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Morning Commentary

SOMETHING'S IN THE AIR

By Charles Payne, CEO & Principal Analyst
8/26/2020 9:23 AM

Question of the Week

So far, which convention has made the strongest case for running the economy over the next four years?

Post your answer below.

Even though it was ninety degrees in my neck of the woods, I could feel summer slipping away, which is a bigger bummer than usual since I hardly did any of the things I love to do in the summer. I was on track for getting in the most exercise ever in my swimming pool before a horrific storm knocked down a 30-foot tree that ripped the liner inside my pool and drained all the water.

We have ordered a new liner, and we hope to get it installed in time for Indian summer (one last hurray in a year of disappointments).  Yes, it’s been the summer from hell with a cherry on top, but I am still sad to see it go. And yet, at this point, you just feel it slipping away.

The stock market, on the other hand, feels as if it’s gearing up for the next leg higher. It has been a remarkable rebound that shocked all the experts, even the few that were optimistic. Yesterday should have been a down session but instead, it was mixed. However, buyers remained the most energetic and committed to their cause.

Consequently, there were more new highs in major indices, although the Dow Jones Industrial Average (DJIA) was foiled by heavy losses in names getting kicked off the index (more on the ironic timing of the folks at Dow Jones later).

Year-to-Date

Winners broadened out a little more. There is a gold mine of opportunities in all those losers- but finding them will take some skill.

S&P 500 Winners 

  • 221 average gain: +21.52%  
  • Top twenty average gain: +75.82%         

S&P 500 Losers

  • 285 average loss: -23.44%
  • Bottom twenty average decline: -59.01%

Nasdaq Winners 

  • 436 average gain: +57.32%
  • Top twenty average gain: +470.35%       

Nasdaq Losers

  • 557 average loss: -27.80%
  • Bottom twenty average decline: -72.36%

The Message of the Market

Stop me if I’ve written this before, but Energy tumbled, and old safe haven sectors pulled back as well.  Communication Services posted the best move on the session, proving my point the folks at Dow Jones blew a chance to add some real octane to the index.

S&P 500 Index

+0.36%

 

Communication Services XLC

+0.94%

 

Consumer Discretionary XLY

+0.33%

 

Consumer Staples XLP

 

-0.22%

Energy XLE

 

-1.40%

Financials XLF

+0.28%

 

Health Care XLV

+0.68%

 

Industrials XLI

 

-0.13%

Materials XLB

 

-0.40%

Real Estate XLRE

+0.31%

 

Technology XLK

+0.50%

 

Utilities XLU

 

-0.95%

After the Close

Earnings keep coming, and for the most part, continue to crush expectations. Moreover, stocks continue to react with a certain glee, rewarding management, and shareholders. This truly has been a great earnings season. Mostly, it’s because so many companies offered guidance, and that guidance has overwhelmingly been to the upside:

Nordstrom (JWN)

Toll Brothers (TOL)

Hewlett Packard (HPQ)

Urban Outfitters (URBN)

The Grand Life of Marc

He was already loving life as a business pioneer, Silicon Valley darling, and the owner of a well-known magazine, Time Magazine. Marc Benioff is one of the wealthiest persons in the world. And yet, life got even better for Benioff in the last 24 hours. His stock is being added to the Dow Jones Industrial Average (DJIA) and after the close, Salesforce.com (CRM) posted a huge earnings beat, sending the shares into orbit.

I bet the folks at Dow Jones wish that the switch had already taken place to enjoy the double-digit gain in the share price.

Interestingly, maybe Benioff will regret the inclusion in the world’s most famous index. According to the folks at Bespoke Research, the timing in those decisions has historically been a disaster.

Take a look at the last three times there have been changes in the DJIA. 

It makes you wonder if we should be buying Exxon Mobil (XOM), Pfizer (PFE), and Raytheon (RTX), which is already in the Hotline Model Portfolio and not doing so hot.

Dow Jones Component Swaps

Added

Removed

Year

Name

Change

Name

Change

2013

Goldman Sachs (GS)

+10.1%

Alcoa (AA)

+90.3%

 

Nike (NKE)

+15.9%

Bank of America (BAC)

+19.1%

 

Visa (V)

+7.3%

Hewlett Packard (HPE)

+68.7%

2015

Apple (AAPL)

-17.7%

AT&T (A)

+15.1%

2018

Walgreens (WAG)

-22.0%

General Electric (GE)

-20.6%

 

 

Historic Average        

-8.6%

Historic Average

-2.3%

Median Average

-10.7%

Median Average

-5.7%

Portfolio Approach

There were no changes yesterday. This morning, we took profits in one Consumer Discretionary stock and are adding a new one in our Hotline Model Portfolio.

Today’s Session

Stock of the Day

Dick’s Sporting Goods (DKS)

*company records

Two weeks ago, my wife mentioned she thought there was only one sporting gear company left, and she wondered if Dicks was a good investment.  She was spot on, but then again, she has been hot. She was my inspiration to feature Michael’s (MIK), which I think we took profits on too soon.

Economy Continues to Defy Experts

Durable goods orders for July climbed 11.2%, significantly beating consensus estimate of +4.3%.

Durable Goods

United States Durable Goods Orders

 


Comments
I think itís all a Mlrage.
At some point the reality of the true economy is going to hit the market and itís going to drop. Thereís far too much unemployment going on and business is shutting down. Iím not a buyer at this time.

Gary on 8/26/2020 10:07:51 AM
MAGA!!!

Don on 8/26/2020 10:42:56 AM
The roaring success of the RNC convention may be adding some optimism. But, I still think the democrat globalist money will try to tank the market between now and the election if possible so I am cautious. I take some profit on channeling stocks and that has worked well during the pandemic. But my cash position is significantly higher than yours. I am a big fan Charles. You're the best.

Tom on 8/26/2020 11:29:34 AM
I think there is a pent up demand just waiting for the bell to ring and the economy will come rushing back. No reason to be pessimistic. However, if the election brings socialistic values to the Whitehouse, there will be a damper on things. Higher taxes and more regulation will discourage investment and bring higher unemployment.

Wayne on 8/26/2020 11:40:41 AM
Look at those tech stocks - wow they are roaring

Patricia Heng on 8/26/2020 12:38:34 PM
Republican

Carl Buccinio on 8/26/2020 5:52:46 PM
Republican

Kenna J on 8/26/2020 7:40:58 PM
The RNC is making the DNC look like a unorganized Zoom call. There is great testimony from the RNC about President Trump's compassion, dedication, strength, talent, and leadership ability that will be an eye opener for many Americans. I hope his speech focuses on his plan for the country going forward more than what he has accomplished. The RNC is going to help the economy, especially if they get a bump in the polls.

George Odell DesBrisay on 8/27/2020 12:16:12 AM
George I have been thinking the same thing.† Production, energy and optimism of message.† It's intriguing considering all of Hollywood backs the democrat party - heck they had to repeat the same persons in several of those Zoom boxes- nuts.† CP

Charles Payne on 8/27/2020 6:38:24 AM
RNC all the way

joel gooch on 8/27/2020 8:15:56 AM
The Trump campaign has the best plan because of a better vision, lower regulations, lower taxes on businesses and individuals. Lastly because Trump comes from a business back round.

Ken Baynes on 8/28/2020 8:20:38 AM
HATE, HATE, HATE That's all the Socialist know, same thing in the 1917 through today. Take, take, take ""WE ARE A BAD COUNTRY" ALL BIGOTS"" "POOR, POOR ME/US." DEMS ARE ALL LOSERS, BEEN THAT WAY SINCE THE 1960s

G Cha on 8/28/2020 11:05:12 AM
Somebody has to take the Democratic side....but itís not going to be me!

Patrick burke on 8/31/2020 7:55:13 AM
RNC convention far out delivered the better message and policies for America!

John Haskins on 9/1/2020 2:02:45 PM
I read Unstoppable Prosperity and have been with Charles Payne since March of this year. I am as advanced practice nurse. I have learned so much from Charles. His projections and recommendations have been spot on! My Father was an accountant. He would be so proud! I am a ďrecovering Democrat ď voting straight RED!

Jan Blume on 9/2/2020 8:23:55 AM
Thank you so much Jan for your kind words and trust.† CP

Charles Payne on 9/2/2020 8:38:09 AM
Trump always impresses me-the biden gang has very little to offer beto will put many gun companies out of business-but the fly in the ointment is the amount of money they (dems) are able to garner-the republican convention offers more for the economy

dr michael corey on 9/4/2020 12:34:57 PM
Republican, by far

Sherwood Barefoot on 9/9/2020 9:07:33 AM
Without a doubt, DJT.

William B on 9/10/2020 1:34:20 PM
I am sticking with who I came to the dance with. Considering my decision to abandon my novice approach to investing in better judgment and deferring to a professional who understands the market better than I ever will, I staying with the President for the same reason, he understands the economy better than what the other party has put up. I do believe he understands better that the real solution is to let America Be America and open the economy back up. The sooner we do the bleeding can stop and the deficits will stop as well.

Ed Conaway on 9/11/2020 1:55:58 PM
The DNC was a sure cure for optimism. How can you really get ahead by constantly tearing down someone else? This is a good time to be a therapist.

Warren Hartz on 9/17/2020 12:31:14 PM
 

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