Yesterday, the S&P 500 edged higher after mostly drifting aimlessly for most of the session. Five sectors closed lower, including Financials, which have been hailed as the shoo-in sector as the Street uniformly believes rates will move higher. Conversely, growth rocked big time; while lower rates helped, the fact is Consumer Discretionary, and Technology have been posting financial results that underscore why they have been super-hot.
S&P 500 Index | +0.42% | |
Communication Services XLC | +0.40% | |
Consumer Discretionary XLY | +1.35% | |
Consumer Staples XLP | +0.10% | |
Energy XLE | +0.14% | |
Financials XLF | -1.31% | |
Health Care XLV | -0.69% | |
Industrials XLI | +0.40% | |
Materials XLB | -0.06% | |
Real Estate XLRE | -1.13% | |
Technology XLK | +1.56% | |
Utilities XLU | -0.55% |
Stepping Up to Plate
Earnings, in general, have been fantastic with 420 reports that have seen 76% beats on revenue and 81% beating on earnings. In addition, earnings for Technology names and (to a lesser degree) Consumer Discretionary have been stellar, and they have the two largest amounts of reports in the queue.
Remember, there have been several times when tech has been seen as a safe haven over the past several years, which makes it easier to chase when you have to get in the mix.
Leading Sectors | Technology | Discretionary | Financials |
Reports | 55 | 45 | 62 |
Remaining | 20 | 17 | 3 |
Beats | 93% | 73% | 84% |
Bringing The Heat
Tech stocks lit up the S&P 500 Heat Map but had an even larger impact on the NASDAQ Composite.
The NASDAQ Composite Relative Strength Index (RSI) spike is through the roof, so perhaps we could get increased volatility as nervous hands get jumpy. Let them panic – and let’s ride the wave.
To see the chart, click here.
Market Breadth (New Highs Beget New Highs)
There were more decliners than advancers on the NYSE and the NASDAQ. And a lot more down volume than up on the NYSE but look at the new highs versus new lows.
Smoking!
Market Breadth | NYSE | NASDAQ |
Advancing | 1,471 | 2,057 |
Declining | 1,831 | 2,544 |
52 Week High | 255 | 366 |
52 Week Low | 29 | 42 |
Up Volume | 1.54B | 2.64B |
Down Volume | 2.86B | 2.51B |
Join the Club
New highs from October 6th have been on a steady climb and have now gone into overdrive. It is especially true for the NASDAQ, where monster beats after the close means huge moves that get procrastinators off the sidelines and into the mix.
To see the chart, click here.
Portfolio Approach
We are adding a new position in Consumer Discretionary this morning to our Hotline Model Portfolio.
Today’s Session
Big news out of Pfizer (PFE) on its Covid19 pill, which study shows it reduces hospitalizations in 89% of cases. The company plans to file for FDA authorization this month.
Even before the PFE news, the market was looking past the coronavirus. But it becomes official today when Peloton (PTON) opens and plunges through a trapdoor as Planet Fitness (PLNT) rockets to a new high.
I am watching cases surge in Germany and China, but for now, investors should pay attention to the message of the market. By the way, a lot of so-called Covid19 names are entering oversold territory, but there is no urgency to buy them yet.
Jobs Report
The jobs report beat consensus, although I actually thought it would be even better. That said, I like the 600,000 private sector jobs created and solid gains in goods-producing (dirty fingernail jobs):
- Manufacturing 60,000
- Construction 44,000
But only 104,000 people returned to the labor force – that number is way too low. Consequently, the participation rate was unchanged at 61.6, which is glaring considering all the jobs that are available and how far we are from pre-pandemic levels.
The market is able to celebrate this report that shows some economic strength but does not move the Fed timetable on rate hikes.
Average hourly wages climbed 4.9%, which isn’t enough to keep up with inflation