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Morning Commentary

CRACKS IN ARMOR REVEALED   

By Charles Payne, CEO & Principal Analyst
4/21/2021 9:27 AM

Yesterday was another tough session for the market that stumbled out of the gate and never came close to taking a stand. There was a little late nibbling, but for the most part, the market finally caved to mounting internal weakness.

Market Breadth

NYSE

NASDAQ

Advancing

877

1,007

Declining

2,440

3,197

52 Week High

177

68

52 Week Low

44

138

Up Volume

1.04B

1.02B

Down Volume

3.28B

3.18B

Blue-Chip Hangout

One continued positive trend is money still sought out the comfort of equities, but in blue-chip names with steady cash flows and strong balance sheets while eschewing top-line growth and margins.

S&P 500 Index

 

-0.68%

Communication Services XLC

 

-0.54%

Consumer Discretionary XLY

 

-1.26%

Consumer Staples XLP

+0.55%

 

Energy XLE

 

-2.65%

Financials XLF

 

-1.87%

Health Care XLV

+0.39%

 

Industrials XLI

 

-1.10%

Materials XLB

 

-0.96%

Real Estate XLRE

+1.11%

 

Technology XLK

 

-0.89%

Utilities XLU

+1.27%

 

Fork in the Road

I’ve been writing about weakness in the NASDAQ and the rotation into Blue-Chips (growth or value), but didn’t realize how bifurcated the market had become.

Heading into yesterday’s session, the S&P 500 enjoyed an increase across-the-board strength. 

The percentage of names above the 50-day moving average:

Interestingly, the NASDAQ is lurching toward being oversold. It also speaks to the fact that there were much more pressing issues for growth names than that spike in the ten-year yield. Now yields are crumbling, and tech is as well, which is 100% counterintuitive to the overarching market narrative a few months ago. 

Additionally, tech stocks did very well last year as adoption was pulled forward. In some instances, by several years.

With this in mind,and seeing how investors bounced into stocks and not bonds, there could be a time soon when growth (particularly technology) rebounds.

Curious Case of Russell Weakness

The Russell 2000 continues to slide rapidly, even as there hasn’t been much of a change on forward-looking macro factors.

This being said, I must put this all into proper perspective. Since last year’s lows, the index is still up more than 100%. I know it’s a cliché to say the market or individual stocks were due to pullback, but few would argue with the notion the Russell 2000 was due.

Inflation

Much is being made of inflation and recent mind-boggling price surges. But I do not think that’s a serious issue into 2022. In fact, we might need some inflation as wages wane.

Lumber: +265%

WTI Crude: +210%

Gasoline: +182%

Brent Crude +163%

Heating Oil: +107%

Corn: +84%

Copper: +83%

Soybeans: +72%

Silver: +65%

Sugar: +59%

Cotton: +54%

Platinum: +52%

Natural Gas: +43%

Palladium: +32%

Wheat: +19%

Coffee: +13%

Gold: +3%

Portfolio Approach

We added to Real Estate yesterday in our Hotline Model Portfolio.

Today’s Session

After the close, Netflix (NFLX) laid an egg, and the stock tumbled more than 10%. That is not unusual for the stock, which has a history of sharp selloffs after posting results. But the market could have used a spark from reinvigorated investors. 

The futures are pointing to a lower open.  Oil is also down. The 10-year yield is up slightly, but still below 1.6%, hovering around 1.57%.


 

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