affiliates nationwide. Radio reaches 97% of the adult American public. They most certainly do not own the New York Post or the Washington Times.

The media cabal also doesn't own the internet, though they're obviously in cahoots with Facebook and Twitter censors. They don't own Zero Hedge, or The Liberty Daily, Breitbart, Townhall, the Conservative Treehouse, Gateway Pundit or hundreds, if not thousands of independent websites or blogs which publish the truth. As far as integrity is concerned, the mainstream media has squandered theirs. Reliable journalism can largely only be found on radio or within the internet's alternative media.

Another problem that the media blackout on this story is that many people have already voted and won't make the effort to change their votes if they even get to see this story. Many people have submitted absentee ballots. There's widespread reporting of voter fraud, everywhere, yet the media continues to deny any exists. Looking at this condition from a cynical perspective, one might assume, as they say, "the fix is in." It may already be too late.

This story has a direct impact on the presidential election and tangentially, all down-vote elections for congress and local offices. If the media was actually doing its job, this story would be the top headline on every network. Instead, they're featuring the World Series, Hurricane Zeta, and riots in Philadelphia.

By themselves, those stories are worthwhile and important, but the Biden corruption saga and how badly he has sold his influence and is compromised is more important by many degrees of magnitude. It will affect the votes of millions and who will be elected to public office for years, and the media's tacit willingness to bury it, to keep it out of the eyes and ears of the American public is nothing short of a criminal conspiracy.

We're supposed to have a free press in this country. What we have instead is a propaganda arm for a leftist movement designed to usher in an era of tyranny and destroy the constitution.

Everybody in America, white, black, Democrat, Republican, should be outraged at the media's handling of this vital story and they should be demanding honest journalism, not the backhanded shilling for Democrats hat's being spoon-fed to the public day in and day out, constantly, without being called into question.

When you mosey over to the stock market this morning and see that futures are cratering, that European stocks are down across the board, that oil is down, gold and silver are down, don't buy into the hype that it's because of COVID-19 cases spiking (another big lie), or that stocks are down because there's no stimulus bill forthcoming before the election (politicians playing games). Everything is going to crash because of this interview and the media's willful ignorance. The story of a compromised presidential candidate and the media's refusal to cover it will shake the foundation of this nation and of society. Smart money is getting out of the way, in a hurry.

Our government has failed us. Our media has failed us, miserably.

We are, truly, on our own. The only hope is that enough people cast ballots for President Trump and he wins re-election in a landslide, by enough votes that even widespread ballot stuffing and other dirty tricks can't overcome it because he is truly the only man standing between saving the Republic and tyranny.

At the Close, Tuesday, October 27, 2020:
Dow: 27,463.19, -222.19 (-0.80%)
NASDAQ: 11,431.35, +72.41 (+0.64%)
S&P 500: 3,390.68, -10.29 (-0.30%)
NYSE: 12,817.87, -118.52 (-0.92%)

Monday Was Ugly. Now, Can the Fed Staunch the Selling, or Has Trump Busted the Blue Wave?

Tuesday, October 27, 2020, 9:28 am ET

Early on Monday, Fed Chairman Jerome Powell sensed a disturbance in the force that is central bank intervention, mad money printing, control of interest rates and equity market command.

Despite the best efforts of the Chairman and his cohorts, there was little they could do to prevent Monday's wholesale one-day slaughter of the equity market and the spreading fear that a Democrat "blue wave" election was not going to materialize.

What some corners had been talking openly about for weeks - A Biden victory over the Bad Orange Man, Donald Trump, and a sweep of the senate, giving Democrats a troika of power with the House added in - all of a sudden seemed to be less certain. It was something Wall Street professionals were banking on, because complete control of the purse-and-policy strings in the nation's capitol by liberal Democrats would likely result in bucketsful of cash flowing to the money center in Manhattan.

What the Wall Street crowd wants more than anything out of this election is four more years of easy money policies, making their world safe from regulation and scrutiny, or so the thinking went.

However they were playing their cards and their money, there was a sneaking suspicion that the polls might be wrong, that President Trump was indeed winning hearts and minds and might pull along some of the Republicans in hotly-contested senatorial races with a week to go before all the votes are counted. That was always a possibility and the hedging of their bets was evident in trading the prior week, which was manifested in selling into strength rather than buying of dips. Lower highs and lower lows became more typical as the week wore on and by Monday, the trickle of dissent became a flood of angry traders relentlessly banging on their sell buttons.

Stocks took a major tumble on Monday, and the likelihood of a continuation - with possibly a brief respite Tuesday, even Wednesday of this week - of a downward spiral appeared not just possible, but probable. After all, any talk of a stimulus bill prior to the election had also been scrapped by Friday, so that helping hand had been withdrawn. There might not be another stimulus (read: free money) after the election or even after inauguration if Trump won and Republicans held the Senate.

After Monday night's senate confirmation of Amy Coney Barrett to the Supreme Court - filling the vacancy created by the death of Ruth Bader Ginsberg - the 6-3 conservative majority on the high bench had been obviated. Trump and loyal Republicans celebrated the swearing in at a White House celebration. The outrage from Democrats would sound hollow to the American public Tuesday morning as races tightened, the veracity of polling again being brought into question. The volatility index (VIX) was bounding upward, futures were trending toward the flatline, and European stocks were under pressure, signaling that the markets might be poised for a dead cat bounce preceding another bloodbath for stocks.

It would not come as a surprise to anybody if the selloff continued all the way through to election day, with little respite in between waves of anxious unloading of stocks, prices falling back below trend lines.

Stay tuned. This is just part of the second leg down of a confirmed bear market.

At the Close, Monday, October 26, 2020:
Dow: 27,685.38, -650.19 (-2.29%)
NASDAQ: 11,358.94, -189.34 (-1.64%)
S&P 500: 3,400.97, -64.42 (-1.86%)
NYSE: 12,936.38, -263.48 (-2.00%)

WEEKEND WRAP: Non-Stimulus Fatigue? Bond Yields Jump; Election Just 9 Days Away

Sunday, October 25, 2020, 8:56 am ET

Stocks took it mostly on the chin this week, though the blow was nothing that could cause a knockdown or even the faintest whisper of a selloff.

Rather, equity markets seemed to be suffering from a combination of coronavirus fatigue, overvaluation fatigue, election fatigue, stimulus fatigue (is such a thing even possible?) and media censorship fatigue. What the market needs most right now is a nap, a good long one, to wring out the excessive volatility that has been built into it by outside forces.

The week's trading provided something along those lines, but it's probably not enough, as Monday will start yet another cycle of incessant noise that has little to do with fundamentals and even less to do with proper valuations, a concept that's been thrown out the window in the age of instant gratification, instant profits, instant allegations, instant bailouts, instant karma.

Instant karma's gonna get you
Gonna knock you right on the head
You better get yourself together
Pretty soon you're gonna be dead

-- John Lennon, Instant Karma, Plastic Ono Band, 1970

What the financial media claimed was responsible for slumping markets was continued foot-dragging by congress on a second stimulus bill. Another week passed without congress capable of agreeing on a bill that would send more money to individuals and families and potentially shore up failing businesses, aid airlines, and maybe even cure cancer.

The mere fact that congress wastes everyone's time on their inability to blow another $1.8 or $2.2 trillion is indictment enough to send them all packing on November 3rd, or to not bother to vote at all, a practice that has been in vogue for decades in the US, with roughly a third of eligible voters to avoid the process altogether every four years, and even more so in off-year elections.

Meanwhile, the presidential candidates squared off in a final debate, with President Trump winning handily, if only for prodding Joe Biden into an outright admission that he would end the use of fossil fuels in America, meaning he would likely ban fracking, which pretty much cost him the state of Pennsylvania and any other constituency that relies on oil or gas for its economy.

Biden, who has called himself a "gaffe machine," really planted his foot into his mouth this time, so much so that moderator Kristen Welker blurted out, "why would you say that?" as almost an admonishment to the favored candidate of the left-leaning media cabal.

On top of that, Trump made reference to Biden's public statements to ban fracking, to which Biden responded that it wasn't true and challenged Trump to put it on his website.

Team Trump did, releasing a tweet that was featured on the campaign website shortly after the debate.

Admist all the chatter of the week, various companies released third quarter earnings results, most notably computer chip manufacturer, Intel (INTC), which was punished for reveaing the truth despite beating earnings and revenue projections.

Revenue fell 4% year-over-year for the quarter, GAAP profits per share slipped 25%, and gross profit margins were lower by 5.7%. CEO George Davis noted that PCs "in the consumer and education markets," which are "more entry-level," or lower margin, were leading sales for the quarter.

Not to let the tidbits of bad news stand alone, Intel raised guidance for upcoming quarters. It didn't matter at all to investors, who took the stock down nearly 11% on Friday, from its close Thursday of 53.90 to 48.20 per share.

What Intel's results say about the real economy is that the slowdown from the summer is obvious and not about to self-immolate. Businesses of all sizes have been slammed, the hardest hit, small to medium sized businesses which have traditionally been the backbone of job creation. While the number of initial claims fell again this week, the data is still staggering. Thursday's reading of 787,000 new unemployment claims was the best number in months, but still extraordinarily high.

Alarm bells were going off in fixed income markets as yield on the 10-year note skyrocketed, hitting 0.87% on Thursday before settling in at 0.85% on Friday. The jump, week-over-week, was nine basis points, or 11.8%. The 30 year bond rose 12 basis points, from 1.52% to 1.64%. Yields on the two long-dated instruments were the highest since June 5th.

For reference, the move from 5/29 to 6/5 dwarfed this past week's. Back then, yields on the 10-year and 30-year spiked by 26 basis points (0.65% to 0.91%) and 27 basis points (1.41% to 1.68%), respectively.

Could this move in the bond market be a signal for a coincident sell-off in equities? Stocks are already lower since October 12. In the week following the June bond rout, the Dow popped to 27,572.44 on June 8, but lost ground the follow four sessions. By June 11, the Dow stood at 25,128.17, a drop of nearly nine percent.

Should bonds and stocks follow the same pattern, the final week of October - and the last full week before the election - could bring an unwanted surprise to the Trump equation, as the president routinely touts the stock market as a gauge for the "recovery."

Certain to bring out the most radical conspiracy theorists, a stock market decline at this juncture might be perceived as damaging to Trump's re-election, though reality suggests that people have already made up their minds and many (as much as 40% in some states) have already voted.

We'll just have to wait and see how things pan out before getting spooked (next Sunday is Halloween).

On the NYMEX, WTI crude oil remained tethered to $40 per barrel. Nothing new there, as crude has maintained this price level - give or take a few points - consistently since the beginning of June. Such remarkable stability in the one market that just happens to be the lifeblood of the global economy is uncanny and is likely the result of an unannounced gentleman's agreement between the major oil producers, the US, Russia, and the Saudis. Nobody will openly admit that oil prices are controlled, but there's undeniable proof that prices that are either too high or too low are damaging to economies. The past five months may have been an orchestrated "goldilocks" moment in the oil fields and something that may extend for longer.

Precious metals were flat on the week. Gold rose from $1899.29 to $1924.33 on Wednesday, only to be beaten back to $1902.05 by Friday's close. Silver put on a small gain, rising from $24.16 to $24.61 the ounce on Friday.

Metals continue to be in short supply as demand has not abated since earlier in the year, especially acute during the early days of the coronavirus panic back in February and March. Back then, shortages were blamed on supply chain interruptions due to travel restrictions, but there's no excuses now, as prices remain elevated and premiums have not come back down.

The most recent prices on eBay for common gold and silver items (shipping - often free - included, numismatics excluded) are presented below:

Item: Low / High / Average / Median

1 oz silver coin: 29.12 / 51.00 / 38.04 / 38.23
1 oz silver bar: 30.50 / 43.01 / 35.81 / 35.00
1 oz gold coin: 1,974.85 / 2,052.13 / 2,023.40 / 2,024.40
1 oz gold bar: 1,995.00 / 2,012.84 / 2,003.75 / 2,003.57

At the Close, Friday, October 23, 2020:
Dow: 28,335.57, -28.09 (-0.10%)
NASDAQ: 11,548.28, +42.28 (+0.37%)
S&P 500: 3,465.39, +11.90 (+0.34%)
NYSE: 13,199.86, +53.94 (+0.41%)

For the Week:
Dow: -270.74 (-0.95%)
NASDAQ: -123.27 (-1.06%)
S&P 500: -18.42 (-0.53%)
NYSE: +30.55 (+0.23%)

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