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Afternoon Note

Looking for Direction

By Charles Payne, CEO & Principal Analyst
2/28/2018 1:57 PM
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The markets are back in the green but well off the highs after yesterday’s hit on the back of Fed Chair Powell’s comments.  Seven of the 11 sectors in the S&P are in the green.  Consumer Discretionary, thanks in large part to TJ Maxx (TJX), Financials, Real Estate and Technology are among the leaders today.  Consumer Staples, Energy, Health Care, Industrial and Materials lag.  Advancers outpace decliners 1601/1275 on the NYSE and 1424/1236 on the Nasdaq.

Energy was up ahead of the EIA report, but has turned lower.  Total U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased to 423.5 million barrels, up 3.0 million barrels from the previous week.

Refineries were at 87.8% of their capacity last week. 

 EIA Petroleum Inventories

 

Actual

Expected

 Crude Oil

+3.0 million

+2.4 million

 Gasoline

+2.5 million

-0.2 million

 Distillates

-1.0 million

-0.7 million

 
Manufacturing

The Federal Reserve Bank of Richmond’s Survey of Manufacturing Activity for February saw strong growth.  The manufacturing index jumped to 28 from 14 in January.  This was the second highest reading on record, driven by increases in orders, shipments and employment.  Despite having difficulty finding skilled workers, manufacturers saw strength in employment and the average workweek in February.  Manufacturing firms saw growth in both prices paid and received and expect prices to continue to grow “at a faster rate in the near future”.   

Housing

Pending Home Sales dropped 4.7% to 104.6 in January, way below consensus of 0.5%, and the lowest since October 2014. The main takeaway is the lack of supply, as stated by NAR chief economist, Lawrence Yun “there’s little doubt last month’s retreat in contract signings occurred because of woefully low supply levels and the sudden increase in mortgage rates.” He added; “With the cost of buying a home getting more expensive and not enough inventory, some prospective buyers are either waiting until listings increase come spring or now having to delay their search entirely to save up for a larger down payment.”

The weakness was nationwide as purchases fell 9% in the Northeast, in Midwest 6.6%, 3.9% in the South and 1.2% in the West.

SPDR S&P Homebuilders ETF (XHB) declined after the report was released and is currently -0.94% to $41.10.


Comments
CARBO (CRR) has been an absolute disaster. Cut in half since the mention. Most of it after they reported. Just shows that you have to be cautious around earnings.

sean s. on 2/28/2018 2:18:51 PM
Sean you are 100% correct this has been a disaster for me...I got whipsawed on crude in general and this is one name I loved for its unique positioning in fracking. I'm sure it will be a tax loss sell by the same token I've had disaster like this come back and even go much higher after writing them off and taking the loss. I certainly wouldn't add to the stock right now. Sorry about this one. CP

Charles Payne on 2/28/2018 3:40:39 PM
Charles! We are down 380 on the DOW at the close. What do we do now? Dan

Dan Cooney on 2/28/2018 4:38:10 PM
We assess the market throughout each session and the current volatility isn't a reflection of the underlying fundamentals or upside potential. There has been a few disappointments with recent economic data but earnings continue to be phenomenal. The smartest move is to hold tight. Sell losers based on broken fundamentals and take profits on certain high Betas names to raise money and mitigate anxiety. Be prepared to buy names that go on sale and obviously adjust to the fact last year's idyllic days of zero volatility are over but the bull market is not. CP

Charles Payne on 2/28/2018 4:49:46 PM
Thanks for keeping an even keel on perspective with this 'dumb is the new smart' legislature today on Making Money. Also, that's a very nice pocket square.

Patricia Flynn on 2/28/2018 6:32:37 PM
 

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