Wednesday was another up session for the market. The Federal Open Market Committee (FOMC) release was greeted with a yawn after it was preempted by a parade of talking Fed heads that will be eclipsed today. Even stocks limped into the close. There was compelling action that underscored the oversold nature of the market and shift in bias.
For the first time since the government shutdown began, I think Washington negatively impacted the stock market. It wasn’t the shutdown, but it was the level of dysfunction that goes beyond gridlock, which Wall Street normally cheers. The place was established to encourage compromise.
S&P 500 Index | +0.55% |
Communication Services (XLC) | +0.11% |
Consumer Discretionary (XLY) | +0.70% |
Consumer Staples (XLP) | -0.76% |
Energy (XLE) | +1.78% |
Financials (XLF) | +0.53% |
Health Care (XLV) | +0.63% |
Industrials (XLI) | +0.90% |
Materials (XLB) | +0.13% |
Real Estate (XLRE) | -0.44% |
Technology (XLK) | +1.42% |
Utilities (XLU) | -0.63% |
Reversals
Three names overcame the pre-opening pressure on lower company guidance, only to finish the session higher. I love these kinds of actions as a broader indicator, but also to make some money.
- Apple (AAPL) seems to have bad news or negative speculation each morning, but the stock rallied 1.7%.
- Skyworks (SWKS) is an Apple supplier and issued a warning that must have already been baked into the share price as the stock finished the session +3.8%. The stock is still deeply oversold.
- Lennar (LEN) had good numbers, but their lukewarm guidance triggered early selling. Management turned things around during the conference call, convincing enough observers that an increase in traffic was a sign the worst is over. It didn’t hurt. We learned mortgage applications surged 23% last week. Last night, KB Home (KBH) beat the Street, and initial reactions saw shares rally more than 5.0%.
Also, after the close, Bed Bath & Beyond (BBBY) rocketed 16% higher, and Union Pacific (UNP) continues its amazing moves.
Chip Ahoy
Computer chip stocks rocked yesterday as a proxy in their burgeoning hope for resolution on the trade battle. On that note, I will say its clear chips ran out of gas before the battle was joined. However, there is no doubt recent selling has been exaggerated, leaving most oversold.
Portfolio Approach
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Communication Services | Consumer Discretionary | Consumer Staples |
2 | 4 | 1 |
Energy | Financials | Healthcare |
1 | 1 | 1 |
Industrial | Materials | Real Estate |
3 | 4 | 0 |
Technology | Utilities | Cash |
1 | 0 | 2 |
Today’s Session
Equity futures have been under pressure all morning long and a short-lived effort to move to unchanged was derailed by earnings warnings.
Macy’s (M) is leading the parade taking retailers lower after disappointing Christmas numbers. The news is more of a shocker considering management guidance. Consequently, the company lowered its own guidance with the high-end of $4.00 from $4.30.
Earlier in the morning, it looked like Target (TGT) and Bed Bath and Beyond (BBBY) would put a spark into retail, but a slew of disappointments from other names will see retail getting crushed at the start of trading.
American Airlines (AAL) also warned, and now, the high end of its guidance is lower than consensus $4.60 versus $4.62.
The Fed
Still the Federal Reserve will dictate how this session finishes and already one Fed official has put a floor under the market into the open.
Let’s keep our powder dry.
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