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:

• Retail: +172,000
• Health Care & Social Assistance: +146,000
• Construction: +90,000
• Manufacturing: +62,000

Regional (not seasonally adjusted)

• Northeast: +119,000
• South: +454,000
• Midwest: +293,000
• West: +240,000
• United States: + 1,106,000

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

• High 3,407 at 2:21am
• Low 3,376 at 4:25 am

NASDAQ

• High 11,453 at 2:22 am & 8:27 am
• Low 11,274 at 4:14 am

Dow Jones Industrial Average

• High 28,025 at 2:22 am
• Low 27,790 at 7:00 am

 

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