The market rallied on Wednesday and while it didn’t look like a gangbuster move, it was a continuation of yesterday’s late-session rebound as the Dow is now higher in nine of the last ten sessions.

• Dow Jones Industrial Average +62.5
• S&P 500 +11.0
• NASDAQ +46.7
• Russell +16.0

Market breadth was very impressive as advancers doubled decliners on the NASDAQ, and almost doubled on the NYSE. The up volume was twice as much as the down volume and new highs swamped new lows.

NYSE

• New Highs 125
• New Lows 54

NASDAQ

• New Highs 146
• New Lows 67

Domestic Economy Firing on All Cylinders

I love these sessions where it looks and feels like a casual stroll on a summer day when in fact, there are pockets of action and whirlwind news - yesterday was one of those sessions.

Signs from three disparate parts of the economy are all saying the same thing that America is on a roll:

• Manufacturing
• Small Business
• Consumer

However, no one has talked about industrial production and capacity utilization, but the data came in better than expected. In fact, industrial momentum is actually gaining strength and speed, lifted by strength in critical components:

 Since November to April:

• Consumer goods
• Construction
• Materials
• Mining, the biggest mover

Mining is also the standout for capacity utilization with oil and gas being higher, but coal soaring.

Small Business

Another great sign the domestic economy is rocking is the Russell 2000 as it surged to a new all-time high as the best, outperforming the Dow, S&P, and the NASDAQ.

The index is considered the better proxy for the U.S. economy as the others derive most of their profit growth outside America. 

Russell 2000 Stats:

• 2026 stocks
• Median marker cap: $784 million
• Largest holding: $3.4 billion
• Smallest: $143 million
• Top five holdings: Nektar Therapeutics (NKTR), GrubHub (GRUB), Bluebird bio (BLUE), Aspen Aerogels (ASPN), & Sage Therapeutic (SAGE)

Two Russell Names I Like For Investors: CRAY and ETSY

Russell 2000 (RUT)

Smart & Healthy Consumer

Then there’s the stock of the day Macy’s (M), which reported results yesterday morning. The company beat on revenue and earnings with comp stores sales above consensus. Management says it was the right combination:

• “Healthy brick and mortars”
• “Robust e-commerce”
• “Great mobile experience”

Inventory levels are lower year-to-year and guidance is better than expected as well.  A lot of this news is company-specific, but it corroborates trends seen in the retail sales report from yesterday.

This was the first time the company beat the Street and offered guidance above consensus since 2011. 

Don’t look now, but the best brick-and-mortar retail ETF (XRT) has gone up 4.9% in the past month.

I also loved the action in rails and trucks, which gets back to intermodal transportation as a great economic indicator.  Semiconductors were up huge, and I hope you have exposure in your portfolio.

Two Consumer Names I Like For Investors: NKE and DIS

Today in Washington, D.C.

All eyes will be on China trade talks after positive comments from Chinese Vice-Premier Liu, who told reporters he’s “optimistic” a deal can be made.

The big development is the fact Peter Navarro will not attend the meeting, which (to me) is the clearest signal the administration wants a deal. 

Navarro has been waving the warning flag for years (see some of his books below), but his harsh approach isn’t the right fit for this phase of negotiations.

Today’s Session

The market has been slightly lower all morning as the street digest key earnings reports.  The biggest name reporting, Walmart, beat the street on the top and bottom line and the shares are indicating higher after initially declining.

• Walmart US $77.7 billion +3.1%
• International $30.3 billion +11.7%
• Sam’s Clubs $13.6 billion -2.7%
• Total Revenue $121.6 billion

Comp Store Sales (without fuel)

• Traffic +0.8%
• Ticket +1.3%
• Total +2.1%

E-commerce +33%

Overall business seems on track as investors breathe a sigh of relief with the rebound in e-commerce from just +23% in the prior quarter that sent then stock spiraling lower.

• Grocery was “strong” in part to increase in private brands.
• Health & Wellness benefited from price inflation in branded drugs.
• General was “solid” in home, auto and wireless but unseasonable cool weather in April hurt traffic and sales in seasonal, lawn and garden and apparel.

Cisco (CSCO) shares have been under pressure all morning after posting stronger than expected top and bottom line results but so-so guidance.  It’s a classic Wall Street knee-jerk sell scenario. 

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