Daily market trading continues to mimic an air hockey game where the puck races back and forth but mostly it remains in play. Themes and styles change, but money, like a puck riding on a cushion of air, just bounces around. Occasionally, all major indices are down on the same session, but for the most part, the puck is in play. Yes, market breadth remains suspect, but players are loath to move to the sidelines, and I like that (although I suck at air hockey).
Market Breadth | NYSE | NASDAQ |
Advancing | 1,787 | 2,021 |
Declining | 1,525 | 2,326 |
52 Week High | 160 | 131 |
52 Week Low | 48 | 109 |
Up Volume | 2.42B | 1.68B |
Down Volume | 1.41B | 2.23B |
Yields Climb Tech Slides
The S&P 500 inched up to a new record, even though only eight out of eleven sectors were positive on the day. Rotation saw buyers jump back into Energy, which has struggled, and Financials, as the counter to weakness in Technology.
S&P 500 Index | +0.10% | |
Communication Services XLC | +0.19% | |
Consumer Discretionary XLY | +0.39% | |
Consumer Staples XLP | +0.72% | |
Energy XLE | +1.76% | |
Financials XLF | +1.05% | |
Health Care XLV | -0.23% | |
Industrials XLI | +1.02% | |
Materials XLB | +1.51% | |
Real Estate XLRE | -1.07% | |
Technology XLK | -0.72% | |
Utilities XLU | +0.10% |
The ten-year yield broke through its trading channel last week after hitting a double bottom. There isn’t a lot of obvious resistance on the chart until 1.53%, which would put lots of pressure on tech stocks, as the narrative of swifter Fed tapering would get a boost.
Out of the Shadows
The good news for those that consider the market overvalued based on traditional metrics, like price to earnings (PE), when the top ten are removed from the equation the market becomes a whole lot more reasonable.
By the way, the outsized influence of mega cap growth is justified, considering the top ten bring in 33.8% of the S&P 500 earnings and 28.9% of the market cap.
Portfolio Approach
There are no changes to our Hotline Model Portfolio.
Today’s Session
The major indices have turned positive on the CPI report, which was actually better than anticipated. Inflation remained elevated in July, at 5.4%, year over year, albeit flat from the prior month’s read, and a tad above expectations of 5.3%. Inflation remained at a 13-month high. On a monthly basis however, prices rose 0.5 percent in July, which was the lowest increase since February 0.4%.
Core CPI, ex-food and energy, which is the most important metrics for the Fed, rose 4.3% year over year. This speaks to the Fed transitory narrative regarding inflation. Core CPI, was down month over month, coming below forecasts.
To see the chart, click here.
Actual | Forecast | Previous | |
CPI (y/y) | 5.4% | 5.3% | 5.4% |
Core CPI (y/y) | 4.3% | 4.3% | 4.5% |
CPI (m/m) | 0.5% | 0.5% | 0.9% |
Core CPI (m/m) | 0.3% | 0.4% | 0.9% |
Food and shelter saw the steepest pricing pressure. Higher labor and material cost, including a shortage of chips has hurt industries, such as autos, and thus prices continue to skyrocket for both new and used vehicles. Energy levels moderated.
Prices are recovering from categories that were impacted the most during Covid-19, such as apparel, entertainment, and travel. And while, they should recover, the impact of Delta and other variants remains to be seen.
CPI Highlights | m/m | y/y |
Gasoline | 2.4 | 2.5 |
Used vehicles | 0.2 | 41.7 |
Bedroom furniture | 1.6 | 8.6 |
Men’s suits | 2.9 | -6.1 |
Women’s dresses | 5.5 | 18.8 |
Hotels | 6.8 | 24.1 |
Owner equivalent | 0.3 | 2.4 |
Rent | 0.4 | 2.9 |
Amazon (AMZN) just announced that it is opening a $1.5 billion air hub in northern Kentucky, which will be the center for its U.S. air cargo operations. This ne facility will help reduce delivery times to more parts of the country. AMZN is up a tad on the news to $3331.95.
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