The broad view of Tuesday’s session was mixed. However, looking under the hood, it was a very encouraging day for the market and the economy.

The Russell 2000 and NASDAQ hit new all-time high points and the S&P 500 climbed off the canvas to close in the plus column.

Market Breadth

NYSE

• Advancing 1,796/Declining 1,889
• Advancing Volume 1.85 billion/Declining Volume 1.53 billion
• New Highs 175/New Lows 52

NASDAQ

• Advancing 1,889/Declining 1,055
• Advancing Volume 1.22 billion/Declining Volume 723 million
• New Highs 268/New Lows 41

The Message of the Session

Materials

Materials were the best performing sector of the S&P 500 on Tuesday, are up more than 3% in the past five sessions, and on the cusp of a breakout that could see a re-testing of the 2018 high. You should have more exposure to this sector than you normally would.

I understand this isn’t the most exciting part of the market, which makes it very exciting for those looking to be positioned and looking for balance.

I think the sector will outperform for the remainder of this year, powered by chemicals, agricultural, and copper names.

XLB

Consumers: Alive and Shopping

“The reports of my death are greatly exaggerated.”

-Mark Twain

XRT

Then there’s the group no one in the financial media is talking about (except me), and that’s consumer stocks, especially discretionary names.

I have raved about the resilience of consumer confidence, especially the present condition component that’s holding at a 17-year high.  Wall Street calls these surveys and polls “soft data,” but those emotions are morphing into reality, otherwise known as “hard data.” 

Forget what the experts are saying,  people are spending money at brick-and-mortar stores. Those companies that have survived and are figuring it out, well their shares have had blockbuster performances that have dwarfed even Amazon (AMZN) and Netflix (NFLX).

Companies up to more than 100% from the 52-week low:

• Yesterday, G-III Apparel Group led the way (please read the story of company’s founder)
• Macy’s (M)
• Kohl’s (KSS)
• Foot Locker (FL)
• Restoration Hardware (RH)

There are a lot of deeply oversold names in retail that look compelling. On that note, choose carefully.  I like The Children’s Place (PLCE) and Gap, Inc (GPS).  

Jobs Everywhere

The retail move reflects the fact that this is the most robust jobs market ever.

Yesterday morning, the government’s report on jobs openings was a jolt. There are 6.7 million job openings and only 6.4 million available workers.  

This takes me back to last week’s Beige Book report and a part that really stood out the most was from the St. Louis Fed:

Some local employers have begun relaxing drug-testing standards and reducing restrictions on hiring convicted felons in order to alleviate labor shortages.

I think this is a compelling situation that intersects society and the economy in a very unique manner. I’m thinking about the case of Nashville native, Matthew Charles, who was released from prison after serving 21 years of a 35-year sentence for a nonviolent drug offense.

If President Trump were to grant pardons, I think it would speed up hiring nonviolent felons, especially in industries such as trucking, which could fall short 63,000 drivers this year. That being said, it will stall this recovery, even possibly reversing this booming economy.

Tariff Update

Business Roundtable members annually:

• Employ more than 16 million people
• Provide health care and retirement benefits to tens of millions of Americans and their families
• Make more than $6 billion in charitable contributions
• Invest $130 billion annually in research and development
• Generate more than $440 billion in revenues for small and medium-sized businesses
• Pay nearly $270 billion in dividends to shareholders

Business Roundtable CEO Economic Outlook Index Eases, Remains Near Historic High: CEO Plans Strong Yet Slightly Diminished Amid Increased Uncertainty around Government Policies, Particularly Trade

The headline above was rewritten by most publications to make it seem as if big businesses were shutting down completely over the administration’s efforts to enact fair-trade from our friends and allies. It’s true that these are the biggest globalists in the world, and I love the status quo, but big businesses plans are still significantly more robust than the last two years.

Business Roundtable	2Q 2018	1Q 2018	2Q 2017	2Q 2016
Sales	130.3	141.9	124.3	107.6
Capital Expenditures	107.6	115.4	87.2	68.8
Employment	95.5	98.5	70.3	44.2

 

Comments

Perhaps the best time in recent history to release these people into a society waiting to hire them and set them on a path of economic success and independence...not welfare and depression. Phil Simmons on 6/6/2018 10:04:50 AM

RELEASING THE NON VIOLENT CRIMINALS IS ABSURD YOU SOUND LIKE OBAMA MAYBE YOU ARE A CLOSET LIBERAL COME ON CHARLES YOU ARE SMARTER THAN THAT ALWAYS REMEMBER A LEOPARD NEVER CHANGES HIS SPOTS ERNEST REMUS on 6/6/2018 10:21:43 AM

Yes we should give these people a path to success. But not because unemployment is low, because it is the right thing to do. jerry Reaume on 6/6/2018 10:23:02 AM

Point taken...there has to be a level of contriteness and commitment to do the right thing, however. CP Charles Payne on 6/6/2018 11:27:19 AM

Sorry.. the leopard doesn't change it's spots ! Martin A Mooney on 6/6/2018 10:23:40 AM

Leopards don't but God gave humans free will and I've some remarkable turnarounds. Of course its always a case by case situation and not easy for sure. CP Charles Payne on 6/6/2018 11:26:21 AM

Charles, we thank you for all you do & FBN. pres Trump should give all that have served their time, or been pardoned nonviolent charges, the USA dream. Right to vote, to get a real wage, job, confidence & PRIDE USA is 2nd chances honor our veterans, is best for ALL USA CITIZENS. Ed on 6/6/2018 10:35:24 AM

Speaking as someone who's had a few run ins with the law giving some a chance is a smart idea. Some will run with the opportunity and make their lives better, I did. Brian Bigelow on 6/6/2018 11:20:28 AM

Congratulations Brian I think another problems comes with rigid sentencing that sometimes puts the wrong person in jail for too long while sick violent felons are offered a revolving door. . CP Charles Payne on 6/6/2018 11:24:00 AM

Should employers relax rules on hiring convicted felons and drug users? NOOOOOOOOOOOOOOOOOOOOOOOO! Thomas Bose on 6/6/2018 11:39:11 AM

Yes, there are job openings and, in order to rehabilitate and remove them from a dependancy on the social structure, they need a chance at a paying job. Scott on 6/6/2018 11:39:40 AM

Convicted felons have paid their "debt to society" and deserve a second chance (with a bit of discretion on what their crime was and what they are given responsibility for). On the other hand, relaxing drug testing is an occupational safety issue and should not be done. People showing up for work when they are high on drugs puts themselves and everyone around them at risk of a preventable "accident", for which the employer may be held liable. Tim on 6/6/2018 12:10:25 PM

Incrementally, yes. Those released from prison or freeing themselves from drug involvement (addition, dealing, whatever) need a chance. I remember Anchor Hocking being noted as a company who would hire felons decades ago. Limits on responsibility would be prudent, with opportunity to earn back trustworthiness over time. Patricia Flynn on 6/6/2018 1:09:57 PM

I can see that too thanks a lot for sharing thoughts and that history lesson. CP Charles Payne on 6/6/2018 2:31:28 PM

Depends on the felony and what drug use. As always the details count !!!!!! mct on 6/6/2018 3:15:57 PM

Im as conservative a guy as you will find anywhere but as a volunteer with the therapeutic [problem solving] courts like Drug Court, DUI court, mental health court, Veterans court here in Olympia WA for the past 25 years I have seen Men and Women become responsible contributing members of society over 700 here have become tax payers not tax users. Albert Einstein said "without discipline there can be no freedom" these courts teach discipline and many of these people have never known discipline in there lives. With the right systems I think many deserve the opertunity to become tax payers instead of tax users. Thanks for the work you do Charles your a great guy! Patrick Martin on 6/7/2018 12:05:05 AM

I work in healthcare and can't support drug users or convicted felons in this business. I already see a lack of critical thinking skills among new hires. The thought of someone I love being entrusted to drug users or former felons is distressing. Cynthia on 6/7/2018 7:50:29 AM

I agree with President Trump on giving people a second chance and be productive citizens. It seems cold to be a graceless society. It may not work for all, but think of those that would be a positive outcome. I always enjoy your commentaries. Johnnie Parnell on 6/7/2018 12:47:31 PM

This is an interesting question; "Should employers relax rules on hiring convicted felons?". The answer is dependent on why you ask this question. One answer is that employers should never modify a practice which is working well. They should focus on improving those aspects of the business that are not producing good results. Another answer is that businesses should now relax their rules on convicted felons because the job market is currently moving toward shorter supply. As such, it requires more effort to find superior candidates, and expanding the search a little is a good idea for that reason. If that is the case, the employer should not let loosening their standards have any impact on increasing the risk to other employers, and should certainly reject any candidate that cannot being convincingly screened to avoid danger to other employees. A third answer is that companies are conglomerates of people. Through those people, the company has a social responsibility to "do good", not just make money. Helping to redeem those felons who truly repent is a good thing. If the company is already behaving in a socially responsible manner, then it certainly should not give much credence to bullying pressure by a bunch of fascists on the liberal fringe of politics. Doing "the right thing" does not involve following the ebbs and flows of liberal politics. I would not want to work for a company that discarded true morality in order to appease a short term focus on some politically correct opinion, especially since political correctness in the last few decades has been equivalent to moral decadence. Bob G on 6/9/2018 2:28:37 PM

Employers must be more open to hiring people with criminal records, especially now with a labor shortage that threatens to tap the brakes on economic growth. Most employers shy away from hiring felons, and being chronically unemployed leads them back to criminal activity. Give them the chance for a fresh start and to become productive taxpayers. I'm not so naive to think that it would work out all the time, but I believe that a large percentage of felons would do just fine in the workplace. James M King on 6/9/2018 7:32:08 PM

I like to give people second chances in life, but I also have been disappointed more than my share of being wrong. It sounds harsh, but I tend to say NO. Karin Pereira on 6/14/2018 12:22:55 PM

Patrick Martin 6/6/18, interested in the program your in. Am in CA really need lots here. seadaddy77@yahoo.com. Concur in all cases incentive is key to recovery or starting over. We all cast stones at times. And lo and behold, we all have stones cast at us. ken stephenson on 6/14/2018 8:55:19 PM

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