It was a heck of an exclamation point…to a heck of a week…to a heck of a year…to a heck of a move off the lows back in March 2020 - and if you want to be honest, back to March 2009. The S&P 500 rallied with fresh leadership, including Industrials on Friday, with only Health Care stumbling,
S&P 500 Index | +0.37% | |
Communication Services XLC | +0.80% | |
Consumer Discretionary XLY | +0.64% | |
Consumer Staples XLP | +0.58% | |
Energy XLE | +1.30% | |
Financials XLF | +0.05% | |
Health Care XLV | -1.12% | |
Industrials XLI | +1.02% | |
Materials XLB | +0.78% | |
Real Estate XLRE | +0.23% | |
Technology XLK | +0.52% | |
Utilities XLU | +0.95% |
Earnings Season
While earnings have been impressive, with 81% of companies beating on the bottom line with a blended rate of 39.1% (the third highest in history), the real story has turned out to be the top line. As a result, it is keeping the forward price-to-earnings (Forward P/E) ratio in check.
To see the chart, click here.
And 75% of companies have beaten the consensus on revenue with a blended return of 17.3%. It is the second-best since FactSet began to keep track back in 2008. The five-year average is 5.8%. Top line growth reflects the ability to pass along inflationary pressure. Not sure how much longer that’s the case.
To see the chart, click here.
Today’s Session
It’s going to be interesting to see how the market reacts to the passing of the infrastructure bill, which was held hostage, but pried loose from that election shellacking of progressives last Tuesday.
It will also be interesting to see if growth stocks will continue their meteoric lift-off since last month. Of course, a lot of that will depend on ten-year bond yields, but it’s been earnings and future excitement making the biggest difference.
There are still big earnings coming from the tech sector, and I think Communication Services continues to attract the buy-on dips crowd.
To see the chart, click here.
When tech is rocking, investors feel a lot more confident and become a lot greedier. If the market gets wobbly, there will be a gang of experts on financial TV who will blame individual investor exuberance and secretly hope stocks will come down enough for them to get into the mix.
Portfolio Approach
There are no changes in sector weighting in our Hotline Model Portfolio.
Today’s Session
It was a slow morning in the futures market, but its building up steam. At this point, with the S&P 500 up seven straight days and NASDAQ up ten straight days, it’s clear bias is to the upside.
Advance Decline line breakout signals more upside momentum.
To see the chart, click