New Covid-19 Cases in U.S. Hit Lowest Level in More Than Two Months The number of new coronavirus infections in the U.S. fell to 34,567 on Sunday, reaching its lowest level in more than two months and notching a ninth straight day with fewer than 50,000 new cases.
The coronavirus outbreak in the U.S. continues to slow, driven by significant progress in the South and Southwest, where cases skyrocketed earlier this summer, Axios’ Sam Baker and Andrew Witherspoon report.
John Authers: “it looks as though we can expect a very tight election if the current fast-improving trend in cases should continue for another two months”:
THE AMERICAN CONSUMER
Although the high share of workers on temporary layoffs suggests scope for additional large job gains later this year, the extended unemployment duration for most temporarily laid off workers—60% of who have been unemployed since April—raises questions about how many temporary layoffs are really temporary.
Transitions from temporary to permanent layoff ticked up in July, and the share of laid off workers that expect to return to the same job fell to 42% (vs. 60% in June and 68% in May). (…) our analysis suggests almost a quarter of temporary layoffs will become permanent, implying scope for roughly 2mn (or 1.25% of the labor force) of these individuals to remain unemployed well into next year.
Also from Goldman Sachs:
Activity Remains Paused Across the US, and Relatively Depressed in Denser Counties
- Covid-19 Is Dividing the American Worker The rapid adoption of remote work and automation could accelerate inequalities already in place for decades. Economists say the resulting ‘K’ shaped recovery will be good for professionals—and bad for everyone else.
Goldman calculates that
The lapse of the $600 weekly federal payment will result in a $70bn sequential decline in personal income ($825bn or 4% of GDP at an annual rate) in August. We estimate this sequential drag on consumer spending power at as much as 6.5% of PCE in the month. At best, the new $300 payment would cover half of this decline if implemented in full this month. But given delays in implementing the program and disbursing funds, the new program is unlikely to meaningfully support incomes until September.
High frequency data suggest that unemployed individuals have already begun to pare back some of their spending after the $600 federal benefit expired at the end of July.
Pandemic triggers wave of billion-dollar US bankruptcies Record 45 large companies file for Chapter 11 despite trillions in government aid
Home Sales Reach Lofty Heights Sales of previously owned homes in the U.S. surged in July as low interest rates and a desire for more space amid the pandemic boosted home-buyer demand.
(…) The July sales numbers were among the strongest the housing market has ever seen. Sales of previously owned homes jumped 24.7% from a month earlier to a seasonally adjusted annual rate of 5.86 million, according to the National Association of Realtors on Friday. That was the strongest monthly gain ever recorded, going back to 1968. It was also the highest sales pace since December 2006. (…)
First-time buyers accounted for 34% of sales in July, NAR said, a category that includes many millennial buyers.
This group, who range from their mid-20s to their late 30s, are a growing presence in the housing market. Older millennials who delayed getting married and having children are now reaching those life milestones, which increases homeownership demand. Younger millennials, who are now entering their 30s, are starting to buy homes more actively at an age when previous generations also began homeownership. (…)
The median existing-home price rose 8.5% from a year earlier to $304,100, a record high nominally and adjusted for inflation, NAR said. (…)
About 40% of home buyers polled by Realtor.com in June said they are looking to buy a home sooner because of Covid-19, while only 15% said the pandemic slowed down their timeline. (…)
Demand is so robust that 68% of the houses that sold in July were on the market for less than a month, NAR said. Brokerage Redfin Corp. said more than half of its offers in July faced at least one competing bid.
In many cities, agents say inventory can barely keep pace with demand. There were 1.5 million homes for sale at the end of July, down 21.1% from July 2019, according to NAR. (…)
As these charts and table from Haver Analytics show, the recent strength is everywhere but in the Northeast. The South continues to be a strong magnet.
The growing problem is prices, particularly in the West where the median price rose 11.3% YoY to a level that is now 50% above the national average.
The median price of an existing home increased 3.3% (8.5% y/y) to a record $304,100 after a 3.8% June rise. The median home price in the Northeast eased 5.0% (+4.0% y/y) to $317,800. In the Midwest, prices rose 4.0% (8.0% y/y) to $244,500. The median home price in the South strengthened 4.6% (9.9% y/y) to $268,500 while prices in the West improved 5.2% (11.3% y/y) to $453,800.
Retail Sales in Canada Return to Pre-Covid Levels, Then Stall Retail sales in Canada exceeded pre-covid levels of spending in June as more shops reopened, however preliminary estimates from July suggest the momentum may have been short-lived.
August Sales Managers Index Shows Chinese Business Confidence at 62 Month High
The China all-sector PMI is at 50.4 in August, from 49.8 in July and 49.1 in June.
(…) August is the fourth successive month of Index figures over 50, with each month higher than the previous one. The August Index reading is now well over the 50 “zero growth” level, reflecting the fact that an increasing number of panelists are seeing modest growth emerging from the wreckage of the months most affected by the closedown. However indications of significant real growth (as opposed to relative growth compared with the previous months) are still relatively few, suggesting that renewed growth is not evident in all sectors of economic activity.
(…) the Staffing Levels Index is now at a 5 month high, with Manufacturing employment levels starting to approach the levels seen a year ago. However employment in the Services sectors still lags some way behind levels seen prior to the Covid-19 close down.
TECHNICALS WATCH
Lowry’s Research argues that the recent weakening of several Adv-Dec lines are symptomatic of “a pause” and “is not problematic as long as they do not persist” without saying how long they need to persist before they become problematic. Lowry’s acknowledges that several of its indicators are showing overbought conditions or divergences, “leaving the market vulnerable to increases in Supply”.
Its measures of Buying Power and Selling Pressure remain favorable (i.e. Demand > Supply). Demand has been declining since mid-June but that was more than offset by also declining Supply. “As long as the downtrend in Selling Pressure continues, investors can be confident in the resumption of the intermediate-term uptrend, once the current overbought and divergent conditions are resolved.”
Lowry’s is rather insistent that a resumption of Demand is needed “to fend off future attacks by the bears”.
But as we have seen lately, short-sellers have been forced to the sidelines by the Teslas and the Kodaks of this world.
- Bets against US stocks drop to 15-year low as market rallies Short-sellers left nursing heavy losses from jump in tech share prices
The impact of short covering is particularly pronounced this time, Bloomberg reports. A Goldman Sachs basket of the most-hated stocks has almost doubled since the market’s bottom in March, a gain that’s nearly twice as big as the S&P 500’s.
And many cautious observers have turned silent in front of this relentless bull fed by an apparently unrestrained Fed. But the “don’t fight the Fed” and “don’t fight the tape” mantras are no longer used by potential buyers to buy more shares, rather by equity holders as unwilling to buy overvalued stocks as they are unwilling to sell into a roaring bull few people really understand.
Much like the deer staring at the coming headlights, investors sense something is amiss but are scared of moving, preferring to wait and see what happens next…
While potential sellers think about it, potential buyers must be pondering why they should buy more equities at this time:
- there is no announced medical breakthrough yet;
- the economy is swooshing, not veeing;
- Congress, Senate and the White House are fully in election mode;
- these U.S. elections look pretty messy from many angles;
- equities are trading like if nothing happened in the last 6 months;
- nobody really knows what’s going to happen over the next 6 months.
In truth, staring at the headlights, we are all hoping for a medical solution while Americans are trying to find their way, first safely to the polls, then safely through the next Administration.
Meanwhile, Lowry’s warns us that its Power Ratings on the big Tech leaders are failing.
Some of the divergences Lowry’s is talking about (vertical line is June 8, the peak in RSP):
SPY VS EQUAL-WEIGHT SPY
NDX VS EQUAL-WEIGHT NDX
EARNINGS WATCH
We now have 475 reports in, an 82% beat rate and a +22.1% surprise factor with only Real Estate and Energy not surprise positive.
Q2 earnings are better than the -43% expected drop but they are still down 30.5% YoY on revenues down 8.9% (-11.8% expected).
Corporate officers remain relatively shy with guidance. Of the 57 offered so far during Q3 (vs 90 at the same time last year), 31 were positive, up from 18 at the same time during Q2 and 22 were negative (vs 31).
With these cues, analysts are generally revising up…
…but with rather little enthusiasm and much restraint. Q3 estimates are -22.5% vs -25.0% on July 1. Q4 estimates: -13.6% vs -13.2%.
Trailing EPS are now $144.94. Full year 2020e: $129.70. 2021e: $166.02 vs $162.93 in 2019.
FYI:
Apple’s Great at $2 Trillion. Its Stock May Not Be Excellent companies can make abominable investments if the price is too high.
(…) The biggest five stocks have a forward price-earnings ratio in nosebleed territory, but the remainder of the S&P is on a multiple of just over 20. The S&P 500 as a whole has only ever sold for a forward P/E above 20 for the two years leading up to, and then the two years immediately after the internet bubble of 2000, according to data compiled by Bloomberg.
Facebook CEO Mark Zuckerberg Stoked Washington’s Fears About TikTok Social-media tycoon emphasized threat from Chinese internet companies as he worked to fend off U.S. regulation of Facebook
When Facebook Inc. Chief Executive Mark Zuckerberg delivered a speech about freedom of expression in Washington, D.C., last fall, there was also another agenda: to raise the alarm about the threat from Chinese tech companies and, more specifically, the popular video-sharing app TikTok.
Tucked into the speech was a line pointing to Facebook’s rising rival: Mr. Zuckerberg told Georgetown students that TikTok doesn’t share Facebook’s commitment to freedom of expression, and represents a risk to American values and technological supremacy.
That was a message Mr. Zuckerberg hammered behind the scenes in meetings with officials and lawmakers during the October trip and a separate visit to Washington weeks earlier, according to people familiar with the matter.
In a private dinner at the White House in late October, Mr. Zuckerberg made the case to President Trump that the rise of Chinese internet companies threatens American business, and should be a bigger concern than reining in Facebook, some of the people said.
Mr. Zuckerberg discussed TikTok specifically in meetings with several senators, according to people familiar with the meetings. In late October, Sen. Tom Cotton (R., Ark.)—who met with Mr. Zuckerberg in September—and Sen. Chuck Schumer (D., N.Y.) wrote a letter to intelligence officials demanding an inquiry into TikTok. The government began a national-security review of the company soon after, and by the spring, Mr. Trump began threatening to ban the app entirely. This month he signed an executive order demanding that TikTok’s Chinese owner, ByteDance Ltd., divest itself of its U.S. operations.
Few tech companies have as much to gain as Facebook from TikTok’s travails, and the social-media giant has taken an active role in raising concerns about the popular app and its Chinese owners. (…)
In an employee meeting this month, Mr. Zuckerberg called the executive order against TikTok unwelcome, because the global harm of such a move could outweigh any short-term gain to Facebook. The remarks were earlier reported by BuzzFeed News. (…)
Facebook’s Instagram unit this month launched its own video-sharing feature, called Reels, and is trying to poach TikTok creators by paying some users if they post videos exclusively to the new service. (…)
Mr. Zuckerberg saw TikTok’s success coming. When its predecessor app in the U.S., Musical.ly, started to become popular among American teens in 2017, Facebook considered acquiring it, The Wall Street Journal has reported. Instead, Bytedance bought Musical.ly, and later rebranded it as TikTok. (…)
Mr. Zuckerberg’s team also reached out to members of Congress who are tough on China, according to people familiar with the meetings. He asked them why TikTok should be allowed to operate in the U.S., when many American companies, including his own, can’t operate in China. (…)
Global dividends suffer worst quarterly fall since 2009 Janus Henderson’s index shows cut in payouts in every region except North America
Pfizer (