Once again, on Thursday, the market was able to climb off the canvas, and put in an impressive session that lifted both the S&P 500 and NASDAQ Composite into positive territory by the closing bell.
Again, you have to believe the dots were connected and go back to a Federal Reserve that’s been extremely friendly and responsive to the rally.
I’m beginning to wonder if the Fed needs the rally as much as the rally needs the Fed. The strong rally is key to the wealth effect.
For stocks, every time the rally looks like it’s down for the count, it gets its spinach and hopes for a longer accommodation.
Unsettled Science
I read an old Business Insider article that claims the “Popeye” story was built on a scientific lie or fib (“Popeye” wouldn’t deliberately pass along false information).
Apparently, a German chemist named Erich von Wolf was researching the nutritional benefits of spinach and accidentally wrote its iron content as 35 grams.
It turns out it was only 3.5 grams. Over the ensuing years, the myth of spinach only grew stronger (see what I did there); then, on January 17, 1929, E.C. Segar’s “Popeye” made its comic strip debut in Thimble Theatre.
Just think how many times “Popeye” beat Brutus and saved the day under the false assumption he was getting all that strength from spinach. Perhaps this market is stronger than it thinks. But as long as it needs the Fed to come to the rescue, investors are tethered to action that comes straight out of a comic strip.
Bad Breadth - Again
It’s just downright ugly at this point. Decliners dwarfed advancers by almost 3:1, while new lows were more than 600% greater than new highs.
Market Breadth | NYSE | NASDAQ |
Advancing | 968 | 1,288 |
Declining | 2,351 | 3,132 |
52 Week High | 47 | 46 |
52 Week Low | 118 | 292 |
Up Volume | 876.29M | 1.67B |
Down Volume | 3.56B | 2.46B |
The Big Boys Have Broad Shoulders
Move over, Atlas - the mighty names in the trillion-dollar club held up the market just when it looked like it would drown in a pity party meltdown.
To see the chart, click here.
Groundhog Day: COVID Version
Great work from Charlie Bilello@charliebilello on the latest spike on the virus.
Cases climbed to 139,000, the highest since February 2 or Groundhog Day. Positive rate climbing to 11.4% while hospitalizations hit 83,222, the highest since February 6th and 693 deaths, the highest since May 4th.
Deaths aren’t rising as fast as other metrics, but nothing is turning down yet, and that is a cause for concern.
To see the chart, click here.
I know high-frequency data is slipping, but we are going to bounce back from the Delta fast and learn even more about not succumbing to the virus.
It could clear the way for the Fed to taper and the market may gyrate lower, but it’s the real elixir as we must get back to normalcy.
Portfolio Approach
We added to Consumer Discretionary yesterday in our Hotline Model Portfolio.
Today’s session
Earnings out from Deere (DE) topped estimates on the top and bottom line, and raised its full year guidance.
-Earnings $5.32 vs. consensus $4.58
-Revenues +32.5% $10.4B vs. consensus $10.33B
Guidance
-Net income for FY21 expected ~$5.7B to $5.9B, prior guidance $5.3B to $5.7B
Revenue grew across all equipment segments with operating margins continuing to surge.
Production Ag | Revenue | Op Profit | Op Margin |
Reported | $4,2Billion | $906 Million | 21.3% |
Change | +29% | +50% | 18.4% |
Small Ag | Revenue | Op Profit | Op Margin |
Reported | $3.1 Billion | $583 Million | 18.5% |
Change | +32% | +73% | 14.1% |
Construction | Revenue | Op Profit | Op Margin |
Reported | $3.0 Billion | $463 Million | 15.4% |
Change | +38% | +9.4% | 9.4% |
The futures have improved throughout the morning, with the Dow still looking to open lower, while the Nasdaq and the S&P 500 are flat to slightly positive. WTI is continuing its decline, slipping to another 1.3% to $62.65.
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