Although it was a nip-and-tuck session and markets were largely held in check, all major equity indices other than the Russell 2000 closed at record highs yesterday. The moves, however, never escaped the shadow of concerns that seem to be mounting:

• Earnings report
• Inflation & Fed
• Valuations

There is an old saying that the trend is your friend, and that continues to be true. Moreover, all of those concerns could become catalysts as well. If earnings shock and guidance dazzles, perhaps inflation will peak sooner than expected. Valuations are high using traditional metrics, but we are in the Fourth Industrial Revolution (4IR).

Message of the Market

The S&P 500 saw nine of eleven sectors higher, led by Financials, Real Estate, and Communication Services. Interestingly, Energy continues to move sideways, even as all signs point to a potentially magnificent breakout very soon.

S&P 500 Index	+0.35%
Communication Services XLC	+0.71%
Consumer Discretionary XLY	+0.69%
Consumer Staples XLP		-0.13%
Energy XLE		-0.19%
Financials XLF	+0.98%
Health Care XLV	+0.20%
Industrials XLI	+0.14%
Materials XLB	+0.33%
Real Estate XLRE	+0.87%
Technology XLK	+0.08%
Utilities XLU	+0.33%

New High…Where?

Volume continues to be anemic, and advancers can’t outrun the number of decliners by margins that would suggest new all-time highs.

Market Breadth	NYSE	NASDAQ
Advancing	1,903	2,269
Declining	1,388	2,063
52 Week High	209	154
52 Week Low	14	31
Up Volume	1.69B	2.11B
Down Volume	1.69B	1.72B

Big Banks at the Bat

The Financial sector has traded sideways over the past month, holding at key support but failing to get back to the recent high.

JP Morgan Chase (JPM) and Goldman Sachs (GS) will report before the open, but the fact is lately, it’s been non-banks that have led the S&P Financials over the past month.

S&P Financial Sector (XLF)	Sector Weights	Percentage Move
MSCI Inc	1.12%	+20.26%
Moody's Corp	1.46%	+10.87%
S&P Global Inc	2.40%	+7.82%
Intercontinental Exchange Inc	1.62%	+7.33%
MarketAxess Holdings	0.42%	+6.26%
T Rowe Price Group Inc	1.16%	+5.51%
Progressive Corp	1.41%	+5.07%
American Express Co	2.73%	+4.78%
Cboe Global Markets, Inc	0.30%	+4.10%
Nasdaq Inc	0.50%	+3.93%
Marsh & McLennan Companies	1.74%	+3.77%

It’s a big day for the market, looking to prove it not only deserves to be in rally mode but should also be trading higher.

Portfolio Approach

There are no changes to the Hotline Model Portfolio this morning. 

Today's Session

Inflation

Consumer Price Index came in hotter than expected sending equities lower and bond yields higher, but the knee jerk reaction was limited, as investors took a moment to dive into the data.

CPI June 2021	Estimate	Actual
Month to month	0.4%	0.9%
Year to year	4.9%	5.4%

Core Inflation

Core CPI June 2021	Estimate	Actual
Month to month	0.4%	0.9%
Year to year	4.0%	4.5%

Highlights

• Laundry equipment +3.5%
• Women’s dresses +5.0%
• Used vehicles +10.5%
• Lodging Away +7.0%
• Car rentals +5.2%
• Airfares +2.7%

Bond Market Reaction

The ten-year yield climbed higher.  There is some resistance at 1.38%, which held as support recently.  The down trendline isn’t violated until 1.45%.

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