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Morning Commentary

Buckle Up & Stay the Course

By Charles Payne, CEO & Principal Analyst
3/1/2018 9:26 AM
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I got a question from a subscriber yesterday about the recent volatility and if he should get out of the stock market.

My Reply:

We assess the market throughout each session, and the current volatility isn't a reflection of the underlying fundamentals or upside potential.  There have been a few disappointments with the 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 Beta 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

Today’s Session

The market has been under pressure all morning, but the outcome of the session probably hinges on the interpretation of Jerome “Jay” Powell’s testimony before members of the Senate.  This should give more clarity than the clown show before House members on Tuesday that sucked out all the oxygen and time only to push their own agendas. 

The nonsense was so amazing, one representative equated slavery to full employment for Black Americans. #Nuts!

While we wait for that, the retail spark continues, and is now undeniable.  Earnings results from key names and observations from management underscore the fact that Americans are feeling much better about their circumstances, and they are shopping again. 

Best Buy (BBY)

This is nothing short of the perfect earnings report as management raised its guidance for the current year to $5.75 versus $4.75 consensus coming into the day.   With a 17% short position, this stock is poised to rocket through a double top formation to new highs.

Kohl’s

Gross margins expanded, and inventories declined, as management continues to perfect the Omni-channel approach and benefited from stores located outside of malls.  Operating margin surged to 8.4% from 7.6% a year earlier.

Full year guidance of $5.42 is well-above $4.72 consensus.

Retail is rocking

Additional retailers posted stronger-than-expected results this morning as well, and there’s a great chance the Retail Index (RLX) could break through a double top.  RLX is up 37% since August 29, 2017.

RLX

We just got the latest read on personal income and spending, and both were in line with consensus.  We will crunch those numbers for you and have more information in the afternoon note.

Trump Steel Resolve

Donald J. Trump‏

Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries from around the world. We must not let our country, companies and workers be taken advantage of any longer. We want free, fair and SMART TRADE!

 

This morning steel and aluminum stocks are moving higher as President Trump continues to pound the table on his determination for fair trade, including the elusive, but obviously massive, dumping of cheap industrial metals by China.

Tech got good news from one of its darlings as Salesforce (CRM) posted a very strong earnings report. 

Initial claims out for the week ending February 17th, declined by 7,000 to 222,000 vs consensus of 233,000. A better gauge, the four-week moving average was decreased by 2,250 to 226,000.  We have now had 155 consecutive weeks of claims below 300,000 Continuing claims decreased to 1,875,000 down 73,000 and the 4-week average for continuing claims declined to 1,925,500 down 16,250. 

The market, after being under great pressure all morning, even with great retail news, industrial and metals higher, and tech sizzling, has turned around, as all eyes are on Powell. 


Comments
I SAW YOUR INTERVIEW WITH SIEGEL LAST NIGHT HE IS AND HAS BEEN A FLAMING BULL HE LOOKED BAFFLED TO ME I BELIEVE HE SAID THE MARKET WOULD BE FLAT TO UP 10% I THINK HE AND PAULSEN WHO WAS BEARISH ARE BEING RATTLED BY THE VOLATILITY I TOOK PROFITS AND LOSSES ON MANY POSITIONS I THINK THE RECALCITRANCE OF THAT IDIOT SESSIONS IS CAUSING TREPIDATIONS AMONGST ALL OF US TRUMP NEEDS TO FIRE THE DOPE SESSIONS ASAP

ernest remus on 3/1/2018 9:53:04 AM
great observation Ernest I know high jinks in Washington DC are impacting the market a lot more than anyone is saying in the media. That said Sessions going to dinner last night with his lieutenants to be photographed together in public underscores he isn't going to quit and understands the enormous scrutiny facing President Trump if he fires his Attorney General. I hope everyone holds on and focuses on underlying fundamentals...all this noise is drowning out the best economy we've had in years. CP

Charles Payne on 3/1/2018 10:00:01 AM
Think about the panic sales, stop loss sales, today is a BUY hold your nose. Wha ts is your idea on these tariff seller panics?

J on 3/1/2018 2:26:44 PM
The market's initial reaction to the United States (finally) getting tough on China and its practice of dumping cheap, low quality steel is the ultimate Wall Street tantrum. One one hand experts say China is a small portion of imports and yet somehow think China would go into a trade war over such a small sliver of their exports. Sure, trade wars create collateral damage all around but if American can get tough on cheap steel where do we draw the line on billions of dollar in annual technology theft. Lost in all of these were reasonable comments from Fed Chairman Powell and a slew of upbeat economic data portraying an economy making a Phoenix-like return to prominence. I've believed there was a chance to re-test recent lows and when key support of Dow 25,200 failed late yesterday that became more of a possibility. But these emotional gyrations belie the fundamental value proposition to own shares of great American companies. Stand ready for a chance to make the kind of purchases that allow investors to outperform the market. CP

Charles Payne on 3/1/2018 2:47:26 PM
products made in other countries are NOT cheaper. ADD THE COST OF UNEMPLOYMENT CHECKS, FOOD STAMPS, AND HOUSING FORECLOSURES to the price of foreign made products and YOU WILL QUICKLY SEE THEY ARE MORE EXPENSIVE .. CHARLES .. PLEASE MAKE THIS POINT.

E.T. Whyte on 3/1/2018 7:35:55 PM
 

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