Apple, Amazon and Employment Report Lead to a Big Friday

As I wrote about the other day, markets were not happy that second rate rating firm, Fitch, using an odd combination of stale and subjective data downgraded the debt of the U.S. Stocks and bonds were hit hard, each losing more than 1%. As I tweeted on Thursday morning, more selling should be expected before the first short-term low is in.

My tune remains the same. The bull market is alive and reasonably well. This pullback was one I started writing about last week as the calendar was about to turn. In our non-aggressive strategies, we raised some cash and pruned some positions, but nothing wholesale or major as I continue to believe this is a single digit decline that becomes interesting to buy at -5%. Right now, too many indices, sectors and stocks look like they should be sold into strength.

Apple and Amazon reported earnings after the close on Thursday. It is not a stretch to forecast that they would both beat. And it doesn’t really matters anyway. What I am most interested in is how they trade on Friday which will be impacted by the employment report. Apple is more extended without a pullback, but neither are in a strong risk reward position. We own both in our Unloved Gems strategy and Apple is the one I would consider hedging.

I do not have strong conviction on how the jobs report plays out. I will take a shot in the dark and say that the economy doesn’t create as many jobs as the past few months. But that’s just based on anecdotal evidence from conversations. Market reaction should be favorable if that’s the case as Goldilocks becomes more and more realistic.

I really can’t comment about the upcoming weekend in New England as I am traveling across the pond. It has been great to have my daughter home. The Yankees really stink and NFL football seems to be gearing up.

On Wednesday we sold PCY, EMB, levered S&P 500 and some HYG. On Thursday we bought SPY, more PDBC and levered S&P 500. We sold JNK and HYG.