Hi Everyone,
The stock market finished the holiday-shortened week with a choppy and mixed session on Thursday, as even though the Fed’s latest stimulus package boosted stocks in early trading, the Nasdaq’s weakness weighed on the broader market in the latter half of the session. The Dow was up 286, or 1.2%, to 23,719, the Nasdaq gained 63, or 0.8%, to 8,154, while the S&P 500 rose by 40, or 1.5%, to 2,790. Advancing issues outnumbered decliners by a more than 5-to-1 ratio on the NYSE, where volume was moderately heavy.
Traders said that while cyclicals and financials, in particular, remained very strong on Thursday, stocks showed intraday weakness for the second time in three days. As one trader explained, “This week’s afternoon selloffs are not a sign of strength, and the fact that tech stocks remained relatively weak on Thursday, might also be a sign of exhaustion among bulls.”
Stocks had a decisively bullish holiday-shortened week, even considering the late-week weakness in the tech sector, as the improving global COVID-outlook, together with the next round of stimulus, gave a boost to cyclical issues and small-caps. While the virus spread rapidly in the U.S. and on the East Coast, in particular, the odds of a relatively short lockdown period helped risk assets globally, even though we could have only been witnessing one of the strongest bear market rallies in history. Investors started to focus more on the economic fallout of the pandemic this week, and the most-affected sectors remained under selling pressure amid the increasing fears of long-term travel restrictions and changing consumer habits.
Monday’s session saw one of the strongest short squeezes in the history of Wall Street, but while the most-shorted issues performed well this week, the total number of bearish bets remains high. After holding up very well amid the March-massacre, National Beverage (FIZZ) gained almost 30% this week, and the stock’s massive short interest of 59% could mean that a short squeeze is underway. PetMed (PETS) hit yet another 18-month high this week, and with the stock’s short interest still being 49%, the increased demand could propel PETS even higher in the coming weeks. Brown-Forman (BFG-B) has also been among the week’s winners, gaining more than 10%, and the stock’s high days-to-cover (DTC) ratio of 10 could signal that shorts will propel the stock back to its all-time high.
We might have a relatively calm day on Monday, barring a major shift in the COVID crisis as most of the European exchanges will be closed, and there will be no key economic releases coming out. The retail sales report will be out on Wednesday, together with the Empire State Manufacturing Index, building permits, housing starts, and the Philly Fed Index will be out on Thursday, while the week will end with the crucial G20 meetings. The evolution of the pandemic will remain at the center of attention. Hopefully, the U.S. will join Europe and Asia in the recovery, and we will get closer to the end of the damaging lockdown as well.
As always, have a great evening, stay calm, stay home, stay healthy, do your part to flatten the curve and stay tuned!!!
Joe
Marketing Research Commentary