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Mask On Thursday – Surging Virus Numbers Push Many States to Lock Back Down

Remember the virus?

The stock market sure doesn't but the US, on the whole, just reported it's second-highest jump in infections and governors and mayors were scrambling to issue new mask orders and limit the size of gatherings.  Several large school districts also said they would open the academic year with online classes, bucking pressure from President Trump and his administration to get students back into classrooms as quickly as possible.

The new restrictions reflect a painful reality that America’s outbreak, which has increased in 41 states over the past two weeks, may worsen in the coming weeks and months.  Wednesday’s tally of more than 67,300 new infections was about 1,000 cases shy of the record set late last week, according to a New York Times database, as the country’s total number of cases passed 3.5 Million.  Meanwhile, 963 more of Trump's "Virus Soldiers" died yesterday in their brave struggle to keep the economy open for the President's Re-Election – no matter how many lives it costs.  

As you can see from the S&P Chart, we were rebounding just fine in May, while we were still locked down as life was ajdusting to the "new normal" – as it did in the rest of the World.   2 months ago, on May 16th, we had less than 1.5M viral infections in the US and we had drastically slowed the spread – even with many states not following the lockdown protocols.  BUT, then we had this rush to "re-open" into the Holiday Weekend and, in just two months since then, we have added 2M more cases and the chart is RAPIDLY accellerating as we hit two new records in the past 5 days. 

DESPITE pouring $2.7Tn of direct stimulus into the economy and another $4Tn of aid from the Fed – we are STILL not back at our February highs – excpet the Nasdaq, which is way off in fantasy land at 10,550, after testing 11,000 on Monday.  The Nasdaq was at 9,500 in February so it's up 11% during the pandemic while the S&P is less than 200 (5.8%) points off it's high.

Fed Cut Back on Helicopter Money for Wall Street & the Wealthy ...Are pandemics GOOD for the economy?  It would seem so, wouldn't it.  But it's only good for the economy in the same way your house is much wetter after a fire, not because the fire makes your house wetter but because the firement use water to put out the fire.  When the fire dies down and they turn off the hoses, you are left with a wet, burnt wreck of a house and it's very few people who shout "YAY!!!" as they survey the damage.

We "only" have an $18.5Tn economy so adding $4Tn in stimulus SHOULD boost it by 21.6% and another $2.7Tn from the Government should be good for another 14.5% so we've SPENT 36% of our ENTIRE economy to keep the S&P 500 where it was in February.  That's a lot of water!

Congress is about to allocate more money for more stimulus and you can bet the Fed isn't stopping despite record-breaking profits from their Member Banks at the expense of the taxpayers.  It's as if the firemen worked for the water company and the wetter they made things the more money they made…  The Fed is NOT the Government, they are a Banking Cartel with Government oversight but they work for GS, JPM, C, etc. – not the other way around.  

That's why earnings, so far, have been good – the major Financial Institutions report early in the cycle and it's easy to do well when you are a banker and the Fed and the Government push $6.7Tn through your doors so you can lend it to taxpayers (their own money!) and charge originaltion fees and interest on programs that are backed by the Government (using more taxpayer money) so you can't possibly lose.  It's good to be the king!  

S&P 500 Earnings Growth End of Qtr Estimate vs Actual

Delta (DAL) lost $4.43 per $28 share but no one cares, Wells Fargo is a bad bank and lost 0.66 per $25 share but Goldman Sachs (GS) made $6.26 per $216 share, blowing away expectations of $3.91.  C doubled expectations, JPM beat by a bit, FRC beat, BNY beat, PNC is another bad bank that lost $1.90 per $102 share but Progressive (PGR) more than doubled expectations and made $3 per $85 share (thanks Flo!).  

United Health (UNH) made $7.12 in Q2 vs $3.08 expectations and their shares are $3.05 and that's more Government reimbursemnets boosting those revenues – your tax Dollars at work!  We can't afford to give health care to poor people but we can pay an extra $3Bn in profits to UNH to provide services to people who already paid them for insurance?

BAC and SCHW both beat this morning as did Domino's (DPZ) and JNJ had a nice beat, as did Morgan Stanley (MS) and Abbot Labs (ABT).  This evening we hear from Netflix and tomorrow BlackRock (BLK) will show us how to leverage all that free money along with FHN, STT, RF, CFG and ALLY.  

Next week is when earnings get more interesting as we start hearing from energy companies and heavy-hitting industrials (the people who have massive accounting staffs and are able to report earnings quickly after the quarter ends).  

Then comes the bad news….


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  1. Good Morning.

  2. Phil tsla is down big time for now anyways.

  3. Good morning!

    Nasdaq down for a change but not much excitement.  Waiting to see if NYSE can confirm a breakout over the 200 dma but that's where our rallies always fail.

    TSLA/Pirate – Under $1,500 is nice and the STP is back to $400,000 with the LTP at $927,000 so almost feeling like better safe than sorry on TSLA now.  

    • Nissan Motor (OTCPK:NSANY) is planning a 30% reduction in global vehicle production through December due to lower demand globally amid the pandemic, according to Reuters.
    • The Japanese automaker hasn't officially announced the production cut yet.
    • Reuters notes that the pandemic has been particularly difficult for Nissan as it was already struggling with lower sales levels and a deteriorating cash position.
    • Nissan will announce June output figures next month. Here is how the May report looked.
    • COVID-19-related demand for test kits propelled a 23% jump in Abbott's (ABT -0.2%) U.S. diagnostics business to $857M last quarter.
    • Overall, sales rose nearly 5% to almost $2B.
    • The company currently offers three COVID-19 tests: a lab-based assay that detects the presence of the coronavirus, a point-of-care test that also detects the presence of virus and a lab-based blood test that detects the presence of IgG antibodies against the virus.
    • The company, along with Danaher's (DHR +0.0%) Beckman Coulter and Roche (OTCQX:RHHBY -0.1%) should capture the bulk of the U.S. lab-based market for test kits. LabCorp (LH +0.6%) and Quest Diagnostics (DGX +1.6%) should capture the lion's share of the testing services business.
    • Q2 results
    • For the first time in 50 years, mortgage rates sink below 3% as the 30-year fixed-rate mortgage averages 2.98% for the week ending July 16, 2020, according to the Freddie Mac Primary Mortgage Market Survey.
    • Compares with 3.03% in the previous week and 3.81% at this time a year ago.
    • " The drop has led to increased homebuyer demand and, these low rates have been capitalized into asset prices in support of the financial markets," said Freddie Chief Economist Sam Khater.
    • However, the economic recovery is stagnating as virus cases increase, putting "many temporary layoffs at risk of ossifying into permanent job losses," he adds.
    • 15-year FRM averages 2.48% vs. 2.51% in the prior week and 3.23% at this time a year ago.
    • 5-year Treasury-indexed hybrid adjustable rate mortgage averages 3.06% vs. 3.02% in the prior week and 3.48% a year ago.
    • Also in the news today, the NAHB builder confidence survey continues to surge, climbing all the way to 72 this month.
    • Homebuilders gain, with the iShares U.S. Home Construction ETF (BATS:ITB) up 1.3%.
    • By name, D.R. Horton (DHI +2.2%), Taylor Morrison Home (TMHC +2.0%), Hovnanian Enterprises (HOV +0.7%), Toll Brothers (TOL +2.0%), PulteGroup (PHM +1.7%), Lennar (LEN +1.5%), and Meritage Homes (MTH +1.8%) all move up strongly.
    • Grocery store stocks are higher after today's retail sales report showed strength in the category. The modest share price gains come with the broad market down on the day.
    • While grocery sales were down 1.7% in June from the level seen in May, the pandemic effect is still in play with grocery store sales up a solid 11.7% from a year ago.
    • Sector watch: Kroger (KR +1.2%), Ingles Markets (IMKTA +1.7%), Albertson's (ACI +1.8%), Weis Markets (WMK +0.3%) and Sprouts Farmers Market (SFM +0.8%).
    • Previously: Winners and losers from the June retail sales report (July 16)
    • July NAHB Housing Market Index72 vs. 60 consensus and 58 prior. The gauge had previously jumped a full 21 points in June.
    • The present single family home sales subindex rises to 79 from 63; future sales to 75 from 68.
    • Prospective buyers traffic rises to 58 from 43.
    • NAHB Chief Economist Robert Dietz: "Flight to the suburbs is real … New home demand is improving in lower density markets, including small metro areas, rural markets and large metro exurbs, as people seek out larger homes and anticipate more flexibility for telework in the years ahead."
    • While shares of Boeing (NYSE:BA) are down 3.2% with the broader market, a downgrade from Wolfe Research is not helping the situation.
    • Analyst Hunter Keay cuts his recommendation on the stock to Underperform from Peer Perform with a $149 PT, implying an 18% decrease from the current price of $182/share.
    • Concerned about demand for widebody aircraft, he believes Boeing will face more MAX cancellations, and also mentions risks for the 777X.
    • "The survival of the Boeing 737 MAX supply chain is at stake," writes Dhierin Bechai in a new Seeking Alpha article, Blow To Boeing 737 MAX Production.
    • Cisco Systems (NASDAQ:CSCO) is 1.5% lower premarket after a downgrade to Neutral at J.P. Morgan, from Overweight.
    • The firm points to a number of continuing headwinds and an "absence of visibility into a return to revenue growth" alongside ongoing macro uncertainty.
    • That includes the November elections: Observers need to "embed incremental headwinds to IT budgets as Enterprises look to cost discipline to mitigate earnings headwinds from a potentially higher corporate tax rate," analyst Samik Chatterjee writes.
    • The firm has a $50 price target vs. current $46.40.
    • Wall Street analysts are Bullish on the stock overall, as are Seeking Alpha authors. It has a Quant Rating of Neutral.
    • The European Commission is seeking information from 400 companies to establish whether top voice assistants create market problems meriting antitrust investigations.
    • European Competition Commission Margrethe Vestager says the large amounts of user data involved could be used to hurt competition and smaller rivals.
    • Violators of the EU's antitrust rules can be fined up to 10% of their global turnover.
    • Apple's (NASDAQ:AAPL) Siri, Amazon's (NASDAQ:AMZN) Alexa, and Google's (GOOG,GOOGL) Assistant top the voice assistant market.
    • Last year, the EU fined Google $1.7B for its "abusive" online ad strategies, the tech giant's third billion-dollar fine from the region.
    • Last month, reports suggested the EU would soon launch a probe into Amazon's treatment of third-party seller data.
    • The Commission recently started investigating Apple's App Store practices for potential antitrust violations.
    • 3M's (NYSE:MMM) legal team has investigated more than 4,000 reports globally of suspected fraud, counterfeiting, and price gouging linked to those exploiting demand for critical 3M products amid the COVID-19 pandemic.
    • The company has filed 18 lawsuits in 10 U.S. states and Canada, winning 6 temporary restraining orders and 4 preliminary injunction orders from courts that halted defendants' unlawful actions.
    • Online, 3M successfully secured the removal of more than 7,000 websites with fraudulent or counterfeit product offerings and more than 10,000 false or deceptive social media posts to date.
    • Joining the chorus of firms praising Apple's (NASDAQ:AAPL) 5G iPhone tailwind, Canaccord Genuity raises the company's price target from $310 to $444.
    • The firm says Apple's positioning to "benefit from the long-term 5G investment cycle" will support results in 2021.
    • Growth in Apple's installed base will also drive ecosystem services and hardware sales benefits, writes the firm.
    • Canaccord expects Services revenue to outpace Apple's total growth.
    • Canaccord maintains a Buy rating on Apple.
    • Apple shares are down 1.3% pre-market to $385.76 as renewed U.S.-China trade tensions weigh on tech.
    • Yesterday, BofA cited the 5G iPhones as it raised Apple's target to $410.

  4. Good Mid Morning

  5. Very quiet, are we just watching the show today?

    • EU registrations of new passenger cars -22.3% Y/Y to 949,722 units in June; improvement from 52.3% drop in May.
    • With France standing out to +1.2% due to government's incentives to low-emission vehicle sales, all other EU markets posted decline. Spain (-36.7%), Germany (-32.3%) and Italy (-23.1%).
    • The half yearly data shows the contraction of 38.1% with Spain recording the biggest decline of 50.9% amid the coronavirus pandemic.
    • New registrations decline among the top 6 carmakers by highest market share:
    • Source: ACEA
    • Related Tickers: Volkswagen AG (OTCPK:VWAGY +0.9%), Peugeot (OTCPK:PUGOY +0.7%), Renault (OTCPK:RNLSY +2.1%),  Hyundai Motor (OTCPK:HYMTF +2.1%), Bayerische Motoren Werke (OTCPK:BMWYY +0.9%) and Fiat Chrysler Automobiles (FCAU +0.4%).
      • Attorney General William Barr took aim at companies he accused of collaborating with the Chinese government, while the White House is considering denying visas to China Communist Party members and families.
      • Separately, White House adviser Larry Kudlow suggested that TikTok could operate as a U.S.-based app if it left its Chinese holding company.
      • Barr said Hollywood, including Disney (NYSE:DIS), and technology companies, including Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOGL) are “all too willing to collaborate” with the Chinese Communist Party, the WSJ reports.
      • “America’s corporate leaders might not think of themselves as lobbyists,” Barr said. “But you should be alert to how you might be used, and how your efforts on behalf of a foreign company or government could implicate the Foreign Agents Registration Act”.
      • Trump administration officials are in the early stages of discussions about banning Chinese Communist Party members and whether or not it could be applied retroactively to expel some people already in the U.S.
      • Dear readers: We recognize that politics often intersects with the financial news of the day, so we invite you to click here to join the separate political discussion.

    • Strong trading activities and debt and equity underwriting that's been driving Q2 earnings beats at the biggest banks aren't sustainable, writes Odeon Capital's Dick Bove.
    • Furthermore, the traditional banking business is being driven by huge increases in deposits, shrinking loans, and lower interest rates, he adds.
    • Wells Fargo analyst Mike Mayo lists the 3Gs applying to Q2 beats — Government stimulus, which helps to mitigate losses and bolsters capital markets; Green shoots up through mid-July; and Goliath is Winning on market share gains and digital dominance.
    • He points to JPMorgan Chase (JPM +0.3%), U.S. Bancorp (USB +0.1%), and PNC Financial as among his favorites due to their high quality; also likes Goldman Sachs (GS -0.8%) and Citigroup (C -0.7%) for their high beta.
    • The "elephant in the room", though, is the recent increase in COVID-19 cases, which can reduce economic activity, Mayo wrote.
    • That has the management of most banks warning about the rest of the year. "The unknowns outweigh the knowns," he quotes Citi's CEO in his note.
    • Bove sees U.S. Bancorp (USB +0.1%), PNC Financial (PNC +2.1%) and Truist Financial (TFC +1.5%), as most likely to suffer from weaker earnings for the rest of the year.
    • Indeed, Evercore ISI analyst John Pancari is cutting his 2020 EPS estimate for PNC to $1.13 from $3.94 to reflect its sizable loan loss reserve build; trims 2021 EPS estimate to $7.04 from $7.46.
    • For USB, he reduces his 2020 EPS estimate to 98 cents from $1.66, but raises his 2021 EPS estimate to $3.14 from $2.67.
    • Wolfe Research's Steven Chubak calls Bank of America's (BAC -2.7%) Q2 results less impressive than its peers, noting that the trends at BofA were "a bit softer" relative to its peers.
    • "Softness in consumer fees and outsized NIM contraction may give some investors pause, and dampen upward revisions," Chuback wrote in a note.
    • Morgan Stanley's (NYSE:MS) blowout numbers should have hardly shocked investors on Thursday. After all, a slew of banks has announced strong results this week on the backs of booming capital markets.
    • On Wednesday, rival Goldman Sachs (NYSE:GS) announced second quarter results that far exceeded expectations on many key metrics. But that resulted in only a lackluster rally for the stock by the end of the day.
    • And earlier in the week JP Morgan (NYSE:JPM) also reported strong results driven by capital markets activity. But investors instead chose to focus on executive commentary that outlined a tough road to economic recovery and boosted loan loss provisions to match the gloomy outlook. Other diversified banks like Wells Fargo (NYSE:WFC), Citigroup (NYSE:C), and Bank of America (NYSE:BAC) have also met with negative investors sentiment after announcing earnings.
    • Shares of MS, though, were up 3.9% in early trading on Thursday despite major indices being in the red.
    • One reason: in MS, investors may have finally found a bank that has sidestepped the risk of mounting loan losses in the event of a protracted economic downturn.
    • Even GS – which, like MS, remains much more focused on investment banking and capital markets than more diversified banks – had to steeply up its loan loss provisions in Q2.
    • GS upped its provisions for credit losses $1.4 billion YoY, while the increase was only $221 million for MS.
    • GS upped its provision for credit losses to $1.59 billion for the second quarter of 2020, compared with $214 million for the second quarter of 2019 and $937 million for the first quarter of 2020. "The increase compared with the second quarter of 2019 was primarily due to significantly higher provisions related to wholesale loans and, to a lesser extent, consumer loans, reflecting revisions to forecasts of expected deterioration in the broader economic environment," the firm said in its 2Q earnings statement. "In addition, the increase in provisions related to wholesale loans reflected the impact of individual impairments during the quarter. The firm’s allowance for credit losses was $4.39 billion as of June 30, 2020."
    • MS, meanwhile, upped provisions for credit losses on loans and lending commitments to $239 million for the second quarter of 2020, compared with $18 million for the second quarter of 2019 and $407 million for the first quarter of 2020 the firm said in its 2Q earnings statement. Its allowance for credit losses on loans and lending commitments was $1.2 billion as of June 30, 2020.
    • Along with seemingly smaller exposure to credit risk, shares of MS remain cheap. At 13 x forward earnings, MS is cheaper than larger, diversified banks that may be more encumbered with poorly performing consumer loans as they navigate a low interest rate environment.

    • And while rivals worry about having adequate capital in the event of a downturn, MS CEO James Gorman was bullish about the prospects of dividends and buybacks.
    • As a defensive play, then, MS may offer investors an avenue of relief in the event of a protracted recession. But the upside potential, too, may be capped if a vaccine is developed far ahead of schedule and business resumes.
    • Gainers: Digital Ally (NASDAQ:DGLY) +65%. Universal Security Instruments (NYSEMKT:UUU) +27%. AgEagle Aerial Systems (NYSEMKT:UAVS) +22%. Virgin Galactic SPCE +15%. Newater Technology (NASDAQ:NEWA) +11%.
    • Losers: American Airlines AAL -7%. Ballard Power Systems (NASDAQ:BLDP) -6%. Spirit Airlines (NYSE:SAVE) -6%. GEE Group (NYSEMKT:JOB) -6%. Greenland Technologies (NASDAQ:GTEC) -%5.

  6. ????

    • In a kind of paradox, the relatively low take-up of the Fed's emergency lending facilities enacted to calm markets in the wake of the COVID-19 pandemic provides evidence of their success, said New York Fed President John Williams in prepared speech for a financial videoconference.
    • "The existence of the facilities, even in a backstop role, has helped boost confidence to the point where borrowers are able to access credit from the private market at affordable rates," he said.
    • He stresses that the Fed's emergency facilities differ to reflect specifics of markets and sectors, but that all have the same goal — "keeping credit flowing to households, businesses small and large, and other key segments of the economy."
    • But, of course, during a healthcare crisis, monetary policy isn't enough.
    • "Sound healthcare policy and the ability of fiscal authorities to put cash directly in the hands of Americans are both essential for the economy to endure this devastating episode," he said.
    • As for the Fed: "Severe crises demand innovative and decisive responses, and the Federal Reserve is striving to deliver just that."
    • It all comes down to why the Fed was created in 1913, he said: "to keep credit flowing when fear and uncertainty take hold, and in that way to foster a strong economy with maximum employment and stable prices."
    • In late March and early April, the Fed added trillions of dollars to financial markets by boosting its purchase of Treasury securities and agency MBS and creating several emergency lending programs, such as a Main Street Lending Facility, Primary and Secondary Corporate Credit Facilities, Term Asset-Backed Securities Loan Facility, and Municipal Liquidity Facility.

  7. Wow – they feds guys are very pleased with themselves. "I'm so wonderful"!

  8. @ Pharmboy  — ARNA

    How are you planning on closing out the butterfly?  Do you have a target in mind?  I started with the same one you had but rolled down to the 60 calls on the dip.  Thanks for the insight on this one — learning something new with this butterfly.  I closed out some of them the other day for double just to be safe but I have a few left.  I am learning they are hard to close out as a 'butterfly' even though TOS gives you that option (which I like) mainly because the 75 calls are worthless and hard to 'close'.

  9. The Fed/lol – how did that wonderful sense of purpose in 1913 work in 1929?

  10. Summer days it seems! People are taking some time off!

  11. I guess everyone went away in May and are staying away, by golly!

  12. That's smart, this market gives me the creeps!  

  13. This entire situation is giving me the creep!