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Morning Commentary

The Drama Beneath The Drama

By Charles Payne, CEO & Principal Analyst
2/10/2017 8:46 AM
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President Trump’s “phenomenal” comments on his tax announcement, coupled with dovish speeches from Federal Open Market Committee (FOMC) members James Bullard and Charles Evans sent most major indices to all-time record levels. However, every market session is a collection of stories, and Thursday’s themes boded well for investors.

(X) U.S. Steel – The stock was pacing ahead of the market out the gate and only gained momentum thereafter.  It will be a big winner from airport infrastructure, lower taxes, and higher tariffs on Chinese steel. The stock rallied back to its December high on convincing volume.

(TSLA) Tesla is at an all-time high as Elon Musk makes the delicate dance between Silicon Valley and the Trump White House. However, he is proving the haters and shorts wrong, over 7% of the stock has been sold short. Those who bet on misery are being carried out on their shields.

(KSS) Kohl’s, Walmart (WMT), and other retailers continue to rebound this week, suggesting big money fund managers have to jump into this market. This means more than window dressing funds with a bunch of winners to fool investors. They need results, so they are buying brick-and-mortar retail with the hope that consumer sentiment will result in big rebounds.

RTH

http://markets.money.cnn.com/cgi-bin/upload.dll/file.png?z798f7c0aze32b71ddf15e41ab81db4514dfcbd4e4

(WFM) Whole Foods – All week long, stocks that have been hit after the bell on disappointing earnings found buyers the next day.  That was the case for this company; it has a litany of problems, yet it rallied by almost four percent on 400% more volume than normally changes hands.

The bottom line is that President Trump has rejuvenated the rally and bought three weeks, while the Fed may have bought us an entire year.  The train is leaving the station again. I hope you’re onboard.

I should note there was some weakness in technology that could be the beginning of rotation out of those huge winners into some of the above-mentioned themes. The same is happening to energy, although crude continues to find support around $52.00. 

Although there are delayed rate hikes, it’s not the news financials are looking for. The group has been by far the biggest winner over the past six months. I think their downside is limited, and everyone should have exposure.

S&P 500 Index

6 Months

 

+7.25%

 

Consumer Discretionary (XLY)

 

+7.43%

Consumer Staples (XLP)

+1.25%

Energy (XLE)

+3.75%

Financials (XLF)

+17.01%

Health Care (XLV)

+4.52%

Industrials (XLI)

+9.48%

Materials (XLB)

+9.29%

Real Estate (XLRE)

+0.85%

Technology (XLK)

+7.59%

Utilities (XLU)

+0.47%

 

One thing to remember is that new highs beget new highs, and a lot of pressure is on masters of the universe that have come up short for years.  For those that keep reading the commentaries and keep waiting, remember those masters of the universe get paid for missing rallies- how much more can you miss?

Today’s Session

Turns out my market cues were spot on as Arcelor Mittal posted a strong earnings beat and better guidance, driven by their assumptions for major demand in the United States (inventory) and Brazil (recovery).

The fundamental building blocks for greater economic growth are being put in place around the world. 

Sears will be the biggest winner this morning after posting results and restructuring details; another retailer written off that might be saved from a rejuvenation of consumer spending.  

-Charles Payne

 


 

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