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Market Commentary

Correction Mode

By Charles Payne, CEO & Principal Analyst
3/23/2018 12:56 PM
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Well its official.  As of now, the Dow is in correction territory, down 10% from the recent high.  The futures were down, then the market opened, and the Dow was up over 100.  Then, China said they are not only considering $3 billion in tariffs on 128 US products, but they are considering scaling back on their purchases of US Treasuries.  That news, sent the market lower.  Whether this happens or hurts our economy is secondary as overall investor sentiment has become quite jittery.  Sell first, then ask questions has been the theme of late. 

Comments from Minnesota Fed President Kashkari that he does not believe the recent economic data supported this week’s rate hike helped support equities early on.  If you recall our dot plot chart on the March 22, 2018 Hotline Report, Kashkari was one of the two dots suggesting there would only be two rate hikes this year.

On the economic front, February orders for durable goods were stronger than market expectations.  Durable goods increased 3.1% compared to estimates of 1.5%.  More impressively, year over year durable goods orders were up 9.1%.  Excluding transportation orders, durable goods were up 1.2%, above the 0.6% consensus estimate.  This reversed January’s 0.2% decline.  Nondefense capital goods orders excluding aircraft orders were up 1.8%, lending support to our theory that business spending continues to remain strong.

February new homes sales of 618,000 were down 0.6% vs estimate for +4.6%. January was revised from 593,000 units to 622,000. Currently, there is 5.9 months’ supply, down from 5.8 in January, and 5 months in the prior year.  This is the third month in a row that new home sales declined, however, year over year, they are up 0.5%.

The median price is $326,800 from $298,000 a year ago, up 9.7%. Higher tariffs, materials prices, and labor costs are impacting prices especially on the lower end where the greatest shortage and need exists.

Financials and Technology are the laggards again today while Consumer Staples, Energy, Industrials, Telecom and Utilities are strong.  The financial sector is down 1.6% and 5.8% on the week thus far as BAC, C, and MS are all down over 2% today.

The bright spot in technology today was Dropbox (DBX), which debuted today and is trading around $30, up over 40% from its IPO price of $21. 

At midday, decliners are leading advancers 1763, 1077 and 1787/796 on the NYSE.

Crude oil is having another strong day as it clears the $65 handle.  Currently, WTI is up 1.68% to $65.38 as talks of Saudi extending its output production cuts into 2019 is giving further support to the market.  This afternoon’s Hotline idea is a play on the energy space.  If you are not currently a Hotline subscriber, call your representative or email info@wstreet.com.

Charles, We are below 23,860 on the DOW. Your "Look out below" Level has been breached. S&P 500 and the Naz are barely above theirs. Do we sell?

Dan Cooney on 3/23/2018 3:14:12 PM
Lets see where we close but i have a lot of work to do over the weekend. The dynamics of an amazing economy being pushed to the background as the media focuses on headlines is obviously taking a toll on stocks. I'm concerned about a few things including: technical breakdown lack of leadership why the yield curve is flashing signs of potential recession I'm not worried about a trade war per se and think Wall Street is deliberately pushing the market lower to pressure the White House. I'll have a lot more on Monday morning. meanwhile I continue to lick my chops over the amazing opportunities.

Charles Payne on 3/23/2018 3:20:47 PM

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