Headwinds - Kuby's Commentary 07.19.2021

Whereas the major headline indexes set record highs again on Monday, the undertone of the market continues to soften, with declining issues increasingly outnumbering advancing issues. In fact, excluding the Fab FAANG Five (Facebook, Apple, Amazon, Netflix, & Google) plus Microsoft, the rest of the market has been primarily in retreat for the past month, with Small-Cap and Value faring the worst. On Friday, Dr. Gottlieb expressed his concern that the U.S. is significantly undercounting the number of Covid delta infections, making it difficult to know whether the highly transmissible strain is causing higher-than-expected hospitalization and death rates. "Perhaps at the core of these recent movements is concern that the Delta variant of Covid-19 might disrupt the recovery later in the summer or in the fall. In any event, small caps have been very moody recently, exhibiting substantially more day-to-day volatility than their big-cap brethren." We would add that the future economic impact of this likely spread of the virus has created a stiff headwind for the "reopening" businesses. Regarding the inflationary pressures, Tuesday's consumer price index came in very hot at 5.4%, making three months in a row of elevated prices. The good news is that corporate earnings reports have been extremely strong. The bad news is that market forecasters are discounting these results as representing peak earnings. U.S. stock futures followed the global markets lower over the weekend, and the "Fear Index" (VIX) jumped 6% going into Monday's trading session. Earnings season will be in full swing this week, with 79 S&P 500 companies scheduled to release results. Stocks on the Move: CarParts.com (PRTS), Westwood Holdings Group Inc (WHG), Madison Square Garden Entertainment Corp (MSGE), Pitney Bowes Inc (PBI), 1-800-Flowers.com Inc (FLWS), Century Casinos Inc (CNTY)