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Morning Commentary

What a Reminder

By Charles Payne, CEO & Principal Analyst
10/20/2017 9:40 AM
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What a way to celebrate the worst one-day crash in the history of the stock market. To see stocks tumble out the gate on a combination of global jitters from China’s economy and a potential civil war in Spain is a sobering reminder that stocks go down, and sometimes they go down hard and fast.

Even as the post-mortem on what caused the ‘87 crash continues three decades later, there are few parallels between then and now. 

The most important thing to remember is Black Monday was just one session in an almost four-month period that saw the S&P 500 peak at 336 on August 25, 1987, and bottom out at 223 on December 4, 1987. 

Higher Stock Chart Example

Source: http://traderhq.com/illustrated-history-every-s-p-500-bear-market/

On that note, the Dow finished yesterday’s session up five points, rewriting the record books again, although the more impressive number is the 110 points that the index finished off its intra-day at a low point. 

The Dow is now up 17% for 2017, and it would have been much higher if not for the decline in shares of Apple (AAPL) or jitters over the demand for their new phones.

Dow Jones Industrial Average One-Day Chart

Make no mistake; there is an increasing anxiety, which explains why the best performing sector was utilities as money seems to be rotating quicker out of technology; this explains why the NASDAQ was down for the session.  The high-flying index had 1664 decliners against 1250 advances, and 49 stocks hit 52-week lows, the highest level in a long time.

The market finished with mixed results, betraying the anxiety and volatile nature of the session.

S&P 500

DJIA

NASDAQ

Crude Oil

Russell 2000

10 Year Yield

+0.03%

+0.02%

-0.29%

-1.23%

-0.21%

-0.77%

Market Themes

Investors continue to crush companies that come up short this earnings period. Case in point: United Airlines (UAL) was hammered by 12% during the session.

The flip side is the continued search for value in oversold stocks which is one reason why shares of Skechers (SKX) popped after posting their earnings results on Thursday.

Yesterday, however, I was most impressed with the action in the stocks that produced the physical building blocks to rebuild America.  I love these stocks for what they represent to the nation in terms of revival and potential.  These names have lagged, but they reversed off lows yesterday to surge higher into the close on convincing volume. 

Two of my favorites:

Arch Coal (ARCH)

President Trump has injected new life into coal and this company is the leading producers of metallurgical coal in the United States.  I think it will go significantly higher.

Vulcan Materials (VMC)

VMC is the nation’s largest producer of construction aggregates, including crushed stone, sand and gravel, along with asphalt and ready-mixed concrete.

Today’s Session

Finally!  The GOP gets the budget through setting the stage for tax reform.  The market is greeting the news with cautious optimism and sending stocks higher and sending Congress a message to get the rest of the job done.

Leadership rotation, which began earlier in the week, will see oversold names pop big with earnings beats as major cash shifts into financials.

The big loser of the session is General Electric (GE), which continues to suffer away with more than a decade of neglect.  I’m a huge Jack Welch fan and believe he built the template for excellence that could be applied to any company or country for that matter. 

But GE went into “chill” mode trying to coast rather than staying hungry and winning.  It’s a cautionary tale that we all should embrace


 

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