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Morning Commentary

Nail Biting Time Is Over
By Charles Payne, CEO & Principal Analyst
4/5/2017 9:52 AM

THE MARRIAGE REPORT

Two weeks ago, I mentioned my special report on marriage and the economy – I finally finished it, and it’s great. Contact your representative for a free copy or download it here. Email research@wstreet.com for assistance. 

Need a password? Get one here.

Yesterday, the market meandered in a very tight trading range ahead of 72 hours of big economic data that will be watched closely on Wall Street, K Street, and Main Street, beginning with tomorrow’s ADP Employment report.

All the major indices were fractionally higher while the big mover of the session was crude oil, which continues to rebound and has reestablished $50.00 support. 

It’s all about hype becoming reality.

In the surveys, there is no arguing that the surge in confidence in households and in all areas of large and small businesses has turned the wheels of commerce.  On Main Street, the potential home-buyer foot traffic has expanded positively for the first time in more than a decade after Trump's victory.  

Of course, there is a difference between what Wall Street calls soft and hard data.  Surveys are one thing, but we are seeing it materialize into reality.  Meanwhile, the stock market is a harbinger of things to come as it is looking for huge moves in financials, industrials, and materials.

Manufacturing

One area is manufacturing, which has come back to life big time. In yesterday's national report on manufacturing, 17 of the 18 manufacturing industries reported growth and no one experienced contractions. 

The market is making note of this as the top performing sectors owe gains to President Trump's Agenda, and to a lesser but important degree, an end to the war on business.

Financials have surged the most in the past six months, in part to the notion that the Dodd-Frank Act will be repealed or, at the very least, prepared to stop punishing consumers. Yesterday, Jamie Dimon wrote to shareholders that banks are sitting on $200 billion to meet risk and regulatory barriers placed by President Obama- they would rather lend that money. 

In fact, until the beginning of the Great Recession, bank loans were greater than bank deposits.

Industrials

Industrials are the second best performing sector, led by United Rentals (URI). In my mind, it’s the best proxy for re-building America, and Caterpillar (CAT) is the best global proxy for industrial growth. Speaking of which, Caterpillar caught an upgrade to the “Conviction Buy” list at Goldman Sachs (GS) Monday morning, followed by a very positive piece in Barron’s after the close.

Materials

Materials are the third best performing sector, led by Freeport- McMoRan (FCX), number 2 percentage gainer, +24% as copper prices surge. Note: this week has seen a spike in metallurgical coal names such as Arch Coal (ARCH). 

While I want to emphasize that the market will go down from time to time with occasional crashes, I think we are on the cusp of a super rally that will lift the market significantly higher in the next three to four years. Please don’t miss it.

Today’s Session

The ADP Report blew the doors of consensus estimates, driven by those good-paying jobs in the goods-producing sector.

  • Mining +4,000
  • Construction +49,000
  • Manufacturing +30,000

It’s the foundation of the economy which is becoming firmer each month, not just the amount, but the quality of jobs.  Higher paying jobs that also bring a sense of pride to the nation.

https://www.adpemploymentreport.com/2017/March/NER/images/charts/Change-in-Nonfarm-Private-Employment-March-2017.gif


Comments
Under the category of anecdotal evidence that validates the coming boom and consumer confidence... A friend of mine that has a small mortgage company with 17 loan reps. just told me yesterday that he is having a tough time because they have over 40 clients approved for loans that just CANNOT find homes because there is not enough inventory. People are willing to make big commitments based on dramatically increased confidence that we are in fact getting better. I believe that they are smart enough to know it will not happen overnight, but will take time when you realize that all this mess has been created over years upon years of attack on our system.

Ray Weldon on 4/5/2017 10:00:30 AM
I think you are on target with your look ahead at the economy. I think the stock market is already partly in the throws of this resurgence and will move higher over the year. If valuations continue to increase from current levels I could see a real pullback late this year of next. When the S&P hits 2500+ - 2600 look out for that correction to materialize. Now that the Bears are jumping on the bandwagon we are probably headed for a little more upside and then bam those who bought high will sell lower.

Garro on 4/5/2017 10:09:27 AM
Charles - Talked to my son yesterday who owns a construction company in San Diego about bidding the border fence projects. He said their main concern is getting enough skilled construction workers to fill their needs. What you were talking about on your show is a REAL problem. My thought is: Our leaders have to start getting on TV and in newspapers and begin "prying" all the workers who couldn't find a job, off their "couches" and into the work force. NO FREE HANDOUTS would start it.

William Brown on 4/5/2017 11:07:19 AM
 

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