The Morning Call
5/13/20
The
Market
Technical
The Averages (23764, 2870) drifted lower throughout most
of the day, then sold off hard into the close. Both of the indices ended back below
their 4/17 highs. That would suggest a
loss of upside momentum; although stocks were getting overbought, so some
consolidation is to be expected. However.
any follow through to the downside would leave them in the prior 4/17-4/21 trading
range.
No ‘V’ shaped
recovery.
The latest of
BofA derivatives specialist.
The stock market
isn’t the economy……….but.
GLD, TLT and UUP
reversed Monday’s pin action (GLD and TLT up and UUP down). All their charts remain strong which remains
a bit confusing. They shouldn’t be
trading in unison to the upside unless investors are nervous---and, yesterday’s
performance notwithstanding, equity investors have been anything but nervous to
date.
Tuesday in the
charts.
Fundamental
Headlines
Yesterday’s stats
were not great but most were better than expected. Month to date retail chain store sales
declined in the past week but at a dramatically slower rate than the prior week;
the April budget deficit and the April small business optimism index were above
downgraded expectations; April CPI was (down) in line, but core CPI was really bad.
The
April budget deficit was a real showstopper.
And if you think
that is a big number, get a load of the new house bailout extravaganza.
When the coronavirus
is gone, the debt will remain.
What the Fed has
wrought.
The
Fed now buying bond ETF’s.
An
optimist’s take on recovery.
Overseas, the March Japanese
leading economic indicators were slightly above forecasts while April Chinese CPI declined
almost double estimates.
China
Senate adds fuel
the US/China tension fire.
***overnight
update on coronavirus.
Bottom line. the budget deficit is exploding which, I believe,
will ultimately result in the crowding out of capital investment by US industry. That is a negative for the long term secular
growth rate of the US economy and corporate profitability. The Fed is throwing cash at the financial system
which, I believe, has, is and will continue to result in the mispricing and
misallocation of assets. That too is a negative
for the long term secular growth rate of the US economy and corporate profitability.
None of this
matters as long as investors believe that Fed supplied liquidity will assure
higher security prices. ‘As long as’
being the operative words.
Value
versus growth investing.
The latest from
Stanley Druckenmiller.
News on Stocks in Our Portfolios
Economics
This Week’s Data
US
Weekly
mortgage applications rose 0.3% while purchase applications were up 10.6%.
Month
to date retail chain store sales declined in the past week but at a dramatically
slower rate.
The
April budget deficit was $738 billion versus forecasts of $747 billion.
April
PPI came in at -1.3% versus estimates of -0.5%; core PPI was -0.3% versus 0.0%.
International
The
March UK trade balance was -L6.7 billion versus expectations of -L1.7 billion; March
industrial output was -4.2% versus -5.6%; manufacturing production was -4.6%
versus-6.0%; March GDP was -5.8% versus expectations of -8.0%; Q1 GDP was -2.0%
versus -2.5%; Q1 business investment was 0.0% versus -2.5%.
Other
What
I am reading today
Dealing with uncertainty.
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