The Old “Bad News Is Good News” Trade Rears Its Head
Equities start the day slightly higher as the old “bad news is good news” trade rears its head! We got the vaunted “employment cost index” report at 730am CT and it showed a very small gain in wages. Small gain in wages…you know what that means right? Speculation the Fed will push back its interest rate hikes! Yay! In the absence of Greece or China we’ve run back to the warm comfort of Fed watching. You know what’s been quiet lately? Macro headlines, which is great. Frankly I’d rather talk about company specific stuff than speculate over Chinese brokerage accounts and whether the Greek Finance minister is playing some kind of chess game against his German allies. Gimme good old fashioned CEO speak over currency interventions any day. So here we sit, 2,108, smack dab in the middle of the range because we have NOWHERE ELSE TO GO (best Richard Gere line of all time). The rally has run out of steam and we’re coasting on fumes. Josh looked at this very issue and came up with one conclusion: anything can happen. “Flat markets do not necessarily suggest any particular outcome when the S&P 500 finally breaks out of its slumber. It’s been down three times, flat once, and markedly higher in the other eight instances.” So there you go, don’t fret about it. Personally I welcome a flat tape, I truly think it gives PM’s an excellent chance to outperform. If you are in things like DIS, SBUX, UA, EXPE, NFLX then you love a market that goes nowhere. Throw up a bunch of Alpha and all of a sudden the world is smiling at you. Speaking of smiling its Friday, let’s do a quick recap and enjoy the weekend!
After the open all anyone could think about was the Hamptons. Well, at least that’s what it looked like judging by price action. A whole load of sideways between 2108 and 2113 my friends. Hey, remember how I was worried about transports? (along with just about every other person on the planet) Let’s see how they are doing shall we? According to my fancy downward line and circle chart it’s entirely possible we’ve turned the corner in these things. We’d have to see a bunch of follow thru (rapidly) but the fact that they made a higher high bodes well. The biggest loser today was OCN, which got hated on more than a Minnesota dentist (company has been struggling for a while now). In the larger caps LNKD and HBI both fell nearly 10% because I guess not enough people are looking for jobs in their underwear. Who knew. Winners were CCE, EXPE, RCL, COLM, and SHAK. Consumer stocks…so hot right now. By lunch I’m guessing most of the East Coast had left because the market sat on 2,107 and refused to budge. I mean it was SHARPLY unchanged.
The end of the day saw this headline: “Bullard says Fed in ‘good shape’ to raise rates in September” and that was enough for a small selloff. We closed at 2,103 which is, again, right down the middle of the 2015 fairway. Let’s face it, the market isn’t going anywhere until the fed does something so be prepared for endless horizontal index charts. Next week is the end of earnings and the beginning of August. Both of which I am sad about. Where did the summer go? Sing us out of here Jean Valjean “The summers dies one by one, how soon they fly on and on”
Final Score: Dow -29bps, S&P500 -20bps, Nasdaq -1bps, Rus2k +52bps
- Succinct Summation of the Day’s Events: Another Friday in Summer which means sideways markets.
- CFA Institute says Active Managers can help themselves out here! “Active managers: We have done it to ourselves! In short, we allowed static concepts, such as benchmarks, style boxes, style drift, and tracking error, to contravene our mandate to be active managers. I actually like each of these concepts (and worked for a pension consultant early in my career) and believe they are useful . . . in moderation. But there are remedies to this madness that can restore moderation. Here are some…”
- Ok bears, here you. Three Bearish charts for you to slobber over!
- I love this Onion article about how Apple can recover from the Watch flop. My two favorite ways? 1) Aim for a demographic with larger emotional voids that can be filled with technology products 2) Invest millions in R&D and organize hundreds of focus groups, then release one in red. Onion writers nail it again!
- Golfers….so graceful.
- Dear Parents sending their kids to college. Coding…its all about coding.. Companies cannot hire fast enough. Glassdoor, an employment site, lists more than 7,300 openings for software engineers, ahead of job openings for nurses, who are chronically in short supply. For the smaller category of data scientists, there are more than 1,200 job openings. The job placement rate for Galvanize students is 98 percent. “Graduation here is you get a job,” Mr. Deters said.
- Decent update on breadth here
- Walking….its good for the brain. A small but growing collection of studies suggests that spending time in green spaces—gardens, parks, forests—can rejuvenate the mental resources that man-made environments deplete. Psychologists have learned that attention is a limited resource that continually drains throughout the day. A crowded intersection—rife with pedestrians, cars, and billboards—bats our attention around. In contrast, walking past a pond in a park allows our mind to drift casually from one sensory experience to another, from wrinkling water to rustling reeds.
I have two solid links to end on tonight.
Have a good night!