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Message from Market and D.C.
Yesterday was another record day for the NASDAQ Composite. As I mentioned last night, the biggest winner was Select Comfort Corp (SCSS). The company’s blowout earnings powered the stock up 28% on huge volume; some of that was from the 16% of the float that was short. A lot of folks are either betting against this market or waiting for the crash.
However, I keep saying that you make your portfolio great again by focusing on great American companies. On that note, Visa (V) posted strong financial results with the initial move higher in the aftermarket.
Also, I pointed out how earnings from CSX pointed to strength in Coal and in Housing, along with Steel Dynamics (STLD) that proved strength in Autos and Infrastructure. Lastly, American Express (AXP) underscored strength in Consumer Spending.
Message from the Corporate Earnings & Stock Market
I mentioned the plight of brick-and-mortar retailers; on Thursday, Footlocker (FL) shook off a disappointing first quarter with robust guidance for the remainder of the year. Obviously, the brick-and-mortar world is in trouble. This goes beyond a shift to the Internet, and this is also about over-capacity and sameness that typically roils every industry.
While I think 2017 will be a stock picker’s market, there will be a distinction between winners and losers, and no industry will exhibit that more than brick-and-mortar retailers. There are a few names getting it right, but most are getting it wrong.
This sector reflects consumer discretionary spending; while it’s mostly a hunch, it is clear smart folks expect folks to start going out to eat again. Recently, Chipotle (CMG) has made an amazing rally as Buffalo Wild Wings (BWLD) soared 6% on twice its average daily volume.
Regional banks have had a great week as well; KeyBank (KEY), Fifth Third Bank (FITB), and Zions Bank (ZION) powered the S&P Financial sector, making it the best performing sector of the session. This is also the best week for regional banks this year. However, even after being up more than 4% in four sessions, the KRE Regional ETFs is still down for 2017.
If ever there was to be a play on America’s heartland of regional banks along with credit unions, it would have the potential to fuel the resurgence of the forgotten flyover country.
A lot is riding on the Dodd-Frank Act reform, but this is a group you should root for even if you don’t own any names.
You know, despite the handwringing and angst, I love the action during this consolidation. I think the Dow and S&P 500 will join the NASDAQ, and touch their own all-time highs soon.
Whether the breakout comes slower for fundamental reasons or sooner from the execution via the Trump Agenda, it remains to be seen. Yesterday, President Trump and his cabinet added oomph several times during the session.
Jawboning Market Higher
The market got help yesterday from news of a healthcare bill that could get enough of the Freedom Caucus and moderates to sign and move to the Senate. President Trump discussed using the Trade Expansion Act of 1962, originally signed into law by President Kennedy for China to curb its steel dumping. Later in the session, Treasury Secretary Mnuchin spoke confidently of tax reform still happening in 2017.
We’ll get a read on housing that this morning that could be influential. Meanwhile, the market looks to open fractionally higher as solid earnings from Honeywell (HON) and Sun Trust Bank (STI) stand up pre- opening bell.
Metals stocks look to move higher, particularly iron ore, which is edging higher in light of the White House announcement of potential action based on security measures covered in the Trade Expansion Act of 1962.
Iron ore has come down a ton (pun intended), but it is at a key support level and overdue for a bounce.
Let’s keep our powder dry this morning.
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