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Morning Commentary

INFLATION CHECK

By Charles Payne, CEO & Principal Analyst
6/10/2021 9:25 AM

Yesterday’s stock of the day was Campbell’s (CPB), which got hit by 6.5% after posting financial results.  Many headlines chronicling the news focused on inflation, and to be sure, there have been huge food price spikes as well as in the metals used in packaging. In addition, Restaurant Brands International (QSR) - which owns Burger King, Popeyes, and several others - lamented at “significant inflation” for protein and oils.

Campbell’s also missed on the top line with revenue of $1.98 billion -11%, and earnings per share were $0.57 -31%. Management also lowered guidance. 

The hit to the stock put pressure on Consumer Staples across the board, making the sector one of the seven that finished lower on the session.  As I suspected, Materials and Industrials were the hardest hit, as the infrastructure bill that was once a slam dunk is now in jeopardy.

There was a cautious tone to the session, as investors opted for the safety and steadiness of Health Care and Utility names.

S&P 500 Index

 

-0.18%

Communication Services XLC

 

-0.10%

Consumer Discretionary XLY

 

-0.55%

Consumer Staples XLP

 

-0.48%

Energy XLE

 

-0.63%

Financials XLF

 

-0.94%

Health Care XLV

+0.97%

 

Industrials XLI

 

-1.02%

Materials XLB

 

-0.78%

Real Estate XLRE

+0.11%

 

Technology XLK

+0.07%

 

Utilities XLU

+0.89%

 
 

Message of the Market

At one point in the session, it looked like we would get a stellar performance in growth names as the ten-year yield plunged. By the time the clocking bell chimed, there were more decliners than advancers on the NYSE and NASDAQ. 

Conversely, combined, the exchanges almost posted 600 new 52-week highs against only 18 new lows.

It’s clear the market is poised, and most stocks are in holding patterns.

Market Breadth

NYSE

NASDAQ

Advancing

1,572

1,999

Declining

1,751

2,274

52 Week High

373

208

52 Week Low

5

13

Up Volume

2.03B

2.58B

Down Volume

2.59B

2.93B

 

Heat Map

Holding Pattern

One thing we know about markets is they don’t trade sideways for very long. A repeated failure to break out eventually leads to decent-sized pullbacks. It On that score, it was a very ugly finish to a session that began with so much promise.

All major equity indices were lower, gold was lower, and crude oil slipped after failing to break out. - Failing to break out was the common theme.

The S&P is trapped in range-bound trading.

The Russell 2000 is also trapped in range-bound trading.

Today’s Session

A few earnings to note, including two of our ‘long’ positions:

Oxford Industries (OXM) posted very strong financial results. It is the perfect example of beginning the investment process off starting with products and services you know, and then drilling down. I’m a huge fan of Tommy Bahama’s summer gear.

Restoration Hardware (RH) is a name I have been in love with for more than a decade. It’s also a store where I’ve spent a lot of ‘coins’. Those huge sofas are perfect for chilling and watching a movie or Making Money with Charles Payne on Fox Business.

GameStop (GME) had $1.28 billion sales +25%, and management said May sales were up 27%.  In addition, two Amazon veterans joined the company in executive roles. The announcement of a U.S. Securities and Exchange Commission (SEC) investigation into trading pressured the stock, which initially moved higher but reversed quickly as the news was anticlimactic.

The biggest news of the day will be the Consumer Price Index (CPI). 

CPI Headline

CPI Core

United States Core Inflation Rate

The initial reaction had the market moving lower, but that pressure subsided quickly and reversed. There are greater hopes this is an inflation top, as yearly numbers are impacted by base effect and m/m core grew slower than prior month.

United States Inflation Rate MoM

Portfolio Approach

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


Comments
We'll have to look into Restoration Hardware! We know we like watching Making Money with Charles Payne. In fact, we'll be listening to Charles on Sirius Radio today 11 to 12 while delivering Meals on Wheels. Thursdays always a day off promise with Charles!

Lorin k on 6/10/2021 10:04:14 AM
MARK LEVIN SAYS BIDEN WILL LEAD US TO A DEPRESSION AND PROBABLY A WAR I BELIEVE HIM!

ERNEST REMUS on 6/10/2021 10:49:34 AM
We moved in November and dealt with a lot of "high end" retailers - RH stands out as the best by far. Best customer service, best return policy, and clear delivery dates (even when delayed) - much better than the other players in the market.

chase on 6/10/2021 12:47:42 PM
 

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