Nothing great was ever achieved without enthusiasm.

-Ralph Waldo Emerson

The market naysayers and prognosticators that make a living from predictions of doom and gloom made a living under President Obama even as the market crashed. People that followed their advice dumped stocks while hoarding canned goods.  And now, these same prognosticators who always get soapbox platforms are facing a different challenge as they preach that “the end is near.”

The 2017 stock market is shaping up to be one for the ages. In many ways, it reminds me of 2013 when the Dow rallied 27% on a combination of extraordinary accommodation by the Fed (it impacted the market the last year) and a general sense that finally, the worst was over.

Fast forward to 2017, and there is a similar one-two punch.  In fact, it’s the stimulus from real economic activity that will include corporate investments and renewed consumer spending, coupled with a general consensus that the best is yet to come.

In order for this to work, there must be execution, but there must also be a cheerleader. We all know President Trump is a seasoned CEO. For the sake of economic prosperity and the stock market, CEO stands for Chief Excitement Officer.

Trump was on full display when he spoke at the Boeing plant in South Carolina as the market was heading for an uninspired loss for the session on last Friday.  His speech left thousands of American workers on their feet cheering and screaming “U.S.A.!”  Those cheers reverberated beyond the plant and triggered the market that had already inclined to rally into the close.

Who buys stocks after a major rally into a three-day weekend?

The market took off, and the S&P 500 joined the NASDAQ into the plus column; a race against the clock saw the Dow finish in the green on Friday.

Speaking of enthusiasm, what’s happening with tech stocks is amazing but it’s not irrational. The world is moving into a period that once only crossed the minds of science fiction writers, such as Isaac Asimov.   The S&P Technology Sector (XLK) is on a record run of a closing session, and up almost 8% year-to-date.

Ironically, the more the market goes up, the more the bears that made short bets will actually help because there are being taken out on their shields daily.  At least they have skin in the game.  Beware of boo-birds looking to sell you a book or a radiation suit, and remember: nothing great was ever achieved without enthusiasm.

The Week Ahead

The three-day weekend allowed many to peak at their 401K and other stock market investments. Many will cheer, and others will wonder if this is too good to be true.  I’ve already heard from a lot of those folks via e-mail and social media, saying “Charles, I am thrilled but this market has to correct soon.”  Of course, this potential dilemma is even more frustrating for those without 401Ks or stock market investments. 

Actually, getting in just in time for a big pullback or correction is frightening for them, but I suspect that part of that fear is more about their ego than their wallets. People have been so afraid of getting egg on one’s face that they have missed an opportunity of a lifetime.  And that’s really the point when you stop thinking about the market as a day at the track; it’s more of a lifelong endeavor where there is less angst over period pullbacks.

As for the market, there is no doubt that changing hands above historically high averages, the highest level since 2004, and a 17. 6 forward price-to-earnings (forward P/E) ratio isn’t significantly above the 25-year average of 15.0. 

More importantly, the economic momentum from employment to manufacturing has picked up at a faster pace than the stock market.  Moreover, corporate earnings this season underscore momentum that not only justifies the rally but it also hints at more of the upside.  According to FactSet Data, this past weekend, 82% of S&P 500 companies posted results and here are the key numbers:

• 66% beat on earnings
• 53% beat on revenue
• 9 of 11 sectors showed a faster growth rate since the start of 2017 (Real Estate joined that list last week as well)

This week’s earnings will give us a glimpse into consumer spending.  Before the opening bell, earnings from pivotal names include the following:

Walmart (WMT), whose shares peaked back in January 2015, has seen its stock make a series of lower highs as earnings consensus has drifted. The company is no longer a pure proxy for consumers because of its faulty internet operations, but we can glean a lot on lower-income folks.

Home Depot (HD) is a monster. The stock closed at an all-time high on Friday, but the Street is looking for $1.33. It might need a beat, considering the recent run in the shares.

Macy’s (M) reported, but it underscores the continued demise of department stores reflected in last week’s 3.2% year-to-year decline for the segment.

Cracker Barrel (CBRL) could bring good news to restaurants, which have suffered from food deflation. I think the stock is also a good proxy for American sentiment, which has been soaring.

Today’s Session

Equity futures slipping a little into the open even as the beleaguered brick and mortar retailer space looks to have a great start to the session.

Retailers

Home Depot (HD)

Home Depot crushed it again, with revenues of $22.2 billion, and earnings of $1.44, coming well ahead of consensus at $21.8 billion and $1.33.  

Comp Store Sales

• Companywide 5.8% quarter 6.9% FY16
• United States 6.3% quarter 6.2% FY16

Management hikes quarterly dividend 29% to $0.89 and starts new buyback program for $15.0 billion.

With the rebounding housing market marked by a shortage of supply demand should remain strong for the company throughout 2017.

Walmart (WMT)

Comp store sales +1.8% (best comp store sales since July 2012 and tenth consecutive month of year to year improvement)

• Traffic +1.4%
• Neighborhood store comp +5.3%
• E-commerce sales +29.0%
• E-commerce general merchandise value +36.1%
• Revenue guidance 1Q $1.00 and FY $4.40 above consensus of $0.96 and $4.32

Headlines focus on internet growth and Jet.com acquisition but the brick and mortar side of the business sans groceries seems to have found equilibrium as well.

Advanced Auto Parts (AAP) and Macy’s are also higher although financial results were mixed.

Restaurants

Cracker Barrel (CBRL) has posted disappointing results this morning but that news overshadowed in the restaurant space with Restaurant Brands (QSR) taking over Popeye’s Louisiana Kitchen (PKLI) at $79.00 a share.  This is the all-time high for Popeye’s.  

Comments

Restaurant prices are going up every day in our small town. A few are closing up as customers are refusing to pay the higher prices (my wife and I included). People (mostly elderly and retired on fixed income) are cooking at home much more now. My question is: How can restaurant stocks go up if this is happening nationwide? Cracker Barrel just missed its earnings and it is one of the cheapest and good places to eat out. If they are having problems, what is going to happen to all the big chain restaurants income? William S. Brown on 2/21/2017 10:20:36 AM

Enthusiasm comes from the Greek word entheoism and means God filled or inspired. Although this may be a bad comparison, Churchill rallied the English from the German Blitzkrieg of daily bombing in Hitlers attempt to break the English will. He failed. Well, here we have had Obama and the anti-colonialist liberals that think we are evil and capitalism is corrupt and had an ongoing assault on our system and people. Trump has become to the US what Churchill was to the British, the person needed to turn the tide. I get so sick of the typical liberal robotic response when asked, "If it's so bad why is the market going up strongly?" They respond of course they are only helping Wall street. What ignorance. It helps all of America directly for those holding 401k's and investments, and even those that do not because everyone's confidence and hence spending go up helping ALL of us. It really isn't that complicated. If you tax something you get less of it. If you cut taxes you get more of it and in so doing make it more valuable relatively. That is why the market is rumbling, those that understand what I stated know that with the stroke of a pen, all stocks just became more valuable! Thanks Charles for encouraging us throughout the continual assault on Capitalism. Ray Weldon on 2/21/2017 11:08:23 AM

Lowes Home Improvement (Corporate) just laid off over 500 employees. Are there mixed signals on the economy or is just Lowes is not doing well vs Home Depot? Richard on 2/21/2017 8:35:51 PM

Lowes' anti-Trump statements may be coming home to roost. Marian on 2/23/2017 11:45:44 AM

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.