Morning Commentary
Monday was a tough session, although it could have been worse. I consider the session a warning about the kind of gyrations that are possible during a contested election. But the main point of the selloff was to send a message to D.C. to get more stimulus into the system.
The good news for investors is the need to stay nimble and smart. The bad news for investors is this is still a stock picker’s market, so any old mutual fund or passive approach will probably significantly underperform.
Market breadth was extremely bearish at one point; 95% of the S&P 500 was negative during the session. Yellow flags to watch:
Market Breadth |
NYSE |
NASDAQ |
Advancing |
388 |
638 |
Declining |
2,697 |
2,886 |
52 Week High |
14 |
38 |
52 Week Low |
45 |
62 |
Up Volume |
363.24M |
908.21M |
Down Volume |
3.64B |
2.25B |
Free Offer Read my Election & Markets Special Report Contact your representative or research desk |
No Darts
I have been hoping for the rally to broaden, but I always knew it would be a problem if it had to come at the expense of money coming out of those top growth names. I thought the best way for this to happen more organically would be for cash to come off the sidelines and rotate out of the bond market. It appears that was happening, and then we hit the latest bump in the road.
Just imagine that half of the publicly traded stocks are down for 2020, and most are down a lot. I know for many, all those trailing names look enticing - and at some point, the tables turn. But we are in a unique period, where the biggest winners are also considered to be safe haven names. There is more to investing than feeling good about names, in part because the crowd is in love with them.
The challenge continues to be maintaining the rally when the leaders stumble. But there are a ton of intriguing names out there.
S&P 500 Winners:
S&P 500 Losers:
NASDAQ Winners
NASDAQ Losers:
Utilities Light Up
I’m spying the Utilities (XLU) sector, in part because I think some of these names would be winners in a Biden administration. I have written and discussed why NextEra (NEE) would be a winner, as it fed on billions in taxpayer subsidies during the Obama presidency. See details in my Election report.
The Utilities sector is breaking out, which makes these names more attractive beyond the dividend yield.
The yields for Dominion and Duke Energy are very attractive:
Utilities Winners |
Sector weight |
Close |
% Change |
Yield |
American Electric Power (AEP) |
5.15% |
91.88 |
+1.86 |
3.20% |
Consolidated Edison Inc (ED) |
3.07% |
81.60 |
+1.40 |
3.75% |
PPL Corp (PPL) |
2.47% |
28.67 |
+0.87 |
5.79% |
Ameren Corp (AEE) |
2.30% |
83.39 |
+0.80 |
2.87% |
Dominion Energy (D) |
7.61% |
81.14 |
+0.71 |
4.63% |
CMS Energy (CMS) |
2.10% |
65.85 |
+0.46 |
2.48% |
Duke Energy (DUK) |
7.60% |
92.78 |
+0.43 |
+4.16% |
Regional Manufacturing Trends
The Dallas Fed surged to its highest level since August 2018, powered by new orders and capacity utilization.
It comes on the heels of a very strong Philadelphia Federal Reserve Manufacturing report, which blew the away the consensus. It came in at 32.3 from 17.3, and the consensus was 14.0.
I appreciated the special question on capital expenditure (cap-ex) spending, which confirms it’s all about software, but non-computer spending might be ready to spike.
Fall into the Gap
Big gap openings are going to play big roles in how and when we take action during increased market volatility. Two gaps need to be filled. On the downside, a big gap around 3,300 for the S&P 500, and on the upside, 3,460.
Hotline Model Portfolio Approach
We kept our powder dry yesterday.
Today’s Session
An early bounce has fizzled, and the marked could struggle out the gate to lure would-be buyers. Earnings continue to be overwhelming positive, but buyers are focused elsewhere. This is why even a major takeover in semiconductors is not reverberating like it should; although, Advanced Micro (AMD) made a major reversal.
Durable goods crushed Wall Street estimates coming in +1.9% against consensus of +0.4%
Core business investing +1.0%, which was double the street estimate of +0.5%.
Comments |
Im not sure any good news is going to matter to this market until this election is over and COVID is under control. David Howley on 10/27/2020 11:27:31 AM |
Hello David
Are you referring to the same stock market that rallied 52% from March 23 lows on the S&P and 66% for the NASDAQ during second waves, riots, and political uncertainty? If you are anxious maybe have less exposure but it's always a mistake to assume or guess when it comes to the stock market. During the best of economic times I've seen it struggle as conventional wisdom held it couldn't get better and during even the weakest post recession recovery ever I watched the market soar on green shoots.
Lets focus on the great names that are undervalued. CP Charles Payne on 10/27/2020 11:34:48 AM |
Tweet |
4/25/2024 1:16 PM | Don't' Bury me, Yet! |
4/25/2024 9:27 AM | THERE CAN ONLY BE ONE |
4/24/2024 1:30 PM | Earnings Flood In |
4/24/2024 9:26 AM | BUYING THE DIP |
4/23/2024 1:25 PM | Bloom Off Rose |
4/23/2024 9:32 AM | WHAT HAPPENED TO THE BRAVADO? |
4/22/2024 1:22 PM | Pins and Needles |
4/22/2024 9:30 AM | LIVE BY THE SWORD … |
4/19/2024 1:20 PM | Fair Chunk of Rotation |
4/19/2024 9:35 AM | DON’T OVERREACT |
4/18/2024 1:37 PM | Didn’t Break Down |
4/18/2024 9:40 AM | MARKET OFF SCRIPT |
4/17/2024 1:59 PM | Facing Pressure |
4/17/2024 9:37 AM | POWELL STILL WANTS TO HELP |
4/16/2024 1:35 PM | Muted |
4/16/2024 9:42 AM | FEAR ARRIVES |
4/15/2024 1:17 PM | Making a Statement |
4/15/2024 9:45 AM | Equal Opportunity Drubbing |
4/12/2024 1:37 PM | Pressure Overall |
4/12/2024 9:42 AM | WHO YA GONNA CALL? |
4/11/2024 1:38 PM | No Urgency |
4/11/2024 9:27 AM | Tough Sledding |
4/10/2024 1:22 PM | Hang In There |
4/10/2024 9:51 AM | HERE COMES THE LATEST RATIONALE FOR PERSISTENT INFLATION |
4/9/2024 1:56 PM | Fighting the Trend |
More commentary archives |
Home |
Products & Services |
Education |
In The Media |
Help |
About Us |
Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.
|