Key Takeways From The GameStop Hearing

There have been many ways to describe this market of late, but I think the 2009 Rally is still characterized mainly by moxie – the determination to move higher. We caught a glimpse of that in yesterday’s session. Every sector in the S&P 500 was higher with impressive reversals in growth niches and solid strength in Financials, while Consumer Staples is getting a moment in the spotlight.

But the market is still vulnerable, and the weight of recent gyrations is causing weakness and enhanced jitters. The NASDAQ snapped the longest losing streak in months, but it finished with pretty ugly internals- far more decliners than winners and bigger, and more down than up volume.

NASDAQ

Although breadth was awful, the NASDAQ held at the trendline, which has been a great reversal point several times in the past year (see chart).

There was a fair amount of bottom-fishing in names like IPG Photonic (IPGP), which was up 7%, but down 15% over the past five sessions. And yet, it’s still up 37% in the past year. Many of these names are simply victims of their success.

Gold

Gold climbed above $1,800 and might attract some more buyers if it can build momentum.

GameStop Hearing

The House Financial Services Committee held its third hearing in the aftermath of the GameStop fiasco. Here are some key comments from Securities and Exchange Commissioner Gary Gensler and Robert Cook, president and CEO of the Financial Regulatory Authority:

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• Short selling: there has to be greater transparency.
• Payment for order flow: can be a conflict and should not be confused with rebates.
• Chat room collusion: there is a right to free speech, which is different than efforts to defraud.
• Robinhood & Trading halts: risk management and access to the market are critical & brokers must be prepared to provide liquidity.
• Bitcoin trading on large exchanges is not protected.

To see the chart, click here.

I came away hopeful the bullies on Wall Street will get some pushback, while investors should have never been told they can only be sellers and not buyers of any stock position(s). Plus, there is no way hedge funds should be able to short 140% of the float of any stock again.

Earnings Keep Rocking

This earnings season has been perhaps the most frustrating ever. The beats have been magnificent.  Guidance has been subliming. 

419 S&P 500 Companies Reported:

Earnings

• 87% beat
• 10% missed
• 50.2% blended average gain

Revenue

• 77% beat
• 23% missed
• 12.4% blended average gain

Portfolio Approach

Yesterday, we took profits in Consumer Discretionary and in Energy our Hotline Model Portfolio. If you are not a current subscriber to our premium Hotline service, email Info@wstreet.com to get started today. 

Today’s Session

The jobs report failed to live up to the hype, and the Fed is breathing a sigh of relief, as are growth stock investors.

Job Openings have come all the way back…

…but participation is essentially stuck near the all-time low point.

Employment Report

At 266,000; the April jobs report is the single biggest miss in history, as Wall Street was officially at 1.0 million consensuses, but several analysts modeled 2.0 million.  Not only was April a disaster compared to estimates, but March was also given a major haircut, revised to 770,000 from 916,000.

To see the chart, click here.

The bond market sniffed this out. Yields were cool all week long, even after Janet Yellen talked about higher rates and the stock market swooned and VIX erupted higher. Bonds were as cool as the other side of the pillow.

This is great news for growth stocks, which felt the heat of potentially higher rates.   NASDAQ futures spurted higher on the news.