Oh what, wow
He's the greatest dancer
Oh what, wow
That I've ever seen
-Sister Sledge
Sister Sledge hit the charts in February 1979 at the height of the disco craze with “He’s The Greatest Dancer.” This could be the theme song for the past 52 trading days in the stock market, of which LPL Financial Holdings (LPLA) is calling the greatest 50 days ever.
The spring bounce continues to pick up momentum, as buyers are seeking value instead of parking money into defensive equity sectors or investments such as gold. Now what’s coming on strong, as it brings up the rear, is the Russell 2000. It rallied 2.84% yesterday but trailed larger equity indices.
Green Roots
Remember back in the days after the market slumped during the ravages of the Great Recession, it began to turn on small signs of recovery - those so-called green shoots?
Well, the depth of the this bear market plunge was such, and the market is reacting to what I’m calling ‘green roots.’ Data is still down from earlier in the year, and a year ago, but it’s on the cusp of turning positive.
Yesterday saw many examples, including the ADP jobs report, which was a mind-boggling 2.7 million job losses. However, it’s a million miles below consensus of -9 million that many were bracing for.
May’s Institute of Management Supply (ISM) rose to 45.4 against consensus of 44.0, up from April’s read of 41.8.
Mortgage applications to purchase homes continue to soar and are now approaching the meteoric levels seen in January.
Mortgage Apps | W/W | Y/Y |
Composite | -3.9% | +74.4% |
Refinance | -8.6% | +152.2% |
Purchase | +5.3% | +14.1% |
To see the chart, click here.
Midday, New York Governor Cuomo said the state “beat” the virus, and then cautioned that “we have to stay smart to make sure we control the beast.” I think the state of NY handled the crisis in the worst way possible, partly because of the miscues we saw in NYC, so this was a welcoming statement.
Portfolio Approach
We took monster gains on two ideas in the model portfolio yesterday and keep putting cash to work. We added Boeing to our current Buys list, increasing Industrials to 5, while lowering Cash to 2.
Today’s Session
Stocks opened lower, consolidating after strong gains.
Continuing claims confirm layoffs are continuing, but at the same time, many American have headed back to work as the economy starts to re-open. Initial jobless claims came 1.87 million, a decrease of 249k from previous week. The results missed consensus of 1.79 million. The four-week moving average of continuing claims fell to 22.4 million from 22.7 million.
Costco reported May comparable sales beating expectations.
May comparable sales 9.7% vs 4.5% consensus vs. flat in April
E-commerce 108.1 y/y