For the second consecutive session, the market saw Boeing (BA) in the spotlight, while the rest of the market was quietly moving higher on Tuesday. All the S&P 500 sectors were higher, except for Industrials that were dragged down by shares of Boeing, airlines, and defense contractors. Transportation names, in general, were pressured after raising red flags in the lead-up to this week.
The biggest winners were Utilities and Real Estate stocks, although not from knee-jerk anxiety.
S&P 500 Index | +0.30% |
Communication Services (XLC) | +0.45% |
Consumer Discretionary (XLY) | +0.28% |
Consumer Staples (XLP) | +0.04% |
Energy (XLE) | +0.65% |
Financials (XLF) | +0.23% |
Health Care (XLV) | +0.73% |
Industrials (XLI) | -0.83% |
Materials (XLB) | +0.38% |
Real Estate (XLRE) | +0.54% |
Technology (XLK) | +0.59% |
Utilities (XLU) | +0.69% |
Grounded
With virtually the entire planet grounding the Boeing 737 Max 8, there will be more pressure on the FAA to follow suit. In fact, there was bipartisan pressure overnight from Senator Romney and Senator Warren, demanding the FAA to follow its global counterparts. It’s a move I would have liked to see yesterday, or even on Monday. However, Boeing needs to have a greater urgency to address this in a way that matches the current level of angst.
Otherwise, this could become a real panic and a deeper hole. Right now, it appears to be a fixable situation that shouldn’t hurt the company’s order book.
Soft Landing
The 10-year yield skidded to its lowest level since last January on a combination of events, including the Consumer Price Index (CPI) release, and its benign inflationary levels. There is more disappointment in the UK as another May vote effort failed, and there was a strong auction bid during the session. The United States is still the best place to park money, and it’s reflected more in the bond market than equities, but the latter isn’t looking too bad either.
Derailed
This breaking college admission scandal has swept up Hollywood elites, fashion designers, Wall Street bigwigs, college coaches, and others. It has everything at the heart of all the major debates embroiling the country. The arrogance, the money, and the privilege are on full display by the crowd that has claimed the mantle of political correctness and caring.
Portfolio Approach
We are looking to be more aggressive in the model portfolio. We just need to see one last technical hurdle cleared.
Communication Services 1 | Consumer Discretionary 3 | Consumer Staples 1 |
Energy 1 | Financials 1 | Healthcare 2 |
Industrial 3 | Materials 3 | Real Estate 0 |
Technology 2 | Utilities 0 | Cash 3 |
Today’s Session
The major indices, including the Dow, are pointing to a higher open despite the fall out from Boeing and the pressure surrounding Brexit. Gold is hitting a two-week high on Brexit concerns and is trading at $1307 an ounce.
This morning, the Bureau of Labor Statistics released its report on producer prices, which measures price changes before it hits the consumer, for the month of February. The Producer Price Index (PPI) for final demand rose 0.1% (consensus 0.2%), mostly because of higher gasoline prices, while the so-called core index (less food and energy), rose 0.1% (consensus 0.2%). Year-over-year, the wholesale prices are up 1.9%, compared to 2.0% in January, while core PPI slipped to 2.3% versus 2.5% in January.
- Energy rose +1.8%
- Finished Goods +0.7%
- Trade -0.4%
- Processed Goods +0.4%
- Unprocessed Goods -4.6%
- Services +0.3%
Overall, the numbers suggest that U.S wholesale inflation is tame, despite unemployment being at an almost a 5 year low with wages growth rising.