Thursday was an interesting session. The Dow seesawed back and forth before a last-minute rally faded during the final seconds into the closing bell. Despite the benign close of the Dow Jones Industrial Average, the internals were very powerful.

 NYSE

• 2056 advancers against 948 decliners

• 3.1 billion, up volume against 1.8, down volume

• 133 new highs against just 7 new lows

NASDAQ

• 1976 advancers against 1,101 decliners

• 1.8 billion, up volume against 1.1 billion, down volume

• 76 new highs against 27 new lows

It turns out it was the best January in decades after the worst December in almost a century. So where does the market go in February?

Leadership

This promises to be a volatile year that will once again test investors and punish those that are too emotional and don’t do their homework.  Even yesterday saw such robust internals and positive market breadth. Also, there was a spike in Utilities, the second-best performing sector of the session, underscoring how some money managers are playing it close to the vest.

 It was all about Communication Services as well, which I’ve already said will be the best performer in 2019. The best performer was Charter Communications (CHTR), but Facebook (FB) was obviously the most influential. On that note, I think we could also see some high-profile deals in this sector this year. 

 Consumer Discretionary had a good day, but it will be a challenge this morning after Amazon (AMZN) traded lower, after posting results after the close (details below).

S&P Sector Performance

Communication Services (XLC)	+4.08%
Consumer Discretionary (XLY)	+0.91%
Consumer Staples (XLP)	+1.85%
Energy (XLE)	+0.65%
Financials (XLF)	-0.15%
Health Care (XLV)	+1.25%
Industrials (XLI)	+0.43%
Materials (XLB)	-1.50%
Real Estate (XLRE)	+0.97%
Technology (XLK)	-0.11%
Utilities (XLU)	+2.11%
S&P 500 (SPX)	+0.86%

Technical View

The S&P 500 is in what they call a no man’s land in tennis; the middle of a trading range, that’s not very comfortable. There is a wall of resistance at 2,800, which held three times in the fourth quarter.  Meanwhile, the index must hold above 2,640.

Amazon

The e-commerce giant posted financial results of $72.4 billion in revenue and $6.04 earnings per share against the consensus of $71.09 billion and $5.58 in earnings.

I think it was a solid quarter, but the Street is now anxious about the company’s core business. North American sales, $44.1 billion (+18%), the slowest quarterly growth in five years.

• Operating Margin: 5.2% from 3.5%

• Cash from Operations: $30.7 billion

• Free Cash Flow: $19.4 billion from $8.3 billion

Amazon Web Services (AWS)

The Cloud business grew faster than consensus, keeping pace with Microsoft’s Azure (AZRE). 

• Revenue: $7.45 billion

• Operating Margin: 29.3 from 26.5

The stock got hammered after the bell, giving back most of the $48 points gained during the session.

I think the stock will be fine. However, perhaps brick-and-mortar companies really are figuring it out and slowing the once unstoppable juggernaut.

Today’s Session

There were 304,000 new nonfarm payroll jobs created in January vs estimates of 172,000. The unemployment rate increased slightly to 4% from 3.9%. Labor participation was 63.2. December jobs was revised down to 222,000 from 312,000. Hourly wages increased 0.1% compared to estimates for 0.3%.  We will have more in the afternoon note.

The Dow and S&P500 are in green, and the Nasdaq is down on the back of Amazon’s earnings.  

Comments

Amazon's core business is Web services software - no one is even close. El Zorro Oro on 2/1/2019 10:43:29 AM

One problem we have today is there is TOO MUCH so called information, data, opinion, technical analysis everywhere you look. A company can turn in good numbers and get hammered because some analyst don't like they are guiding down some going forward. NOTING goes up forever in a smooth trending way! It would be nice to hear some folks says "hey X company turned in a good quarter and year so they may not duplicate that this coming year but, they're solid and will endure for many years to come. The buy and hold ( not necessarily forever) still works if you invest in good compaines with good management and prudent financial leverage and controls. garro on 2/1/2019 1:56:53 PM

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