Rather, equity markets seemed to be suffering from a combination of coronavirus fatigue, overvaluation fatigue, election fatigue, stimulus fatigue (is such a thing even possible?) and media censorship fatigue. What the market needs most right now is a nap, a good long one, to wring out the excessive volatility that has been built into it by outside forces.
The week's trading provided something along those lines, but it's probably not enough, as Monday will start yet another cycle of incessant noise that has little to do with fundamentals and even less to do with proper valuations, a concept that's been thrown out the window in the age of instant gratification, instant profits, instant allegations, instant bailouts, instant karma.
Instant karma's gonna get you
Gonna knock you right on the head
You better get yourself together
Pretty soon you're gonna be dead-- John Lennon, Instant Karma, Plastic Ono Band, 1970
What the financial media claimed was responsible for slumping markets was continued foot-dragging by congress on a second stimulus bill. Another week passed without congress capable of agreeing on a bill that would send more money to individuals and families and potentially shore up failing businesses, aid airlines, and maybe even cure cancer.
The mere fact that congress wastes everyone's time on their inability to blow another $1.8 or $2.2 trillion is indictment enough to send them all packing on November 3rd, or to not bother to vote at all, a practice that has been in vogue for decades in the US, with roughly a third of eligible voters to avoid the process altogether every four years, and even more so in off-year elections.
Meanwhile, the presidential candidates squared off in a final debate, with President Trump winning handily, if only for prodding Joe Biden into an outright admission that he would end the use of fossil fuels in America, meaning he would likely ban fracking, which pretty much cost him the state of Pennsylvania and any other constituency that relies on oil or gas for its economy.
Biden, who has called himself a "gaffe machine," really planted his foot into his mouth this time, so much so that moderator Kristen Welker blurted out, "why would you say that?" as almost an admonishment to the favored candidate of the left-leaning media cabal.
On top of that, Trump made reference to Biden's public statements to ban fracking, to which Biden responded that it wasn't true and challenged Trump to put it on his website.
Team Trump did, releasing a tweet that was featured on the campaign website shortly after the debate.
Here you go @JoeBiden! pic.twitter.com/UBqPJT85Pt
— Donald J. Trump (@realDonaldTrump) October 23, 2020
Admist all the chatter of the week, various companies released third quarter earnings results, most notably computer chip manufacturer, Intel (INTC), which was punished for reveaing the truth despite beating earnings and revenue projections.
Revenue fell 4% year-over-year for the quarter, GAAP profits per share slipped 25%, and gross profit margins were lower by 5.7%. CEO George Davis noted that PCs “in the consumer and education markets,” which are “more entry-level,” or lower margin, were leading sales for the quarter.
Not to let the tidbits of bad news stand alone, Intel raised guidance for upcoming quarters. It didn't matter at all to investors, who took the stock down nearly 11% on Friday, from its close Thursday of 53.90 to 48.20 per share.
What Intel's results say about the real economy is that the slowdown from the summer is obvious and not about to self-immolate. Businesses of all sizes have been slammed, the hardest hit, small to medium sized businesses which have traditionally been the backbone of job creation. While the number of initial claims fell again this week, the data is still staggering. Thursday's reading of 787,000 new unemployment claims was the best number in months, but still extraordinarily high.
Alarm bells were going off in fixed income markets as yield on the 10-year note skyrocketed, hitting 0.87% on Thursday before settling in at 0.85% on Friday. The jump, week-over-week, was nine basis points, or 11.8%. The 30 year bond rose 12 basis points, from 1.52% to 1.64%. Yields on the two long-dated instruments were the highest since June 5th.
For reference, the move from 5/29 to 6/5 dwarfed this past week's. Back then, yields on the 10-year and 30-year spiked by 26 basis points (0.65% to 0.91%) and 27 basis points (1.41% to 1.68%), respectively.
Could this move in the bond market be a signal for a coincident sell-off in equities? Stocks are already lower since October 12. In the week following the June bond rout, the Dow popped to 27,572.44 on June 8, but lost ground the follow four sessions. By June 11, the Dow stood at 25,128.17, a drop of nearly nine percent.
Should bonds and stocks follow the same pattern, the final week of October - and the last full week before the election - could bring an unwanted surprise to the Trump equation, as the president routinely touts the stock market as a gauge for the "recovery."
Certain to bring out the most radical conspiracy theorists, a stock market decline at this juncture might be perceived as damaging to Trump's re-election, though reality suggests that people have already made up their minds and many (as much as 40% in some states) have already voted.
We'll just have to wait and see how things pan out before getting spooked (next Sunday is Halloween).
On the NYMEX, WTI crude oil remained tethered to $40 per barrel. Nothing new there, as crude has maintained this price level - give or take a few points - consistently since the beginning of June. Such remarkable stability in the one market that just happens to be the lifeblood of the global economy is uncanny and is likely the result of an unannounced gentleman's agreement between the major oil producers, the US, Russia, and the Saudis. Nobody will openly admit that oil prices are controlled, but there's undeniable proof that prices that are either too high or too low are damaging to economies. The past five months may have been an orchestrated "goldilocks" moment in the oil fields and something that may extend for longer.
Precious metals were flat on the week. Gold rose from $1899.29 to $1924.33 on Wednesday, only to be beaten back to $1902.05 by Friday's close. Silver put on a small gain, rising from $24.16 to $24.61 the ounce on Friday.
Metals continue to be in short supply as demand has not abated since earlier in the year, especially acute during the early days of the coronavirus panic back in February and March. Back then, shortages were blamed on supply chain interruptions due to travel restrictions, but there's no excuses now, as prices remain elevated and premiums have not come back down.
The most recent prices on eBay for common gold and silver items (shipping - often free - included, numismatics excluded) are presented below:
Item: Low / High / Average / Median
1 oz silver coin: 29.12 / 51.00 / 38.04 / 38.23
1 oz silver bar: 30.50 / 43.01 / 35.81 / 35.00
1 oz gold coin: 1,974.85 / 2,052.13 / 2,023.40 / 2,024.40
1 oz gold bar: 1,995.00 / 2,012.84 / 2,003.75 / 2,003.57
At the Close, Friday, October 23, 2020:
Dow: 28,335.57, -28.09 (-0.10%)
NASDAQ: 11,548.28, +42.28 (+0.37%)
S&P 500: 3,465.39, +11.90 (+0.34%)
NYSE: 13,199.86, +53.94 (+0.41%)
For the Week:
Dow: -270.74 (-0.95%)
NASDAQ: -123.27 (-1.06%)
S&P 500: -18.42 (-0.53%)
NYSE: +30.55 (+0.23%)
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