After a seesaw session on Wednesday, major indices finished higher as the ten-year treasury yield settled comfortably above 3.00% to 3.03%. However, investors adjusting to the idea that a 3.0% yield on the ten-year isn’t the death knell for stocks is a critical part of reigniting the next rally attempt.

In addition to learning to live with higher rates, the market needs continued strong earnings and economic data. I see too many signs and signals that the economy and stock market have not peaked, nor are the current lower valuation metrics warranted.

Earnings

Without a doubt, the stock of the day was Boeing (BA), also known as the poster child of President Trump’s misguided notion of forcing smart and fair trade with China. It wasn’t known as that yesterday because the shares were higher - actually going up on good news. Going into the session, conventional wisdom (if I may call it that) was to sell into pops on good news because it couldn’t get any better than this… or so they say.

I liked yesterday’s session not because the market finished higher, but because investors fought off the urge to sell great stocks on great news. 

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I don’t believe this is an Orwellian groupthink thing or a Pavlovian response, but the herd is being manipulated. A lot of investors are selling, and someone was buying that weakness -witness the reversals:

Thus far, earnings season has been a smashing success with respect to actual results and guidance. This is something investors must keep in mind as they grapple with increased volatility and the anxiety that comes with trading ranges of 300 to even 700 Dow Points in a single session

Economic Proxies

As the stock market grapples with the notion that this is as good as it gets, there are so many other signs this locomotive is just leaving the station. Housing is on fire with existing and new home sales and strong earnings coming from PulteGroup (PHM) and other homebuilders. The labor shortage and higher lumber prices will continue to be a challenge, but people are saying “home sweet home,” again and that’s great.

That brings us to the stock of the day (not named Boeing) Norfolk Southern (NSC), which rallied on financial results that saw numerous records, including operating ratio, net income, and earnings per share. The key business segment was intermodal which has powered truck and rail earnings beats for the quarter. I like intermodal as a proxy for the economy, especially the online retail economy.

Intermodal Macro Drivers:

Crude Gushing

The most compelling action came in the oil patch, which saw crude climb higher, even after a huge increase in inventories when a huge drawdown was expected. Crude-oil related stocks continue to act great, making energy the top performing sector.

 

S&P 500 Index

+0.18%

Consumer Discretionary (XLY)

 

+0.41%

Consumer Staples (XLP)

 

+0.18%

Energy (XLE)

 

+0.80%

Financials (XLF)

-0.07%

 

Health Care (XLV)

 

+0.45%

Industrials (XLI)

 

+0.29%

Materials (XLB)

 

+0.54%

Real Estate (XLRE)

-0.33%

 

Technology (XLK)

 

+0.02%

Utilities (XLU)

 

+0.02%

 Market Breadth

Although major indices rebounded, market breadth wasn’t anything impressive: 

NYSE

NASDAQ

After the close, there was a parade of earnings releases:

Stocks Rocketing Higher

Stocks Under Pressure

Today’s Session

I’m a little surprised that equity futures aren’t higher on the strength of Facebook and other high-profile names indicating much higher before the opening bell.   We have been combing through all those results, not just to assess those companies, but also for implications for the broad economy.   Speaking of leadership, I’m watching the chips closely, as Micron is poised to make a huge percentage move at the start of trading.