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Morning Commentary

FAILURE TO COMMUNICATE

By Charles Payne, CEO & Principal Analyst
3/24/2021 9:29 AM

Tuesday was a tough session for the market. It was actually a lot worse than reflected in the closing quotes of the major indices.

Market Breadth

Declining shares were four times advancing shares on the New York Stock Exchange (NYSE), and seven times advancers on the NASDAQ Composite.  Moreover, a lot of names not traded on those exchanges or the major indices were down tremendously. We have a fair amount of those in the Hotline Model Portfolio, and there will be special updates. In the meantime, reach out to your rep or research desk.

Market Breadth

NYSE

NASDAQ

Advancing

743

550

Declining

2,553

3,631

52 Week High

60

66

52 Week Low

106

229

Up Volume

578.30M

1.47B

Down Volume

4.15B

4.09B

When the dust settled, it was the three traditional safe haven sectors that finished the session higher.

S&P 500 Index

 

-0.76%

Communication Services XLC

 

-0.74%

Consumer Discretionary XLY

 

-0.94%

Consumer Staples XLP

+0.42%

 

Energy XLE

 

-1.46%

Financials XLF

 

-1.40%

Health Care XLV

 

-1.01%

Industrials XLI

 

-1.75%

Materials XLB

 

-2.08%

Real Estate XLRE

+0.31%

 

Technology XLK

 

-0.62%

Utilities XLU

+1.49%

 

Vote of No Confidence

Investors wanted to be wowed by testimony from Janet Yellen and Jerome Powell. But after hearing mostly regurgitated talking points, the evening ended in a whimper, and selling picked up momentum to the downside.

Major indices took turns early in the session trying to lead the way, but small-cap names stumbled hard out of the gate, and it was mostly straight down from there. The communication problem is becoming more than an issue for investors. Main Street’s concern about inflation sparked record searches this month.

Are Good Times Fading?

The day after existing home sales came in below the consensus, new home sales were an unmitigated disaster.

The adjusted annual rate of 775,000 was a sharp decline from 948,000 in January, and well below the consensus of 875,000. I know supply is a major issue, but this is the kind of window of opportunity that doesn’t stay open forever. Meanwhile, median sales price edged up to $349,400 from $311,800 a year earlier. 

Consumers are probably Googling inflation more for gasoline prices than the ten-year yield.

I continue to believe there is enough dry powder to power the economy to a 7% Gross Domestic Product (GDP) this year, but inflation should be short-lived. I am more concerned with taxes beyond those promised on the campaign trail. For now, however, the market is more concerned with whether Powell and Yellen can do all the things they promised.

I think they can - but dang, I wish they could articulate it better.

Portfolio Approach

Yesterday, we closed a position in Energy and added to Technology in our Hotline Model Portfolio.

Today’s Session

Well Powell & Yellen get another chance to wow lawmakers and Wall Street with their appearance in front of the Senate financial committee.  I suspect most of the time will be spent with the usual attempts to get them to endorse schemes favored by lawmakers. 

But they will also have a chance to convince the market they have everything under control.  

Chips

Yesterday, Intel (INTC) announced its vision for IDM 2.0 and the creation of Intel Foundry Services.  CEO Pat Gelsinger said the company plans to spend $20 billion to open two new chip plants in Arizona, which should be ready to go by 2024.  This was music to the markets ears, as it could be a huge opportunity for INTC to get a chunk of the $100b market by 2025.  Not only does it help address the chip shortage, but it means more jobs in the US and hopefully, INTC can get its mojo back, as it has faltered of late and lags its peers. By the way, we still believe that Advance Micro devices (AMD) and Taiwan Semi (TSM) are holds.
 

Some are skeptic, as INTC faces challenges and hurdles.  Nonetheless, today, it’s up 3.5% in the pre-market, and there are all kinds of firms either defending their ratings/targets or raising them.  INTC also stated that Q1 will exceed its prior guidance, but overall, its 2021 guidance is below some firms’ estimates.  

Durable Goods

U.S Durable Goods declined 1.1% in February, the first decline in 10 months.  Despite the declines, January was revised higher to 3.5% from 3.4%. So, it seems that this decline maybe a short-term pullback in an overall increasing demand for durable goods.  Ex-transportation, durable goods were down 0.9%, and January was revised up to 1.6%.

Orders month over month:

A proxy for business spending, nondefense capital goods, excluding transportation, dropped 0.8% month over month following January’s increase of 0.6%.

 

The futures have turned around and are pointing to a positive open.


Comments
Thank you Charles, looking forward to listening to "Making Money" today! A voice of optimism in the storm!

Lorin K on 3/24/2021 10:23:18 AM
 

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