It was another good day for the market, considering these are the lazy days of summer when no one is around. I can leave the house an hour later than usual and make it in almost the same time it would take when everyone is back from the Hamptons.
S&P 500 Index | +0.21% |
Communication Services (XLC) | +0.62% |
Consumer Discretionary (XLY) | +0.79% |
Consumer Staples (XLP) | -0.71% |
Energy (XLE) | +0.51% |
Financials (XLF) | +0.39% |
Health Care (XLV) | 0.00% |
Industrials (XLI) | +0.74% |
Materials (XLB) | +0.39% |
Real Estate (XLRE) | -0.91% |
Technology (XLK) | +0.16% |
Utilities (XLU) | -0.72% |
The Message of the Market
That said, the dynamics of the session was very telling. Money came out of high-yielding safer sectors in real estate and utilities, and consumer staples were the big losers. In fact, The J.M. Smucker Company (SJM), a name I thought was already oversold, took the sector down on flaccid earnings results.
Americans simply aren’t paying up for basic consumer staples. This might hasten consolidation in the sector, but it also means would-be premiums would be lower.
Conversely, we saw homebuilders roar after Toll Brothers (TOL) posted strong earnings, lifting Consumer Discretionary (XLY) sector to the top performer of the session. The homebuilders absolutely have been crushed this year. It will be interesting to see if value buyers flock in today.
On the topic of value, underperforming tech names, including chips, fetched a lot of interest yesterday. There is huge value there, although these names are a lot more volatile than traditional value investments.
Market breadth was very impressive: 361 new highs versus 54 new lows between the NYSE & NASDAQ.
Milestone
Yesterday, several equity indices reached all-time highs Intraday, including the S&P 500, Russell 2000, and the Dow Jones Industrial Average.
“Why should I invest in the stock market?”
Consider yesterday’s milestone, and what it would have meant to your life if you would have invested $10,000 or maybe $100,000 over time, or simply didn’t sell in a panic. You would have beaten inflation and be positioned to attain the things that are the foundation of the American Dream.
Climbing Out the 2009 Abyss | Mar 9, 2009 | Aug 21, 2018 | Change |
S&P 500 | 676 | 2867 | +324% |
Dow Jones Industrial Average | 6547 | 25848 | +295% |
Climbing Out the 2009 Abyss | Mar 9, 2009 | Aug 21, 2018 | Change |
College 4 year Private | $29,260 | $34,740 | +19% |
College 4 year Public | $8,040 | $9,970 | +24% |
New Car | $28,970 | $34,670 | +20% |
New Home (Median) | $205,100 | $302,100 | +47% |
College source: College Board
Housing source: https://www.census.gov/construction/nrs/pdf/uspricemon.pdf
Political Intrigue or Injury?
We’ll see how all the late breaking news interferes with the stock market rally. I’m not sure to what degree if any - it will curb investor enthusiasm. The Dow pulled back into the close 58 points, but it also pulled back the last three sessions (49, 59, and 38 points).
Meanwhile, after the close, Urban Outfitters (URBN) was higher on earnings, continuing the trend of strong results from retail and reflecting a very robust and confident consumer.