It was another huge session for the market.  The Dow was up 1.6%, while NASDAQ and the S&P both rallied 1.2%, and crude finished at $64.00 a barrel.

Message of the Market

Market breadth was strong as you would expect in a session that saw the Dow rally 400 points. 

NYSE

1,997 winning stocks versus 998 losing stocks and 2.4 billion up volume to 460 million down volume, while stock hitting new highs spiked to 94 against 26 hitting new lows.

NASDAQ

1,931 winning stocks versus 1,013 losing and up volume 1.4 billion to 472 million declining volume, as 117 names hit new highs against 39 new lows.

In the past week, the surge in new highs has been impressive and pointing to true market leadership as new highs beget new highs.

Technology led the pack again powered by HP Inc., which continues to rebound after strong earnings last week.  Semiconductor names continue to rock, and don’t look now, but Apple is back.

Health Care was paced by medical device makers Medtronic and Stryker.

Consumer discretionary names were powered by Netflix, and brick and mortar names like Macy’s, which is up 45% from its November low.

Financials were strong powered by Berkshire Hathaway, which posted its financial position as Warren Buffett released his annual shareholder letter over the weekend.  It was much better reading than the democrat memo.

S&P 500 Index		+1.18%
Consumer Discretionary (XLY)		+0.84%
Consumer Staples (XLP)		+0.63%
Energy (XLE)		+0.60%
Financials (XLF)		+1.51%
Health Care (XLV)		+1.27%
Industrials (XLI)		+1.38%
Materials (XLB)		+0.44%
Real Estate (XLRE)		+0.36%
Technology (XLK)		+1.57%
Utilities (XLU)		-0.30%

The Spark

I want to revisit the spark to this turnaround, which began Friday with the economic outlook to Congress from the Fed ahead of Jay Powell’s testimony this week. 

Essentially, the Fed believes we are entering into a Goldilocks period.

The monetary policy makers significantly raised their outlook on GDP and lowered the projected unemployment rate from the period assessment.  I must repeat, this table tells a remarkable rosy story and should be your handy guide as Powell speaks today.

Economic Projections Federal Reserve	2018	2019	2020
GDP Growth	2.5%	2.5%	2.0%
Sept Estimate	2.1%	2.0%	1.8%
Unemployment Rate	3.9%	3.9%	4.0%
September Estimate	4.1%	4.1%	4.2%

Yet, they didn’t change their outlook for inflation.

Economic Projections Federal Reserve	2018	2019	2020
Core PCE	1.9%	2.0%	2.0%
September Estimate	1.9%	2.0%	2.0%

The result is the monster rebound that all of a sudden has the all-time highs back in sight.  The rally got a boost from Fed Governor Randal Quarles first public comments since being added as a voting member of the FOMC.

Not only did he state the obvious "it has been quite some time since the economy looked this good,” but he gave credit to fiscal policy saying that “after subtracting from growth over much of the period from 2011 onward, the impetus from fiscal policy has turned distinctly positive.”

Looks like the Fed gets it, and will do its’ job, but not become so overzealous it destroys your job.

Today’s Session

The star of the morning is Macy’s, which was already up 45% from its November low when the street played taps declaring the demise to be final.  It wouldn’t be the first time the stock was declared done for, and it seems perhaps, such reports are premature again.

The company beat on the top and bottom lines, but more importantly, it offered strong guidance.

• Comp stores sales +1.4 versus estimate +0.1
• Digital up 34 consecutive quarters (helps to have low expectations unlike Walmart whose shares crashed on 20% digital growth)
• Concept stores working
• 2 Blue Mercury stores added during quarter, 36 during the year and now have 137
• 30 Backstage off price stores

In addition to strong guidance, the most important part of the report is operating margin surging to 14.0% from 9.6% in the prior year comparison. 

I like this market but want to keep our powder dry as we exam Powell maneuver around crazy politicians asking about things he has no connection to and try to get him to endorse things like universal basic income.  The better interview will come next month at the conclusion of the FOMC, but today could be riveting and move markets.

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