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Morning Commentary


By Charles Payne, CEO & Principal Analyst
10/1/2020 9:44 AM

Yesterday, the avalanche of good news helped to propel the market higher. However, the bad news might have been the secret sauce that kept the rally going, despite late headlines of yet another stumble in the last-ditch effort to get one more round of a fiscal stimulus.

There Is Pain

Challenger, Gray & Christmas reported there were 115,762 announced job layoffs in August, +116% from a year ago. The number is down significantly from more than 600,000 in April, but the numbers are too high:

Unite those August numbers with additional layoff announcements, including Disney (DIS) 28,000, and Royal Dutch Shell (RDS.A), up to 9,000. This is real carnage, and it’s going to continue to go up.

I find it mind-boggling that the swift work to save the economy will be allowed to wither on the vine over politics.

Nancy Pelosi held back on a mostly symbolic vote on the Democrat Party’s $2.2 trillion package for one more round of talks today. I’m not sure how to handicap a deal announced today, but Mnuchin has been masterful and has a good relationship with the Speaker of the House.

Let’s see what happens because, sadly, we know what’s going to happen if Congress doesn’t step up.

Essentially, investors are looking for a Congressional Hail Mary.

Rally Mode?

The market gave up a big chunk of gains. the selling however didn’t trip massive programs or unleash the algorithms that might have cratered the market back to its lowest pre-opening levels.

Hotline Model Portfolio Approach

We added a new position to Consumer Discretionary yesterday and are adding one in Technology today in our Hotline Model Portfolio. If you are not currently a Hotline subscriber, email your Account Representative or email Info@wstreet.com to get started today.

Today’s Session

All eyes are  on Washington, D.C., where all of a sudden both sides are talking stimulus.  Its still tenuous,  but it could happen, as lawmakers start to look beyond broader Presidential politics and closer to their own careers.

Obviously, this would be the right thing to do, but Congress would not have an approval rating of 9% if they had a history of doing the right thing.

Waves of layoff announcements is adding pressure, along with the stock market.  Everyone is watching, and Nancy Pelosi and Steven Mnuchin know this.

Economic Data

Initial Jobless Claims 837,000 comes in slightly better than consensus of 850,000.

United States Initial Jobless Claims

Continuing claims enjoyed a larger decline, landing at 11.76 million from 12.74 million and less than consensus of 12.20 million.

United States Continuing Jobless Claims

Personal Income

Personal Income declined 2.7% against consensus of -2.5%, making it three of the last four months of income declines.  This coincides with various stimulus plans expiring.

United States Personal Income

Personal Spending

Spending came in better than expected but has declined sequential in the last three months.  Moreover, spending came at the expense of savings, which declined to $2.43 trillion or 14.1% from $3.15 trillion or 17.7%.

United States Personal Spending-_

Equity futures ebbed a little on all this news, as most came in better than expected, and it could give some lawmakers the notion to delay any fiscal stimulus.  There are still 26.5 million Americans getting some form of benefits and Pandemic assistance edged higher. 

Stock of the Day

One of my investment themes has been buying brick and mortar retailers – the survivors that are learning the game and will find ways to compete.

Bed Bath & Beyond (BBBY)

The company posted financial results that blew away Wall Street consensus and suggests new management has put systems and practices in place that could continue to yield immediate results.

Revenue $2.7 billion

Earnings per share $0.50

Adjusted Gross Margin 35.9%

Digital +89%

Comp store sales +6% (first increase since 4Q FY16)

Shares of BBBY were already +321% from the April 2 low and look to open at the new 2020 high with little resistance to $18.00.  Beyond there, and another quarter like this, and it would not be unreasonable to see shares climb to $23.00.

My rollover IRA completed yesterday morning where I have taken charge. One of the positions I purchased are the BBBY. What a pleasant surprise this morning with the trading already nearing the target. Thank you, Chuck

Charles Dockery on 10/1/2020 10:08:48 AM

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