Thursday, July 9, 2020

Morning Note: "The Day's Still Young"

Asian stocks closed mostly in the green overnight, with the Chinese state continuing to succeed mightily in their quest to mask reality by pumping China and Hong Kong equity markets.

While emerging markets can very well be a "relative" bright spot in a weaker US dollar environment, the above does not make for a sustainably investible thesis, in my humble view. Some, believe it or not, strongly suggest that, in surely more subtle fashion, something similar has been occurring (i.e., direct buying by government operatives) in US equities as well. I'm not all in on the latter by the way, however, the mere mention of such shenanigans can for a time become a self-fulfilling prophecy (folks attempting to front-run) in terms of market bounces. 

European equities are trading lower virtually across the board this morning, while U.S. stocks are taking a notable hit on -- according to the headlines -- COVID numbers and news that Wells Fargo (the largest employer among U.S. banks) is preparing to cut "thousands of jobs" later this year.  The Dow's off 540 points, the S&P 500 is down 1%, the Nasdaq is off 1.5% and the Russell 2000 is trading 2.5% lower as I type.

The VIX (S&P 500 volatility), as you might expect, is up a huge 10%, while VXN (Nasdaq vol) is up 9%. 

Oil's down 3.25%, gold (interestingly) is down $18, silver's off 1.54%, copper (interestingly) is up .34% and ag commodities are mostly green this morning. 

Per the action in copper and ag, the two core positions we manage that are positive on the morning are DBA (ag commodities) and DBB (base metals). Of course our put hedge is rallying this morning (up 15% as I type) as well.

The dollar's up 0.26%. 

Now, all of the above reported, keep in mind, "the day is still young", which is a most meaningful statement these days.

In the pre-market this morning futures were rallying based -- according to the headlines -- on news that weekly jobless claims came in at 1.31 million rather than the 1.39 million anticipated. Now, just sit with that one for a minute ........................................... stocks rallied on that "happy" news. Remarkable!

If indeed the weekly jobless claims report explained the pre-market rally, it makes sense that the Wells Fargo news would kill the optimism.

Stay tuned... much more to come...

Have a nice day!

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