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Morning Commentary

Stronger Than It Looked

By Charles Payne, CEO & Principal Analyst
3/13/2018 9:45 AM
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After starting strong out of the gate, the market began to fade and for the most part, it was difficult for the broad market to get back on track. Trading was bifurcated with the Dow Jones Industrial Average and the S&P 500 finishing lower, while the NASDAQ composite and Russell 2000 closed higher.

Technology continues to be paced by semiconductor stocks, which has a new bellwether in Micron Technology (MU), which caught a share price upgrade to $100 from $55.00 at Nomura Securities (NMR).  Semiconductors have been hit-or-miss for two decades, and Micron Technology is the perfect proxy for this mercurial sector.

However, the best sector was real estate, led by healthcare facilities (HCP REIT) that sports a 6.5% dividend yield.  Consumer discretionary names led by beaten down names such as Newell Rubbermaid (NWL), and Foot Locker (FL), as well as Amazon (AMZN), also held up for most of the session.

Technology was strong as semiconductor stocks belying the notion there is an impending trade war.

Stealthily Bullish

I often refer to market breadth for a better gauge on the session than moves in overall indices. Yesterday’s breadth was extraordinarily bullish:



All in all, Monday was a good session.  There is some concern with losses in industrial names, but many have come so far that it was inevitable there would be a pullback.  To those griping about Trump’s tariffs hurting industrials, let’s remember Boeing was $159 on inauguration day and recently hit an all-time high of $365.00. In other words, be cool and get ready to buy the dip.

Budget Dip

Perhaps the most unnerving news of the session is the latest read on the federal budget deficit.  After achieving a $49.0 billion surplus in January, the budget flipped to a deficit of $215.2 billion.  That was higher than expected (as more than $28.0 billion was spent on interest). 

We knew there would be an early deficit pressure, which is the trade-off the administration took in order to jumpstart the economy. Thus far, it’s working, but we should be concerned with mounting debt and the cost to service that debt. 

Supply-side economics work.  Without any real spending cuts, supply economics better work.

Today’s Session

Scarce Inflation Scare

This morning’s CPI report was benign with respect to inflation, coming in at 0.2% month to month and 2.2% from a year ago.  Vehicle insurance was up huge +1.7%, as was apparel and transportation services.  But vehicles, new and used, were lower along with food away from home.

The market got a little bump from the news, which is an extension of the Goldilocks scenario.

Lots of news out of the White House this morning, which all speak to the fact President Trump is putting the American public ahead of elites.  Initially, this was great news for the stock market.  However, in the long run, it is great news for everyone, including the spirit of capitalism, which has been gutted by cronyism and Washington, D.C. self-dealing.


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