Thursday was an intriguing session that got off to a hot start as the broad market rode the coattails of Facebook (FB) and Apple (AAPL). But profit-taking kicked in early, sending the NASDAQ Composite lower to join the Russell 2000 in the red. Then, buyers reemerged to send the S&P 500 back to a new record close. 

So, how do you get the S&P to finish higher when Technology is lower and get Communication Services to erupt higher? Don’t look now, but that stealth rally in Financials is back again.

S&P 500 Index	+0.68%
Communication Services XLC	+2.77%
Consumer Discretionary XLY	+0.03%
Consumer Staples XLP	+1.06%
Energy XLE	+1.12%
Financials XLF	+1.78%
Health Care XLV		-0.40%
Industrials XLI	+0.71%
Materials XLB	+0.62%
Real Estate XLRE	+0.73%
Technology XLK		-0.08%
Utilities XLU	+0.91%

Chink in the Armor

Perhaps Wall Street will breathe a sigh of relief after a big dip in individual investor confidence. Still, at 42.57%, the trend is higher and holding and significantly above the historical average. I have admired the way individual investors have remained confident through ridicule and learning pangs.

Dr. Copper

“Doctor Copper” is in the house and continues to march toward an all-time high. There are still a lot of potential inputs, including global reopening, global stimulus, and a potential true infrastructure bill in the United States. This name reflects well for Industrials (XLI) and Materials (XLB), and management at Caterpillar (CAT) cheered the strength in industrial metals.

Mighty Amazon

Fun Fact:  The name Rio Amazonas was reportedly given after native warriors attacked a 16th-century expedition by Francisco de Orellana. The warriors were led by women, reminding de Orellana of the Amazon warriors, a tribe of women warriors related to Iranian Scythians and Sarmatians[16][17] mentioned in Greek mythology. The word Amazon itself may be derived from the Iranian compound *ha-maz-an- "(one) fighting together"[18] or ethnonym *ha-mazan- "warriors", a word attested indirectly through a derivation, a denominal verb in Hesychius of Alexandria's gloss "ἁμαζακάραν· πολεμεῖν. Πέρσαι" ("hamazakaran: 'to make war' in Persian"). Wikipedia

There he goes again, laughing all the way to the bank. Jeff Bezos set up his last act as Amazon CEO by pulling a rabbit out of his hat, and the Street gave him a standing ovation. Bezos is looking to relinquish the CEO title after the third quarter and will remain the company chairman.

Meanwhile, he led the company on a monster quarter:

AMAZON (AMZN)

• Revenue: $108.52 billion +44%, beating consensus of $104.47 billion
• Earnings: $15.79 against consensus of $9.54
• 2Q Guidance: $116.0 billion revenue against $108.6 consensus
• The company is raising wages: $1.0 billion
• We learned that 175 million movies were streamed on Prime Video (it’s not a great experience)
• The only sore spot was physical store revenue of $3.9 billion, down 16%

The stock moved sharply higher in after-hours trading.

Portfolio Approach

We took profits in Consumer Discretionary and Technology, and we added a new position to Consumer Discretionary yesterday in our Hotline Model Portfolio.

Today’s Session

Personal Income and Spending

Personal income was expected to increase 20.3% in March, instead it soared 21.1%, the highest monthly gain ever recorded. 

Spending edged up 4.2% against consensus estimate of 4.1%. The difference sent the US savings rate to 27.6% or $6.04 trillion dollars.

This is potentially great news for businesses, and even the market, as savings is deployed.  On the flip side, this could exacerbate inflation, which would force the Federal Reserve to move much sooner than they want.

There is also huge political risk here, as Main Street will not tolerate higher prices.  There are already rumblings about gasoline prices and groceries – soon people will have sticker shock when buying anything. 

Note:

The inflation gauge of this morning moved up sharply:

Core PCE Month to Month 1.8% from 1.4%. Once it clears 2.0%, the street will take notice…the street might take notice before then.  

Implications

Stock Market

·         Buying stocks directly

·         Corporate earnings

·         Influence Fed

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