Entering text into the input field will update the search result below

Wall Street Breakfast: Will The Historic Rally Continue?

Wall Street Breakfast profile picture
Wall Street Breakfast

Listen on the go! A daily podcast of Wall Street Breakfast will be available by 8:00 a.m. on Seeking Alpha, iTunes, Stitcher and Spotify.

Traders are reassessing the current state of the market after the S&P 500 wiped out all of its 2020 losses on Monday, in a historic rally that shocked the Wall Street establishment. It took just 53 sessions for the index to restore the nearly $10T in value that was erased since an intraday low on March 23. The move may be warranted, especially after May's blowout jobs report, unprecedented stimulus and economy reopenings, but many are reviewing positions and looking for the next big catalyst. Ahead of a session that kicks off the Fed's latest two-day policy meeting, S&P 500 futures have pulled back, falling 1% in overnight trade.

Bull vs. Bear

Speculative excess has surged to the highest in at least two decades among U.S. options traders and not a single stock in the S&P 500 index is down for the past 10 weeks. It's either a coming sign that everything will fall together when the rally fades or an indication of broader optimism. "I don't think even the most optimistic bullish bull could have anticipated this," said David Sowerby, portfolio manager at Ancora Advisors in Cleveland. "The words that comes to mind are epic, monumental." Job openings data and small business optimism numbers are on deck for today, while Tiffany (TIF), Chewy (CHWY) and GameStop (GME) report quarterly earnings.

Recession began in February

The peak in monthly economic activity in the U.S. occurred in February, according to the National Bureau of Economic Research - more or less the group that gets the honor of dating expansions and recessions. The expected duration of the downturn is a matter of debate and is likely to influence opinions on the need for additional economic relief. Congress has already provided $3.3T in emergency spending and tax breaks, prompting worries about a ballooning budget deficit.

Bankruptcy and financing

Shares of Chesapeake Energy (CHK) tumbled 42% in extended trading on Monday following reports that the natural-gas producer was preparing to file for bankruptcy. The owner of Men's Wearhouse and Jos. A. Bank, Tailored Brands (TLRD), also fell nearly 5% on similar reports. On the flip side, Macy's (M) soared 13% AH upon securing $4.5B in new financing, while Hertz (HTZ) erased all the losses suffered since the car rental company declared bankruptcy on May 22.

No active deal discussions

Following a weekend report that Gilead (GILD) and AstraZeneca (AZN) were in touch about a possible merger, CNBC's David Faber said there is nothing going on at the moment. Faber does acknowledge that "there may have been a conversation" at one point, but points out that AstraZeneca, as a U.K. company, would have been required to disclose that anything was going on per takeover panel regulations. The prior report did indicate that formal talks weren't yet underway and that advisers and others were being informally included in the process.

Facial recognition exit

"We believe now is the time to begin a national dialogue on whether and how facial recognition technology should be employed by domestic law enforcement agencies," IBM CEO Arvind Krishna told Congress, as the company shut down its facial recognition business. The unit did not generate significant revenue, according to CNBC, but the decision remains notable for a technology giant that counts the U.S. government as a major customer. "Technology can increase transparency and help police protect communities but must not promote discrimination or racial injustice."

$5B rescue package for Cathay Pacific

Governments across the globe have been aiding airlines amid a plunge in travel demand, and in some cases, like Germany's Lufthansa (OTCQX:DLAKY), they are taking direct equity stakes. Cathay Pacific Airways (OTCPK:CPCAY) is the latest to announce a recapitalization plan worth HK$39B ($5.03B) led by the Hong Kong government to help it weather the COVID-19 pandemic. According to the carrier, a plunge in passenger revenue to only 1% of the previous year's levels meant the airline had been losing cash at a rate of HK$2.5B-HK$3B per month since February.

Electric vehicle revolution

Shares of Nikola (NKLA) are up another 14% premarket to $83 per share after a major run yesterday that saw the stock skyrocket more than 100%. The company went public this past Thursday - after a merger with VectoIQ - with the intention of disrupting the trucking industry, like Tesla (TSLA) upended the car business. Shares of Tesla also hit a record closing price of $949.92 on Monday, partly in response to electric vehicle sales data out of China.

Start your engines

The IPO market is heating up as online car seller Vroom priced its initial public offering at $22/share, with the stock expected to start trading today on the Nasdaq under ticker "VRM." That's above even its recently increased price range of $18-20/share, and brings the raise to about $412.5M. Underwriters have received a 30-day greenshoe option to buy up to an additional 3,187,500 shares at the IPO price.

Movie theater reopenings

New industry guidance in California allows for theaters in the state to start reopening as soon as this weekend with strict measures. Cinemas will need to limit capacity to 25% or 100 people per auditorium (whichever is fewer) at first, though the rule is expected to be relaxed after two weeks. That would provide some ramp-up time before the planned arrival of the first big post-pandemic blockbuster, Tenet from Warner Bros. (T) on July 17, followed by live-action Mulan from Disney (DIS). Related tickers: AMC, CNK, IMAX, MCS, RDI, NCMI

What else is happening...

Goldman Sachs forecasts a pullback in crude prices.

BP (BP) to slash 14% of global workforce.

Taiwan Semiconductor (TSM) would be able to fill Huawei order gap.

3M (MMM) sues seller over fake N95 respirators.

Beauty brands are pivoting away from talc.

Today's Markets

In Asia, Japan -0.4%. Hong Kong +1.1%. China +0.6%. India -1.2%.
In Europe, at midday, London -1.9%. Paris -2%. Frankfurt -2.1%.
Futures at 6:20, Dow -1.2%. S&P -1%. Nasdaq -0.6%. Crude -2.3% to $37.32. Gold +0.6% to $1715.10. Bitcoin -0.8% to $9670.
Ten-year Treasury Yield -6 bps to 0.82%

Today's Economic Calendar

6:00 NFIB Small Business Optimism Index
8:55 Redbook Chain Store Sales
10:00 Job Openings and Labor Turnover Survey
10:00 Wholesale Trade
1:00 PM Results of $29B, 10-Year Note Auction

Companies reporting earnings today »

This article was written by

Wall Street Breakfast profile picture
Wall Street Breakfast, Seeking Alpha's flagship daily business news summary, is a one-page summary that gives you a rapid overview of the day's key financial news. It is designed for easy readability on the site or by email (including mobile devices), and is published before 7:30 AM ET every market day. Wall Street Breakfast's readership of over 3.4 million includes many from the investment banking and fund management industries. Sign up here to receive the Wall Street Breakfast in your inbox every business day.Check out our Podcast RSS feed

Recommended For You

Comments (88)

RMECSSPA profile picture
Hi, 06/09/20 SPY oppened notoriously lower than 06/08. Actually, during the day it didn't went at the same level of the previous day maximum price. Does this shows the change of a trend? We've got 5 peacks from March until 06/08... What do you think?
SilentRage profile picture
I've seen this movie before... the 2000 dot.com bubble. You just have to let go and sell the stocks you're in love with if you think they're overextended. Remember, it's not a winner until you get out of it.
Chris Lau profile picture
Mark this down for the triple that will triple: https://bit.ly/37fNftn
PSA: if you lost your gains overnight, you never had gains.
What happened? Why it's red? I want to talk with the manager, please.
Buyandhold 2012 profile picture
Will the historic rally continue?

"The peak in monthly economic activity in the U.S. occurred in February, according to the National Bureau of Economic Research"

There have been as many as 47 recessions in the United States. The shortest since the Great Depression was Jan 1980 – July 1980, 6 months. Stocks fell a little more than 8% during that one. Interestingly, one year later there was another recession, July 1981 - October 1982, during which stocks fell 23%.

Economist are now attempting to forecast a Recessionary period in which the FED has unleashed massive amounts of liquidity. As has the ECB and other Central Banks around the World. So what does all of mean to Investors?

Now that we have rallied back, stock valuation in the US are starting to reach extremes versus International Stocks at their current valuation. Projected Market returns around the World: Singapore 20.6% Spain 13.4% Australia 12.6% UK 10.8% USA (-2.4%)
Emerging Markets: Turkey 29% Russia 28.9% China 28.7% India 16.5% Indonesia 15.5%

Maybe it's a good time to refocus...
I keep on laughing at the reference to "blow out" when talking about unemployment report. Going from (officially) 14% to 13% can not be considered a "blow out".
Valuejay profile picture
It's a blowout relative to what was expected. Analysts were expecting unemployment to rise from 14% to 20%.
Well if you include the amount reported, classification adjustments, part-time employed due to the economy, and those wanting a job but not currently looking it's: 11.9% (March), 31.6% (April), 27.7% (May).
I guess plus differential of 10.5 million jobs could be a blow out.
LaughingTrader profile picture
Will the historic rally continue?

NO. After sitting on the sidelines I finally did some buying yesterday. Look out below! YOu have been warned.
Finally the futures are showing a decent amount of weakness. Is it he end of the rally? Who knows? Just have a plan to exit or preserve profits in case it is. My own thoughts are that we will see a decent pull back until more is known about the amounts a timing of another stimulus package. Yesterday there was some talk about postponing it so a bit of pullback/profit taking today not to mention an adjustment for the messed up BLS report.

FWIW, I do not see how the markets get past the elections without at least a very scary pull back.The other day I read somewhere that 82% of the time if the markets are up for the 3 months before the election the incumbent is reelected, conversely if they are down those 3 months the challenger wins. Interesting battle lines are taking shape.

All great day!
Watch the biggest guest of FANNIE coming any day, the wall street insiders will make billions
Chris Lau profile picture
We cannot allow this year to end.
That would be admitting that 2021.
DIY guide of the day: Want stocks that triple? Just buy bankrupt firms - $CHK $HTZ
Joseph Diamon profile picture
Google (GOOGL) is a safe haven.. for now
With the anticipated Fed meeting starting today & through Wednesday, along with the stunning jobs report that was just released, it has bought the Fed some time, but more help can be expected until the economy is on more sound footing. So I'd expect a pause in the Market's until the Fed decision is known. If positive news is released by the Fed on Wednesday afternoon, expect the new bull rally to continue with vigor. Hope you all buckle your seat belts for what could possibly be the ride of your life.
On the BLS jobs report: On Saturday last after the report the Washington Post reported the BLS had incorrectly classified something in their model. None of their approximate 2500 employees caught the mistake. The error had it been corrected would have just about reversed the numbers to 2 million jobs lost. One would of thought that the market would have picked up on this yesterday, and given back Fridays gains but no it does not fit the Wall Street narrative.

My suggestion is forget the news stories the press throws out there as explanations and focus on how much money governments around the world are printing. Whenever the USA or EU or China or IMF says we are gona print more money figure a rally will follow within a day or so.
I don't read fake newspapers like the Washington Post or New York Times. So whatever they print or say means nothing to me. They both are worse than the gossip tabloids. Just my 2 cents worth!!
Most likely the job numbers came in great because of the PPP paying for employers to keep employees on the payroll. It's kind of "unemployment light" but in the end that doesn't matter. What does matter is if the businesses can recover enough so they keep those employees after PPP runs out. And yeah, if you haven't figured out that the WaPo lies for a living...
Invader from Earth profile picture
Airlines are still running up the Shute like animals.... the cabin interiors must be reconfigured bring the business class seats all the way back plus partitions.
Invader from Earth profile picture
Does anyone know where all this lithium is going to come from for all these EV auto and truck batteries? Seems like a lack of planning and capitalization of lithium mines is creating a giant unfulfilled demand...
Good question. China goes not have a geological monopoly on Lithium. Demand is caused increased exploration and development, much of it in my home country if Canada.

Like RSA and oil, China (the primary world supplier of Li) has taken measures to reduce the price. On Canada, that caused a bust in the Li sector. One mine in quebec, however , appears to be moving ahead - the Namaska (sp?).

Like diamonds, potash and oil, it will be impossible to maintain monopoly/duopoly/oligopoly in the long. This IMO is particularly true should governments decide that Li is a resource of national security importance. Which I believe many will.
Belcanam profile picture
There are huge lithium mines and reserves in yhe corner of Chile, Bolivia and Argentina. Large investments made over the last 5 years by SQM (Chile) and Albemarle (USA)
The Robinhooders are playing this market like geniuses. They are taking us up, they are taking us WAY up.
They're all over NKLA
blueline profile picture
"Cinemas will need to limit capacity to 25% or 100 people per auditorium"

Ridiculous! The WHO has just confirmed that asymptomatic people pose a very low risk of spreading the disease and we have also confirmed over the past two weeks that large crowds don't spread the virus.

If you're going to allow thousands of people to pack themselves on a bridge or town square you can allow more than 100 people in a theatre.
I thought you didnt believe anything out of the WHO and were happy we wont be funding them?
@blueline posts "and we have also confirmed over the past two weeks that large crowds don't spread the virus."

Could you please post where this statistic is from? I can't find it anywhere.
Wait, large crowds don't spread a highly communicable virus??? Huh??
"Electric vehicle revolution" continues to happen in plain sight.

History shows a disruptive technology’s tipping point can be under 5% of market share. For example, the number of horses in use peaked in the U.S. once car ownership reached 3%. Gas lighting in the UK peaked with electric lighting at just 2% of the market. Landline phones in the U.S. fell precipitously after mobiles captured 5% of the market.
MyPrivilegeIsShowing profile picture
Gaslighting has been on the rise
So what do we invest in to take advantage of the electric vehicle revolution? My only idea is copper. What else looks good?
SA title not mine. Meanwhile US gas-powered light vehicle sales peaked in 2016.

Short answer is , YES.
But, SP 500 will likely have to retest its 200 DMA line on daily chart or 50 MA on weekly chart ,that is 3000, before election.
If economy is to be recovered in 2 years,which is a reasonable assumption, then SP 500 will have to go 4350+ ..
The Sustainable Investing Monkey profile picture
Will have to go to 4350?
Where does this come from?
I think current value would be correct if US GDP has to grow 10% per year toward 2025.. And this is not gonna happen.. big crashes ahead.. the latter the worse
@Gian Tonik what's GDP got to do with anything? We're talking about the stock market here.
Yep...new market highs coming for sure, a lot quicker than many could imagine, as the economy gets going once again. The economy will be stronger than the last imho.
Rescue packages for the airlines? I am on the sidelines in this decision to do so or not. Maybe if it was a contract type loan that they would have to pay back the rescue package, then I'd agree with it.
blueline profile picture
The airlines don't need a handout. Ticket sales are going up. Vegas is open, Key West is open, theme parks will be open in 30 days.

And they will be flying with some very very cheap fuel.
matttrakker profile picture
I’ll also take preferred shares paying dividend, no free money.
One simple question: Considering how calamitously wrong the "experts" were with their bearish predictions of past markets & up to present, why would any smart well informed investor believe them now? Just imagine how many bull market rallies were missed by many who follow their predictions. That's why you should take what they say with a grain of salt & use your own investing knowledge & skills when making investing decisions. So enjoy this new bull market, which many "experts" predicted would be a "bear" market.
The Sustainable Investing Monkey profile picture
Too quick to speak..
Let's see the S&P 500 value in 2022 ... I do not se it much higher than now.. even with tge greatest optimism ever..
Off course if people continue putting their money like that could be nice shirt term gains.. But long term can be very very painful
Glan Tonick
As long as apple and facebook, amazon exct are in S&P it probably will exceed expectations.
@john boy great point. Sooner rather than later, as markets eventually set new highs, its a given. From my 36+ yrs of being an investor, the markets have proved that to be. Just my 2 cents.
Hudson Investments profile picture
The market is overbought and needs a breather.
blueline profile picture
Profit taking time.
matttrakker profile picture
I am now 30% cash. Sitting and waiting. Everything looks super expensive.
ESGFIRE profile picture
lol you’re looking at the wrong places then
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

Past Podcasts

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.