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Morning Commentary

Internals Not So Hot
By Charles Payne, CEO & Principal Analyst
5/4/2017 9:45 AM

Yesterday, Facebook posted financials after the close that beat the Street on revenue and missed slightly on earnings. Their key metrics were impressive, including the monthly active users: 1.94 million +17% year-over-year.

The other hot tech name that posted results was Tesla (TSLA). It also beat on revenue and missed on the bottom line, but the -$1.33 loss was way off consensus by -$0.83.  However, shares of both names were lower in after-hours trading.

I am a holder of Facebook; even though I’m not in Tesla, the company laid an egg, and its Model 3 is on track for a summer release. Coming into yesterday’s session, shorts had a loss of $3.7 billion betting against Telsa. It’s fine if you think it is all hype, but I wouldn’t bet against the stock yet.

The market has gone into a wait-and-see mode with the jobs report looming on Friday and non-stop political intrigue over the spending and healthcare bills.  It was clear by the end of the day that despite being burned in the past, the market is beginning to believe a healthcare deal could get done, and that sent hospital stocks lower into the close.

Meanwhile, the Federal Reserve concluded its 2-day Federal Open Market Committee (FOMC) gathering without taking action. It’s hinting at the possibility of a rate hike in June; the estimate surged to a 90% probability from 70% at the start of the session.

The key observation that slowed the first quarter economic growth was “likely to be transitory” as it underscored my contention that we could be in the midst of a 3.5% growth or better right now.  While most of the major equity indices remained in the red, the Dow Jones edged into the plus column powered by financials.

Even as the big money center banks closed higher, financials got the biggest lift from insurance companies Allied World Assurance (AWH) and Allstate (ALL). Regional banks acted better as well – I love these regional bank stocks. I think they are so well-positioned for growth.

Red Flags

There are problematic elements from the collapse in crude oil and now plunging metals prices.   Moreover, market breadth is getting uglier, and it soon won’t be masked by high-flying stocks that are taking a pause. 

Although new highs continue to outpace new lows, the sheer number of the latter reflects the carnage awaiting shares of companies that disappointed the Street on earnings and guidance.  It also underscores the difficulty of making money in funds.   

Market Breadth NYSE

Positive

Negative

Movers

1,146

1,768

Volume

301.9 million

430.6 million

52-week Milestones

121

53

 

Market Breadth NASDAQ

Positive

Negative

Movers

1,016

1,819

Volume

813.8 million

1.238 trillion

52-week Milestones

92

71

Capitol Hill

Last night, word came down that the GOP plans to vote on the latest version of the Obamacare healthcare replacement bill today.  The latest addition to the GOP bill would provide $8 billion over five years to help with pre-existing conditions. This is a major deal. More than likely, the vote wouldn’t happen if it wasn’t a forgone conclusion. It will finally clear this hurdle and then move onto a bigger hurdle in the Senate.

I am not a fan of the bill. I think the GOP had public support to truly repeal, but this moves the Trump Economic Agenda along and adds momentum to the incoming tax reform. That being said, if the vote is postponed, it will be a huge blow to market sentiment and animal spirits that might go into hibernation.

Today’s Session On the economic front, initial claims were down 19,000 to 238,000 from the prior week while the 4-week moving average inched up 750 to 243,000. These numbers bode well for the jobs report and continue to show a tightening larbor market. • The advance number number for seasonally adjusted insured employment dropped 23,000 to 1,964,000 and is the lowest level for insured unemployment since April 15, 2000, when it was 1,962,000. • The 4-week moving average was 1,989,250, a decrease of 17,750 from the previous week's revised average and is the lowest level for this average since November 26, 1988, when it was 1,978,250. There is quite a bit of economic data out this morning and the markets are all poised to open in the green. Let’s see how things go in early trading.

Today’s Session

On the economic front, initial claims were down 19,000 to 238,000 from the prior week while the 4-week moving average inched up 750 to 243,000.  These numbers bode well for the jobs report and continue to show a tightening larbor market. 

  • The advance number number for seasonally adjusted insured employment dropped 23,000 to 1,964,000 and is the lowest level for insured unemployment since April 15, 2000, when it was 1,962,000.
  • The 4-week moving average was 1,989,250, a decrease of 17,750 from the previous week's revised average and is the lowest level for this average since November 26, 1988, when it was 1,978,250.

There is quite a bit of economic data out this morning and the Dow is poised to open in the green.  Let’s see how things go in early trading. 

 


Comments
WHY in the world does TSLA carry a market price of $296.00 and F $11.00? Makes no sense to me even given the expectations for Tesla's future.

Garro on 5/4/2017 9:51:45 AM
Garro, you know the answer! Elon is the new "it-guy whiz-kid". Investing by emotion works so well!


kev on 5/4/2017 10:36:37 AM
When will tax reform be done?

MIKE MC COWAN on 5/4/2017 11:27:11 AM
And, emotional investing is a sure way to bankruptcy.

William Brown on 5/4/2017 4:04:55 PM
 

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