Stocks Rebound After Yesterday's Steep Drop

Dow: +1.62% | Nasdaq: +1.57% | S&P: +1.52%

Catch Up Quick

• Malaysian authorities put 1,069 seized bitcoin mining rigs (worth $1.3M) in a police parking lot and crushed them with a steamroller

• Nancy Pelosi (U.S. House Speaker) tested positive for coronavirus → has mild symptoms (Axios)

• Peloton ($PTON) announced plans to enter the video game business

• Masayoshi Son (SoftBank CEO) once calculated that WeWork could be worth $10T in a decade (WSJ)

• Mastercard ($MA) plans to enhance card offerings for crypto wallets & exchanges → customers will be able to convert between cryptocurrencies and traditional

• Tesla’s electric semi truck is finally about to enter production (Electrek)

• Elon Musk recently opened up about The Boring Company (his company aimed at solving traffic by building underground tunnels), revealing unanticipated difficulties of such a mission and the need to revolutionize tunnel building technology

• Jeff Bezos says sales of Blue Origin’s space tourism flights are already “approaching $100M”

• United Airlines (UAL) narrowed its losses, revealing plans to ramp up flying to meet robust travel demand → shares rose over 6% today

• IBM (IBM) reported its strongest revenue growth in 3 years, spending $1.8B on acquisitions this past quarter

• Chipotle (CMG) exceeded its earnings estimates, citing surging sales as customers return to restaurants for dine-in → shares are up ~6% in after hours trading

• Netflix (NFLX) reported lower-than-expected Q2 net income, but beat estimates for paid subscriber growth and revenue

• General Motors (GM) confirmed it will offer an electric GMC full-size pickup truck as its third such vehicle since its $27B investment in electric / autonomous driving → shares rose almost 4%

• Carnival (CCL) announced that 75% of its cruise ship fleet will return this year → shares rose 7.5%

Thought of the Day

• Today, the stock market roared back to life as buyers regained momentum after equities yesterday experienced the steepest sell off seen by investors in months

• Amid sky-high market volatility (a term that simply refers to abnormal price swings), it is clear that both retail and institutional investors remain highly uncertain given various market risks such as:

  • The infectious coronavirus Delta variant, which accounts for ~83% of new cases and has led to a 50% uptick in virus related deaths this past week

  • Senate gridlock (opposing perspectives from different political parties that slow down the release of new laws and policies) has led to beliefs that a coronavirus resurgence will be met with an ineffective governmental response, especially with previous pandemic safety nets expiring

  • Skyrocketing inflation that not only reduces the amount of goods consumers can by per dollar, but also leaves the Fed with very little ability to combat another economic shut-down given risks of hyperinflation

  • A global housing market frenzy driven by pandemic-induced migration, high-powered institutions buying entire residential neighborhoods, low interest rates to finance mortgages, and new technologies that make it easier than ever to buy homes

• While we’ve predicted multiple times (here and here) that active retail investor volumes will be quick to buy market dips such as the one yesterday, it’s likely that today’s rebound was also facilitated by a strong start to Q2 earnings season

• However, it’s important to note that earnings largely indicate economic health for this past quarter, which may be a bit more backwards-facing than the risks mentioned above

• Even though market volatility psychologically prompts action from greedy / fearful investors, it might make sense to wait out the apparent uncertainty, especially since gridlock and inflation could hinder the ability for policymakers and central bankers to respond to another coronavirus outbreak

• Though more shutdowns still remain unlikely, this aspect could be devastating if the spread of variants outpaces that of vaccinations

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