Four Stock Market Mini-Worries Set Stage For More Wall Street Gains

Thursday’s and Friday’s four mini-worries combined into a Wall Street wind that felt like risk. However, each individual worry was only a slight breeze that will soon dissipate. Therefore, expect stock market thoughts to return to potential gains.

The four mini-worries and why they are non-starters (of a downtrend)

1. The unemployment report’s initial claims, billed as a dangerous increase

However, initial claims actually dropped. So, why all the teeth gnashing? Once again, it was the use of misapplied seasonally adjusted factors that converted the drop to a rise. Those seasonal adjustments apply to normal unemployment cycles, but they do not apply to this abnormal, coronavirus-driven unemployment period.

Here is the math…

  • The previous (July 11) weekly report had not-seasonally-adjusted (NSA) initial claims at 1.51 million. However, that reading was seasonally-adjusted (SA) downwards by -13.6% to 1.31 million.
  • In the latest (July 18) weekly report, the one that produced the negative media reports, initial claims NSA were 1.37 million, well below the previous week’s 1.51 million NSA. However, it was adjusted upwards by 3.3% to 1.42 and then compared to the 1.31 figure.
  • So, the actual -0.14 million decrease was morphed into a misleading 0.11 million increase, fodder for the many negative reports – some even labeled as an unemployment “spike.”

(Unemployment statistics is an important area to understand because similar problems are coming in the weeks ahead. I will cover the issues in a separate write-up.)

2. The coronavirus benefits’ July 31 expiration, billed as a climactic event

Visions include the economy and financial system in a tailspin. However, the “climax” (of government support) can occur only if Congress does not create an extension of some sort. But Congress is already working on a plan. Naturally, it’s taking time because competing and conflicting interests need to be hashed out. As usual, we can expect a late-night, nick-of-time agreement.

3. Intel INTC ‘s weak outlook, raising specter of tech “bubble” burst

However, that’s not the way the stock market is functioning now. Individual stocks are going their individual ways. As an example, look at Intel’s vs NVIDIA NVDA ‘s recent stock performance. Clearly, while Intel’s Thursday comments were disappointing, the stock’s preceding weak stock performance showed Wall Street was already expecting something less than exciting.

(Disclosure: Author holds NVIDIA)

(And, by the way, there is no tech “bubble.” More about that in a separate write-up.)

4. The U.S.-China discord, raising worries of ­­__ (fill in the blank)__

Does this mishmash of noisy, political rhetoric and tit-for-tat, counterpunch behavior really need to be dissected again? We may not know exactly what details come next, but we do know that, in the end, Wall Street will move on, focusing on real business developments and hunting up stock market opportunities.

So, lots of commotion about those four items, but there is nothing important enough to trip up the stock market’s selective, upward trend.

The bottom line: The bears’ hunt for an anti-bull market rationale continues

Unhappy, underinvested bears continue the search for something – anything – that can reverse this bull market’s uptrend. However, that search is doomed to fail, unless some unforeseen adversity strikes the economy and/or market.

Two things are for sure:

  1. Known issues are not being ignored by investors, as bears are wont to believe
  2. Minor negatives, even when combined, cannot alter a stock market trend

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