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Morning Commentary

Arrows Pointing Higher: Not Only Hype & Hope

By Charles Payne, CEO & Principal Analyst
2/16/2017 9:59 AM
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Yesterday was another monster session for the market:

Dow Jones Industrial Average: +0.52%

 NASDAQ: +0.64%

 S&P 500: +0.50%.

Many are asking if the rally is justified, and how it keeps going.

It’s earnings season; coming into this week, 317 of S&P 500 companies have posted their earnings results for the December quarter.  There are a lot of newsworthy developments, including the first-time year-to- year earnings increase in consecutive quarters since the fourth-quarter of 2014 (4Q14) to the first-quarter of 2015 (1Q15).

While it’s true the market is breaking out of a two-year trading range, earnings are as well. There are signs that the earnings momentum is gaining strength.

The Message from Corporate America

Here are the earnings milestones and stories by the numbers:




Beat consensus on earnings


Beat consensus on revenue

8 of 11

Sectors growing at faster rate than assumed on December 31


Companies raised guidance for current quarter


Companies offered negative guidance


Forward PE Ratio


The forward price-to-earnings (forward P/E) ratio is higher than the historical average, but it is nowhere near the levels that foreshadowed stock market crashes in the past.

Trump Train

What do businesses need from the administration to keep this locomotive going?  Thus far, 165 companies have mentioned “Trump” and/or the Trump “administration” during conference calls, along with tax policies, regulations, trade policies, and healthcare.

Answers to the above questions:

Today’s Session

Yesterday, the Empire State Manufacturing report showed major improvement, this morning, the February Philadelphia Fed report goes beyond corroborating that news but shows that manufacturing is going parabolic.

General Business Conditions 43.3 from 23.6

New Orders 38.0 from 26.0

Shipments 28.6 from 20.5

Employment 11.1 from 12.8

I would like to see better employment data but workweek is increasing and prices received are keeping up with prices paid at this pace. We should see more jobs and higher wages sooner rather than later.

Despite the strong manufacturing data, the market looks to open a little lower mostly because it’s “due.”  Let’s stand back and watch the first half of the session shakeout.


Although the economic growth, and the market recovery although up has been sub-par from day one due to the fiscal and regulatory pile on since the economic crash. For that reason the recovery has not been what you'd expect from such an extreme crash. Previous recovery's have had much greater snap back.

When under attack, businesses and capital have gone into hiding. When you consider how low the ten year bond is and that the P/E does not adjust for the anomaly of the crash, we are still substantially undervalued. We keep hearing about wage inflation and I laugh. What about the U-6 and the millions not counted in the employment statistics. There is so much slack in the employment and their statistics it is laughable.

Let the paralysis of analysis infect them all while we position ourselves for success as we all get on the Trump Train!

Ray Weldon on 2/16/2017 8:41:57 AM
AMEN, RAY. I'm at the station.

William S. Brown on 2/16/2017 10:15:33 AM
I would like to hear Charles dedicate at least a two minute segment on why wages have not come up across the board and what specifically it will take before average American workers will see their pay rise more than a percent or two.

Joseph F Tucciarone on 2/16/2017 10:18:35 AM
As a commercial business insurance broker these past 20 years, I have found it to be wise to question my "insureds" on whether they are experiencing any "improvement" in their respective businesses (always helps ME to prepare MY business.) One of the hardest hit "industries" here in California during our recent "recession" has been the building industry. Yesterday, I asked one of my long-time San Diego, Ca. insureds & general contractors "How's business?" and he said things are BOOMING! This has been repeated numerous times by others I have contacted and I am GREATLY encouraged about the future of "business" now and under the Trump Administration. Woooo Woooooo Don't be left standing on the raid siding!

James Warlin on 2/16/2017 1:39:55 PM

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