Wall Street Breakfast: Markets In Full Swing

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Thursday was an ugly day on Wall Street, as stocks posted their worst day since March, though some of the massive losses might be recouped as S&P 500 futures rebounded 2% overnight. "The U.S. economy will not be shut down again," declared U.S. Treasury Secretary Steven Mnuchin, saying testing and tracing are improving and officials understand more about how to contain outbreaks. "There's just too much cash sitting around for this to be a deep correction," added Ken Peng, head of Asia investment strategy at Citi Private Bank. "The Fed and other major central banks have already made it very clear they're there to buy the bottom basically."

Betting or investing?

Another factor to consider in the current environment is the advance of retail traders into the market as the coronavirus pandemic sidelines many professional investors. "Day trading has replaced sports betting as a form of entertainment," reads a headline from Axios, "and this phenomenon could partly explain the current disconnect between the economy (down) and the stock market (up)." Big price action seen in the stocks of bankrupt companies like Hertz (HTZ), J.C. Penney (JCPNQ) and Whiting Petroleum (WLL) have also underlined this trend as investors rush to buy anything that moves.

737 MAX production start and stop

Boeing's (BA) 16% drop yesterday contributed more than 230 points of the Dow Jones' 1,700-pont plunge as the planemaker cut production plans for the 737 MAX just two weeks after restarting work in its Seattle-area factory. Key supplier Spirit AeroSystems (SPR), which was asked by Boeing to cut production on the MAX, and other suppliers also traded deep in the red. Less production in 2020 could mean the MAX timeline is slipping again or Boeing will deliver MAX jets at a slower rate than previously expected.
Go deeper: BA shares are up 7% premarket and SPR shares are 10% higher.

Quarantine policy

British Airways (OTCPK:ICAGY), easyJet (OTCQX:EJTTF) and Ryanair (RYAAY) have initiated legal action against the U.K. government's quarantine policy, asking for a judicial review to be heard as soon as possible. The airlines describe the rule as "flawed," saying it will have a "devastating effect on British tourism and the wider economy." Instead, they want the government to reintroduce a policy from March 10, which saw passengers from countries deemed at high risk for COVID-19 being ordered to self-isolate upon arrival in the U.K.

Record contraction

Besides logging the highest COVID-19 death toll in Europe, Britain has also paid a heavy economic price. GDP contracted a record 20.4% in April, the largest monthly fall on record, as businesses and workers reeled under a lockdown designed to control the coronavirus pandemic. The OECD has already warned that the U.K. could see one of the developed world's deepest recessions in 2020, with output plunging more than 11%.

What is free speech on social media?

Presumptive Democratic nominee Joe Biden penned a letter to Facebook (FB) that called, among other things, for the promotion of trustworthy sources of election-related information and to quickly remove fast-spreading misinformation and false paid advertisements. "Just as they have done with broadcast networks - where the U.S. government prohibits rejecting politicians' campaign ads the people's elected representatives should set the rules, and we will follow them," Facebook responded in a statement. Snap (SNAP) is also facing some backlash after it stopped promoting President Trump's Snapchat account on its Discover feature, a move CEO Evan Spiegel said "is within its First Amendment rights."

Zoom does some explaining

The company's recent ban against U.S.-based Chinese activists "fell short," Zoom (ZM) wrote in a blog post, offering more details about what happened. In May and early June, the Chinese government reached out to the platform about meetings commemorating the 1989 Tiananmen Square massacre. The activity is illegal in China, so Zoom terminated some of the meetings that had a significant number of mainland China participants - as well as their host accounts - despite a few being based in Hong Kong and the U.S. (those have since been reinstated). "We will have a new process for handling similar situations," Zoom added, saying it is "developing technology over the next several days that will enable us to remove or block at the participant level based on geography."
Go deeper: "Looming litigation and privacy concerns are another headwind for Zoom," writes Kevin George.

Facial recognition - again

Microsoft (MSFT) is latest big firm to back away from the business following similar moves by IBM (IBM) and Amazon (AMZN). The company said it won't sell facial recognition software to police departments in the U.S. until there's a national law "grounded in human rights" to govern the technology. The news comes amid nationwide protests against law enforcement brutality following the death of George Floyd in Minneapolis on May 25.

Bankrupt Hertz wants to sell shares

One of the more curious bankruptcies in recent memory just got a little odder with word that Hertz Global (HTZ) wants to sell up to $1B in shares following a sizable rally (a court ruling could come today). "The recent market prices of and the trading volumes in Hertz’s common stock potentially present a unique opportunity for the company to raise capital on more favorable terms than the strings-attached loans that many other bankrupt companies get," stated Hertz attorneys on the strategy. Related? Hertz has been extremely popular on Robinhood over the last few weeks, with twice as many users snapping up shares than in Amazon (AMZN) or Microsoft (MSFT).

What else is happening...

Quicken Loans, the largest U.S. mortgage lender, files for IPO.

Cox returns as Facebook (FB) head of product.

Sony (SNE) shows off PlayStation 5 at online event.

Nestle (OTCPK:NSRGY) explores overhaul of water business.

Uber (UBER), Lyft (LYFT) drivers are employees - California regulator.

Regeneron (REGN) initiates study of antibody cocktail for COVID-19.

Thursday's Key Earnings

Adobe (ADBE) +4.1% AH despite soft forecast.
Lululemon (LULU) -5.1% AH amid losses from shut stores.
The Children's Place (PLCE) -3.9% AH on mixed results.

Today's Markets

In Asia, Japan -0.7%. Hong Kong -0.7%. China flat. India +0.7%.
In Europe, at midday, London +0.9%. Paris +1.7%. Frankfurt +0.7%.
Futures at 6:20, Dow +2.3%. S&P +2%. Nasdaq +1.7%. Crude -0.4% to $36.18. Gold +0.2% to $1743.10. Bitcoin -3.3% to $9468.
Ten-year Treasury Yield +5 bps to 0.71%

Today's Economic Calendar

8:30 Import/Export Prices
10:00 Consumer Sentiment
1:00 PM Baker-Hughes Rig Count

Companies reporting earnings today »

Comments

[Fracguy]

Drilling rig count only dropped by 5 rigs. Couple more weeks of this and we may see the bottom. Oil price still volatile.

[1575]

Bears dare not leave their positions over the week end ..
Have seen sigh that bears are about to give in ..
Smart bears dare not to leave their positions over the week end ..

[techy46]

One vaccine away from bear meat for all

[1575]

What I posted yesterday
-----------------------------------------------------------------------
1575
Comments885 | Following
50 DMA on SP 500 index daily chart :
1) This 50 DMA just made its U turn around May 20 and go rising ..
2) The first sizable pull back against this rising 50 DMA is necessary technical move and textbook BUY !
Selling could end by tomorrow (Friday) close / early Monday..
Next week should be a big up , followed by another moderate down week, paving the road for 3350 ~3400 by end of July ..
(edited)
11 Jun 2020, 09:16 AM Edit/Delete
--------------------------------------------------------------------------

[1575]

We could see market flush down on Monday !

[Ace-Ventura]

Stocks only go up, bro. Buy the dip bro. YOLO

[FirstFIREWealth]

Markets ALWAYS come back! Long $TQQQ, $TSLA, $NKLA!

[geeeorge2000]

There's no telling with these franken-markets, but usually a large drop, on large volume is not a one day event. I'm not saying this is the start of a bear market, but I don't think today is the beginning of a straight line to all time highs.

[Diesel]

Markets were already down on Tuesday and Wednesday and yesterday's drop was actually the third day of drops.

[geeeorge2000]

I'm not necessarily talking about the previous days. Just that there was an 1800 point drop, on large volume, that closed at the LOD. People this morning were talking, at today's open, it was the time to buy simply because the market was up. There's usually some sort of back and forth (which we may have saw today) while the market picks its direction. Being that it's Friday the market's raise into the close may very well be shorts closing their positions for the weekend. We'll see how the weekend's news cycle plays out.

[WWG1_WGA_Q]

Happy for those that bought during the drop. As the Market's are on a tear.

[1575]

According to market history in recent years, up leg from a major bottom usually would run 19~21 weeks and current leg is on its 12th week. And also based on the history, market usually would rally into the July 4 , especially when we had selling in the June ..
Therefore, believe this rally should have some more weeks to go ..

[wyostocks]

@1575
I think that market history is totally irrelevant.
This market is not given to swings caused by economics, it is driven by a virus that we haven't seen the likes of in over 100 years. A big city outbreak and subsequent shutdown will wreck havoc, be it domestic or foreign. Betting the market either short or long is a bet on the virus, not economic or corporate fundamentals.
That's my theory and I'm sticking to it.

[wyostocks]

@Novavax Op Warp Speed
"if we have no further 'black swan'"
That is a mighty big "if".
Enjoy the weekend

[Invader from Earth]

Yesterday’s market collapse started at 2:40 pm the prior day during the Chairman Powell’s Speech. He could not convince the board to increase the rates, so he crashed the economy with his doom and despair monologue. Avoiding this tantrum by Powell in today’s column is noticeable. The liberal congressman will position the chair in front of the cameras all week.... Yikes! $NKLA SP is coming back to earth it seems. $TSLA Elon Musk is now pushing his own semi into production albeit prematurely to protect his market share. Yikes!

[WWG1_WGA_Q]

Fed wasn't responsible for the Market crash, it was the second wave fear of the coronavirus hitting certain states.

[robinhood_trader]

Simpler explanation.

Stocks were overbought. The recent rally was an overreaction to the upside. Now we may see an overreaction in the opposite direction.

[wyostocks]

Re Hertz
File for bankruptcy and then file to sell common stock to the sheeple. Gotta give the a big award for seeing how to suck in the sheeple.

[john boy]

Wystocks
People buying Hertzstock are not investors or sheeple just gamblers.

[wyostocks]

@john boy
And the big Wall Street boys are playing them like a fiddle.

[Seekingbetaguy]

Q2 American Airlines revenue down 90%. In other words, revenue went from 100 units to 10. In Q3 when revenue goes to 30 units Larry Kudlow can sprint to the mic and thunder: "Airline revenues triple!!!" Some will be fooled, some won't.

[WWG1_WGA_Q]

Alert! Alert! Headliner: According to CNN, Wall Streets party is over. Coronavirus fears are back. More fake news??

[john boy]

Novavax op warp speed
I feel bad for you, are you OK, you listened to CNN. It must have been tough.

[SB Pirate]

QQQ & Stuff

Short Term: Down everywhere but the Hammer bounce this morning. Yesterday for me was a wash except for one trade that went against me during the day as I tried to catch a bounce. After that I just sat until eod with a full hedge from from when the selling began on Wednesday after Powell's speech. At the end of the day I lifted part of the hedge in anticipation of a bounce this morning. Fridays are for whatever reason usually up but today? may be unusual if the morning bounce fades. Maybe some wide swings during the day? IWM already off the pre market highs, Be wary of a failing rally until Medium Term turns up again.

Medium Term: IWM and QQQ broke down marginally on yesterdays selling. Sell the rally this morning indicated? EEM hanging in there by a thread. Until medium term turns up again I think more downside is in the cards. Market stomping it's feet for more money?

Long Term: 260sma; EEM & IWM broke below yesterday. QQQ still up with lots of support in the 200-210 area.

VIX: Watching for it to close back inside the upper B-band along with Medium Term turning up.

All a great day!

[Lord100]

Dead cat bounce likely.

Yesterday is warning when selling occurs there are no real institutional buyers.

This mkt is not investable, everyday feds, treasury, etc need to show up on CNBC, by the hour to pump stocks.

There are hardly any rational buyers in the mkts, buffet, gratham, etc are not buying the BS as the economic recovery is few years away and debt levels are massive and not sustainable. IMF now see much much slower recovery!

Mega caps are as worse as speculative companies with valuations in trillions. These been pumped by cramer and CNBC in the name of FAAMG. they have 7 TRILLION in mkt cap, who is there to buy on the other side when you sell! No big investor to buy these Massive risk to mkts and people buying these MEGACAPS.

*** 7 TRILLION 25% ofUS mkt cap, UP 3T in 2M. ***

-MSFT 1.55 T, PE40 debt 90B,UP 600B in 2M,140B 1Wk
-AAPL 1.6T PE 30) debt 130B,UP 700B in 2M, 160B 1Wk
-AMZN 1.35T PE 120 debt 125B, UP 700B IN 2M, 120B 1Wk
-GOOG/FB 1.9T PE 40 debt 60B, UP 700B IN 2M

These stocks are pumped up in thin volumes and pre mkt hours..

[blueline]

How do you know Buffet isn't buying?

[WWG1_WGA_Q]

Hogwash!! Welcome your insights on who's investing & who's not. Links please! Show us the proof, please.

[SayItWithLyrics]

I own a lot of tech, and I am holding. These are great companies with rapidly growing FCF. Mostly in ETFs. I sold half my AMZN at about $2500 and am holding the rest. When I built a DCF model of their FCF and the growth rates they are generating, I get a value of $2500 - $3000 per share. And my assumptions are fairly conservative.

But there are lots of other lower risk stocks to watch. I added TSN, WM and AEP on dips recently (last 2-4 weeks). Nothing sexy about chicken, garbage, and electricity, but these are good cash flow generators that I got at great prices. Just added PFE yesterday at $33.50.

Markets run on momentum, but that doesn't mean you can't grab some value stocks under the turmoil of the momentum swings.

[probalduttaroy]

This is yet another buying opportunity. The US economy is going to grow at 5% in 2021 and by 2023 growth rates should steady at 1.6% which was the OBM forecast for 2020 made before the pandemic. In addition, all the experts say that even at 3350 the S&P was grossly undervalued. I don't understand why Powell is so pessimistic because Kramer & Kudlow aren't.

[WWG1_WGA_Q]

I still am going with S&P 500 will be 4,000 by eoy & DOW near 30K just my humble opinion. I think the economy will be more robust in the 3rd & 4th qtr of this yr myself, surprising many.

[J Pinon]

I want to save this so I can come back to it.

[earlyriser]

I love the fact that noobs are pushing market around. Just fresh meat for the rest of us.

[Seekingbetaguy]

The FED through word, thought and deed, is signaling that we are in for a nasty recession. That said, fortunes will be made and lost trading cruise line stocks, hotels, airlines, banks, etc. They just won't be made by me. Stick to your knitting.

[2959]

Will the Bank trades be the fortunes made or lost? I can't envision Banks being completely removed after the financial crisis; maybe some regionals get bought, maybe some large banks drop in value. I was perplexed when the Fed talked about how to get into Non-Profits to help support communities, or maybe I misunderstood.

[john boy]

I see cruises in our hemisphere like the Carribian picking up nicely by the end of the year. Might be a deent bet but I don't know which one to go with.

[Chris Lau]

vents in the US Today (EDT):

8:30am - Export & Import Price Index (MoM-May) [2/3 Volatility]
10:00am - Michigan Consumer Metrics [2/3 Volatility]
FOMC Member Barkin Speaks [1/3 Volatility]
1:00pm - US Baker Hughes Oil & Total Rig Count [2/3 Volatility]
FOMC Member Narkin Speaks [1/3 Volatility]
3:30pm - CFTC Speculative Net Positions [2/3 Volatility]
POTUS is at his home in Bedminster, N.J., with he has no events on schedule
Saturday, he will be in upstate New York to deliver the commencement address to the graduating cadets at the West Point Military Academy
Sunday, is his 74th birthday

Events in the UK Today (EDT):

2:00am - GDP (YoY & MoM) [3/3 Volatility]
Manufacturing Production (MoM-Apr) [3/3 Volatility]
Monthly GDP 3M/3M Change [3/3 Volatility]
Trade Balance (Apr) [2/3 Volatility]
Industrial Production (Apr) [2/3 Volatility]
9:30am (approx) - NIESR GDP Estimate [2/3 Volatility]
10:00am (approx) - NIESR Monthly GDP Tracker [2/3 Volatility]
3:30pm - CFTC GBP Speculative Net Positions [2/3 Volatility]

Events in the World Today (EDT):

12:30am - Japan Industrial Production (MoM-Apr) [2/3 Volatility]
2:45am - France CPI & HICP (MoM&YoY-May) [2/3 Volatility]
3:00am - Spain CPI & HICP (MoM&YoY-May) [2/3 Volatility]
4:00am - ECB's Enria Speaks [2/3 Volatility]
5:00am - Euro Zone Industrial Production (MoM&YoY-Apr) [2/3 Volatility]
6:00am - EU Finance Ministers Meeting [2/3 Volatility]
8:00am - India CPI (YoY-May) [2/3 Volatility]
ECB's Enria Speaks [2/3 Volatility]
3:30pm - Brazil CFTC Speculative Net Positions [2/3 Volatility]
Japan CFTC Speculative Net Positions [2/3 Volatility]
Euro Zone CFTC Speculative Net Positions [2/3 Volatility]
Formula One has canceled races in Singapore, Japan and Azerbaijan

Earnings Before Open:

Party City
Bitauto Holdings, Ltd.

[blueline]

"Day trading has replaced sports betting as a form of entertainment,"

True! How many people who used to be too busy to day trade stocks all of a sudden found themselves trapped in their house or apartment with nothing to do and decided to "play".

Their losses and yes they did lose, then added to an already depressing environment. It's time to get people out of the house and back to work.

[WWG1_WGA_Q]

And how many won & won a lot? Win some, lose some. Agree that its time to get out of the house & back to work.

[blueline]

I would be willing to "bet" that most new day traders with little to no stock trading experience lost more than the made.

[WWG1_WGA_Q]

It all depends on Lady Luck. Who knows??