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Morning Commentary

HEADING BACK TO “GO”

By Charles Payne, CEO & Principal Analyst
5/21/2020 9:48 AM

enter image description hereWell, do not look now, but the market is moving closer to those halcyon levels enjoyed before the pandemic. 

I am not sure how to timestamp the coronavirus (COVID-19) with respect to the stock market. 

As stories about the virus were circulating, it felt like fodder for doomsday blogs or those perpetual shorts looking for any reason to jawbone the market lower.

Through this period, the stock market moved higher. Yesterday, the Wall Street Journal posted a good piece that suggests the virus almost brought the financial markets to the brink on March 16th. That session saw the Dow Jones Industrial Average (DJIA) down 2,997 points or 12.9%, and other financial markets and instruments were under similar duress.

I think February 27th was the day the market got a whiff and reacted to the coronavirus wafting across the Pacific Ocean. Whenever the timestamp is, we all know it was swift and brutal; for many, it felt like the end of the world. 

In a way, it felt like lifting the ‘Chance Card’ in the game of Monopoly that takes you back to “Go,” where you collect $200. Everyone has wished they could turn back time or cut to the chase in life to quickly correct mistakes or avoid the pain associated with healing. The current rally effort feels like that as well.

Highest Close Since 2020

2020 Year-to-Date (YTD)

It is Not as Easy as it Looks

This is still a very bifurcated market, where the winners are up big, while the mass of stocks are still down significantly. A lot of folks are mistakenly playing Monday morning quarterback, assuming most stocks are back to even or higher. 

They are not.

S&P 500

It is an old cliché, but this really is a ‘Stock Picker’s Market.’

The Message of Session

I like that buyers continue to flock to unloved sectors, such as Industrials and Materials. The rally in Energy off the lows is very impressive, but the big buying was in Communication Services and Technology.

It’s tough to not have exposure to these sectors when they are the hottest companies in the world, and they have only gotten hotter since COVID-19.

S&P 500 Index

+1.67%

Communication Services XLC

+2.77%

Discretionary XLY

+1.31%

Consumer Staples XLP

+1.19%

Energy   XLE

+3.99%

Financials XLF

+2.22%

Health Care XLV

+0.12%

Industrials XLI

+1.87%

Materials XLB

+1.59%

Real Estate XLRE

+0.94%

Technology XLK

+2.19%

Utilities XLU

+0.55%

 

Portfolio Approach

Yesterday, we took big profits in LULU (Consumer Discretionary) and added two new ideas to our Hotline Model Portfolio, one in Consumer Discretionary and one in Technology.  If you are not a current Hotline subscriber, contact your account representative or click here to get started today.

Today’s Session

Another 2.4 million people filed for unemployment claims last week.  The silver lining is its down 9% or 249,000 from the prior week but still at horribly high levels.  Since the coronavirus, well actually the last 9 weeks, 38.6 million people have filed for unemployment.

More earnings from some big retailers:

Best Buy (BBY)

TJX Companies (TJX)

BJ's Wholesale Club (BJ)

L Brands (LB)

The major indices are slightly positive this morning. 


 

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