Commenting on yesterday’s trading focusing on the manufacturing sector, Gorilla Trades strategist Ken Berman said:
Although stocks gave back almost all of their gains towards the end of the session, investors shrugged off another dismal indicator from the manufacturing sector. Bulls haven’t shown any sign of exhaustion, despite the lofty gains of the past weeks and the mixed economic trends, and even in today’s illiquid market, they managed to push the major indices to new record highs.
The major indices all finished slightly higher after hitting new all-time highs in early trading, with the Nasdaq extending it’s winning to seven days. The Dow was up 96, or 0.3%, to 28,552, the Nasdaq gained 16, or 0.2%, to 8,941, while the S&P 500 rose by 3, or 0.1%, to 3,224. Advancing issues outnumbered decliners by a less than 6-to-5 ratio on the NYSE, where volume was well below average.
Qualivian Investment Partners Up 30% YTD; Long ORLY Thesis
Qualivian Investment Partners commentary for the second quarter ended July 30, 2020. Q2 2020 hedge fund letters, conferences and more “Short-term investors will accept a 20% gain because they didn’t spend the time to develop the conviction and foresight to see the next 500%.” - Ian Cassell Executive Summary Readers of investment letters fall into Read More
Even though the first hours of trading were relatively active on Wall Street, the second half of the session was very quiet. Stocks consolidated near their all-time highs, volatility was muted, and most of the key sectors remained stable. The utilities sector was the most obvious outlier, as the upbeat investor sentiment and the uptick in Treasury yields hurt the safe-haven sector. Industrials, consumer goods, and tech stocks fared slightly better than the large-cap indices, while small-caps and financials trod water in choppy trading.
The manufacturing sector and Boeing CEO
Saying that Boeing (BA) had a rough year is quite the understatement, and even though the stock rallied thanks to the departure of CEO Dennis Muilenburg, it remains well below its all-time high from February. Due to the stock’s stellar rise between 2016 and the beginning of this year, the stock’s volatility had a large effect on the major indices, and the Dow, in particular. While today’s change could have a positive long-term effect on the company’s valuation, the 737 Max scandal will likely continue to haunt Boeing, and the stock could remain volatile in 2020.
The end of last year was a memorable and highly volatile period for stocks, as the deep correction accelerated in the illiquid period, with the funding troubles of some of the mega-cap banks causing further troubles. This year, the Fed has been actively preparing for the year-end ‘cash crunch’ especially in light of this fall’s funding issues that already triggered intervention by the Central Bank. The Fed offered up $500 billion in liquidity well in advance to mitigate the year-end effect, and since credit markets have been quiet recently, the bank’s strategy is likely working and another liquidity crisis can be avoided.
As only the Richmond Manufacturing Index will be out tomorrow, traders could be in for a very quiet shortened session. While today’s durable goods report and last week’s Philly Fed Index both painted a gloomy picture of the manufacturing sector, analysts still forecast a small increase in tomorrow’s measure following last month’s negative reading. With several European exchanges already closed for Christmas, and with no major economic releases coming out in Asia or Europe, the recently active pre-market session might already be slow across asset classes. Stay tuned!