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Morning Commentary

CAN THE APES KEEP IT GOING?

By Charles Payne, CEO & Principal Analyst
5/27/2021 9:35 AM

Once again, the internals belie the print of big equity indices, which all closed higher, but still not reflected in improving market breadth. Even the volume was a little better. Moreover, up volume was 3:1 to down volume, which hasn’t happened in a while.

Market Breadth

NYSE

NASDAQ

Advancing

2,257

3,195

Declining

1,083

1,073

52 Week High

154

99

52 Week Low

24

41

Up Volume

3.46B

3.21B

Down Volume

907.87M

952.11M

Consumer Discretionary led the way as brick-and-mortar retailers continue their blistering pace. – Still, nobody on Wall Street likes them, although a few firms are coming off their “sell” ratings.

S&P 500 Index

+0.19%

 

Communication Services XLC

+0.65%

 

Consumer Discretionary XLY

+0.95%

 

Consumer Staples XLP

 

-0.21%

Energy XLE

+0.89%

 

Financials XLF

+0.29%

 

Health Care XLV

 

-0.58%

Industrials XLI

+0.32%

 

Materials XLB

+0.03%

 

Real Estate XLRE

+0.23%

 

Technology XLK

 

-0.01%

Utilities XLU

+0.02%

 
 

Growth vs Value Debate

Growth is coming on, but the gap with value over the past three months remains pronounced. For many, this is a buy signal for growth; for others, it’s a sign of “changing of the guard.” 

Just try to own great stocks with potential that’s not built into the current share price.

Keep watching those bond yields. The iShares 20+ Year Treasury Bond (TLT) is a good proxy for the bond market and up to five straight sessions. That doesn’t sound like the imminent demise of bonds- a call in place more than 30 years – I know because I have made that call on and off for over 30 years, LOL.

Planet of the Apes

Many traders in the Reddit (REDDIT) community like to refer to themselves as apes and have the best deprecating humor. I really appreciate how they have hijacked the financial media, and Wall Street elites disdain for them for poking fun at their success.

But these folks are not playing, and they are not aping around. 

I saw late yesterday where the Center for Financial Research and Analysis (CFRA) upped its rating on AMC Entertainment Holdings (AMC) to “hold” from “sell.” 

Slew of Data and Bombs

The morning has seen a whirlwind of data and drama.  The biggest story is the report from the New York Times that President Biden will propose a $6.0 trillion budget that eventually climbs to more than $8.0 trillion.

It’s a monster government reach to dictate daily life in the nation that would see higher taxes and fewer opportunities.  Even the proposal admits to slower growth and unemployment rates that are not as low as one might expect.

The plan is more about control, and I suspect the notion is squeezing the gap between rich and poor means lowering the wealth of the rich.

This plan will be pitched as a way to help people when in fact the nation was built on allowing people to help themselves.  But in times of need, society steps up with the notion such periods, whether on national or personal level, will be short-term.

It’s actually human instinct to fend for ourselves, but America has perfected the practice better than anyone else.

Monster Budget

One of largest annual percent increase ever.

Percent of government spending spiked to fight the pandemic and aid the shutdown but now heading toward WWII levels.

GDP Revision

Without a doubt, the story from GDP is strong personal consumption expenditures.

PCE +11.3%

United States GDP Growth Rate

 

Durable Goods

The key here is business investment, which climbed 2.3%, well ahead of consensus of 1.0%.

Lots of new software names posted results, and they are mostly down, even those that offered higher guidance.  There was huge pressure to crush the numbers, but the fix was in for these names, which are facing valuation reckonings.  Most are going to be homeruns.

The earnings story continues to be about the consumer (see GDP) helping Best Buy (BBY) and Dollar General (DG).

 


 

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