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Profit from the Pros By Kevin Matras Executive Vice President
Stocks Down As Increase In Coronavirus Cases Overshadows Strong Economic Reports
Stocks closed lower on Friday and lower for the week.
The growing concern over rising coronavirus cases weighed on stocks, overshadowing the better than expected consumer spending report which showed a sharp 8.2% increase vs. last month's upwardly revised -12.6%.
But the increase in COVID cases was the main story on Friday. Although, there was some positive news for perspective. For example, it was great to read that the COVID-19 inpatient count in TX, according to a Texas hospital CEO, has been "misinterpreted", and that the "level of alarm" is "unwarranted."
This was confirmed by a spokeswoman for the Texas Department of Health Services, which said that the state is categorizing every inpatient in the state with a positive COVID-19 test as a COVID-19 hospitalization, "even if the person is admitted to the hospital for a different reason."
The CDC also said on Friday that half of the new cases in the U.S. are from people under the age of 35. That doesn't diminish the count, but it does reduce the consequences as that age group is not a high risk group.
Nonetheless, cases are on the rise in TX, hospitalization or not. And on Friday, TX Gov., Greg Abbott, shut down bars and scaled back restaurant dining. This follows his comments on Thursday when he said he would be temporarily pausing the state's next phase of the reopening due to an increase in cases and hospitalizations.
And FL Gov., Ron DeSantis, has ordered bars to stop selling alcohol, effectively shutting down bars in his state as well as a precautionary measure.
But it's important to note, while 16 states are seeing an increase in cases due to the economic reopening and weeks-long protests, it's also important to note that 34 states are not seeing an increase.
Either way, the markets will be watching these developments closely. And if reality proves to be better than people's fears, stocks should quickly resume their winning ways.
Remember, stocks surged by more than 40% in 3 short months. There was bound to be a pullback one of these days. And now it's here.
But don't get distracted from the bigger picture. The economic rebound is underway. And we're seeing great pent-up economic demand being unleashed virtually everywhere.
That's why top analysts are calling for unprecedented GDP growth in Q3, more record growth in Q4, and the largest full year GDP growth in 2021 in 38 years.
Use this pullback as an opportunity. Get rid of your laggards. Decide which of your winners you want to add to at these lower prices. And make a plan for which new stocks you want to add to your portfolio.
Because when this dip is over, it looks like there's a lot more upside to go.
So make sure you're taking full advantage of it.
See you tomorrow,
Executive Vice President, Zacks Investment Research
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