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The economy got more good news yesterday as retail sales data in May beat expectations (think: Miracle at the 1980 Winter Olympics). The Department of Commerce reported that retail sales were up 17.7%, absolutely destroying the estimate of 8%. These must be the same economists who botched May’s unemployment numbers…
Before you break out the champagne, the data isn’t that great compared to other recent data. Total spend was $485.5B in May, compared to $527.3B in February and 6.1% lower than May of one year ago.
But remember, we saw a 14.4% drop in retail sales during April. And keep in mind that the only thing investors like more than a beat on estimates is a 9:00 reservation at Dorsia. Pre-market, the Dow was up as much as 900 points following the news.
So, where’s the bubbly?
In the words of Lee Corso, “not so fast my friend.” The markets ambitious start was interrupted by Jay Powell doing his best interpretation of Brutus. Yesterday, the Fed giveth, and today, it taketh away.
J-Poww warned Congress in his semiannual testimony that there is still “significant uncertainty” as it relates to the economic recovery… in case his decision to buy individual corporate bonds wasn’t proof enough that we’re so f*cked. Specifically, he called out risks for small businesses to be able to survive a slower recovery.
But that wasn’t the only bad news. Word from Beijing is that it is raising its Covid-19 response level, closing schools in the capital as it deals with another outbreak of the not-quite-as-novel-anymore coronavirus. It’s unclear to what extent the virus is spreading throughout the country.
That news caused the Dow to drop mid-day before closing up 526 points.
The bottom line..
In between it’s high over 900 and close of 526, the Dow dropped all the way down to 130 points above open during mid-day trading. After clawing back from down 700 points on Monday it’s safe to say, volatility is back.
Davey Day Trades and his army of retail investors are making the VIX one of the only sure winners out there these days. In fact, a hedge fund, Formidable Fund has been handsomely rewarded for its long VIX position. It took a risk when the news of coronavirus first came out and is up 39% this year.
Water Cooler Talking Point(s)
💧 “I’d dump all my money into the VIX if I didn’t lose it on weed stocks…seriously don’t take trading advice from me.” (Ian, The Water Coolest HQ)
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