Tech Rose, All Else Sank: What Wall Street's Saying

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Stocks were mixed Thursday, but the market was completely risk-off. 

The S&P 500 fell 0.38%, but it was down 1% in the morning. Making the loss more mild was a midday tech shares rally that landed the Nasdaq at a 0.43% gain for the day. Meanwhile, the safe 10-Year Treasury bond saw its yield slip to 0.55%, signaling investors are fearful for what’s to come. Yields fall when prices rise. 

FANG stocks rose as three of the mega-cap tech components are reporting earnings Thursday. They’d been volatile into earnings, as they have had a substantial run-up since mid June. Investors, in a last minute dash to own more tech ahead of earnings, sent the group up Thursday. Investors often favor growth tech that can power though economic headwinds, although not all of big tech is completely resistant to economic changes. 

Aiding the Nasdaq’s gain was the iShares PHLX Semiconductor ETF  (SOXX) - Get Report, which rose 1.97%. Qualcomm easily cleared revenue and earnings estimates and guided for the higher end of its forecast for yearly 5G sales volumes. Qualcomm  (QCOM) - Get Report, the equity of which is a blend of growth and value, rose 15.22%. Most chip stocks in the SOXX that are highly exposed to 5G and other growth trends like data center rose considerably. 

But the entire cyclical landscape fell hard. 

Weekly jobless claims came in at 1.4 million versus estimates of 1.5 million, but its yet another week of more than 1 million people filing for unemployment. Earlier in the year, the economic recovery looked on track to be a V-shape. Now, it’s stalling as virus cases spread, states pause reopenings, monetary stimulus is ongoing but may have peaked and more fiscal stimulus hasn’t rolled in yet. 

Large cap oil, banking, consumer discretionary, industrials and materials all fell between 0.76% and 3.87%. 

Here’s what Wall Street's saying: 

Ryan Detrick, Chief Investment Strategist, LPL Financial: 

"Initial jobless claims have stubbornly refused to go lower lately, a different story than much of the other improving economic data. Jobs are a key part to this recovery and this shows yet again how bumpy the recovery is going to be.” 

Marc Odo, Client Portfolio Manager, Swan Global Investments: 

"California, Texas, and Florida are numbers 1, 2, and 3 in terms of population and 1, 2, and 4 in terms of GDP in the U.S. The fact that the virus is spiking in all of these states is certainly bad news for the economy and is likely bad news for the market. A "double spike" in infections might lead to a "double dip" in the market. With bonds no longer able to provide that dual role of capital preservation and income, investors need choices. Hedging strategies using options have seen a lot of growth both in terms of products available and assets under management these last few years. We expect that trend to accelerate as bonds are viewed by many as being "dead money.”” 

Ton Dwyer, Chief Market Strategist, Canaccord Genuity: 

"In the summer of 2009, I remember sitting in a Q2/09 post-EPS investor presentation by an industrial company just as the global economy was beginning to recover from the worst economic downturn since the Great Depression. The S&P 500 (SPX) was up over 40% from the low just a few months before, and investors were very skeptical of the gains, believing it was “too far too fast” given the economic risk and high level of uncertainty. In the company’s presentation they had three slides for their contingency plans in case things got worse. I was sitting up front listening to everyone speak to how smart those plans looked, and I raised my hand for a question. I asked the company what their contingency plan was for things getting dramatically better, and you could have heard a pin drop as everyone turned their head to see who was asking such a silly question with such uncertainty in the background. Data drives a more constructive contingency plan. As Covid-19 and election fears heat up, we use the same premise looking at the macro backdrop – what is the plan if things get dramatically better?” 

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