Back to Life, Back to Reality
I’m rolling with a little late ‘80s hip-pop today. I know that’s not everyone’s cup of tea, but this ‘89 Soul II Soul classic seemed rather appropriate given this morning’s October retail sales data:
The vaccine rally of the past two weeks was a nice diversion, but it’s time to face facts. And the facts are that we still have a long recovery road to walk, even with the promise of a vaccine.
Case in point: October U.S. retail sales rose a pitiful 0.3% — far less than the 0.5% growth expected. Core retail sales for the month limped 0.1% higher.
Core retail sales are what economists and the Federal Reserve use to judge inflation. They exclude things like automobiles, gasoline and food services — you know, those things nobody uses, right?
To make matters worse, September’s data were revised lower from 1.9% sales growth to 1.6%. Adding insult to injury, September core retail sales were revised lower from a gain of 1.4% to 0.9%.
That’s a lot of number mumbo jumbo, Mr. Great Stuff! Give it to me straight, man.
You already know the “straight” answer, Great Ones. You’re living it.
Basically, American consumers aren’t buying as much stuff as Wall Street’s talking heads think we are. This is due to a variety of reasons, including (but not limited to) pandemic restrictions, massive unemployment, expiring or expired COVID-19 relief aid, etc.
The U.S. economy was juiced after we all got those $1,200 checks, extra unemployment benefits and small business loans. Now, those checks are long gone, benefits have expired and the slush pool for loans dried up months ago.
To paraphrase the 1947 Tex Avery cartoon King-Size Canary: “Ladies and gentlemen … we just ran out of the stuff. Good night.”
As always, Wall Street looks forward when pricing in economic growth … and it got a little ahead of itself when the vaccine news hit. The reality is that it’ll take months before either Pfizer or Moderna’s vaccines are distributed enough to have a lasting impact on the U.S. economy.
Until then, the situation will get worse … potentially much worse. Several states are headed toward Lockdown 2: Pandemic Boogaloo, including California and Michigan.
Right across the river from me in Ohio, Governor Mike DeWine threatened to start shutting things down if people don’t follow COVID-19 guidelines and infection rates continue to climb.
Now, I know full well how tired all y’all are of the “market volatility” story. But being tired of it won’t make it go away.
Things will get better, yes. But we’ll have many bumps in the road — some possibly severe — before we return to normalcy. And if you don’t already have your volatility trading plan in action … where have you been?!
The Good: The Tesla 500
Tesla Inc. (Nasdaq: TSLA) was off to the races today. CEO Elon Musk’s wish was finally granted. TSLA will join the S&P 500 Index on December 21 and will replace a “yet to be named” company.
Many analysts expected Tesla’s addition to the S&P 500 back in September after the company banked its fourth-consecutive profitable quarter.
Never deterred, Tesla extended that winning streak to five in a row, and it apparently paid off.
The addition is somewhat problematic for S&P Dow Jones Indices — the company that maintains the S&P 500. Tesla is just so big, with a market valuation in excess of $386.8 billion, that S&P Dow Jones might roll out TSLA on the index in two separate batches.
Still, this “is a major feather in the cap for the Tesla bulls after much agonizing around not getting into the S&P 500 in early September,” said Wedbush analyst Dan Ives.
Every time I see his name, I think of that old rhyme and riddle: “On my way to St. Ives, I met a man with seven wives…” But I digress…
TSLA bucked the downtrend today, racing to an early 12% gain before settling off its session highs. Like I’ve said before, chasing Tesla right now is like chasing your tail. And the big red T isn’t the only stock to get hyped up about today in the new energy market…
The Bad: Wal-E-Mart
Honestly, there was no “bad” news from Walmart Inc. (NYSE: WMT) today.
The world’s largest retailer posted solid third-quarter results. Earnings spiked 17% to reach $1.34 per share. Revenue? That climbed 5.2% to $132.7 billion. Both figures topped consensus expectations.
Walmart also put the “E” in e-commerce. And that “E” stands for “exceptional.” Online sales rocketed 79% higher on the quarter at Walmart.com, while Sam’s Club’s e-commerce revenue spiked 41%. The company cited rapid uptake of Walmart+ subscriptions for the online boost.
So, if Walmart fundamentals were so good, why did WMT shares fall today?
That, Great Ones, is a sordid tale involving drugs and the Amazon…
The Ugly: Meet Your New Dealer
We’ve known for years that it would come: judgment day for pharmacies nationwide.
Today, the drugstore apocalypse finally arrived. Amazon.com Inc. (Nasdaq: AMZN) launched Amazon Pharmacy, an online and mobile prescription drug service.
The writing was on the wall back in June 2018 when Amazon snapped up prescription drug delivery service Pillpack for $753 million. Drugstore stocks nosedived on the news, but investors soon forgot.
Now, Amazon Pharmacy is a reality, boasting that “Friendly and knowledgeable pharmacists are available 24/7 to answer questions about medications.” Amazon’s pricing power on prescription medication is one thing, but anyone who’s ever dealt with Amazon’s customer service balked at that statement.
Customer: Hello, Amazon? You sent me Xanax instead of my regular insulin prescription.
Amazon Customer Service: I’m sorry to hear that. You can just go ahead and throw away the Xanax, and we’ll have your insulin overnighted to you tomorrow. Thank you!
Customer (silently): Score!
Which brings us to our public service announcement of the day: Don’t do drugs. Drugs are bad. M’kay?
All joking aside, Amazon Pharmacy’s launch is almost certain to hit Walmart right in the drug-sales breadbasket.
But WMT isn’t alone. Rite Aid (NYSE: RAD) is somehow still around and plunged 15% on the news. CVS Health (NYSE: CVS) shares were down more than 8%. Even the great Walgreens Boots Alliance (Nasdaq: WBA) plunged 9%.
The Beacons are lit! Boots Alliance calls for aid!
AMZN, meanwhile, added just shy of 1%, with gains limited by broader-market selling pressure. I can’t help but see Amazon Pharmacy as a boon for the company, especially in the midst of the current pandemic.
Meanwhile, in Tesla-adjacent news … Elon Musk continues to elude reason and elicit backlash. It’s Elon’s First Law of Twitter Momentum. Every trolling tweet prompts an equal and opposite trolling tweet … eventually.
Anyway, check out the Muskman’s latest Twitter tête-à-tête for our Quote of the Week.
Note: For those of you unfamiliar with the Twitter-verse, the top text is a reply to what’s at the bottom. (It’s quirky, confounded buffoonery, I know.) Check out Twitter sometime, though — your friends here at Great Stuff are on it!
With a possible COVID-19 case, Elon Musk quarantined and watched his SpaceX rocket launch remotely (because Bond-esque villains never look directly at explosions).
All the same, Elon cranked out redo tests, acting like DJ Khaled and ordering another one … another one … another one.
Not mentioned in Elon’s complaints is the backup testing following his mixed results, which “include follow-up (reflex) testing with a molecular assay when appropriate—such as the one Musk is getting.”
The moral of the story here: “Best three out of five?” isn’t a way to view your diagnoses, but Elon’s point about false positives with fast-response-time testing equipment is something that health care providers and clinical labs are aware of and take into consideration.
The investment angle here: Well, there wasn’t one initially, but you needed more Space Karen in your life.
Plus, all this proves that you can send astronauts to the International Space Station … you can get your innovative car company into the S&P 500 and flick a finger to the likes of Ford and GM … and still get dumped on by Twitter.
What do you think? Let us know at GreatStuffToday@BanyanHill.com.
Great Stuff: Speaking of Social Media…
Throughout this email, you may have noticed a few new (or old, depending on how hip to be square you are) ways to follow and keep in touch with the Great Stuff gang you know and love (or merely tolerate) on social media.
If you already follow us across the interwebs, thank you! We appreciate each and every time you share some ‘Stuff with your friends, family and semiwilling recipients.
Buuuuuuut have you taken a sec recently to sit down, summon your witty remarks and send along a message to our inbox? Drop us a line and let us know how you’re doing out in this cray market!
GreatStuffToday@BanyanHill.com. Send us your feedback, your eager questions, your pent-up rants and everything in between. We’ll catch you tomorrow! Don’t forget to follow us on social media too: Facebook, Instagram and Twitter.
Until next time, stay Great!
Editor, Great Stuff