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Morning Commentary

All Eyes on U.S. - China Talks

By Charles Payne, CEO & Principal Analyst
1/9/2019 9:02 AM
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The market held its gains into the close, even as there was wild speculation and guessing on what an extra day of meetings between the United States and China on our trade relationship would yield.  Early this morning, there are positive signs on energy and agricultural, both  which are low hanging fruit considering China’s massive appetite for LNG (Liquefied​ Natural Gas) and crops, including soy beans.

Brazil was already carving out market share gains on soybeans in China, but they cannot meet total demand; hence, renewed imports from American farmers. Prices are coming on strong and breaking key resistance.  Note: prices were down 30% from the 2015 high by time this administration took over, so there are longer term challenges, but would like to see it rebound toward $11.00 this year.

Soybean Prices

Message of Market

Consumer-driven sectors and industries continue to act great, powering Communications Services and Consumer Discretionary.   Lots of beaten down names act great, including Mattel (MAT), which is trading like a takeover candidate, and Hanes (HBI), which is simply oversold.

Consumer Staples also continue to attract value – buyers; although, the initial reaction to earnings from Constellation Brands (STZ); which crushed Wall Street consensus but offered lukewarm guidance, might set a negative tone.   We’ll send an alert and assessment on the news and guidance later in the session.

Real Estate was the best performer again in part to investors looking for yield.

Let’s watch homebuilders today after Lennar posted so-so results, which initially sent the stock lower, but it is now looking to open higher.  Mortgage applications surged 23% last week as the 30-year fixed mortgage rate declined 10 basis points to 4.74%, the lowest since April 2018.

S&P 500 Index

+0.97%

Communication Services (XLC)

+1.68%

Consumer Discretionary (XLY)

+1.11%

Consumer Staples (XLP)

+0.94%

Energy (XLE)

+0.87%

Financials (XLF)

+0.08%

Health Care (XLV)

+0.89%

Industrials (XLI)

+1.37%

Materials (XLB)

+1.05%

Real Estate (XLRE)

+1.74%

Technology (XLK)

+0.84%

Utilities (XLU)

+1.28%


 

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