It was another great session for the market, which has been in coiled-spring mode all week, and is ready to uncoil as the pendulum shifts from the unknown on trade talks, the United Kingdom (UK) election, and the House impeachment. Okay, there was never any doubt that Democrats were going to vote on impeachment, but two charges after all the howling seem almost comical and will be squashed next month in the Senate.

Speaking of comical, it looks as if the left won’t get the last laugh in the United Kingdom, where exit polls have Boris Johnson winning by a landslide. The promised implosion of the UK starts with the strongest rally in Pound Sterling since May 2018. 

Meanwhile, there are big moves out of yield-sensitive stocks, but large chunks of buying are still seeking value in beaten-down names. The good news is that Wynn Macau (XHKG: 1128) pushed Wynn Resorts (WYNN) to the top of S&P performers, but L Brands (LB), Gap Inc (GPS), and Mylan Pharmaceuticals (MYL) found enough buyers to be in the top ten.

Symbol	Select Sector SPDR Fund	Last	Change	% Change	Volume
XLC	Communication Services	52.68	+0.06	+0.11	2.87 M
XLY	Consumer Discretionary	123.06	+1.07	+0.88	4.61 M
XLP	Consumer Staples	62.56	-0.05	-0.08	11.84 M
XLE	Energy	60.77	+1.10	+1.84	22.49 M
XLF	Financials	30.82	+0.59	+1.95	68.43 M
XLV	Health Care	100.95	+0.93	+0.93	9.77 M
XLI	Industrials	81.93	+0.72	+0.89	15.56 M
XLB	Materials	60.91	+0.84	+1.40	7.23 M
XLRE	Real Estate	37.55	-0.46	-1.21	7.62 M
XLK	Technology	88.90	+0.94	+1.07	12.09 M
XLU	Utilities	62.88	-0.27	-0.43	24.12 M

Seeking Value

The market breadth was remarkably bullish, and the new highs-to-lows ratio is mind-boggling, but it explains why it’s so difficult to find stocks that haven’t moved. It’s a worthwhile approach, in my opinion, to be in these names, but not under the pretense they will pop even in this next leg higher. When they do recover; more than likely, many will significantly outperform the broad market.

Meanwhile, there’s also room for breakouts in every portfolio. Remember that you shouldn’t be afraid to chase performance.

NYSE

• Advancers: 1,911
• Decliners: 1,074
• New highs: 214
• New Lows: 21
• Up Volume: 1.52 billion
• Down Volume: 745 million

NASDAQ

• Advancers: 2,118
• Decliners: 1,092
• New Highs: 322
• New Lows: 64
• Up Volume: 1.45 billion
• Down Volume: 586 million

With so many stocks near 52-week highs and all-time highs, the bar is also going to be higher to justify those numbers now and going forward. This will lead to making jerk reactions that I hope investors don’t get caught up in out of frustration.

This morning, it will be Costco (COST), which posted impressive financial results after the close, but revenue was a little light against consensus, which isn’t the same as being a little light in general.

• Revenue: $36.2 billion, Street looking for $36.4 billion
• Earnings: $1.90, consensus was $1.71
• Comp-store sales: +5.0%, consensus +4.3%

Gasoline held down their revenue, but the company is firing on all cylinders, and the stock is definitely a buy.

Phase One: Chinese Trade Deal

It looks as though Phase One of the Chinese trade deal is about to happen, and it’s going to be huge.  Details are slowly emerging, but the United States will apparently pull back on half of the existing tariffs and not impose those scheduled for December 15.  Actions taken by China include massive agricultural buys.

Farmers Woes

Long before President Trump arrived, American farmers were facing a myriad of problems, including prices that have largely been in retreat for a long time. When Trump came into office, soybeans were $10.25 a bushel, so they have felt the pressure from China’s deliberate targeting.

There has been more than China targeting soybeans, as farmers endured one of their worst years ever of weather-related crop damage.  Yesterday, the USDA announced that it estimates 84 million acres of soybeans will be planted next year, making it the fourth largest ever. Some think the number will go higher. The good news is there will now be a buyer for this massive yield, and maybe even some price appreciation.

Thank A Farmer

Sonny Perdue visited farmers in Arizona, where we were reminded by Mark Killian, head of the state’s Department of Agriculture, how lucky we are to have such great and efficient farmers. He noted when he bought his first farm pick-up truck in 1976, it cost $6,000 and how the cost is north of $50,000 today. And yet, the price he gets for his cotton hasn’t changed.

The food at home, as measured by the Consumer Price Index (CPI) report, peaked back in 2015. The Federal Reserve can make it easier for money to get into society, but affordable food moves people that move the economy.

Portfolio Approach

We added an idea to Consumer Discretionary Yesterday.  Call your account representative or email research@wstreeet.com if you have any questions.

Today's Session

This morning we got the November Retail sales report that were lower than expected.

• Headline +0.2% vs 0.5% expected
• Ex-auto +0.1% vs 0.4% expected
• Ex auto and gas 0.1% vs 0.3% expected

November 2019	M/M	Y/Y
Headline	+0.2%	+3.3%
Ex-Motor	+0.1%	+3.0%
Motor	+0.5%	+4.9%
Furniture	+0.1%	+1.9%
Electronics	+0.7%	-1.5%
Building Materials	+0.0%	+0.4%
Grocery	+0.3%	+3.0%
Health and Personal Care	-1.1%	-0.4%
Gasoline	+0.7%	+0.5%
Clothing	-0.6%	-3.3%
Sporting Goods	-0.5%	+3.4%
Department Stores	-0.6%	-7.2%
Internet	+0.8%	+11.5%
Restaurants	-0.3%	+5.1%

 

Futures trimmed gains after President Trump tweeted a Wall Street Journal report on the U.S.-China trade deal is “completely wrong”.

Moreover, Chinese officials will hold a press briefing at 10:30 p.m., or 9:30am NY Time. The main theme will be to discuss “issues on relevant progress of China-U.S. economic and trade consultation.”

The futures are in the red this morning. We are going to keep our powder dry.

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