Apple Of My Eye (See You In Tulsa)

US equities chopped around on Friday, as expected, with more incrementally negative headlines on rising coronavirus cases weighing on sentiment headed into the weekend.

Apple said it will temporarily reclose 11 stores in four states out of what the company called “an abundance of caution”. Most locations across the country had been reopened, albeit with some restrictions, including curbside pickup and by-appointment-only shopping.

The affected locations are in Arizona, Florida, North Carolina and South Carolina.

There was no timeline for reopening the newly shuttered retail outlets beyond the company’s statement to Bloomberg, which said Apple “look[s] forward to having our teams and customers back as soon as possible”. Shares were not amused, and neither was the broader market, which swooned when the news first crossed.

This will (rightly or wrongly) be seen as a possible harbinger of what’s in store for the world’s largest economy if what Larry Kudlow has called “relatively small bumps” turn into an undeniable “second wave”. The figure shows new COVID-19 cases in Tulsa County, where infections jumped by a record this week. The trend is not difficult to discern.

Against the advice of some Oklahoma state health officials, Donald Trump will tempt fate Saturday by holding what Brad Parscale described as a “convention”-like rally in Tulsa. The indoor event is seen attracting as many as 100,000 people in total. The arena itself can only hold 20,000, but some of the expected overflow will be directed to a nearby convention center which can hold an additional 35,000. Thousands more with gather in the streets.

Protests are assured, and the mayor issued an executive order calling for a downtown curfew. Apparently, authorities had credible information that “organized groups” were “planning to travel to the state”.

Trump on Friday appeared to threaten the protesters. “Any protesters, anarchists, agitators, looters or lowlifes who are going to Oklahoma please understand, you will not be treated like you have been in New York, Seattle, or Minneapolis”, the president said. “It will be a much different scene!” Later, he tweeted that “there will be no curfew tonight or tomorrow for our many supporters attending the #MAGA Rally”.

Who knows. The point is, Trump is chancing a super-spreader event, and the governor doesn’t seem particularly concerned.

“Oklahoma is ready for your visit”, Gov. Kevin Stitt said Thursday, while participating in a roundtable event at the White House. “It’s going to be safe and everyone’s really really excited”, he added, before saying the following about his state’s reopening push and the subsequent increase in cases:

And so, we were one of the first states that has safely and measurably reopened. We went through – we went to phase three on June 1st. So we’re 56 days into our reopening plan, and currently we have under 200 people in the hospital across the state of Oklahoma. And we had an uptick in the number of cases, and so the – some of the media tries to talk about that. But we knew we were going to have an increase a little bit, because we’re 56 days into reopening.

“In the last two weeks, more than half of the cases have been people under 35 because people are getting back out”, Stitt remarked earlier this week. The state health department says 54% of new infections over the past two weeks are in citizens 35 or younger.

Arizona logged a record rise in cases Friday, and infections in Florida rose more than 4%.

Hopefully, Trump’s rally will come and go without incident, although that seems optimistic on a number of fronts.

In any event, despite being plagued (no pun intended) by “second wave” stories, US equities managed to gain for a fourth week in five.

The economic data was mixed. The latest read on the labor market was disconcerting as continuing claims are proving to be quite sticky. That said, investors cheered blockbuster retail sales figures.

Oil rose above $40 this week, a three-month high. 10 additional rigs were idled in the US, Baker Hughes said Friday. It was the 14th consecutive week during which oil exploration contracted.

There’s some concern that markets could be more vulnerable to a near-term pullback next week thanks to the collision of several technical and flow factors (more here).

JPMorgan addressed some of those issues in a late Friday note. “Many clients have been asking us about the impact of fixed-weight portfolio rebalances into quarter-end”, the bank’s Marko Kolanovic wrote, adding that while equities have outperformed bonds, “the month-end effect is much stronger (~20% reversion) than quarter-end effect (~5% reversion)”.

Stocks have outperformed by just 4% on the month, and while the bank does expect some rebalancing out of stocks, it would only be “a modest reversion” worth perhaps 70-190 bps for the S&P, the bank says. Generally speaking, JPMorgan expects volatility to decline into the summer, helping to set the stage for re-leveraging from the variety of investor types where positioning is still very light.

This week marked what might be remembered as peak absurdity in trading of “insolvency stocks”, as Hertz was forced to abandon a ludicrous idea to sell shares in bankruptcy after the SEC effectively stepped in to protect retail investors from getting swept up in a scheme to raise funds to repay creditors higher up in the capital structure.

UBS Wealth Management is telling its rich clients what they should already know — namely to stay out of the frenzy.

“The stocks that I hadn’t heard of three months ago all of a sudden are the most active — that’s not where investors go, that’s where traders might go or hobbyists might go”, the bank’s Charles Day is quoted as saying, in a Bloomberg piece published Friday.

“If you’re a wealthy investor, you have to avoid thinking that you’re missing out on huge returns in these stocks”, he added.