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End of Day Briefing - Wednesday June 17, 2020

Major indices, except Nasdaq, close lower - Mixed day.

Dow -170.37 at 26119.63, Nasdaq +14.66 at 9910.54, S&P -11.25 at 3113.36

[BRIEFING.COM] The S&P 500 declined 0.4% on Wednesday, falling for the first time in four sessions amid lingering angst about a U.S. recovery and equity valuations. The Dow Jones Industrial Average lost 0.7%, and the Russell 2000 lost 1.8%. The Nasdaq Composite, however, increased 0.2%.

It was a relatively benign decline for the benchmark index considering that eight of the 11 S&P 500 sectors finished in negative territory. The energy (-3.3%) and financials (-1.4%) sectors declined noticeably, while the communication services (+0.1%), consumer discretionary (+0.1%), and information technology (+0.03%) sectors barely finished higher.

The market's recovery optimism was kept in check after several states (and Beijing) continued to report an uptick in COVID-19 cases, Oracle ($ORCL 51.52, -3.07, -5.6%) disclosed that customers within some of its hardest hit verticals postponed some orders, and Norwegian Cruise Line ($NCLH 19.20, -1.76, -8.4%) extended its suspension of cruise voyages through Sept. 30.

The S&P 500 was trading higher in the afternoon despite any growth concerns but notably slipped to session lows (-0.5%) shortly after Jeremy Grantham, a closely-followed market pundit, told CNBC that the goal number for equity exposure in the U.S. is zero due to the market's bubble-like characteristics.

It's one man's view, but one that some investors wouldn't disagree with given the grim economic environment. Domestically-oriented small-caps underperformed amid the recovery angst, but losses were mitigated by a recognition that the Fed will continue to aggressively support financial conditions. Investors siding with Mr. Grantham will likely have to bet against the Fed.

On a related note, Fed Chair Powell concluded his semiannual monetary policy testimony on Wednesday. Mr. Powell reminded lawmakers of their spending powers, reiterating that Congress should do more to support the economy. Market reaction was muted.

U.S. Treasuries ended the session slightly higher after trading in a narrow range. The 2-yr yield declined two basis points to 0.19%, and the 10-yr yield declined two basis points to 0.73%. The U.S. Dollar Index increased 0.2% to 97.13. WTI crude declined 0.9% to $37.93/BBL amid an unexpected increase in weekly crude inventories.

Reviewing Wednesday's economic data:

  • Total housing starts increased 4.3% m/m in May to a seasonally adjusted annual rate of 974,000 units. That was well below the consensus estimate of 1.170 million and down 23.2% yr/yr. Total building permits increased 14.4% m/m to a seasonally adjusted annual rate of 1.220 million, which was just shy of the consensus estimate of 1.260 million.
    • The key takeaway from the report is that permits, which are a leading indicator, increased a solid 11.9% m/m for single-unit dwellings. Single-unit permits increased in all regions, too.
  • The weekly MBA Mortgage Applications Index rose 8.0% following a 9.3% spike in the prior week.

Looking ahead, investors will receive the weekly Initial and Continuing Claims report and the Philadelphia Fed Index for June on Thursday.

  • Nasdaq Composite +10.5% YTD
  • S&P 500 -3.6% YTD
  • Dow Jones Industrial Average -8.5% YTD
  • Russell 2000 -14.5% YTD

Market Snapshot

SP 5003113.36-11.25(-0.36%)
10-yr Note +25/320.725
NYSEAdv 966 Dec 1945 Vol 1.0 bln
NasdaqAdv 1252 Dec 2084 Vol 4.2 bln

Industry Watch

Strong: Consumer Discretionary, Information Technology, Communication Services
Weak: Energy, Financials, Real Estate

Moving the Market

-- Major indices, except Nasdaq, close lower

-- Lingering angst pertaining to a recovery and valuations

-- Relative weakness in small-caps and the energy and financials sectors

-- Aggressive policy support from the Fed remained a positive consideration; Fed Chair Powell reminded Congress of their spending powers

Stocks end mixed as Texas, Florida show increases in COVID-19 cases

The major averages were mixed for most of the morning, with the Dow lower, the Nasdaq higher and the S&P hugging the flatline. Optimism over the prospects for a "V-shaped" recovery continues to compete with worries that a second wave of viral infections will emerge as restrictions are lifted. The averages all moved into the green in the early afternoon, but gave up some of their gains as the session came to a close. The S&P and Dow broke their three day winning streaks, although the Nasdaq managed to eke out a gain.

ECONOMIC EVENTS: In U.S. data, housing starts rose 4.3% to a 974,000 rate in May, missing expectations. However, permits bounced by a more encouraging 14.4% to a rate of 1.22M units.

In Texas and Florida, which are now in focus as COVID-19 hotspots, data showed that the daily increases in cases rose by more than their recent run rates. Texas reported 93,206 COVID-19 cases, up from 89,108 yesterday, while Florida reported 82,719 COVID cases, up 3.3% from yesterday. Meanwhile, in New York, which was previously seen as the "epicenter" of the virus in the U.S., Governor Andrew Cuomo said that he will end his daily COVID-19 briefings on Friday, saying the state is ready to enter Phase 2 of its reopening process next Monday.

TOP NEWS: Shares of Oracle ($ORCL) fell 5.6% following last night's fiscal Q4 results. Jefferies analyst Brent Thill said he views Oracle's report of $10.44B in total revenue in the "seasonally strong" fourth fiscal quarter as "underwhelming," adding that he views the company's results in the current "highly supportive software spending environment" as reflective of share losses to Microsoft ($MSFT), Amazon ($AMZN) and other vendors.

The DOJ officially proposed a reform of legal protections for online platforms that have been in place for more than two decades. The department said it has identified "a set of concrete reform proposals to provide stronger incentives for online platforms to address illicit material on their services while continuing to foster innovation and free speech." The DOJ action follows President Trump's recent executive order seeking to weaken broad immunity enjoyed by Facebook ($FB), Twitter ($TWTR) and Google ($GOOGL).

Target ($TGT) announced that it will permanently raise its starting wage for U.S. team members to $15 per hour and will give a one-time bonus of $200 to its frontline store and distribution center hourly workers in recognition of "their efforts throughout the coronavirus pandemic."

MAJOR MOVERS: Among the noteworthy gainers was 21Vianet ($VNET), which rose 15.9% after Jefferies analyst Edison Lee initiated coverage of the stock with a Buy rating. Also higher was Beyond Meat ($BYND), which gained 2.9% after Credit Suisse analyst Robert Moskow raised his price target on the shares to $142 from $90, saying he now believes Beyond may emerge as a net beneficiary of the pandemic in the near-term due to strong demand in retail channel and in the long-term due to rising consumer interest in healthier foods.

Among the notable losers was Enphase Energy ($ENPH), which slid 26% after short seller Prescience Point issued a negative research report on the shares. Also lower was Chembio Diagnostics ($CEMI), which plunged 60.8% after the FDA revoked emergency use authorization for the company's COVID-19 antibody test.

Source: (

Disclosure: I may trade in the ticker symbols mentioned, both long or short. My articles represent my personal opinion and analysis and should not be taken as investment advice. Readers should do their own research before making decisions to buy or sell securities. Trading and investing include risks, including loss of principal.

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