Good Night Everyone 💤
Solid down day in the markets today with all major indexes going lower on the back of more sour economic news in the US, geopolitical implications due to Afghanistan’s fall and the continued regulatory crackdown by the Chinese Government. On the economic front, U.S Retail sales for July came lower month over month which is now the 2nd signal as a slowdown in consumption in the U.S after the Michigan consumer survey came in weaker just a few weeks ago. In addition, it seems like the supply chain constraints caused by the reopening finally had an effect on the housing market where the Builders confidence hit a sudden 13-month low. The National Homebuilding Association confirmed material/construction prices are so high that builders are struggling to carry on their work cost-effectively causing many clients to either delay or cancel. To top it off, covid cases continue rising across the nation with various states already preparing (and some facing) full capacity in hospitalizations in the near future.
Cryptocurrency markets are taking a breather Tuesday as volume seems to be fading for now. Cryptos are usually more active towards end of week given the financial markets are closed over the weekend. In today’s headlines, the hacker who stole $600 million from crypto platform Poly will now be a C-suite exec in the company as the Chief Security Advisor (what!).
Headlines
☔️ A (Perfect) Storm? After last week’s Michigan survey came in colder then expected, many in the U.S feared that today’s retail sales report would follow, and it did exactly that. It seems like people are finally choosing on their own to stop consuming at the same rate (Retail sales slowdown month over month). Even though we are still too early to know the real impact of the delta variant (according to Fed Chair Jerome Powell), the situation paired with any further gathering and/or mobility restrictions on the consumer could send consumption levels into a dramatic drop. if so, market sentiment will then be most probably impacted negatively.
Tale of the Tape
As of 08/17/21 close.
U.S Markets
📈 Markets, Rates and Volatility (VIX) Down day in the markets today with all indexes spiraling to almost -2% when they started to recover midday and were able to recoup some of the losses. Particularly, the consumer discretionary sector took a beating with investors wary that the slowdown in consumption might just be starting. It would definitely be concerning for markets if the consumer is further locked down due to the spread of the delta variant because of just how recent we had the negative consumer reports. As mentioned, August and September are known for being slow months as most professionals in the industry take vacations the latter weeks of august and a below-average performing September for the overall markets. Rates failed to pick up some steam after its decline from the 1.3’s and is still unchanged at 1.27%. Volatility (VIX) finally had its day by almost touching the 20 price level. Thankfully, the market retraced some of the losses and volatility eased down to 17.91, still quite high and trending upwards.
Here’s a look on every sector in the S&P500 from SPDR.
⚠️ The Wall of Worry In this fast paced market, it is key to note the themes that seem to be impacting stock market performance so that we keep track of its progress and can inform ourselves to tactically adjust. In my opinion, these are the most important issues that are keeping volatility and market rotations in place.
Updates as of 08/17/21:
Inflation Sentiment: No relevant updates.
Delta Variant Strain: Covid cases still on the rise across the U.S and causing disturbances in the markets galobally.
Job Market Recovery: No relevant updates. Still 10 million jobs open.
Fed Tapering: Fed Chair Jerome Powell spoke today but did not give any updates, not even a hint. We will hear all about it on August 27th where policymakers will meet at Jackson Hole.
Peak Growth & Asset Prices: Disappointing retail sales fueling the theory of peak growth and possibly a further slowdown in consumption if covid dynamics get out of hand.
Check the Full U.S Economic Calendar (Here).
Earnings Today
🛍 Walmart Q2 Earnings came in better than expected with in-store sales more than offsetting the slowdown in online sales. The dynamic comes as people are finally coming back to their normal habits of grocery shopping and a back-to-school that is just around the corner. Further details from (BBG).
🏬 Home Depot The home improvement retailer reported a beat on both top and bottom lines for its Q2. Particularly, the company achieved a milestone of over $40 billion in quarterly sales for the first time in its history. On the flip side, less people are going to Home Depot than previous quarters which is a negative sign of slowdown for the housing market. See full report (Here).
Check the Full U.S Earnings Calendar (Here).
Corporate News
👨🏻💻 Palantir bets on… Gold? When you thought the big data company could not get any more boomer-esque, they definitely topped the list with this one. Palantir disclosed on its August report that it bought $50 Million worth of 100 ounce gold bars. The company’s cash position has grown substantially and they are using it to hedge the uncertainty around covid and a possible “black swan event”.
📉 Big Short vs ARK Famously known for his bet against the housing market prior to the collapse, Michael Burry’s fund disclosed in its 13F that it holds Put options on Cathie Wood’s Ark Innovation fund (ARKK). Burry who already shorts tesla, was grilled on Twitter by the legendary fund manager. More details from (Seeking Alpha).
Meme Headlines
Disclaimer: I am not a financial advisor. This is not a recommendation to buy or sell any security. When investing, always do your own research and asses your own risk.