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Morning Commentary

MARKET SEES RECOVERY SOONER

By Charles Payne, CEO & Principal Analyst
8/11/2020 9:30 AM

Major Indices

NASDAQ

S&P 500

DJIA

Russell 2000

Session

-0.4%

+0.3%

+1.3%

+1.0%

2020

+22.2%

+4.0%

-2.6%

-5.0%

It was another solid session for the market on Monday, which continues to prove it can rally, even when Technology and Communication Services are underwater. Admittedly, there is no way one would think the market would be where it is back in March. Not only has the market rebounded, but the rally is also broadening out.

Big mega-cap growth losers held back the NASDAQ, but even that index enjoyed great breadth. This is why it’s critical to always look under the hood.

NYSE

NASDAQ

Great Guidance

I have been saying guidance this earnings season has been huge, but I did not realize how good it is. Bespoke Research puts out amazing work, including this chart of the S&P 1500 guidance. 

Of the S&P 1500 companies that have posted results, 66% beat on revenue, and 76% beat on earnings. It’s guidance that really stands out.

One hundred and eighty-eight companies have offered upside guidance (56 are S&P 500 components). These companies were not supposed to have much visibility. The future was supposed to be opaque at best, a disaster at worst; and yet, it’s turning out to be the exact opposite.

The guidance spread (upside versus downside), which is historically a negative number (average -2.97), is now at a record high of 18.61.

I think the best way to express this is that up guidance is at a record high compared to the down guidance. In fact, the up guidance is 700% above its historical average (which is down since most of the time, companies warn more than they guide higher).    

The Message of the Market

Look at the names that enjoyed the biggest gains yesterday. Some were up on news like the big investment MGM Grand (MGM) received from IAC/InterAct (IAC), but casino stocks have been looking better for a few days. It was casinos, cruise lines, airlines, and department stores.

There have been sessions with these compositions of winners periodically since the COVID-19 swoon, and they have proved to be false alarms. But investors figure one day these names will hit rock bottom, and the market will sniff out the inflection point with respect to coronavirus business restrictions and declines.

Yesterday, Goldman Sachs (GS) top analysts hiked his outlook for the stock market, and now believes there could be a vaccine approved this year. Understandably, Wall Street was confused at the onset of the pandemic, but they have erred on the side of ultra-conservative market observations. For the most part, the Street has assumed a worst-case scenario.

What has been remarkable about the last few sessions are the sizes of the moves in normally staid names that typically move at a more pedestrian pace, even in good times.

MGM Grand Resorts

XLY

+13.77%

Royal Caribbean Cruises

XLY

+10.00%

Wynn Resorts

XLY

+9.96%

United Airlines

XLI

+9.35%

Carnival Cruise Lines

XLY

+8.58%

Norwegian Cruise   

XLY

+8.36%

FedEx

XLI

+8.96%

Delta Airline

XLI

+7.95%

Las Vegas Sands

XLY

+7.51%

ULTA Beauty

XLY

+7.47%

Macy's

NA

+7.85%

American Airlines

XLI

+7.44%

Alaska Airlines

XLI

+7.21%

Live Nation

XLC

+6.61%

Mosaic

XLB

+7.04%

Diamond Energy

XLE

+6.33%

 

Jobs (JOLT)

Job openings in June climbed 518,000 to 5.9 million, coming in at a million higher than Wall Street ‘s consensus.  A year ago, there were 7.18 million job openings. 

JOLTSUnited States Job Openings

Portfolio Approach

Yesterday, we took profits in Consumer Staples and added a new position to Industrials in our Hotline Model Portfolio. Today, we took profits in Healthcare and adding to Consumer Discretionary. If you are not a current subscriber to the Hotline service, get started today.  Contact your account representative or email Info@wstreet.com.

Today’s Session

Putin has a vaccine, but I am going to skip it for now.  How about you?

The Russia vaccine news put a bump into stocks ahead of the open, but make no mistake, equity futures were higher since yesterday’s close.  The fact is, Russia is not ahead of many companies with a potential vaccine. But it has more lax standards for drug and vaccine approval.

What’s Moving Market?

There are things happening that the rally has promised would happen and now think those adjustments are gaining momentum, including the stronger JOLT's report and the rebound in air travel. 

TSA checkpoint data from Sunday saw the largest volume since March 17th with 831,789 travelers.  The tally is down considerably from 2,647,897 a year earlier, but it is a major breakout from post-coronavirus swoon.

The bottom line is what I have said from the very beginning.  We are learning how to co-exist, and even prosper, with Covid-19 in our midst.  

Buying Begets Buy

Do not look now, but as I have been saying, a lot of fence sitters are going to have to get in the mix.  If the S&P hits an all-time high today, look for it to trigger even more buying, as the pros that have watched all of this from the sidelines.


Comments
WOW! So much said, so few lines. Thank you

John McLees on 8/11/2020 10:10:03 AM
Yes the Dow busted through resistance 27,200-300 on Fri and has sustained. Good sign !

Martin A Mooney on 8/11/2020 10:17:57 AM
 

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