With coronavirus cases continuing to spike in the South and West, and some states re-imposing business restrictions, it’s fair to say the pandemic data this past week has been bad.
And markets reacted, but not by much. The Dow closed down -2.8% on Friday.
Stay tuned later this week when we take a deep dive into why this is, but the short version is that two factors are keeping markets up.
First, of course, is the stimulus. The Fed continues to buy bonds, pump money into banks, and lend money to cash-strapped businesses. Markets haven’t closed down multiple days in a row for weeks because there’s just so much money floating around, and as always it ends up where it’s treated best – the stock market.
As we discussed last week, there’s simply nowhere else for this money to go.
Second, while the coronavirus data coming out of Texas, Arizona, Florida, California, and elsewhere is bad, there’s still a silver lining for optimists to cling to. On the negative side of the scale, more people are testing positive, in some states more than ever before, and the percent of test results coming back positive is also increasing. Where we have the data, hospitalization rates are also up.
That all points pretty clearly to a growing outbreak – as I’ve written before, it’s not just more testing that causing the spike – more people are getting infected by the virus in many areas.
But on the positive side, the number of people dying of Covid-19 in America has continued to trend down. It’s something Big Media isn’t really covering, but it’s a sign that things aren’t as bad as they could be, perhaps because these new cases tend to be in younger people.
Optimistic traders and investors seem to be hanging their hat on that, and trading away.
In fact, the market dip we saw on Friday may have had just as much to do with the growing boycott of Facebook Inc. (FB) and other social media networks.
Companies like Verizon Communications Inc. (VZ), Unilever NV (UN), Coca-Cola Co. (KO), and others have frozen ad spending on Facebook and sometimes other social media networks, demanding more limits on hate speech and so on.
That sent Facebook’s shares down 8.32%, while Google-owner Alphabet Inc. (GOOGL) lost 5.45%. With both such a huge factor in this month’s market rally, these losses pulled the markets as a whole down.
Stay tuned for what to do with your social media stocks later in the week.
But first, there are five earnings reports of note this week. Micron Technology Inc. (MU) reports after markets close today. More importantly, the silicon chip manufacturer will also release its outlook for the second half of the year, which will be a key bellwether for them and the chip industry. Expect the company to announce stronger than expected demand for the rest of 2020.
Food giant General Mills Inc. (GIS) reports on Wednesday, and given its strong performance during the lockdowns, this will most likely be a case of selling the news.
Today and tomorrow, Herman Miller Inc. (MLHR) and Steelcase Inc. (SCS) will provide their outlook for how badly the shift to working from home has affected these higher-end office furniture suppliers.
Finally, FedEx Corp. (FDX) also reports tomorrow. The delivery firm used to be a bellwether for how the economy is doing, but since they’ve broken most ties with Amazon.com Inc. (AMZN) and the document shipping business evaporated with the lockdowns, don’t expect any fireworks here.
Great trading, stay safe out there and God bless you,