Morning Commentary
The Dow rebounded on Friday, keeping the index in the plus column for the year, but over the past week, it was unable to break the down-trend line of lower highs and lows. On the upside, the index needs to find a way to retest its all-time high. More than likely, that could be the scenario as we enter the big jobs report on Friday. Conversely, on the downside 17,800 needs to hold as support and if not, then 17,600.
It will need to reverse that trend to establish a strong buy signal. In the meantime, the miracle bond rally is beginning to stumble big time which could mean the economy is improving and the Great Rotation could finally happen. Of course this also means the Fed could be forced to hike rates sooner rather than later.
The Great Rotation would mean funds coming out of bonds into equities which has been long rumored, but never really materialized (even as major indices have rebounded more than 200% from their March 2009 lows). We're taking an amazing amount of money that even if it all doesn't seek domestic stocks, it would be a huge boost, more than offsetting money invested solely on Fed policy. This all being said, it’s premature to call an end to the bond rally as it was supposed to happen each of the last four or five years.
Following the Money
The market held where it had to and that's huge, but beneath the surface, it’s clear some rotation out of high flying sectors continue into also-rans and underperformers. These are notable sectors that brought up the rear last week. Note, while consumer stocks have been unimpressive, the 1.78% move in basic materials is substantially higher than the one year average- a possible huge buy-signal.
Sector Watch Slowest Percentage Movers |
5-day |
1-Year |
Consumer Cyclical |
1.56 |
12.78 |
Consumer Defensive |
1.71 |
11.58 |
Basic Materials |
1.78 |
-3.54 |
Last week's faster movers are clearly breaking out of the pace of the past year and sending clear buy signals.
Sector Watch Fastest Percentage Movers |
5-day |
1-Year |
Energy |
4.02 |
-8,28 |
Real Estate |
4.19 |
19.71 |
Today’s Session
I like the action before the open this morning, but have no idea why futures are higher. China manufacturing data was another disappointment and there's no big fundamental news, so we aren't going to chase the open...lets hold cash and keep options open.
Below are some of the notable companies that reported earnings this morning.
Company |
EPS |
Consensus |
Revenue ($M) |
FY EPS Guidance |
FY EPS Consensus |
ARCB |
0.06 |
M 0.04 |
613 |
- |
2.51 |
CVC |
0.20 |
B 0.03 |
1,615 |
- |
0.84 |
CTSH |
0.71 |
B 0.01 |
2,991 |
2.93 < |
2.94 |
CMCSA |
0.79 |
B 0.05 |
17,853 |
- |
3.24 |
L |
0.29 |
M 0.42 |
3,500 |
- |
3.02 |
MGM |
0.26 |
B 0.13 |
2,332 |
- |
0.42 |
SYY |
0.30 |
M 0.11 |
11,746 |
- |
1.88 |
TSN |
0.75 |
B 0.03 |
9,979 |
- |
3.44 |
Comments |
economy is still limping. QE 4 more likely than rate hike. jim c on 5/4/2015 10:44:40 AM |
Economy on fragile ground. Rate hike sends a big earthquake. Need new policies from government. Jepwill Jepwill on 5/4/2015 12:40:40 PM |
The Fed needs to keep interest rates low so that the U.S. Government can afford the interest on their oversized debt. Tim on 5/4/2015 1:10:16 PM |
It's elementary ... the Fed is a political body and will act to pacify its critics. With the great baby-boom now retiring, the pressure to raise rates to appease the retirees demanding safe fixed income will be unstoppable and the Fed will invent a reason to raise rates, to safeguard their "Independence" from Congress. Paul Lasky on 5/4/2015 1:44:07 PM |
Obama and C linton & the Democrats cannot afford a turndown in the economy. I would not be surprised if they find reason after reason to stall doing anything until after 2O16. Tom Wayne on 5/4/2015 3:05:37 PM |
The burden of govt debt in the US and around the world is crushing GDP growth, unless policies change or major event occurs low interest rates are here to stay... Caroline on 5/9/2015 4:56:09 AM |
Tweet |
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4/9/2024 1:56 PM | Fighting the Trend |
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