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Morning Commentary

AFTER THE RAIN  

By Charles Payne, CEO & Principal Analyst
4/1/2021 9:47 AM

Raindrops keep fallin' on my head

And just like the guy whose feet are too big for his bed

Nothin' seems to fit

Those raindrops are fallin' on my head, they keep fallin'

-BJ Thomas

It’s the month known for its showers and the day that’s known for its gags, and both seem appropriately timed. The stock market spoiled a lot of folks who were rattled big time during weeks of wild gyrations, and with previously invincible stocks doing their best Icarus impressions, there was a lot of woe-is-me.

More seasoned investors were always on the prowl.  But let’s face it, even seasoned hedge funds made mistakes, although they were based on a lack of fear or humility. A lot of raindrops fell on our heads in recent weeks, but as the song says, it won’t be long before happiness steps up to greet me (and my portfolio).

Hang onto stocks of great names, and you should be feeling much better sooner than expected, and that’s no fooling.

The S&P 500 eked out a gain and tickled a new all-time high, but all the action was in the NASDAQ. Composite.

S&P 500 Index

+0.36%

 

Communication Services XLC

+0.40%

 

Consumer Discretionary XLY

+0.78%

 

Consumer Staples XLP

 

-0.32%

Energy XLE

 

-0.69%

Financials XLF

 

-0.76%

Health Care XLV

+0.20%

 

Industrials XLI

 

-0.32%

Materials XLB

 

-0.49%

Real Estate XLRE

 

-0.40%

Technology XLK

+1.59%

 

Utilities XLU

+0.74%

 

Market Breadth

Volume was light, and market breadth on the New York Stock Exchange (NYSE) underscored some profit-taking, as hot money was on the move once again. This time, it headed back to the NASDAQ Composite, which enjoyed slightly better market breadth, mainly the up to down volume. But it is still not strutting its stuff like it did until bond yields tripped up tech.

Market Breadth

NYSE

NASDAQ

Advancing

1,814

2,667

Declining

1,505

1,487

52 Week High

188

100

52 Week Low

15

44

Up Volume

2.17B

3.31B

Down Volume

2.49B

1.72B

Software

Keep an eye on software, especially Software-as-a-Service (SaaS) names. The iShares: Expand Tech-Software (BATS: IGV) Exchange-Traded Fund (ETF) is a good proxy with big old-school names like Adobe (ADBE) and Microsoft (MSFT) but also newer upstarts like ServiceNow (NOW) and Workday (WDAY).

The index has held above its 200-day moving average, and a move through 358 should trigger the next leg higher to test the all-time high.

Portfolio Approach

Portfolio Approach

There were no changes in the Hotline Model Portfolio yesterday. Today, we are adding to Technology. If you are not a current subscriber to our premium service, contact us at info@wstreet.com to get started today. 

Today’s Session

 The Chicago Purchasing Management Index (PMI) crushed Wall Street’s consensus, climbing to its higher level since July 2018 (the 66.3 read for March). Production was +10.1 points and new orders +7.1 points.  Employment rose 5.5 points into expansion ahead of the U.S. Bureau of Labor Statistics (BLS) jobs report.

This month’s special question asked, “As the first quarter of 2021 comes to an end, are you planning to amend your inventory position due to any of the following conditions?”

Chicago PMI

Manufacturing Renaissance

Regional manufacturing surveys have been on fire, which means all eyes are on the Institute for Supply Management (ISM) report this morning. 

The consensus is 61.7 from 60.8 in February – when 6 out of 6 regional data showed improvement:

Initial Jobless Claims

Initial jobless claims climbed to 719,000 from 684,000; but the street was looking for 675,000.  The number is perplexing, as these numbers remain stubbornly high. 

The good news is the trend is moving in the right direction. 

I’m not sure how this influences tomorrow’s jobs report.  I suspect there are a pocket of Americans that will be permanently unemployed from the pandemic.

There is a chance we could see one million job print. 

Initial Jobless Claims

Watch the Chips

This morning, Taiwan Semiconductor (TSM) announced it will spend $100 billion over the next three years to improve capacity.  Last week, Intel (INTC) announced it will spend $20 billion on two new factories in Arizona. 

The semiconductor index (SOXX) peaked on February 19 at 437.69.  Then,  it stumbled hard all the way down to 374.50 or 14.4% by March 8.

Interestingly, the move came amid a supply crunch that has hit a number of industries that I’m sure would pay up for more chips.  For some reason, however, the narrative shifted to the notion that a glut was imminent, so semiconductor stocks took it on the chin.

Considering how much capacity is being built over the next few years, it stands to reason there will not be an overnight glut.

The SOXX breaks an important resistance point at the start of trading and should rally to retest that February high.

 

 


Comments
Nice info for any day. Wonder if the jobless are persons drawing the stimulus unemployment payments that feel they are better off, which they are not, not working and living the early faux retirement via the biden stimulus plan. Some dems want extended additional stim payments! Crazy!

Lorin K on 4/1/2021 10:54:46 AM
 

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