“You don’t understand! I coulda had class. I coulda been a contender, I could’ve been somebody, instead of a bum, which is what I am.”

-Terry Malloy

Okay. So, it’s not the pity party and moment of truth from one of the most famous scenes and most quoted lines in one of the most famous movies of all time. When Marlon Brando’s character Terry Malloy blames his brother Charlie for his failed career as a boxer and current struggles in the classic 1954 film On the Waterfront.

Later in the movie, Terry finds some redemption by taking on and defeating a corrupt union boss.

Yesterday’s rally was a contender and for a moment, it looked unstoppable, but internals were crumbling for weeks, and the market was vulnerable. Moreover, the spike in yields made rally leaders wobbly, coupled with the waves of inflation concerns, which have begun taking a toll on various companies in a variety of industries.

The streak of closing without a 5% pullback  ended at 230 – the second-best in the last 20 years.

It’s a Wrap

Once again, the market fell through a trapdoor with less than an hour in the session, erasing a determined effort by the NASDAQ, which climbed off the canvas several times.

Performance	Day	Month	Quarter
S&P 500	-1.19%	-4.8%	+0.20%
NASDAQ	-0.44%	-5.3%	-0.40%

It was a sea of red with sprinkles of green in shares of companies that can avoid or mitigate the great supply chain crisis. For the day, semiconductors were the most impressive niche.

The up volume on the NASDAQ points to aggressive buyers stepping up to load up on the dip.

Market Breadth	NYSE	NASDAQ
Advancing	1,221	2,139
Declining	2,151	2,394
52 Week High	53	66
52 Week Low	82	176
Up Volume	1.34B	3.71B
Down Volume	3.03B	2.06B

Random Walk

There is a lot of work on historical outcomes from the type of winning streak the market has been on, and one that caught my eye was Chief Market Strategist Ryan Detrick of LPL Financial. For the most part, streaks of six consecutive winning quarters see the momentum continue for the next four quarters.

Here’s How I See It

I think the selling is overdone, but that’s the nature of selling. With earnings season around the corner, I believe Wall Street is too pessimistic, and that’s great for names that blow away the consensus and offer robust guidance. Conversely, misses and subpar guidance will be greeted with harsh selloffs. The market should not be like this, but it’s the consequence of more attention, signals, and ways to engage.

In many ways, it makes buying and holding a more difficult goal. And at the same time, it makes it a worthwhile goal. As the pendulum swings, it eventually gets stocks to where they are supposed to be when the underlying fundamentals justify higher share prices.

Portfolio Approach

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

Today’s Session

News and data out this morning reveals all of investors greatest hopes and fears.

Headline

Pill to treat Covid-19 cuts the risk of death by half, says Merck, which will seek its emergency authorization

News from Merck (MRK) on a pill to treat people with Covid is the shot in the arm (couldn’t resist) we all needed this morning.  This is absolutely huge as we are going to have to do a better job living with the virus instead of shutting down Broadway plays after a single show because of breakthrough cases.

S&P 500 futures, which had been as low as 4,261 climbed to 4,319 and NASDAQ futures, which bottomed overnight at 14,560 climbed to 14,741.

Consumers Spending…But Paying Up

Then we got the latest on consumer income and spending, which saw consumers stepping up, but it was a reminder of inflation.

Personal income +0.2% was in line with consensus

Personal spending +0.8% against consensus of +0.7%.  Note, there was a dip in savings lowering the rate to 9.4% from 10.1%.

The PCE deflator +0.4% consensus +0.3%, and year over year 4.3%, the highest level since 1990.  This took some of the bloom off the rose.

While the stock market and its emotionally driven traders and algorithms are bouncing around the ten-year bond yield is steady and now drifting lower.

I like the struggle this morning, but it’s the close that’s been the big test and we have to respect that – but its time to make sure you have reopening stocks in your portfolio. If you are not currently subscribed to our premium Hotline service, email Info@wstreet.com to get started today. 

 

Comments

The other day you modified your questions to your guest to get right to a question that was more important to you concerning veterans benefits and getting health services to them more quickly than through the VA. I was touched by your sincerity and saddened to hear of your veteran friends death. Matthew Rattay on 10/1/2021 12:44:24 PM

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