Okay, yesterday was the pause or calm before the next big move, which probably hinges on data and comments about the economic health and willingness of households to spend. We will also get a sense of whether the recent uptick in housing starts and permits, coupled with other signs of household formation, remains intact.

The market breadth is still not great, which underscores the challenge of stocks not considered winners finding buyers when so many investors are chasing performance. 

• NYSE: 1,267 winners versus 1,674 losers
• NASDAQ: 1,373 winners versus 1,797 losers

S&P 500 Index	+0.05%
Communication Services (XLC)	+0.35%
Consumer Discretionary (XLY)	+0.35%
Consumer Staples (XLP)	+0.52%
Energy (XLE)		-1.22%
Financials (XLF)	+0.20%
Health Care (XLV)		-0.34%
Industrials (XLI)		-0.38%
Materials (XLB)		-0.25%
Real Estate (XLRE)	+0.54%
Technology (XLK)	+0.30%
Utilities (XLU)	+0.21%

Have We Stopped Sprucing Up the House?

Yesterday, sectors with the closest ties to the consumer, including Communication Services, Consumer Discretionary, Consumer Staples, and Technology traded higher. However, all eyes will be on retailers this morning. Watch Kohls (KSS) to see if the Amazon (AMZN) deal has begun to pay dividends. More than 14% of the float is shorted as Wall Street continues to bet against the company, which has been a rudderless ship.

A beat and stronger guidance could make it the biggest winner of the session, and impact other retailers:

• (TJK) T.J. Maxx
• (KSS) Kohls
• (URBN) Urban Outfitters
• ARMK) Aramark
• (HD) Home Depot

There will be extra scrutiny on Home Depot (HD).

The stock rallied the last two times it posted financial results. Before that, the stock was hit the day after posting results, even though it only missed the Street once in the past seven quarters. To be clear, this is a stock I would never consider selling in a long-term 401K plan, as those knee-jerk reactions have proven to be short-lived.

• Year-to-date: +39%
• Three years: +82%
• Five years: +149%

HD	Quarter	Actual	Estimate	Difference	Actual	Estimate	Reaction
8/20/19	Q219	$3.17	$3.08	+$0.09	$30.8B	$30.98B	+3.9%
5/21/19	Q119	$2.27	$2.19	+$0.08	$26.4B	$26.39B	+0.1%
2/26/19	Q418	$2.09	$2.16	-$0.07	$26.49B	$26.57B	-0.9%
11/13/18	Q318	$2.51	$2.26	+$0.25	$26.3B	$26.26B	-0.2%
8/14/18	Q218	$3.05	$2.84	+$0.21	$30.46B	$30.01B	-1.3%
5/15/18	Q118	$2.08	$2.06	+$0.02	$24.9B	$25.21B	-1.6%
2/20/18	Q417	$1.69	$1.62	+$0.07	$23.9B	$23.67B	-0.1%

Lately, market bears have taken to pointing to the building material and garden supply stocks as a reason to sell the market. There is a suggestion for the recent decline in sales (see chart) that underscores key consumer weakness not captured in the control group of the Gross Domestic Product (GDP) report.

Another way to look at the building materials trend is that perhaps people are shifting their focus to buying homes instead of sprucing them up.

Housing Trends	Consensus	Previous
Starts	1.325	1.256
Permits	1.390	1.387

Return of Conference Season

With earnings season ending, look for investor conferences to move markets. Today and tomorrow, it’s the RBC Capital Markets Global Technology, Internet, Media and Telecommunications Conference. The key participants are, according to Briefing.com:

LogMeln (LOGM), Akamai Tech (AAKAM), Wix.com (WIX), Telaria Inc (TLRA), Ansys Inc (ANSS), Etsy (ETSY), Varonis Systems (VRNS), Booking Holdings (BKNG), Pinterest (PINS), Proofpoint (PFPT), Fortinet (FTNT), Roku ( ROKU), Fidelity Ntl Inf (FIS), Cognizant Tech (CTSH), Datadog (DDOG), Arista Networks (ANET), Zillow Group (ZG), Zillow (Z), Tyler Tech (TYL), Netscout Systems (NTCT), Trupanion Inc (TRUP), Redfin Corp (RDFN), Lending Tree (TREE), j2 Global Inc (JCOM), Celestica Inc (CLS), and Zen Graphene Solutions (ZEN).

Portfolio Approach

Communication Services	Consumer Discretionary	Consumer Staples
1	4	2
Energy	Financials	Healthcare
1	2	2
Industrial	Materials	Real Estate
3	1	1
Technology	Utilities	Cash
3	0	0

Today’s Session

Housing Data

Permits annualized pace of 1.46 million highest since May 2007 this supports my contention we could be in the midst of a shift in millennials moving out and forming their own households.

• Single family 909,000 +3.2% m/m +14.1% y/y
• Multifamily 505,000 +6.1% m/m +27/5% y/y

Starts +3.8%

 

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