Now, the mist across the window hides the lines
But nothing hides the color of the lights that shine
Electricity so fine
Look and dry your eyes
We are tired of all the darkness in our lives
With no more angry words to say can come alive
Get into a car and drive to the other side
Into the night, into the light
Steppin’ Out - Joe Jackson
This market is all about folks stepping out. People are eager to get out and stay out and bask in the sunshine of life and in the cool night skies of freedom.
The top fourteen winners in the S&P 500 are considered reopening trades. There has been a string of false starts, but this time, it feels real.
Ironically, while the Omicron variant might be less lethal, the Delta variant is spreading rapidly. So, perhaps there will be a point when the market decides we have to live with the virus – and still find ways to thrive.
To see the chart, click here.
Message of the Market
The only thing you need to know about the market these days is where Pfizer (PFE) and Moderna (MRNA) traded (see red arrows). If they are up, chances are the broad market is down, and if they are down chances, are the broad market is higher.
To see the heatmap, click here.
Yesterday, the session began in a decidedly cautious manner, but Communication Services was up more than the Utilities sector by the close. That underscores A) hope on Omicron and B) value-seekers turning over rocks in the growth patch – particularly Communication Services stocks like Facebook (FB).
Select Sector SPDR Fund
Market breadth improved, but 52-week lows remain high, especially on the NASDAQ Composite, where 657 names finished with that dubious distinction. There is some work to be done to get the broad market to better health.
52 Week High
52 Week Low
Yesterday, we added a new position in Real Estate and this morning we are adding a new position in Consumer Discretionary in our Hotline Model Portfolio.
More good news on Omicron, or I should say no bad news, as outside of its transmissibility, it seems tame. The markets love that, but once that coast is clear, the focus will return to the Federal Reserve.
Meanwhile, we are trying to stay focused on fundamentals even as conjecture is moving the needle a lot more than normal.
The 3Q 2021 Nonfarm labor productivity in the U.S. fell an annualized 5.2% from the preliminary estimate of 5.0%, and against estimates of a 4.9% drop.
It was the largest decline in quarterly productivity since the second quarter of 1960.
The news took a little starch out of the morning rally and adds questions about the productivity miracle that is needed for a roaring 2020s. The news helped the bond yields and maybe moved the needle on potential rate hikes out further.