Yesterday, the session began with so much promise, with all the major indices bolting out of the gate, powered by growth names. But a rare downgrade on Apple (AAPL) with a price target 30% below the current price, the start of trading seemed to cast a pall over most Technology(XLK) names. So, the star of the session was the Russell 2000, as the S&P 500 and NASDAQ Composite finished lower.

Market Breadth	NYSE	NASDAQ
Advancing	2,434	2,755
Declining	945	1,525
52 Week High	448	281
52 Week Low	23	23
Up Volume	4.01B	2.88B
Down Volume	847.84M	1.18B

Energy (XLE) dominated (see red circle), capturing almost every spot in the top fifteen winners.

Manufacturing at a Glance, May 2021

The Institute for Supply Management (ISM) manufacturing number continued to reflect concerns about finding qualified workers, or simply anyone willing to work.  It’s exacerbating an already compromised supply chain. Prices edged down a little but are still near record highs.

• “Difficulty finding workers at the factory and warehouse level is not only impacting our production, but suppliers’ as well: Spot shortages and delays are common due to an inability to staff lines. Delays at the port continue to strain inventory levels.” [Food, Beverage & Tobacco Products]
• “[A] lack of qualified candidates to fill both open office and shop positions is having a negative impact on production throughput. Challenges mounting for meeting delivery dates to customers due to material and services shortages and protracted lead times. This situation does not look to improve until possibly the fourth quarter of 2021 or beyond.” [Fabricated Metal Products]
• “Labor shortages impacting internal and supplier production. Logistics performance is terrible.” [Electrical Equipment, Appliances & Components]
• “Business is good, but labor and raw materials are becoming very problematic, driving increases in costs.” [Furniture & Related Products]
• “The continued global supply chain tightness and raw material shortages from the Gulf (winter storms) make it less likely that any business can recover this year. Demand is strong, but what good is that if you cannot get the materials needed to produce your finished goods?” [Nonmetallic Mineral Products]

Index	Series Index May	Series Index Apr	Percentage Point Change	Direction	Rate of Change	Trend*  (Months)
Manufacturing PMI®	61.2	60.7	+0.5	Growing	Faster	12
New Orders	67.0	64.3	+2.7	Growing	Faster	12
Employment	50.9	55.1	-4.2	Growing	Slower	6
Customers’ Inventories	28.0	28.4	-0.4	Too Low	Faster	56
Prices	88.0	89.6	-1.6	Increasing	Slower	12
Backlog of Orders	70.6	68.2	+2.4	Growing	Faster	11

 

Commodities Up in Price

Aluminum (12); Aluminum Products (2); Brass; Coatings (2); Copper (12); Copper Products (3); Corn; Corrugate (8); Corrugated Boxes (7); Diesel (5); Electrical Components (6); Electronic Components (6); Epoxy Resin; Fabricated Metal Components; Foam Products (3); Freight (7); High-Density Polyethylene (HDPE) (5); Hydrochloric Acid; Labor — Temporary; Linerboard; Low-Density Polyethylene; Lubricants (2); Lumber (11); Medium-Density Fiberboard (MDF); Natural Gas (2); Ocean Freight (6); Packaging Supplies (6); Paper; Paper Products (6); Plastic Containers; Plastic Resins (9); Polyethylene (4); Polyethylene Terephthalate (PET) Products; Polypropylene (11); Precious Metals (2); Resin-Based Products (4); Rubber Products (4); Semiconductors (4); Solvents; Soybean Products (8); Steel (10); Steel — Carbon (6); Steel — Cold Rolled (9); Steel — Galvanized; Steel — Hot Rolled (9); Steel — Scrap; Steel — Stainless (7); Steel Bars; Steel Drums; Steel Products (9); Stainless Steel Components; Wire Harnesses; Wood for Pallets (2); and Wood — Pallets (Finished Product) (6).

Commodities Down in Price

Acetone.

 Key Charts

AMC Entertainment Holdings (AMC) rocked again and was higher in after-hours trading. There will be an effort to identify true shareholders and perhaps squeeze the ‘shorts’ even further.

I love these ‘apes.’  I would not chase the stock here, but I think there is a chance this could be a long-term winner. It was on our watch list, and we were too flatfooted. 

Apple (AAPL) is not getting the universal love it has become accustomed to, and the stock is looking flaccid as a result. The stock closed right at the 200-day moving average and is near a major support point. Beyond the charts and the occasional analyst trying to make a name for him or herself, I think the stock is a screaming buy.

p>Today’s Session

 

 

I like stock reaction to earnings beats, particularly Zoom (ZM), which beat top and bottom and offered guidance above consensus.  Initially, the stock got smacked but has since reversed higher.

I’m watching Materials and Industrials closer after the Senate Parliamentarian has issued an opinion that will make it more difficult for President Biden to ram through his economic agenda through multiple bites at the reconciliation apple. 

President Biden meets with Senator Capito today and it could be a more serious conversation.  I suspect an ultimate compromise would be closer to one trillion than $1.5 trillion, which is where I was leaning.  The good news is it would be mostly infrastructure.

Watch for the inflation conversation to begin to change.  A lot depends on Friday’s jobs report, but there are signs a lot of inflation will be transitory and demand could be peaking, especially for durable goods.

Portfolio Approach

We are adding a new position in Technology in our Hotline Model Portfolio this morning. If you are not a current subscriber to our premium Hotline service, email Info@wstreet.com to get started today. 

Comments

Thanks Charles. biden,obama want minimal income for everyone so they can buy nothing, because it's to overpriced and it's not available. Lorin K on 6/2/2021 10:13:38 AM

Thank you, Charles, for the best business/investing program on Fox Business. It is recorded daily and watched at a more convenient time. (Even though retired, mid-afternoon is too early to stop other work or play.) Dick Hoffman on 6/3/2021 4:55:32 AM

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