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Morning Commentary

INTERNALS IMPROVE

By Charles Payne, CEO & Principal Analyst
9/3/2021 9:40 AM

Yesterday wasn’t a bang-up session, but it was impressive for a couple of reasons. First, there were no signs of anxiety ahead of the jobs report that could send everyone back to the drawing board. Not a single session this week acknowledged the risks. Instead, buyers bought a recent dip in Energy rather than moving to the sidelines. Consequently, market breadth keeps improving, and that will beget even stronger internals.

S&P 500 Index

+0.28%

 

Communication Services XLC

 

-0.67%

Consumer Discretionary XLY

 

-0.01%

Consumer Staples XLP

+0.39%

 

Energy XLE

+2.54%

 

Financials XLF

+0.34%

 

Health Care XLV

+1.07%

 

Industrials XLI

+1.08%

 

Materials XLB

+0.64%

 

Real Estate XLRE

+0.47%

 

Technology XLK

 

-0.11%

Utilities XLU

+0.91%

 

 

Market Breadth

NYSE

NASDAQ

Advancing

2,132

2,735

Declining

1,125

1,616

52 Week High

251

248

52 Week Low

18

39

Up Volume

2.46B

2.65B

Down Volume

1.25B

1.29B

Morgan Stanley (MS) lowered its third-quarter (3Q21) Gross Domestic Product (GDP) to 2.9% from 6.5%, and yesterday, the Atlanta Fed also dramatically lowered its estimate to 3.7% after it maintained the trend mostly above 6.0% for weeks.

High-frequency data, including air travel, continues to fade; while there are seasonal factors, this has to be a concern.

Factory Orders

Coming in at +0.4%, orders climbed slightly ahead of the +0.3% consensus. It’s fine the number beat the Street, but the trend is moving in the wrong direction. 

Summary From U.S. Census Bureau

New orders for manufactured goods in July, up fourteen of the last fifteen months, increased $1.9 billion

or 0.4 percent to $508.1 billion, the U.S. Census Bureau reported today. This followed a 1.5 percent June

increase. Shipments, also up fourteen of the last fifteen months, increased $7.8 billion or 1.6 percent to

$508.5 billion. This followed a 1.9 percent June increase. Unfilled orders, up six consecutive months,

increased $4.1 billion or 0.3 percent to $1,225.6 billion. This followed a 0.8 percent June increase. The

unfilled orders-to-shipments ratio was 6.79, down from 6.90 in June. Inventories, up thirteen of the last

fourteen months, increased $3.7 billion or 0.5 percent to $744.4 billion. This followed a 1.0 percent June

increase. The inventories-to-shipments ratio was 1.46, down from 1.48 in June.

Conclusion: There is no doubt chronic supply chain issues, coupled with domestic and global restrictions, continue to hamper factory orders. But how much of this can be made up down the road? 

Red Flags:

ADP

Mixed and Positive Data:

Portfolio Approach

We added a new position in Technology yesterday afternoon.

Today’s Session

All the signs were there, but the “experts” said this jobs report could come in as high as a million and consensus estimate was 720,000.   No firm on Wall Street was even in the neighborhood of 235,000 total jobs.

I’m going to go into greater details in Payne’s Perspective, but it was a disaster all around – even the strong wage group was explained by the mix of jobs, as all lower paying gigs went begging.

This buys Powell time, but it’s very sobering.  There is something wrong, and if politicians compound the problem by cheering on the workers’ strike, and more free money, it’s going to get worse.

 


 

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