The market opened in the plus column on Tuesday and gingerly worked higher even as the internals began to shift. The Russell 2000 turned lower after hitting a new all-time intraday high. A lot of high-flying tech names stumbled into the close.
I mentioned Consumer Staples (XLP) on Monday night. It was the best performing sector yesterday, led by PepsiCo (PEP), which posted a better-than-expected organic growth in North America.
S&P 500 Index | +0.31% |
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Consumer Discretionary (XLY) | +0.13% |
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Consumer Staples (XLP) | +1.02% |
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Energy (XLE) | +0.73% |
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Financials (XLF) |
| -0.42% | |
Health Care (XLV) | +0.34% |
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Industrials (XLI) | +0.14% |
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Materials (XLB) | +0.60% |
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Real Estate (XLRE) | +0.47% |
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Technology (XLK) | +0.32% |
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Utilities (XLU) | +1.10% |
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Hitting the Bricks
If I had the guts to say
Take this job and shove it
I ain't working here no more
-Johnny Paycheck
The cautionary tone of the market was reinforced after the U.S. Bureau of Labor Statistics (BLS) released its Job Openings and Labor Turnover, also known as the JOLTS report. There was a slight decline in job openings, 6.6 million from 6.7 million. The headline, a record number of folks calling it quits.
In May, a total of +212,000 quits climbed to 3.56 million to an all-time record (the data goes back to 2000). This lends more anecdotal evidence that big wage increases are right around the corner. Remember, these “quits” were featured prominently on Janet Yellen’s economic dashboard.
I’m not sure how important it is with this Fed, but there is no doubt a potential spike in wages, which is scaring the heck out of Wall Street. Nothing is a better harbinger of higher wages than a tsunami of folks telling the boss to “take this job and shove it.”
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In addition, it was another solid outing as the major equity indices have now staged a four-day rally in the midst of the so-called Trade War. I will say; however, yesterday’s session underscored a persistently frustrating issue for investors -you still can’t throw darts.
There were barely more winners on the NYSE than decliners and substantially more losers on the NASDAQ than winners. The good news is combined - those indexes saw 262 new 52-week highs against only 51 new lows.
Red Flag
After a nice bounce yesterday, the financials looked awful on Tuesday, as it was weighed down by regional banks, but those big money center institutions were also lackluster.
The S&P Financial (XLF) is now down 2.6% for 2018, but off 9.9% from its January 26th high point. That was the day President Trump went to Davos and threw the gauntlet down on the global elite establishment.
Of course, I think banks in this country have other issues. Small banks are just getting out of the shade of onerous regulations that should have never applied to them. Large banks continue to rely too much on gimmicks and trading desks.
Right now, Financial is in a descending triangle after making a series of lower highs. It’s going to make a decisive break, either reversing the trend or collapsing beneath key support.
That move probably begins on Friday when four big financial names report their quarterly financials. The following names are down year-to-date:
- (C) Citicorp -8.31%
- (JPM) JPMorgan -0.30%
- (WFC) Wells Fargo -6.68%
- (PNC) PNC Bank -4.53%
Financials are expected to see revenues up 4.5%, and earnings up more than 22.0%
Big Hopes for Big Earnings
After a monster earnings period for the first quarter, the Street is looking for lightning to strike again.
2018 Earnings Bonanza? | 1Q 2018 | 2Q 2018 |
Revenue | +8.4% | +8.1% |
Earnings Per Share | +26.6% | +20.7% |
With just three days to go until earnings season kicks off, I’m excited there have been so few earnings warnings. That is a great sign, although the key to breaking the market out to new highs for all the major indices will be a strong forward guidance.
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