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Morning Commentary

DONíT BURY THIS RALLY YET

By Charles Payne, CEO & Principal Analyst
9/10/2020 9:09 AM

We got the rebound yesterday, but I did not like the way the major indices acted into the closing bell, as the overall rally faded with thirty minutes remaining in the session. Some of that was a report that the owner of TikTok is talking to the administration about avoiding a sale and instead, implementing safeguards to make sure the data of American consumers stay out of the hands of China’s communist government.

The report suggested an American company would take a minority stake to ensure compliance. That news derailed Microsoft (MSFT) and Walmart (WMT), both Dow Jones Industrial components.

Be that as it may, the market had to take a stand, and it did; however, the smoke is still clearing, and the veneer of invincibility is dented. The great news is the economic backdrop continues to improve. The combination of volatility with information gleaned during earnings season offers investors a fantastic chance to zero in on the best names to own.

The cream of the crop will outdistance other names in the same sectors.

S&P 500 Index

+2.01%

Communication Services XLC

+1.20%

Consumer Discretionary XLY

+1.89%

Consumer Staples XLP

+1.45%

Energy XLE

+0.68%

Financials XLF

+1.01%

Health Care XLV

+1.77%

Industrials XLI

+1.54%

Materials XLB

+2.58%

Real Estate XLRE

+1.09%

Technology XLK

+3.26%

Utilities XLU

+1.32%

Better Breadth

Internals were better, and just about the exact inverse from Tuesday’s session. New highs for both the NYSE and the NASDAQ Composite are a lot lower than just a week earlier. 

Market Breadth

NYSE

NASDAQ

Advancing

2,250

2,366

Declining

783

1,056

52 Week High

37

52

52 Week Low

16

26

Advancing

2.75B

2.70B

Declining

1.16B

842.49M

Economic Backdrop

Although the number is delayed and more of the rearview mirror stuff than most economic releases, the momentum in the job openings report (JOLTS) is important and does influence the stock market. The market bounce gained momentum after a solid start, which was by no means guaranteed to result in a strong session.

Don’t forget equity futures were lower on Tuesday night.

The seasonally adjusted number of 6,618 million job openings came in well above consensus and is gaining momentum. At this pace, we might already be back at pre-coronavirus levels of job openings.  Moreover, the non-seasonally adjusted data is even more encouraging and also underscores the importance of open societies.

JOLTS

 

The Gig Economy

Biggest Job-Opening Sectors:

Regional (not seasonally adjusted)

The economy continues to improve much faster than the experts thought it could, so let’s hope the experts keep on doubting that good old American Spirit.

Portfolio Approach

We put money to work in the model portfolio yesterday, bringing the cash level down to 5%. There are so many names we want to own beyond the parameters of the model portfolio – if you have the wherewithal for more ideas, please let your rep know.

Today’s Session

Some of the most anticipated action today will come from earnings released after the closing bell. The one everyone will be watching is Peloton (PTON), considered one of the biggest winners in the locked-down society.

I think earnings will beat and the stock will rally. 

Peloton

(PTON)

Earnings

VS consensus

Stock Reaction

1 week

Session

May 6, 2020

Miss $0.01

+16.2%

+13.5%

Feb 2, 2020

Beat $0.16

-12.3%

-10.2%

Nov 5, 2019

Miss $0.90

-2.3%

-7.6%

Chewy is another name to watch, as the company has quickly carved out its presence as an online retailer.

Chewy

(CHWY)

Earnings

Vs Consensus

Stock Reaction

1 week

Session

June 9, 2020

Beat $0.04

-8.7%

-3.7%

April 2, 2020

Beat $0.02

+21.7%

-4.7%

Dec 9, 2019

Miss $0.04

+16.5%

+5.9%

Dave & Busters has a history of being a hit-or-miss, but more recently, shares have reacted strongly. I like the stock as a reopening trade as well.

Dave & Busters

(PLAY)

Earnings

Vs Consensus

Stock Reaction

1 week

Session

June 20, 2020

Miss $0.52

+15.4%

+14.6%

April 2, 2020

Beat $0.04

+46.1%

+1.5%

Dec 2019

In Line

-2.4%

-3.5%

Oracle, the largest market cap of them all, is usually a snooze-fest, but there is a battle for attention from these older guard tech names and newer upstarts.  

Oracle

(ORCL)

Earnings

Vs Consensus

Stock Reaction

1 week

Session

June 16, 2020

Beat $0.04

+1.1%

-5.6%

March 12, 2020

Beat $0.01

+10.6%

+17.6%

Dec 12, 2019

Beat $0.02

-5.7%

-3.5%

Overnight, equity futures have been all over the place, and trying to achieve equilibrium.  In the process, they have established key parameters for trading today.

S&P 500

NASDAQ

Dow Jones Industrial Average

 


 

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