Arline stocks took off (no pun intended) along with casino stocks and cruise ship operators on more good news in the race for a coronavirus vaccine. Concert promoters and travel websites also enjoyed strong share price gains. These will be the ultimate barometer of confidence, but many investors looking at these investments are thinking I might get rich or I might get busted.
Royal Caribbean Cruises | XLY | +$10.11 | +21.00% |
Norwegian Cruise Line. | XLY | +$3.01 | +19.60% |
American Airlines | XLI | +$1.78 | +15.38% |
Carnival Cruise Line. | XLY | +$2.27 | +15.11% |
United Airlines | XLI | +$4.61 | +14.52% |
MGM Resorts | XLY | +$2.04 | +12.59% |
Live Nation | XLC | +$5.40 | +11.64% |
Hilton Worldwide | XLY | +$7.41 | +10.08% |
Industrial Boom
It might surprise some that airlines are in S&P Industrials (XLI) and not Consumer Discretionary, but these stocks trade in the sector with other transportation names in railroad and trucking. The sector has flashed signs of taking off only to be proven as false alarms.
The key name in the sector is the same name that needs to keep rallying for the Dow Jones Industrial Average: Boeing (BA).
In yesterday’s session, nine stocks enjoyed larger percentage gains than Boeing, but their collective weight in the sector is 4.68 versus 4.64 for Boeing. The company has been the recipient of $24 billion of government contracts in the past three days:
- Awarded $916M contract to support International Space Station.
- Awarded nearly $23B Air Force contract for F-15EX fighter jet program.
- Wins $150M Missile Defense Contract for GMD System.
- Awarded $28,147,925 contract by the Defense Logistics Agency: U.S. Department of Defense.
- Awarded contract from Internal Revenue Service for maintenance and support for M3 O&M.
Next Leg Higher
I like the current momentum and love the chart formation, as the sector is coming off the bottom of the trading range and faces its first upside test at 76, and top of channel above 80.
Spreading the Wealth
Ten of the eleven S&P sectors rallied yesterday and value clearly outperformed growth. I continue to welcome this dynamic but also caution broad market indices cannot rally if Communication Services and Technology are getting hit.
S&P 500 Index | +0.95% | |
Communication Services XLC | +0.61% | |
Consumer Discretionary XLY | +1.53% | |
Consumer Staples XLP | +0.28% | |
Energy XLE | +2.08% | |
Financials XLF | +2.11% | |
Health Care XLV | +1.22% | |
Industrials XLI | +2.74% | |
Materials XLB | +1.88% | |
Real Estate XLRE | +0.55% | |
Technology XLK | +0.45% | |
Utilities XLU | -0.07% |
S&P 500 Winners
- 173 average gain: +17.89%
- Top twenty average gain: +55.91%
S&P 500 Losers
- 332 average loss: -22.07%
- Bottom twenty losers average decline: -58.05%
Nasdaq Winners
- 402 average gain: +49.8%
- Top twenty average gain: +400.34%
Nasdaq Losers
- 586 average loss: -26.76%
- Bottom twenty losers average decline: -71.06%
Market Breadth
- NYSE 4.08 billion up volume and only 587.2 million down volume.
- NASDAQ 3.60 billion up volume against 965.5 million down volume.
Portfolio Approach
We took profits on two names in the Hotline Model Portfolio yesterday, and we put on two long new ideas. I am excited about the performance of names on the New Buy List, which moved away from growth to value in the last week. Many of those names were lower before yesterday.
There is a chance we could take action early in the session.
Investors have normally piled into HACK ETF on this kind of news. We are also watching BUG, which has a higher valuation metrics but some serious fast-moving stocks.
Today’s Session
Retail sales for June increased 7.5% as restaurants and stores continued to open. Total Sales of $524.3 billion rose from $487.7 billion in May and were close to pre-pandemic numbers as clothing and electronics, furniture and motor vehicle sales rose. Gas sales also rose as many went back to work or simply out on the road. Bars and restaurants saw an increase of 20%. Sales declined in two areas, online sales and grocery store spending.
We will see if trend continues as some cities and states rollback openings.
June 2020 | M/M | Y/Y |
Headline | +7.5% | +1.1% |
Ex-Motor | +7.3% | -0.5% |
Motor | +8.2% | +7.5% |
Furniture | +32.5% | -3.5% |
Electronics | +37.4% | -12.7% |
Building Materials | -0.3% | 17.3% |
Grocery | -1.6% | 11.7% |
Health and Personal Care | +3.5% | -5.7% |
Gasoline | +15.3% | -19.1% |
Clothing | +105.1% | -23.2% |
Sporting Goods | +26.5% | +20.6% |
Department Stores | +19.8% | -10.6% |
Internet | -2.4% | +23.5% |
Restaurants | +20.0% | -26.3% |
On the unemployment front, new jobless claims were essentially flat, down 10,000 to 1.3 million last week. Initial claims filed for Pandemic Unemployment assistance dropped to 928,488 from the prior week’s 1,046,433.