June 03, 2020
It was a melt-up today as global markets rallied, economies reopened and economic data came in better than expected. A steep drop in May Jobless Claims came in at 2.76 million, far below expectations of 9 million, while the May ISM Non-Mfg Index was 45.4 vs. estimates of 44. April Factory Orders disappointed down -13% vs. -12.5%, but the data is a month behind. European markets continued to rally with Germanyâ€™s DAX surging +3.88% and Franceâ€™s CAC jumping +3.36%. Earnings also added to positive investor sentiment with video-conferencing company Zoom (ZM), Spirit Airlines (SPR), At Home Group (HOME), Dave & Busterâ€™s Entertainment (PLAY) and Canada Goose Holdings (GOOS) all spiking after topping estimates. Every sector was higher and Industrials (XLI), Financials (XLF) and Energy (XLE) outperformed, all up more than +3%. The DJ Transportation Index led the melt-up with a gain of +3.35% and has now retraced 61.8% of its selloff from its February high. The small cap Russell 2000 also outperformed jumping +2.39%, but like the DJIA, it failed to close back above its 200-day moving average (MA). The DJIA was led by a +12.95% spike in shares of Boeing (BA), after reporting that some carriers were keeping their orders for the grounded 737, but finished points below its 200-day MA (26297). The Dow gained 572.24 points (+2.05%) and closed at 26269.89. The S&P 500 added 42.05 points (+1.36%) to 3122.87, while the NASDAQ picked up 74.54 points (+0.78%) finishing at 9682.91. The large cap NASDAQ 100 briefly traded above its record close of 9718.73 before settling at 9704.69.
Breadth was bullish with advancing issues beating declining issues better than 4:1 on the NYSE and better than 2:1 on the NASDAQ. Volume was heavy and advancing volume was 85% on the NYSE and 72% of the NASDAQ. VIX dropped 1.18 point (-4.40%) and finished at 25.66, its lowest mark since a 25.03 post on 2/24/20. Crude oil prices increased 0.10 (+0.27%) and the July contract closed at $36.90 a barrel. Gold dropped 34.30 (-1.98%) to $1699.70 an ounce.
The S&P 500 jumped for a fourth consecutive day as the major averages set their sights on the old highs. For a second day, there was a buy order imbalance at the close, this time for $2.3 billion. The bull may need to catch his breath soon and the stock market is overbought, but traders will be buying any dip until we hit new highs.
Earnings releases to watch for on Thursday include: Broadcom (AVGO), Ciena Corp (CIEN), Cooper Cos. Inc. (COO), DocuSign (DOCU), Gap Inc (GPS), JM Smucker Co (SJM), Michaels Cos. Inc (MIK), RH (RH), Slack Technologies (WORK), Toro Co (TTC) and Vail Resorts (MTN).
Thursdayâ€™s Market Moving Economic Calendar: New Jobless Claims and Q1 Productivity & Costs.
By David L. Blake, CMT