Once again, on Thursday, the market was able to climb off the canvas, and put in an impressive session that lifted both the S&P 500 and NASDAQ Composite into positive territory by the closing bell.

Again, you have to believe the dots were connected and go back to a Federal Reserve that’s been extremely friendly and responsive to the rally.

 I’m beginning to wonder if the Fed needs the rally as much as the rally needs the Fed.  The strong rally is key to the wealth effect.  

For stocks, every time the rally looks like it’s down for the count, it gets its spinach and hopes for a longer accommodation.

Unsettled Science

I read an old Business Insider article that claims the “Popeye” story was built on a scientific lie or fib (“Popeye” wouldn’t deliberately pass along false information).

Apparently, a German chemist named Erich von Wolf was researching the nutritional benefits of spinach and accidentally wrote its iron content as 35 grams. 

It turns out it was only 3.5 grams. Over the ensuing years, the myth of spinach only grew stronger (see what I did there); then, on January 17, 1929, E.C. Segar’s “Popeye” made its comic strip debut in Thimble Theatre.

Just think how many times “Popeye” beat Brutus and saved the day under the false assumption he was getting all that strength from spinach. Perhaps this market is stronger than it thinks. But as long as it needs the Fed to come to the rescue, investors are tethered to action that comes straight out of a comic strip.        

Bad Breadth - Again

It’s just downright ugly at this point. Decliners dwarfed advancers by almost 3:1, while new lows were more than 600% greater than new highs.

Market Breadth	NYSE	NASDAQ
Advancing	968	1,288
Declining	2,351	3,132
52 Week High	47	46
52 Week Low	118	292
Up Volume	876.29M	1.67B
Down Volume	3.56B	2.46B

The Big Boys Have Broad Shoulders

Move over, Atlas - the mighty names in the trillion-dollar club held up the market just when it looked like it would drown in a pity party meltdown.

Groundhog Day: COVID Version

Great work from Charlie Bilello@charliebilello on the latest spike on the virus.

Cases climbed to 139,000, the highest since February 2 or Groundhog Day. Positive rate climbing to 11.4% while hospitalizations hit 83,222, the highest since February 6^th and 693 deaths, the highest since May 4^th.

Deaths aren’t rising as fast as other metrics, but nothing is turning down yet, and that is a cause for concern.

I know high-frequency data is slipping, but we are going to bounce back from the Delta fast and learn even more about not succumbing to the virus.

It could clear the way for the Fed to taper and the market may gyrate lower, but it’s the real elixir as we must get back to normalcy.

Portfolio Approach

We added to Consumer Discretionary yesterday in our Hotline Model Portfolio.

Today’s session

Earnings out from Deere (DE) topped estimates on the top and bottom line, and raised its full year guidance.

-Earnings $5.32 vs. consensus $4.58

-Revenues +32.5% $10.4B vs. consensus $10.33B

Guidance

-Net income for FY21 expected ~$5.7B to $5.9B, prior guidance $5.3B to $5.7B

Revenue grew across all equipment segments with operating margins continuing to surge. 

Production Ag	Revenue	Op Profit	Op Margin
Reported	$4,2Billion	$906 Million	21.3%
Change	+29%	+50%	18.4%

 

Small Ag	Revenue	Op Profit	Op Margin
Reported	$3.1 Billion	$583 Million	18.5%
Change	+32%	+73%	14.1%

 

Construction	Revenue	Op Profit	Op Margin
Reported	$3.0 Billion	$463 Million	15.4%
Change	+38%	+9.4%	9.4%

The futures have improved throughout the morning, with the Dow still looking to open lower, while the Nasdaq and the S&P 500 are flat to slightly positive.  WTI is continuing its decline, slipping to another 1.3% to $62.65.

Comments

Yes Charles, I see what you did. But how could you not give some kudos to Olive Oil?! You know that old adage....behind every good man is a good woman and vice versa. Bob Cayia on 8/20/2021 11:20:42 AM

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