Tuesday was largely a pedestrian session that began with some promise, but stumbled after news Washington, D.C. filed a lawsuit against Amazon for anti-competitive behavior.

Market breadth was actually worse than the print of major indices with far more decliners.

Market Breadth	NYSE	NASDAQ
Advancing	1,229	1,527
Declining	2,059	2,705
52 Week High	192	126
52 Week Low	26	47
Up Volume	1.45B	2.25B
Down Volume	2.72B	1.82B

Small Caps Big Pressure

One Year Performance

Russell 2000 +62.7%

S&P 500 +41.7%

NASDAQ +46.5%

For all the attention paid to the NASDAQ Composite over the past year, none of the major equity indices are down for the year. But yesterday, Nasdaq was by far the weakest.  I’m not sure what’s going on, but I wonder about the impact of the U.S. Dollar (DXY) falling against other currencies. It reduces purchasing power and hurts domestic businesses, best represented by Russell 2000.

RUT

DXY

Best Earnings Season…Ever

Eighty-seven percent of the S&P 500 names that posted results this earnings season beat Wall Street consensus.  Even though many of these beats were greeted with selling – they matter and, in many cases, will be part of the foundation for higher share prices.

After the close, we saw strong beats in several industries:

Restaurants

Red Robin Gourmet Burgers (RRGB)

• Beat Revenue
• Beat earnings per share (EPS): $0.86

Cloud

Zscaler (ZS)

• Beat Revenue
• Beat earnings per share (EPS): $0.08

Retailer

Urban Outfitters (URBN)

• Beat Revenue
• Beat earnings per share (EPS): $0.35

Portfolio Review

We are reiterating a position in Consumer Discretionary in our Hotline Model Portfolio this morning.  To subscriber to our premium Hotline service, email Info@wstreet.com. 

Today’s Session

The broad market looks to open slightly higher with lots of attention on those so-called meme stocks.  Financial media will spend the entire day directly and indirectly dissing these investors for not simply putting their money in a few funds and settling for mid-single digit returns. 

I do think there are a number of overly shorted stocks that are poised to pop. 

Compelling Insight from Richmond Fed

Wages Soar – Cap Ex Spending Soars

This is another reason to be long materials, industrials and software names that make businesses more efficient with fewer workers.

GDP Note: Nonresidential Investments

• Structures -4.8%
• Equipment +16.7%
• Intellectual Property +10.1%

Lack of Skills Coupled with Higher Wage Demands

Wages are expected to climb sharply in next six months, and yet, the report saw the worst levels ever for available skills needed among the working pool.

This is why you want to have outsized exposure to materials, industrials and software that makes it easier to operate and grow businesses without or with fewer humans.

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.