Author: Dorian Holden

There’s been plenty of misery over the last few weeks.

The global economy closed up shop.  Businesses closed their doors.  Schools ended their years early.  Retailers boarded up, or went out of business.  Millions of people lost their jobs.  All thanks to the threat of the coronavirus.

However, it looks like the worst has been priced into the market.

In fact, over the last week, the Dow Jones exploded from a low of 23,000 to 27,110.  The NASDAQ soared from 8,706 to 9,814, as the S&P 500 jumped from 2,800 to 3,193.  Helping quite a bit was the better than expected jobs report late last week.

Non-farm payrolls increased by 2.5 million in May.  And the unemployment rate fell to 13.3%.  Meanwhile, Wall Street had expected a decline of 8.3 million jobs, and a jobless rate of at least 19.5%.

“Barring a second surge of Covid-19, the overall U.S. economy may have turned a corner, as evidenced by the surprise job gains today, even though it still remains to be seen exactly what the new normal will look like,” said Tony Bedikian, head of global markets at Citizens Bank, as quoted by CNBC.

·      Leisure and hospitality increased by 1.2 million in May after a loss of 7.5 million

·      Construction increased by 464,000 in May after losing 995,000 in April.

·      Education and health services jobs jumped by 424,000.

·      Retail jobs jumped by 368,000 after a loss of 2.3 million in April

·      Manufacturing jobs increased by 225,000.

·      Professional and business services rose by 127,000

Even with chaos breaking out in the streets across the U.S., markets are hitting higher highs.  That’s because the market is treating the riots “just like natural disasters,” says Chris Burns, CEO of Dynamic Money, as quoted by CNBC.  Markets don’t see a “long-term impact.”

“There’s a heck of a lot that the market is seemingly ignoring right now, in addition to the protests,” added Liz Ann Sonders, chief investment strategist at Charles Schwab & Co. “But if you look back at the history of large-scale civil unrest…the market tended to sort of look through that. You didn’t tend to see significant weakness either while it was happening or in the aftermath.”

The post Why Markets Are Not Reacting to Protests appeared first on Morningology.

There’s been plenty of misery over the last few weeks.

The global economy closed up shop.  Businesses closed their doors.  Schools ended their years early.  Retailers boarded up, or went out of business.  Millions of people lost their jobs.  In fact, according to the latest ADP report, the U.S. lost another 2.76 million workers in May 2020 thanks to the coronavirus.  

That was well below the estimated loss of 8.75 million.  

Still, the loss “is obviously an awful number, but not as catastrophic as expected,” says Mark Zandi, chief economist at Moody’s Analytics.  Plus, with economies reopening, and people trying to get back to life as it was, the worst may have been priced in.

“The good news is I think the recession is over, the Covid-19 recession is over, barring another second wave, a major second wave, or real serious policy errors,” said Zandi, as quoted by CNBC.  The bad news, he added, is that “the recovery will be a slog until there’s a vaccine or therapy that’s distributed and adopted widely.”

The other good news is that the pace of layoffs appears to have slowed considerably, and more people are heading back to work. From here, we could potentially see job growth pick up lost momentum in June and July.  

Even Bank of America CEO Brian Moynihan apparently sees light at the end of the tunnel.  

“We’re starting to see the economy come out of the hole,” he told CNBC. “The unemployment numbers are very high and very concerning. But on the other hand, if spending picks up, that will drive the economy back to where these people get their jobs back.”

“If consumer spending picks up and the demand for services, especially in the service side of the economy, picks up and how fast we can cross that river to where there’s enough spending to re-employ the people,” he added.

Given time, both the economy and markets could return to pre-coronavirus highs.

The post The COVID-19 Recession May Finally be Over appeared first on Morningology.

Weeks ago, oil prices plummeted into negative territory.

All thanks to far too much supply, and no demand.  However, with “stay at home” orders being lifted, and economies reopening, we’re just beginning to see a return of demand.  

“While demand for petroleum products fell off a cliff in April, the outlook is improving as economies around the world begin to reopen. Raymond James, which has been tracking shelter-in-place orders, said that of the 3.9 billion people worldwide who have been under lockdown at some point since January, 3.7 billion, or 95%, have experienced some sort of reopening,” reports CNBC.

There’s also hope OPEC+ will agree to extend output cuts during its conference this week.  According to Business Insider, Russia and other OPEC members are looking into a one-month extension to cuts that are set to end in June.  Meanwhile, the Saudis may be in favor of extending production cuts for another one to three months longer.

All in an effort to rebalance the supply-demand issues.

This comes just weeks after OPEC+ agreed to cut production by up to 9.7 million barrels a day in both May and June.  That brought some relief to the oil market battered by the coronavirus.

If we see an extension of cuts, some of the top oil stocks to consider include:

Exxon Mobil (XOM)

In recent months, XOM plummeted from $70 to less than $30.  However, it’s just now beginning to recover from those lows, and could potentially refill a bearish gap around $58.

Chevron (CVX)

After plunging from $110 to less than $55, CVX is also recovering quickly.  At the moment, it’s consolidating just under $94.  What we’d like  to see is a potential break out with a bearish gap refill around $110 again near-term.

Other top ways to trade a bigger potential recovery in oil is by trading ETFs, such as the United States Oil Fund (USO), the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), and even ProShares Ultra Bloomberg Crude Oil (UCO).

Unless something else catastrophic happens in the world, oil could refill its bearish gap around $47, near-term.  Stay tuned for more on OPEC developments.

The post The Top Ways to Trade a Potential OPEC+ Extension appeared first on Morningology.

Chaos has broken out across the U.S.

Days after the death of George Floyd, riots and protests are raging.  Tensions could flare even more, as President Trump threatens military involvement under the Insurrection Act.

“I am mobilizing all available federal resources, civilian and military, to stop the rioting and looting, to end the destruction and arson and to protect the rights of law-abiding Americans, including your Second Amendment rights,” Trump said, as quoted by NBC News.

While we’ve seen law enforcement stocks, like Axon Enterprises (AAXN) explode on higher demand for body cameras, we’re also seeing big demand for guns.  Shares of Sturm Ruger (RGR) for example shot higher along with Vista Outdoor Inc. (VSTO).

RGR for example has exploded from a low of $60 to $72.20 in days.

VSTO ran from a low of$7 to $11.70.

Both could run to higher highs as the riots and protests begin to spread to the suburbs, too.

“People are watching the news,” said Steve Sosnick, chief strategist at Interactive Brokers, as quoted by The Wall Street Journal. “The market is anticipating that there will be increased interest and demand for firearms as a result of what’s going on in the world right now.”

But it’s not just the riots and protests pushing gun sales.

The coronavirus pandemic is doing that, too.  In fact, Americans bought another 1.7 million firearms in May, according to Small Arms Analytics & Forecasting.  And, according to the FBI, it has now performed more than three million background checks for gun purchases.  That’s 700,000 higher year over year.

That’s happening for two potential reasons, says KUNC Radio.  “Some people are concerned about heavy-handed government during a crisis and others are worried government services, like police, won’t be able to reach them.”

In addition, according to Georgia State University Law Professor Timothy Lytton, “I think the current civil unrest is likely to stoke both of those fears even further and that we’re likely to see increased sales of firearms continuing on through the summer.”

Until the virus threat, and the riots fade, we could see even more gun sales – and higher highs in guns stocks like AOBC and RGR.

The post War Zone USA: The Top Stocks Shooting Higher on Fear appeared first on Morningology.

It’s the calm before the storm.

With China cracking down on Hong Kong, tensions could lead to sky-high volatility.

All after China approves a proposal to impose a new national security law for Hong Kong. 

While details of the potential law are scarce, it will reportedly target secession, subversion of state power, terrorism, and foreign interference.  And it won’t sit well with the U.S., especially after President Trump said the U.S. will have “a very strong reaction” to new China legislation. 

It’s a “disastrous decision,” added Secretary of State Michael Pompeo.

It’s “the latest in a series of actions that fundamentally undermine Hong Kong’s autonomy and freedoms and China’s own promises to the Hong Kong people under the Sino-British Joint Declaration.  “The United States stands with the people of Hong Kong as they struggle against the CCP’s increasing denial of the autonomy that they were promised.”

While it’s not clear what the potential repercussions could be, China is ready for a fight.  

“The Chinese government is firm in its determination to safeguard China’s sovereignty, security and development interests, to implement the principle of “one country, two systems” and to oppose any external interference in Hong Kong affairs. If someone is bent on harming China’s interests, China will take all necessary measures to hit back,” says Foreign Ministry spokesman Zhao Lijian.

From here, a war of words – and the potential for a new trade war could see a return of volatility.  If that’s the case, some of the top investment opportunities to watch include:

ProShares Ultra VIX Short-Term Futures ETF (UVXY)

The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. It last traded at $34.

VelocityShares Daily 2x VIX Short-Term ETN (TVIX)

The ETN tracks an index of futures contracts on the S&P 500 VIX Short-Term Futures Index. As volatility ticks higher, the TVIX ticks higher.  It last traded at $144.06.

iPath S&P 500 VIX Short-Term Futures (VXX)

The VXX ETN provides exposure to the S&P 500 VIX Short-Term Futures Index Total Return.  It last traded at $33.15.

The post Three of the Best Ways to Trade New Tension with China appeared first on Morningology.

Warren Buffett made a huge mistake when he sold his airline stocks.

Arguing such stocks won’t be a good investment for the foreseeable future, he noted, “I don’t know whether it’s two or three years from now that as many people will fly as many passenger miles as they did last year. The future is much less clear to me about how the business will turn out through absolutely no fault of the airlines themselves.”

The odd part is he sold on the fear – when he usually buys fear.

Remember, this is the same billionaire that made fortunes from telling us a “climate of fear is your friend when investing; a euphoric world is your enemy.” And of course, we all remember his advice to “be fearful when others are greedy and greedy when others are fearful.”

However, perhaps he’ll buy back in again now that economies are reopening, and airline stocks are beginning to take flight again.  

Plus, “There are ‘flickers of hope’ that demand has bottomed, according to Raymond James. Data from the Transportation Security Administration indicated a slight uptick in travelers passing through checkpoints on May 1, going to a 93% year-over-year decline from a low 96% in mid-April,” as reported by Barron’s.

While we’re not seeing monster gains in airlines just yet, that could soon change.

Over the last few weeks, American Airlines (AAL) ran from a low of $8.25 to $12.50.  Delta Air Lines (DAL) popped from $17.50 to $27.47.  JetBlue (JBLU) just exploded from a low of $7.34 to $11.56.  United Airlines (UAL) ran from $20 to $32.63.

If you bought on the excessive fear that Buffett sold on, you’re doing quite well.

If economies can successfully reopen – and stay open, many of these airline stocks could double, it not triple near-term.  The worst may have already been priced into these stocks.

The post This Was One of Warren Buffett’s Worst Investment Decisions appeared first on Morningology.

Markets are exploding higher on vaccine hopes.

Moderna Inc. (MRNA) took a hit in recent days after STAT News noted that some vaccine experts were skeptical of the MRNA data.  In fact, they noted the Moderna study did not provide critical information to assess effectiveness. 

“The statnews.com report states that data from only eight patients out of total 45 and also only two weeks of data following the second dosage also raise concerns related to the durability of the data. Data on a majority of patients as well as longer-term data will likely provide clarity on the vaccine’s efficacy. However, we note that the phase I study primarily evaluates a candidate’s safety in human volunteers rather than efficacy.”

However, according to MRNA’s Noubar Afeyan, Moderna would never put out data that was “different from reality,” as quoted by CNBC.  “We take what we do very seriously. We would not have not put out some of the data to make anything look any different from reality.” 

Despite the criticism, Moderna is expected to launch Phase II trials in coming weeks.  Phase III is expected to begin by July 2020.  As MRNA pushes forward with the vaccine, the stock is beginning to recover, giving us another opportunity to buy.

Novavax Starts First Human Study of Vaccine

Novavax just started its first human study of its COVID-19 vaccine.  Initial results on safety and immune responses due in July 2019.

“Administering our vaccine in the first participants of this clinical trial is a significant achievement, bringing us one step closer toward addressing the fundamental need for a vaccine in the fight against the global COVID‑19 pandemic,” said Stanley C. Erck, President and Chief Executive Officer of Novavax. “We look forward to sharing the clinical results in July and, if promising, quickly initiating the Phase 2 portion of the trial.”

The Phase 1/2 clinical trial is being conducted in two parts. The Phase 1 portion is a randomized, observer-blinded, placebo-controlled trial designed to evaluate the immunogenicity and safety of NVX‑CoV2373, both adjuvanted with Matrix‑M and unadjuvanted. The trial is enrolling approximately 130 healthy participants 18 to 59 years of age at two sites in Australia. The protocol’s two-dose trial regimen assesses two dose sizes (5 and 25 micrograms) with Matrix‑M and without.

Merck Working with IAVI on Vaccine

Merck is working alongside non-profit IAVI to develop a vaccine, as well.  

“In a statement, Merck and IAVI said their vaccine candidate would use the recombinant vesicular stomatitis virus technology that is the basis for its Ebola Zaire virus vaccine — which was the first rVSV vaccine approved for use in humans,” as quoted by CNBC.

Such news is also fueling hopes the worst of the shutdowns may now be over.  

“If this is the only wave [of coronavirus], it looks like we’ve bottomed out and the normalization process has begun,” said Beth Ann Bovino, U.S. chief economist at S&P Global Ratings.Plus, we’re already seeing a pickup in spending on hotels, restaurants, airlines, and other industries that took a hit on “stay at home” orders.  “I think we’re very, very close to an inflection point in terms of business activity, and probably about a month away in terms of employment,” said White House economic adviser, Kevin Hassett.

The post The Top 3 COVID-19 Stories Driving Markets Higher appeared first on Morningology.

This may not end well.

Beijing is introducing a new national security law that could limit protests in Hong Kong, and put an end to its autonomy.  Reportedly, the National People’s Congress will soon vote on a bill “establishing and improving the legal system and enforcement mechanisms” for Hong Kong in order to “safeguard national security,” as noted by NBC News.

All in an effort to criminalize treason, secession, and subversion against the Chinese government.  It would also allow China to operate in the city to “fulfill relevant duties to safeguard national security in accordance with the law,” says CNN. 

All because the leadership of China feels threatened.

On passage, it won’t sit well with most of the world, especially the U.S.

President Trump says the U.S. will have “a very strong reaction” to new China legislation. 

In addition, “We urge Beijing to honour its commitments and obligations in the Sino-British Joint Declaration,” said State Department spokeswoman Morgan Ortagus as quoted by South China Morning Post in reference to a treaty signed in 1984 that guarantees a “high degree of autonomy” for Hong Kong until at least 2047.

“The USA cannot let this stand,” added Senator Josh Hawley, who said he would introduce a Senate resolution “condemning this attempted crackdown” and calling on “all free nations to stand with” Hong Kong, as noted by MSN.

At the moment, it’s a wait-and-see.  But passage later this month could see tensions erupt.

The post Chaos Could Erupt Over Potential Hong Kong Law appeared first on Morningology.

The U.S. is in trouble.

However, the Federal Reserve seems ready to act.

“There’s a lot more we can do,” said Federal Reserve Chairman Jerome Powell, as quoted CBS News 60 Minutes, as quoted by CNN. “We’ve done what we can as we go. 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.”

At the moment, thanks to the effects of the coronavirus shutdowns things are bad.

According to the National Bureau of Economic Research for example, found the pandemic will lead to the death of more than 100,000 small and medium sized businesses, says PYMNTS.com. 

Worse, according to Restaunt.com, “As the coronavirus epidemic rages on, 3% of restaurant operators have already permanently closed their restaurants, 44% have temporarily closed their restaurants, and 11% say they anticipate they will permanently close within the next 30 days, according to new research from the National Restaurant Association.”

On top of that, the Federal Reserve Bank of Atlanta says U.S. GDP will sink by 42.8% in the second quarter of the year.  “The economy is essentially still in freefall because of the shutdown, there is no question about that and the pandemic contraction in 2Q is going to be very difficult,” top White House Economic Advisor Larry Kudlow told Fox Business.

As for employment, Goldman Sachs says the unemployment rate could spike to 25%.

We’ve also learned the number of Americans filing for initial jobless claims is now up to 36.5 million.  Worse, up to 42% of workers experiencing layoffs could suffer permanent job losses, says the National Bureau of Economic Research.

Retail sales are also plunging, which isn’t a shock with unemployment numbers. U.S. retail sales collapsed 16.4% in April 2020 thanks to the virus threat. 

Once the threat of the virus is over, there’s hope we’ll see significant improvements to all.

The post The Top Numbers That Show Just How Bad the Economy Has Become appeared first on Morningology.

So much for cooling tensions with China.

The U.S. again blamed China for its lack of transparency over the coronavirus.  

“Some wacko in China just released a statement blaming everybody other than China for the Virus which has now killed hundreds of thousands of people. Please explain to this dope that it was the “incompetence of China”, and nothing else, that did this mass Worldwide killing,” tweeted President Trump.

China then suggested the U.S. might be the real source of the pandemic.  China has also said the U.S. is trying to shift blamed for the U.S. mishandling of the COVID-19 crisis, says Reuters.

On top of that, the U.S. just passed the Holding Foreign Companies Accountable Act, which “requires certain issuers of securities to establish that they are not owned or controlled by a foreign government. Specifically, an issuer must make this certification if the Public Company Accounting Oversight Board is unable to audit specified reports because the issuer has retained a foreign public accounting firm not subject to inspection by the board.”

“Furthermore, if the board is unable to inspect the issuer’s public accounting firm for three consecutive years, the issuer’s securities are banned from trade on a national exchange,” according to Congress.gov.

Now, there’s new potential tension over Hong Kong.

President Trump says the U.S. will have “a very strong reaction” to new China legislation.

At the moment, China has plans to introduce a new national security law in Hong Kong that would ban “sedition, secession, and subversion of the central government in Beijing,” as reported by CNN.  “The move could enable Beijing to crack down on anti-government protests in Hong Kong and will raise further fears that the city’s autonomy is being eroded just as demonstrations begin to resume following a lull due to the coronavirus pandemic.”

If it happens, the U.S. could react quite strongly.  

Hopefully, things cool off between the two.  

The last thing the world needs is more tension with the COVID-19 still making the rounds.

The post US v. China: The Top Reasons For New Explosive Tension appeared first on Morningology.