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Morning Commentary

Stacking Chips But New Narrative Gains Momentum

By Charles Payne, CEO & Principal Analyst
5/12/2020 9:26 AM

The market continues to fall on the shoulders of Technology, which continues to carry the load.  Consequently, the NASDAQ Composite finished higher on the session and even the S&P 500 crept into positive territory by the closing bell.

Overall market breadth was slightly negative, although it improved throughout the session.  Clearly, the NASDAQ is were all the buyers are flocking sending 119 names to 52-week highs, which is the highest level since February 21st when there were 127 new highs but also 66 new lows.

Market Breadth

NYSE

NASDAQ

Advancing

1,007

1,482

Declining

1,913

1,788

Unchanged

89

64

Total

3,009

3,334

52 Week High

34

119

52 Week Low

14

15

Up Volume

1.29B

2.38B

Down Volume

3.64B

1.55B

Unchanged

14.88M

14.83M

Total

4.94B

3.95B

Chips Ahoy

Despite eking out a gain for the session only three of the eleven sectors closed higher.  Healthcare was the biggest winner as Cardinal Health (CAH) simply crushed Wall Street consensus on revenues and earnings.   The stock was the biggest percentage gainer of the session and had long coattails lifting shares of rivals and other names in the sector.

Conversely, Financials sagged and continue to be disappointing and inconsistence.  The same could be said for Energy, although the known and unknowns explain the wild swings.

S&P 500 Index

+0.02%

 

Communication Services XLC

+0.06%

 

Consumer Discretionary XLY

 

-0.22%

Consumer Staples XLP

 

-0.14%

Energy XLE

 

-1.75%

Financials XLF

 

-1.93%

Health Care XLV

+1.72%

 

Industrials XLI

 

-1.25%

Materials XLB

 

-1.52%

Real Estate XLRE

 

-1.20%

Technology XLK

+0.66%

 

Utilities XLU

 

-0.43%

As for Technology, it was the computer chip names that once against rose to the occasion, picking up from last week’s momentum.   After a lull that saw software names carry the load, chips are in the lead again.   The Philadelphia Semiconductor Index (SOXX) is +7.0% in the past five sessions, but -4.0% for 2020.  The index breaks out through 244.

SOXX

Portfolio Approach

Yesterday, we added a Consumer Staples name our model portfolio and we are adding a Financial name today.  If you are not currently a Hotline subscriber, call your account representative or email research@wstreet.com to get started today.

Today’s Session

So, the resurgence narrative is gaining steam among Wall Street media headline writers and others looking for the reason of the day for the market to be lower.  Typically, any reason can do, and sometimes they pound the table hard enough to make it a thing.

Of course, everyone is watching for increases on coronavirus cases around the world, but everyone knows there will be increases.  I’m not sure where individual thresholds of panic are, but I don’t think there is any place that’s hit them yet. 

Today, the Fed is beginning a new program, one that they have never done before.  They are buying bond ETF’s (exchange traded funds) to help support the credit markets.  On Monday, the Fed announced it will purchase “U.S.-listed ETFs whose investment objective is to provide broad exposure to the market for U.S. corporate bonds.”

Consumer inflation has declined to 0.3% from 1.5% in March representing the largest drop since 2008.  At the beginning of 2020, inflation was 2.5%. The pandemic has put major pressure on prices as demand drops despite the federal emergency aid.  

Futures are pointing to a positive open.  Nasdaq is up 2.5% or 2020, and it’s the highest level since February 24, and is continuing is trek higher.


Comments
Charles, Morgan Stanley now says a V-shape recovery. Dig deeper and sandwiched in-between the MS forecast is a 10% market decline followed by year-end highs. Ummm, isn't that a W-shape recovery?

Walt on 5/12/2020 10:05:46 AM
Why is there so little talk and analysis of the S&P 500 where many investors like me are invested.

David L. Bennett on 5/12/2020 11:29:11 AM
 

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