Attention-Deficit Disorder

On Thursday, investors received a decidedly unwelcome reminder that stocks can (and will) occasionally fall, recent developments notwithstanding.

There for a while, it was beginning to seem as though the very concept of a “selloff” had been relegated to the theoretical realm — an event that, while theoretically possible, isn’t something anyone is likely to actually experience. Kind of like winning the lottery. Which is ironic, because part of what created the parabolic surge in tech shares over the past two weeks was the buying of lottery tickets (i.e., single-name calls).

But, it turns out it’s still possible for “buyable” dips to occur, although the definition of “buyable” is always arbitrary. In many cases, what looks eminently “buyable” today appears as a (very sharp) falling knife with the benefit of hindsight.

In any event, Thursday’s action makes for an interesting setup ahead of Friday’s jobs report and the long US weekend. A downside miss could be a match on dry kindling.

Jobless claims painted a mixed (and convoluted) picture and not only was ADP a big miss earlier this week, but the revision to July’s headline figure preserved the disparity with NFP.

Thursday’s other key data point was lukewarm. ISM services printed essentially in-line at 56.9, but the new orders index decelerated markedly to 56.8 from 67.7.

This contrasts a bit with this week’s robust ISM manufacturing report, although you can partly square the circle by pointing to a five-month low in services inventories and an increase in backlogs.

Meanwhile, the trade deficit ballooned to the widest in a dozen years last month, data out Thursday showed. While the breakdown makes this less amusing (in the context of the president’s war on trade deficits) than it appears on the surface, there’s still something glaringly (and tragically when you consider part of the “problem” is the pandemic) ironic about the situation.

This is mostly down to a narrowing of the services surplus, whereas the administration’s obsession is typically focused on bilateral goods trade. And we all know the pandemic has created distortions, rendering historical comparisons virtually meaningless. Still, the fact remains that on Donald Trump’s watch, the US trade deficit (which he variously promised to “fix”) is the widest since early 2008.

“For all the bullets fired in the trade war, it did nothing to change the trend of the trade imbalance”, Bloomberg’s Ye Xie wrote Thursday, adding that this “highlights why the dollar is likely to struggle in coming years”.

Speaking of deficits, the sheer number of tweets and various “quick takes” that proliferated on Thursday in the wake of the tech selloff underscores my broader criticism of America — namely that the nation collectively suffers from an acute case of attention-deficit disorder, which means  most market participants (especially newly-minted Robinhood types) aren’t likely to care much about the data. Not when Tesla is down three days in a row.