Week-In-Review: Split Tape Continues on Wall Street
The market rallied last week as the big money continued to plow into the Nasdaq and Nasdaq 100 type stocks. The other indices rallied but are still under-performing. In fact, the Nasdaq Composite and the Nasdaq 100 turned higher for the year as the other popular indices are still down. This reiterates the point of taking your time and picking the right stocks to make sure you are participating in the right areas of the market. In other news, the US economy lost a whopping -20.5 million jobs last month which “beat” estimates for a decline of 21.5 million. Separately, the unemployment rate jumped to 14.7% but also beat estimates for 16%. Remember, the news does not matter… all that matters is how the market reacts to the news. For now, the reaction remains “bullish.” So, we are once again in an environment where weakness should be bought, not sold.
Stocks were quiet on Monday as investors waited for another busy week of earnings. In other news, several states across the U.S. are letting nonessential businesses reopen and are easing stay-at-home orders in an effort to restart the economy. Buyers showed up on Monday and helped curb some of the selling. On Tuesday, the market opened higher but closed in the lower half of its range as more and more places around the globe announced plans to re-open and several high profile stocks reported earnings. Disney announced earnings after the close and said operating income plunged by -58%. The company said it now has 54.5 million Disney+ subscribers and Shanghai Disney plans to reopen on May 11. Separately, the White House is considering phasing out the coronavirus task force. On Wednesday, stocks were mixed as the Nasdaq led the way higher while the rest of the market fell. The world is slowly reopening which, for now, is a good sign.
Thursday & Friday Action:
Once again, stocks opened higher on Thursday but closed in the lower half of the range ahead of Friday’s jobs report. Several stocks gapped up on earnings which is an encouraging sign, such as PTON, FTNT, and TWLO were some of the stocks that gapped up on earnings. Before Friday’s open, the government said US nonfarm payrolls fell by -20.5 million in April and the unemployment rate rose to 14.7%, both post-World War II records. The market rallied because the actual number beat the Street’s estimate for a decline of 21.5 million jobs and the unemployment rate to surge to 16%.
Market Outlook: Flood The System With Liquidity
Global governments and global central banks stepped in with massive rate cuts and other “aid” packages to help “stimulate” both Main Street and Wall Street. So far, it is working as intended. As long as March’s lows hold, the market will likely move sideways to higher. On the other hand, if March’s lows are breached, then look out below. As always, keep your losses small and never argue with the tape.