Inflation slowing as Wall Street looks bullish on healthcare sector

Wall Street’s roil has stabilized somewhat in recent days, with the S&P 500 brushing up against its 200-day moving average and rising more than 10 percent since its October lows, as of publication time.

The index’s 50-day moving average is trending up, according to financial data firm Refinitiv. But it still must climb another 7.4 percent to form a “golden cross,” which is when a stock or index’s short-term moving average rises above one of its longer-term moving averages. The S&P 500’s 20-day and 100-day moving averages are closer to the milestone, only needing increases of 5 percent and 1.2 percent, respectively.

The Dow Jones Industrial Average has already formed a small golden cross: its 20-day moving average is 1.2 percent higher than its 200-day moving average.

Investors Optimistic about Healthcare Sector

 Investors are most optimistic about the Healthcare sector, which is trading close to its 3-year average “price to earnings-per-share” ratio of 48.1x, according to Simply Wall Street.

 Analysts are expecting an annual earnings growth of 13.4 percent, higher than the sector’s past year earnings growth of 5 percent.

 Merck and Johnson & Johnson were among last week’s top gainers driving the market.

Inflation Appears to be Slowing

 The recent lower-than-expected inflation figures could indicate it is slowing.

 The Fed may continue raising rates, considering the strength in recent labor market and retail sales data.

Dow plunges more than 1,800 points as rising COVID-19 cases roil Wall Street

Dow plunges 1,800 as investors turn jittery over new wave of ...

Stocks plummeted Thursday as the emergence of new coronavirus hotspots and a caution from the Federal Reserve chairman shook Wall Street after months of steady gains.

The Dow Jones Industrial Average closed with a loss of 1,861 points, plunging 6.9 percent for its worst day of losses since March. The S&P 500 index closed with a loss of 5.9 percent, and the Nasdaq composite sunk 5.3 percent on the day.

All three major U.S. stock indexes closed with their steepest single-day losses since crashing in March amid the beginning of lockdowns imposed to slow the spread of COVID-19. Thursday’s losses come after more than two months of steady recovery toward the record highs seen before the pandemic derailed the economy.

Despite the loss of more than 21 million jobs and the deaths of more than 110,000 Americans due to the coronavirus, investors had gradually upped their bets on a quick economic recovery through April and May as states began loosening business closures and travel restrictions.

The surprise addition of 2.5 million jobs in May, according to the Labor Department, also fueled hopes for a quicker than expected rebound from a recession of unprecedented scale and speed.

But Thursday’s abrupt reversal comes as states across the U.S. see spiking COVID-19 cases and diminishing hospital capacity to handle a new wave of infections.

Week-over-week case counts are rising in half of all U.S. states, and only 16 states plus the District of Columbia have seen their total case counts decline for two consecutive weeks.

North Carolina, California, Mississippi and Arkansas are all facing record levels of hospitalizations, and the virus appears to be quickly spreading in Houston, Phoenix, South Carolina and Missouri.

Some market experts also attribute Thursday’s losses to Fed Chairman Jerome Powell’s Wednesday prediction of a “long road” to recovery.

During a Wednesday press conference, Powell said that while the U.S. may see significant job growth in coming months as people return to their jobs,” the country is “still going to face, probably, an extended period where it will be difficult for many people to find work.”

“What we’re trying to do is create an environment in which they have the best chance either to go back to their old job or to get a new job,” he continued.

President Trump, who frequently lashes out at the Fed when markets turn south, blasted the Fed for underestimating how quickly the U.S. economy could recover and how soon a COVID-19 vaccine would be available.

“The Federal Reserve is wrong so often. I see the numbers also, and do MUCH better than they do. We will have a very good Third Quarter, a great Fourth Quarter, and one of our best ever years in 2021. We will also soon have a Vaccine & Therapeutics/Cure. That’s my opinion. WATCH!” Trump tweeted.

Trump’s top economic advisor Larry Kudlow also criticized Powell, urging the Fed chief to ease up on the dour forecasts

“I do think Mr. Powell could lighten up a little when he has these press offerings. You know, a smile now and then, a little bit of optimism,” Kudlow said on Fox Business Network.

“I’ll talk with him and we’ll have some media training at some point.




Sports bettors may be a driving force behind the stock market surge

Sports bettors may be a driving force behind the stock market ...

Professional investors have largely abandoned the stock market amid the coronavirus pandemic, but sports bettors and bored millennials have jumped into the retail stock trading market with both feet.

Why it matters: They may be a driving force pushing U.S. stocks to their recent highs — and potentially driving them further.

What’s happening: Online brokerages have seen a record number of new accounts opened this year, and the big four — E-Trade, TD Ameritrade, Charles Schwab and Interactive Brokers — executed as many trades in March and April as in the whole first half of last year, per public disclosures.

  • Equity strategists at Deutsche Bank note there is “plenty of evidence” that new retail investors have been buying since the stock market began to crash and that professional money managers are “now chasing” them.

Between the lines: Robinhood, whose easy-to-use app makes the transition between sports betting and trading seamless, boasts a similar customer base to most sportsbooks, notes Marc Rubinstein in his newsletter, Net Interest.

  • “43% of North American men aged 25-34 who watch sports also bet on sports at least once per week, and that’s the same group that has flocked to Robinhood,” Rubinstein writes.
  • “On the basis that their customers love sports betting, there’s something meta about DraftKings itself having worked its way into more Robinhood portfolios than practically any other stock over the past month.”

The big picture: Sports betting and stock trading aren’t all that different. In fact, most online betting platforms are modeled on stock exchanges, and Nasdaq itself provides sportsbooks with technology that was born in the financial markets.

  • The comparisons between the two have only increased with the rise of legal sports betting and the surge in mobile stock trading, two activities that cater to the thrill of short-term gains and losses.
  • “For a gambler, investing has a ton of similarities,” said Barstool Sports founder Dave Portnoy, who has begun streaming his day-trading sessions for an audience that normally consumes sports betting content.
  • Barstool also changed its daily gambling radio show from “Picks Central” to “Stocks Central” — further evidence of the crossover between the two.

Meanwhile, most professional investors were sitting on the sidelines.

  • Nearly $5 trillion now sits in money market funds, which are effectively savings accounts, the largest total on record and about $1 trillion more than the record high during the global financial crisis.
  • In its note to clients, Deutsche strategists add that for “large swathes of the equity market in the U.S. as well as globally … positioning is still extremely low.”

Professionals have also been buying bonds rather than stocks as U.S. equity indexes raced back from their lows over the last two months.

  • Data from the Investment Company Institute shows equity funds saw six straight weeks of outflows from the week ending April 22 to the week ending May 27, totaling $78.2 billion. Bond funds, on the other hand, have had seven straight weeks of inflows through May 27, totaling $91.7 billion.
  • Professional traders have finally started dipping their toes back into the stock market in June, according to Bank of America’s data, which showed $6.2 billion into stocks last week, compared with $32.5 billion into bonds.
  • BofA’s Bull & Bear indicator rose from its lowest possible level — 0.0 — where it had been since March 25 to move to 0.4 last week, still indicating a paucity of institutional investors buying stocks.

The bottom line: Day trading has replaced sports betting as a form of entertainment for many Americans during the shutdown, and this phenomenon could partly explain the current disconnect between the economy (down) and the stock market (up).





The pandemic isn’t hurting health care companies

The pandemic isn't dampening Wall Street's view of health care - Axios

The S&P index of top health care companies finished Monday higher than where it opened the year, Axios’ Bob Herman reports.

The big picture: A global coronavirus pandemic, social unrest, mass unemployment, and the halting of medical procedures haven’t been enough to derail Wall Street’s rosy view of the health care industry.

Where things stand: The coronavirus started to affect the economy toward the tail end of the first quarter, but the health care industry was relatively unscathed.

  • Among the 109 publicly traded health care companies tracked by Axios, first-quarter profits exceeded $50 billion, good for a 7.4% net profit margin.
  • Pharmaceutical companies and health insurers generated the highest returns. Wall Street believes drug companies stand to benefit from potential coronavirus treatments or vaccines.
  • The stock price of Gilead Sciences, for example, is up 18% so far this year, partially on the assumption its coronavirus drug, remdesivir, will produce billions of dollars of revenue — even though the drug has showed only modest benefit for patients.

Between the lines: The second quarter likely will be worse, as the brunt of the coronavirus lockdown was felt in April and May. But normal operations have already started resuming for some health care sectors, regardless of the virus’ spread.





Trump reportedly squandered 3 crucial weeks to mitigate the coronavirus outbreak after a CDC official’s blunt warnings spooked the stock market

Dow closes with decline of 950 points as coronavirus continues to ...

  • President Donald Trump’s administration wasted three key weeks between February and March that could have been spent enacting mitigatory measures against COVID-19, The New York Times reported on Saturday.
  • By the end of February, top officials knew that time was running out to stem the virus spread, and wanted to present Trump with a plan to enact aggressive social distancing and stay-at-home measures.
  • But on February 26, a top CDC official issued stark warnings about the virus’ spread right before the stock market plummeted, which angered Trump for being, in his view, too alarmist. 
  • The Times reported that the entire episode killed off the efforts to persuade Trump to take aggressive, action to mitigate the virus’ spread. In the end, Trump didn’t issue stay-at-home guidance until March 16. 

President Donald Trump’s administration stalled three key weeks in February that could have been spent enacting mitigatory measures against COVID-19 after Trump was angered by a public health official issuing a dire warning about the virus, The New York Times reported on Saturday.

On Saturday,The Times published a lengthy investigation of all the instances Trump brushed aside warnings of the severity of the coronavirus crisis, failed to act, and was delayed by significant infighting and mixed messages from the White House over what action to take and when. 

The Times wrote: “These final days of February, perhaps more than any other moment during his tenure in the White House, illustrated Mr. Trump’s inability or unwillingness to absorb warnings coming at him.”

The Times conducted dozens of interviews with current and former officials and obtained 80 pages of emails from a number of public health experts both within and outside of the federal government who sounded the alarm about the severity of the crisis on an email chain they called “Red Dawn.”

One of the members of the email group, Health & Human Service disaster preparedness official Dr. Robert Kadlec, became particularly concerned about how rapidly the virus could spread when Dr. Eva Lee, a Georgia Tech researcher, shared a study with the group about a 20-year-old woman in China who spread the virus to five of her family members despite showing no symptoms.

“Eva is this true?! If so we have a huge [hole] on our screening and quarantine effort,” he replied on February 23. 

At that point, researchers and top officials in the federal government determined that since it was way too late to try to keep the virus out of the United States, the best course of action was to introduce mitigatory, non-pharmaceutical interventions (NPIs) like social distancing and prohibiting large gatherings.

As officials sounded the alarm that they didn’t have any time to waste before enacting aggressive measures to contain the virus, top public health officials including Dr. Robert Kadlec concluded that it was time to present Trump with a plan to curb the virus called “Four Steps to Mitigation.”

The plan, according to The Times, included canceling large gatherings, concerts, and sporting events, closing down schools, and both governments and private businesses alike ordering employees to work from home and stay at home as much as possible, in addition to quarantine and isolating the sick.

But their entire plan was derailed by a series of events that ended up delaying the White House’s response by several weeks, wasting precious time in the process.

Trump was on a state visit to India when Dr. Kadlec and other experts wanted to present him with the plan, so they decided to wait until he came back.

But less than a day later, Dr. Nancy Messonnier, the director of the National Center for Immunization and Respiratory Diseases at the CDC, publicly sounded the alarm about the severity of the coronavirus outbreak in a February 26 press conference, warning that the outbreak would soon become a pandemic.

“It’s not so much a question of if this will happen anymore but rather more a question of exactly when this will happen and how many people in this country will have severe illness,” Messonnier said, bluntly warning that community transmission of the virus would be inevitable.

The Times reported that Trump spent the plane ride stewing in anger both over Messonnier’s comments and the resulting plummet of the stock market they caused, calling Secretary of Health & Human Services Alex Azar “raging that Dr. Messonnier had scared people unnecessarily,” The Times said. 

The Times reported that the entire episode effectively killed off any efforts to persuade Trump to take aggressive, decisive action to mitigate the virus’ spread and led to Azar being sidelined, writing, ” With Mr. Pence and his staff in charge, the focus was clear: no more alarmist messages.” 

In the end, Dr. Kadlec’s team never made their presentation. Trump did not issue nationwide social distancing and stay-at-home guidelines until March 16, three weeks after Messonnier warned that the US had limited time to mitigate community transmission of the virus, and several weeks after top experts started calling for US officials to implement such measures.

In those nearly three weeks between February 26 and March 16, the number of confirmed COVID-19 cases rose from just 15 to 4,226, The Times said. As of April 12, there are over half a million confirmed cases in the United States with over 21,000 deaths.





Fauci: US could have ‘saved lives’ if social-distancing restrictions were enforced earlier

Top doc Fauci admits lives could have been saved if US had shut ...

Anthony Fauci, the U.S. government’s top infectious disease expert, said Sunday that the U.S. would have saved lives had the country enforced firm social-distancing requirements as early as February, but noted that those recommendations were met with pushback at the time.

Speaking on CNN’s “State of The Union,” Fauci addressed a New York Times report that said he and other health experts concluded on Feb. 21 that the Trump administration would need to issue aggressive mitigation measures in order to slow the spread of COVID-19, the disease caused by the novel coronavirus. 

“As I have said many times, we look at it from a pure health standpoint,” Fauci said. “We make a recommendation. Often, the recommendation is taken. Sometimes, it’s not. It is what it is. We are where we are right now.”

Fauci added that “you could logically say, that if you had a process that was ongoing, and you started mitigation earlier, you could have saved lives.”

“Obviously, no one is going to deny that. But what goes into those kinds of decisions is complicated,” he said. “I mean, obviously, if we had, right from the very beginning, shut everything down, it may have been a little bit different. But there was a lot of pushback about shutting things down back then.”

The National Security Council reportedly received intelligence reports in January warning that the COVID-19 outbreak would spread to the U.S. By the third week of February, Dr. Robert Kadlec, the top disaster response official at the Health and Human Services Department (HHS), convened a meeting on whether officials should lock down the country to prevent an outbreak. The group determined that mitigation measures such as school and business closures were necessary despite the devastating economic implications, The Times noted.

The White House issued social-distancing guidelines, including recommendations against gatherings of more than 10 people, in mid-March. President Trump later that month extended those guidelines through the end of April.

The U.S. has reported more than 530,000 confirmed COVID-19 cases and roughly 20,600 deaths caused by it as of Sunday morning, according to a Johns Hopkins University database. 

Asked whether the statistics were a direct cause of the late start on mitigation measures, Fauci said that “it isn’t as simple as that.” While earlier mitigation efforts would have had an impact, Fauci noted that “where we are right now is the result of a number of factors,” including the size of the country and the heterogeneity of the country.

“I think it’s a little bit unfair to compare us to South Korea, where they had an outbreak in Daegu, and they had the capability of immediately, essentially, shutting it off completely in a way that we may not have been able to do in this country,” he said. “So, obviously it would have been nice if we had a better head start, but I don’t think you could say that we are where we are right now because of one factor.”

The Trump administration has faced continued scrutiny over its handling of the outbreak, as state and federal officials raise alarms over testing and medical equipment shortages.

The president on Feb. 28 predicted that the disease would disappear like a “miracle.” Asked about those comments last week, Trump said that “the cases really didn’t build up for a while” and that he was trying to avoid stirring panic.