The Week That Was on Wall St. – May 18th – 22nd

I join with our American traders and friends this Memorial Day weekend in honoring those who sacrificed their lives for all of the freedoms we enjoy today. Regardless of where you call home, whether it is in the United States or elsewhere, I hope you are well, safe, and of course keeping it green going into this weekend.

This was an important week for the markets, as many companies in the retail sector (such as Walmart (ticker: WMT), Home Depot (ticker: HD), Target (ticker: TGT) and Lowe’s (ticker: LOW)) reported their Q1 earnings. 70% of the U.S. Gross National Product is based on consumer spending, and this week’s earnings were expected to provide us with a glimpse on whether or not consumer confidence is coming back.

For the most part, earnings were positive, and the market continues to show signs of recovery. If you take the financial and consumer discretionary sectors out of the picture, year over year earnings have been FLAT, which is amazing considering we are in the middle of a pandemic.

The theme of the week was “do whatever it takes”. In an interview aired on 60 Minutes last Sunday, Fed Chairman Jerome Powell declared:

“But I will say that we’re not out of ammunition by a long shot. No, there’s really no limit to what we can do with these lending programs that we have. So, there’s a lot more we can do to support the economy, and we’re committed to doing everything we can as long as we need to.”

The Fed’s balance sheet is now at a whopping $7 trillion (see the figure that follows this paragraph). In the last two months we have seen more expansion in the money supply than in the five years following the great recession. On the bright side, the economic “depression” appears to be off the table and a somewhat quick economic recovery is expected.

Air travel has jumped to a two-month high, indicating that it might be starting to be heading in a better direction. Data from the Transportation Security Administration (TSA) showed that “total traveler throughput” on May 21, 2020 was at 318,449. That figure refers to the number of people screened at U.S. airports and that was more than 3x the number from the month prior (92,859 on April 21, 2020).

Monday was an amazing day! The S&P reached its highest level in more than two months and closed up 3.15%, its best daily performance since April 6th. It was all because Moderna’s (ticker: MRNA) potential vaccine showed promise on both safety and efficacy.

Is Wall Street overreacting to this small sample size trial? Maybe, but Wall Street would much rather be “sorry than safe”.

The stream war continued on Tuesday. This time not between Netflix (ticker: NFLX) and Disney (ticker: DIS), but between Spotify (ticker: SPOT) and Apple (ticker: AAPL). Spotify signed yet another exclusive deal, this time with Joe Rogan, to confirm they are market leaders when it comes to audible entertainment. Following the news, Spotify went up over 10%.

Almost all sectors finished green for the week, with Real Estate, Industrials and Energy among the big gainers.

Lastly, I would like to end this market roundup with a quote from F. Scott Fitzgerald’s The Great Gatsby, “Never confuse a single defeat with a final defeat.” If you had a bad week with a few bad trades, stay positive, and start over next week.

See you in chat on Tuesday morning!

To your success,
Andrew