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Morning Commentary

Transportation Flies and Tech Finds Footing

By Charles Payne, CEO & Principal Analyst
7/6/2017 9:21 AM
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What a difference a national holiday makes in the middle of the week. The inability for tech stocks to maintain an early rally cemented the idea there was a fair amount more to go on the downside on Monday. However; yesterday, the tech-laden NASDAQ Composite Index turned lower, following the Dow; it looked as if we’d be talking about continued rotation. 

Instead, tech found buyers and the NASDAQ Composite Index enjoyed the best session of any major equity index.

There was rotation out of hot names including retail winners. Ulta Salon (ULTA) and Burlington Coat Factory (BURL) were under more pressure than usual. After the close, Price Smart (PSMT) was down more than 7% after posting quarterly results. 

Speaking of former hot retailers, True Religion, once the hottest jeans in the nation, filed for bankruptcy protection yesterday. Being hip is fickle and flighty.

The overall comparable-store sales for May are mixed; there are mostly improvements, but nothing to write home about:

The biggest loser yesterday was energy. Crude oil was hit on reports of the OPEC discontent over their next move.  That cheap crude story is finally helping out transportation names powered largely by airlines. The Dow Jones Transportation Index (DJT) flew to a new all-time high.

 Before you assume it’s too late to have exposure there, understand that while the index is up more than 29% in the past 52-weeks, it’s only up 6.66% in 2017.  In other words, after moving sideways all year long, this might be the breakout you want to own.

 

We got a bit of good news from the Gallup Job Creation Index, which came in unchanged at +36, just a fraction off the all-time high that was established in May +37.  It’s been 16 straight months with a read at +30 or greater, which is the ultimate sign of a strong employment market.

We’ll get the ADP Employment Report numbers today, and the big jobs report comes from the Federal government on Friday. 

There is a perfect set-up this week for all three major indices to close at all-time highs on Friday. The data, including the jobs report, must come in stronger than expected.

Today’s Session

The market has been under pressure all morning even before the one-two punch of North Korea and Jobs.  President Trump speaking at a news conference in Poland took a stronger tone with North Korea.  Meanwhile, the ADP jobs report is out and it’s a slight disappointment.

In June, 153,000 jobs were added, below the consensus of 180,000, and down from 253,000 in May.  Despite the lowered numbers, the job market remains strong with midsize business with the most growth.

Business Size

Change

Small 1-49 Employees

17,000

Midsize 50-499 Employees

91,000

Large 500 or more Employees

50,000

 

All job creation was in Service Producing jobs, as Good producing jobs were a net zero with mining and construction losing ground, while manufacturing gained.

Good Producing

Service Producing

Mining -4,000

Trade, Tran & Utility +30,000

Construction -2,000

Information 0

Manufacturing +6,000

Financial Activities +10,000

 

Professional & Business +69,000

 

Education & Health +28,000

 

Leisure & Hospitality +11,000

 

Other +9,000

Weekly jobless claims increased by 4,000 to 248,000.  However, for the 4 week moving average, a better indicator, claims rose by only 750 to 243,000.  Claims have been below 300,000 of 122 consecutive weeks.

The Nasdaq is looking to open under the most pressure of the major indices.


Comments
Thanks for all of your knowledge. Sure appreciate all you do. Long time forever fan. You're awesome.

Roy Orem on 7/7/2017 4:09:11 PM
 

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