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Tight Trading Ranges, China News, Amazon ‘Prime Day’


It took me a little while to find the right word to describe Thursday’s pricing across financial markets. My mind kept trying to use the term “risk-off”, but that does not quite fit. Overnight equity index futures markets are looking a bit “risk-offish”, but we’ll get to that in just a moment.

Thursday markets were, in my opinion, almost indifferent. Almost seemed to stop caring around lunchtime. Earlier in the day, there had been a tug of war, as there has been all week. On one side, those with an optimistic view took control, as AstraZeneca PLC (AZN) joined the growing list of pharmaceutical companies making forward-looking, “vaccine-related” news, and as regional economies try to reopen incrementally with (it’s still early) less-broad consequence than at first feared (fingers still crossed).

The other side then put their foot down, gently, as those with a negative view that have focused on both geopolitical and macroeconomic deterioration came to the fore.

That said, I would not really call the tight trading ranges and light trading volumes seen on Thursday as indifference. I would more call it an expression of a broad “lack of clarity” in where markets — and capital allocations — need to be right now. There would be a very good chance as headlines have posted overnight that have moved markets, that domestically, going into a three-day holiday weekend, at least some managers could be provoked into pausing, themselves. Maybe even bolster cash positions. That is in no way a prediction. There are too many moving parts.

Perhaps the most interesting takeaway from Thursday would be that although the Nasdaq 100 underperformed the Nasdaq Composite, largely due to the fact that Tech stocks sold off, trading volume — at the Nasdaq Market Site in particular — was incredibly thin, and in terms of breadth across U.S. equity markets, there really was legitimate parity between advancing and declining volume. In other words, there is still no flight to cash.


The news as Thursday melts into Friday is all about China. The Hang Seng Index (Hong Kong) really took it on the chin (-5.6%), as the Chinese legislature made plans to impose what it considers a “national security” bill on the semi-autonomous locals. The 5.6% drop in that index, by the way, was its worst one-day performance in roughly five years. A U.S. State Department spokesperson referred to “Any effort to impose national security legislation that does not reflect the will of the people of Hong Kong” as destabilizing. Cold war? Working on it, I think.

In addition, and globally, this has hurt energy markets on Friday morning, while chasing investors into the U.S. dollar, U.S. debt securities and precious metals. Ahead of the annual National People’s Congress, Chinese leadership has pledged to ramp up economic stimulus and increase defense spending — but did not, for the first time, mention a target for GDP. This is a big deal. Really big. Global equity markets and equity index futures have been volatile ever since. Typically, a target for GDP is set at this “convention,” and then steps are taken to get to that number.

Not Surprising

It might have slipped by most folks. While Treasury Secretary Steven Mnuchin remains publicly optimistic that better economic times lay ahead, and the the broader economy did “bottom” in the second quarter (which is consensus opinion), he also mentioned the “strong likelihood” that more needs to be done, fiscally. That view was more or less backed up by Federal Reserve Vice Chair Richard Clarida on Thursday afternoon, as well.

My opinion? Readers know that I have a history as a fiscal hawk. Yet, as claims for unemployment benefits simply mount, it becomes apparent that the labor market, even if the pace of economic transaction has picked up from a bottom, is still in a very serious state of rapid erosion. Though claims have printed in decline for seven consecutive weeks, that weekly number remains incredibly high this far into the public-health-crisis-induced economic collapse.

Economists seem to almost breathe a sigh of relief as the number on Thursday actually landed close to consensus expectations. But that number, even now, is still more than 10x what we had become accustomed to over the last few years.

It has been said by many business leaders that the pandemic has brought forward with violent disruption, changes to conditions that might have taken a decade or more to evolve naturally. What if part of this forced evolution results simply in a downsized labor market? What does that do in turn to such existential concepts as population distribution? This is something that must be considered, and also something that possibly changes our intellectual ability to interpret the balance between economic performance and social responsibility in an environment that we don’t fully understand just yet.

More will need to be done. This much is true, but this is still crisis response. The aftermath? I can not pretend that I can truly discern what will be necessary moving forward, but an increased level of creativity will be a requirement. How valuable will long experience in both business and economics be in that environment? We’ll see. On that note, International Business Machines (IBM) announced the firm’s intention to reduce payroll, in unspecified size, across at least five states that would include New York, Pennsylvania, California, Missouri, and North Carolina. Thousands are expected to be impacted.


Amazon (AMZN) appears to be making at least some attempt to get the firm’s e-commerce operations if not back to normal, at least pointed toward whatever the “new normal” will be for the business. The firm will now allow for unlimited shipments of non-essential goods to warehouses — to create increased inventory as well as decrease response time to orders placed.

The firm also intends to hold its annual “Prime Day,” which has been wildly successful in recent years, in September, instead of July. My take? I find a great deal of confidence as an investor in the fact that Amazon has enough confidence in its own logistical abilities to even hold a “Prime Day” this year. I honestly had expected that the firm would take a pass on the event for 2020.

Thursday Night Earnings

A number of well-known tech firms reported strong-looking earnings on Thursday night. Network security infrastructure provider Palo Alto Networks (PANW) posted top and bottom line beats, as well as upside guidance. Elite GPU designer Nvidia (NVDA) posted impressive numbers for the quarter, after closing on the Mellanox deal. Key to note that NVDA ran into earnings. In addition, big data cloud king Splunk (SPLK) posted impressive growth in Cloud Services even as revenue disappointed at the headline level.

This is where leadership likely comes from, not just going forward, but I mean on Friday. If there is an attempt made to rally equity markets off of the pre-opening weakness in futures markets, in my opinion it will have to come from the semis, the cloud, and cyber-security. Especially with crude prices now trading in the barrel. On the other side of the coin, Alibaba (BABA) reports on Friday morning, amid all of the headline news coming from that side of the planet.

Economics (All Times Eastern)

13:00 – Baker Hughes Oil Rig Count (Weekly): Last 258.

The Fed (All Times Eastern)

No public appearances scheduled.

Today’s Earnings Highlights (Consensus EPS Expectations)

Before the Open: (BABA) (6.02), (CPB) (0.54), (DE) (1.75), (FL) (0.01)

After the Close: (AMC) (-1.44)

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