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Morning Commentary

IN WITH A WHIMPER, OUT WITH A BANG

By Charles Payne, CEO & Principal Analyst
7/1/2020 9:29 AM

What a close! Although, the internals telegraphed that the market wanted to go higher all session. All eleven sectors in the S&P were higher most of the day, and the market breadth remained firmly upbeat, even during lulls. So, I was not surprised when the market began to trade higher in the two o’clock hour, building momentum for the last hour of trading on Tuesday.

By the close, the combined up volume was 6.18 billion shares versus the down volume of 2.99 billion.

Breadth

NYSE

NASDAQ

Advancing

1,956

2,273

Declining

1,041

1,091

52 Week High

58

102

52 Week Low

6

16

Up Volume

3.26B

2.98B

Down Volume

1.48B

1.51B

 

Energy was the most compelling sector, as it was a laggard early in the session, then reversed to be the best performing sector by the closing bell. Crude oil still needs to get through the $40-$41 wall of resistance.

S&P 500 Index

+1.88%

Communication Services XLC

+1.35%

Consumer Discretionary XLY

+1.71%

Consumer Staples XLP

+1.08%

Energy XLE

+2.86%

Financials XLF

+1.97%

Health Care XLV

+2.22%

Industrials XLI

+1.11%

Materials XLB

+2.00%

Real Estate XLRE

+1.89%

Technology XLK

+2.12%

Utilities XLU

+0.84%

 

More V-Shaped Conviction

Economic and sentiment data continue to come in much better than anticipated, as Americans continue to feel better about the economy and jobs. It’s hard to fathom confidence that can come back before the discovery of a COVID-19 vaccine, but it’s not inconceivable. The stock market could rally back, telegraphing a vaccine and complete economic recovery sometime in 2021.

It was less than a month ago when the action in transportation stocks caught our attention. The S&P Transportation index raced higher and began outpacing the broader market. It was easy to believe the index would have no trouble getting back to highs that reached the highs of February.    

Then the rally was derailed, and a series of lower highs began as the index rapidly lost ground.

All of that might be changing after FedEx (FDX) posted a monster quarterly report that crushed Wall Street’s consensus. With the kind of report, that dovetails with anecdotal evidence, the company should be prospering in this environment. Heck, they came to my house twice yesterday.

In the last couple of years, the company founder and CEO Fred Smith has been complaining about everything from the trade to his company’s treatment by Amazon. However, Smith came through big time.

The shares rocketed up 9% in after-hours trading.

XTN

It was the best quarterly performance for the stock market since the fourth quarter of 2018 (4Q18), and the momentum suggests everything from the Gross Domestic Product (GDP) to corporate earnings will come in better than expected.

Portfolio Approach

Today’s Session

The ADP employment at 2,369,000 was less than anticipated making tomorrow’s BLS number even more of a guessing game.  2.4 million is an impressive number but hints at a slowing recovery.

I’m particularly worried about very small business of less than 50 employees, and when you drill down, even more less than 20 employees.

The market began to chip away at the big pre-opening declines after this news, and equity futures got stronger after positive data on early vaccine trials at Pfizer.


 

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