Market Briefing For Wednesday, July 28

Tolls being taken out of the market for those overstaying not just Chinese stocks, but the S&P and NDX behemoths as well. Solid earnings are 'in the mix' (discounted) of course, and it's the guidance that matters (SPX, SPY, NDX, QQQ).

I viewed what was an honest reflection by Texas Instruments (TXN) of unknown recovery prospects as a good hint of what would follow from many others, but few have been that candid. Nevertheless many have sell-the-news events.

Executive summary:

  • Most stocks reporting made their numbers and experienced profit-taking, it's generally what I had in-mind by noting good results were factored-in.
  • Several gave decent 'estimated' forward guidance, while it's clear many of the factors that impact demand, even politics, and surely supply-chains in the months just ahead, are really not well understood as they can't be.
  • Hence it's become a world of results based on 'what if' scenarios for most global players, while some domestic stocks that aren't dependent on chip supplies may be relatively immune to some concerns.
  • Then you get into the realm of travel, airlines, restaurants and ponder the psychological impact of 'indoor masking' to ponder if this hobbles things.
  • A number of solid earnings reports, although not all stunners, which I'll just summarize a bit later (although we usually don't cover earnings).
  • CDC mandating mask-wearing indoors for everyone basically, won't be a well-received 'order', even if it simplifies the distinctions for authorities.
  • Part of me thinks that's what this is about, not so much the asymptomatic fully-vaccinated people carrying COVID, as much as getting on one page, where nobody has to query who is or isn't vaccinated or recovered etc..
  • Tensions with China rise, while they crack down on their own tech stocks and some think it's ominous, I think that depends on whether they stop.
  • Such 'retro' moves in China are understandable 'to a degree', as would be some moves in this Country, which we already had on 'pay-off' tutoring for college admissions (some celebs went to jail briefly over that scandal).
  • At the same time if China goes too far they risk their entire 'belt & road' initiative progress (in their eyes) made with other nations.
  • Draconian approaches to diplomacy (not wanting to talk about things, just command as in the case of claiming the South China Sea area, moaning about maps that were shown at the Olympics), threatening Taiwan .. isn't going unnoticed around the world.
  • Delta (DAL) reaches-out to irritated or reluctant business travels with apologies, new hires (5000 people and alumni returning), and neat status extension, details follow.
  • Most significant earnings report (for us) was AMD, beat numbers, and guided higher, with shares narrow and about a dollar higher tonight (AMD).
  • Among stocks not working well, Sorrento (SRNE) has bears beating every rally but that won't last forever, if Mexico sales news doesn't do change this up, keep in mind the June 22nd PR about Brazil testing, I'd estimate by the middle of August we might see a top-line data readout, UK maybe.
  • S&P futures up this evening as Oil 'draw downs' will help the morning, further-out it's set-up for more chop or just drop eventually.
  • 2-day FOMC meeting ends Wednesday, nobody expects Fed action, but it depends how much they 'talk about talking about taking tapering'...

In-sum: 

The market stopped going up long ago, the S&P much more recently. Worries about the Delta Variant more so than China, dominates the concern.

Speaking of the 'other Delta', CEO Ed Bastian just offset recent slow service responses, by extending all Delta Medallion status until end-January 2023. Good for me and perhaps many of you who fly Delta, which I really hope to do in 2022, with slim chances of being enticed to fly any time this year.

Despite a surge in everyone flying, perhaps Delta's clever marketing decision (benefits customers, but also because of Delta's relationship with American Express (AXP), as it was AMEX that funded lots of the capital they needed early in the pandemic)...the decision reflects awareness that many are not traveling as of yet, especially business travel. It's what Delta wants to entice in 2022.

For now the S&P probably gets hit a bit in the morning. CDC isn't helping, this is so political it's sort of uncomfortable, and it was since before either party as you'll recall would even acknowledge 'WuFlu' was out there (pre COVID name). The daily prisms fluctuate, the new day may be down-up-dip or even up, and I expect more rocky periods for the biggest cap momentum stocks ahead.

Disclosure: This is an excerpt from Gene Inger's Daily Briefing, which is distributed nightly and typically includes one or two videos as well as charts and analyses. You can subscribe ...

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William K. 1 year ago Member's comment

Interesting. Now consider that wearing masks has been done in some Chinese areas for many years. I recall the photos of commuters wearing masks in Hong Kong from back when I was in high school. And masks are much less an impingement on freedoms than closures are. IF masks had been mandated at day #1 possibly the plague would not have done nearly as much damage a it has done. Obvious in hindsight, not so obvious at the time. Of course the whole mask "thing" was new to much of the world at the start, and not many were available. But probably masking from day one would have changed a lot.