That was a great performance for America’s tech giants.
Google parent Alphabet GOOG,
It beat earnings and revenue expectations, though the search giant’s annual revenue fell.
What the four benefit from is that their products and services can be used from home, and increasingly in the absence of real-world shopping and entertainment competition.
It is also an economy without “mouths or noses,” according to Dhaval Joshi, chief European investment strategist at BCA Research. That is, the physical distance and the increasingly mandatory requirements to wear masks restrict any activity that requires the use of the mouth and nose near other people.
In the United States, hospitality, retail, and transportation account for 12% of economic activity, he notes. Suppose physical distancing and the use of face masks compel you to operate at a two-thirds capacity, then the economy will lose a tolerable 4% of activity. However, these labor-intensive sectors employ 25% of all workers, so at a two-thirds capacity, more than 8% of all jobs are eliminated, or 10% in a less favorable scenario.
As governments tire of providing lifelines to employers, permanent unemployment will continue to rise, which should continue to depress yields on 30-year bonds, Joshi says. Given the close relationship between bond yields and bank stock prices, bank stocks should fall.
The winners, he notes, are not European, which is why America’s earnings have held up better. Amazon, Apple, Microsoft MSFT,
and Netflix NFLX,
they only account for more than half of the Stoxx Europe 600 SXXP’s poor performance,
vs. the S&P 500 SPX,
this year.
Joshi dismisses the argument that Robinhood’s day traders are creating a speculative frenzy in defense of growth, saying that all recent price movements can be explained by both resilient gains and the collapse of bond yields.
While there is always the possibility of a sudden end to the pandemic, he does not expect that, as he believes that a credible vaccine will not be available until next year. “This will depress the ultra-long link TMUBMUSD30Y,
it performs even more, and continues to support an overweight for growth advocates, at least relative to other parts of the stock market, “he says.
The buzz
In addition to technology earnings, Thursday night also included well-received earnings from automaker Ford F,
and video game maker Electronic Arts EA,
whereas the Expedia EXPE travel service,
Disappointed after a worse than anticipated loss.
White House chief of staff Mark Meadows said the Trump administration would support a one-week extension of additional unemployment benefits of $ 600 per week, due Friday.
France, Italy and Spain reported double-digit decreases in gross domestic product in the second quarter. The US Economic Calendar features publications on personal income, the Employment Cost Index, the Chicago Purchasing Managers Index, and the University of Michigan Consumer Confidence Index.
The market
Nasdaq-100 NQ00 futures,
went up after the banner’s tech results, while the S&P 500 ES00,
futures were higher.
Gold GC00,
and SI00 silver,
Futures were recovering on Friday.
Pound GBPUSD,
It was trading above $ 1.31 and advanced more than 5% in the last month.
The graphic
The permanent portfolio, which is an equitable weighting of stocks, bonds, gold and cash, had its best performance in 40 years, says Michael Batnick, director of research at Ritholtz Wealth Management and author of the Irrelevant Investor blog. While this portfolio is underperforming for long periods, it is also more stable, suffering a monthly decline of just 5% in the most recent bear market and less than 15% in the 2008-09 global financial crisis. “With the bonuses that give you 1-2% and the cash that gives you 0, I wouldn’t expect much up from here. The good news is, if the story is a guide, you shouldn’t expect too much trouble, either, ”says Batnick.
Random readings
The season of the National Basketball Association resumed with an ugly but hard-fought Los Angeles Lakers victory over the Los Angeles Clippers.
Now that it’s a nap: sleeping microbes wake up after 100 million years buried under the seabed.
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