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Morning Commentary

From the Ashes

By Charles Payne, CEO & Principal Analyst
12/28/2018 9:25 AM
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The market on Thursday went from "Stayin' Alive" to "Disco Inferno" in one session, but I have to say I was impressed it didn’t completely collapse. All eleven S&P sectors were lower, including safe havens Utilities and Health Care as they went into the final hour of trading before buyers emerged.

That alone should be considered a win. When the Dow tumbled down more than 600 points, it felt like the market was on the verge of giving back all its gains from Wednesday’s record session. Stocks held and found buyers at 2 PM (I call it the ‘CP Effect’ because the market often stages a rebound during the hours my show airs). Still, the Dow looked vulnerable at 3 PM.

However, at 3 PM, all eleven S&P sectors were lower, and by the closing bell, and all were higher.

Hour of Power

3PM

4PM

S&P 500 Index

-1.84

+0.86

Communication Services (XLC)

-2.14

+0.46

Consumer Discretionary (XLY)

-2.36

+0.53

Consumer Staples (XLP)

-1.21

+0.96

Energy (XLE)

-2.12

+0.52

Financials (XLF)

-1.76

+1.20

Health Care (XLV)

-1.59

+1.10

Industrials (XLI)

-1.55

+1.25

Materials (XLB)

-0.77

+1.84

Real Estate (XLRE)

-2.10

+0.23

Technology (XLK)

-2.06

+0.72

Utilities (XLU)

-0.71

+0.84

 
Value Fishing

So, after the biggest single-session point gain, the market fended off a massive late-day selling to stage a remarkable rebound. What I love about the move is that it wasn’t led by big momentum names. Instead, the best-performing sector of 2018 was the best in yesterday’s session.

Material names led the way, attracting buyers in Freeport-McMoRan (FCX), Avery Dennison (AVY), and LyondellBasell Industries (LYB). Defense contractors, led by Lockheed Martin (LMT), powered the Industrial sector, and Procter & Gamble (PG) and Kimberly-Clark (KMB) were the best-performing stocks in Consumer Staples.

I think buying in these value names is critical, and it speaks to the need for an upside move to be more than just a half dozen momentum stocks.

Market Breadth was still abysmal.

The Turn

I blame the advent of financial television for the need to have instant answers when they often don’t reveal themselves until much later. Many times, they are not conventional wisdom. Heck, these days, you can come on TV and can make a declaration based on the market now and be 100% incorrect by the closing bell.

Perhaps, reports that Fed chairman Jay Powell would be willing to sit down with President Trump were the key to yesterday’s reversal. I think it’s the only plausible reason for the sharp turn higher, but the momentum to the upside also underscores the fact there is a lot of pent-up demand.

Portfolio Approach

I love the action, but I love having cash even more right now. Hang tight and keep your head on a swivel.

Communication Services

Consumer Discretionary

Consumer Staples

2

3

1

Energy

Financials

Healthcare

1

1

1

Industrials

Materials

Real Estate

3

4

0

Technology

Utilities

Cash

1

0

3

 

Today's Session

Futures are pointing to a higher open. It's been a wild ride this week. Let's see if the positive momentum continues.


Comments
I would prefer President Trump to sit on Jerome Powell. Don't let him up until he understands that raising rates when there is no inflation is WRONG.

Ken Knight on 12/28/2018 12:57:07 PM
 

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