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Morning Commentary

SLIPPING BUT WONíT FALL

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

I was slippin' into darkness

When they took my friend away

I was slippin' into darkness

When they took, when they took my friend away

You know he loves to drink good whiskey (Wo oh oh ho)

While laughing at the moon

-War

It’s been a boring week that will become somber and solemn as we approach the twentieth anniversary of those 9/11 attacks. Things generally haven’t gone very well. Someone from the FBI’s Most-Wanted List just took on an important role in Afghanistan’s new government, and he’s not alone. How painful this must be for Vets and America’s Gold Star Families. I cringe in sadness for them, even as I salute and encourage each and every one of them to remain proud of their service to the nation.

In addition to that fiasco, the nation grapples with high inflation. And the inability to get COVID-19 under wraps, even though the world is in vaccine development. I’ve been calling it a malaise, but that is an understatement. That mood is hovering over the market, and while it doesn’t have to seize control, there is a narrative void to make investors change the focus – at least, from 9:30 am to 4:00 pm.

Market breadth is reflecting a market slippin into darkness. I’m not panicking. I think we will use these same factors to rally our collective souls, forging renewed determination. ‘It’s what we do.’         

Market Breadth

NYSE

NASDAQ

Advancing

1,279

1,384

Declining

2,038

3,018

52 Week High

97

83

52 Week Low

37

53

Up Volume

1.03B

1.55B

Down Volume

2.73B

2.53B

Defensive Position

Defensive sectors continue to lead the charge as investors race into Utilities, providing an opportunity in a yield-starved world. We don’t have any open positions in the sector. Still, I’m on record saying NextEra Energy (NEE) will be a huge winner during President Biden’s term in office, as it was during President Obama’s time in office when a lot of renewable money filled their coffers.

During that period, NEE shares erupted higher, and the company became more valuable to Exxon-Mobil (XOM).

Staples, including Procter & Gamble (PG) and Walmart (WMT), set the pace. In addition, large-cap restaurant names performed well.

S&P 500 Heat Map

Consumers continue to tap credit, especially revolving (credit card) on a percentage basis. For example, In July, revolving credit increased by $5.56 billion and non-revolving +$11.45 billion. Thus, high savings and strong household balance sheets are central to my ‘buy thesis’ for 2021.

Percentage Change

May

June

July

Revolving

+11.6%

+22.3%

+6.7%

Non-Revolving

+9.4%

+7.2%

+4.1%

Luxury for All?

There was several earnings reports after the close yesterday, including Lululemon (LULU) and Restoration Hardware (RH) – both blew away the Street.

These are not companies with inexpensive products, but like Williams-Sonoma (WSM), they continue to widen the net of shoppers.

LULU had a perfect quarter, as the company continues to fire on all cylinders and gain greater market share among men. 

Restoration Hardware (RH) offered higher revenue, operating margin, and return on invested capital (ROIC) guidance. But it’s the ‘long’ view comments that grabbed my attention:

We believe, “There are those with taste and no scale, and those with scale and no taste,” and the idea of scaling taste is large and far reaching.

That’s a little in ‘your face’, and it might sound too cocky for some. But it’s an intriguing point that I do not disagree with, especially with such a focus on the home, as it’s more than just a shelter or place to hang your hat and hide out from the rain.

Portfolio Approach

There are no weighting changes to our Hotline Model portfolio this morning.

Today’ Session

The market flat to up slightly, off the worst pre-open levels, but it is still shaky. The ECB news that it will begin to reduce the pace of its asset purchases starting in Q4 was inconsequential.  Investors are waiting however for Biden to make on a decision on whether he will keep Jerome Powell on as the Fed Chair when his current term ends.

Claims

Initial unemployment claims dropped to 310,000 for week ending September 3, a new pandemic low, and beating expectations for 355,000.  This was last read before the enhanced unemployment benefits of $300 expire.

The 4-week moving average, a better read, was 339,500 down 16,750 from the prior week, and it also represented a new pandemic low.

Continuing claims (week ending August 28) decreased by 22,000 from the prior week’s 2,783,000; another pre-pandemic low, while the 4-week moving average decreased by 29,000 to 2,840,250 representing the lowest reading since March 21, 2020, at 2,071,750.


Comments
The words of "Slipping into Darkness" made me recall the days working as a "local" in the Fed Funds Future pit during the 2008-2009 Financial Crisis. They came to mind back then. I began to sing the song. Others in my pit listened. It sort of became our theme song during those trying times. Let's hope your recollection of these lyrics is not the harbinger of a repeat of those dire moments when there seemed to be nothing but pessimism hanging in the air

Charles Haselberger on 9/9/2021 10:03:39 AM
 

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