Yesterday, was an impressive session but one that was complicated as well. Buyers were more motivated. Hence, the up volume was better than down, but advancers trailed decliners on the New York Stock Exchange (NYSE) and the NASDAQ Composite, where the gap was noticeable. Moreover, there were 137 new 52-week lows and only 93 new highs on the NASDAQ.

Market Breadth	NYSE	NASDAQ
Advancing	1,597	1,992
Declining	1,699	2,477
52 Week High	141	93
52 Week Low	47	137
Up Volume	1.78B	2.56B
Down Volume	1.85B	1.56B

The clear winning sector was Consumer Discretionary, while investors bailed big time on defensive sectors. This session was all about the right leadership with long coattails (read mega-cap growth).

S&P 500 Index	+0.34%
Communication Services XLC	+0.77%
Consumer Discretionary XLY	+1.22%
Consumer Staples XLP		-0.59%
Energy XLE	+0.07%
Financials XLF	+0.03%
Health Care XLV		-0.68%
Industrials XLI	+0.07%
Materials XLB		-0.07%
Real Estate XLRE	+0.17%
Technology XLK	+0.85%
Utilities XLU		-0.96%

Supply Chain Woes

Google searches for inflation and supply chain are spiking to historical levels, but manufacturers didn’t need a search to tell them about the deleterious impact of bottlenecks and worker shortage.

Industrial Production came in at -1.3% from +0.4%. The Street was looking for +0.2%, and economists blamed the sharp decline on Hurricane Ida. Here is the problem: While that might be true, these are the same analysts that saw and formed the +0.2% consensus.

Capacity utilization declined to 75.2 from 76.4; the Street was looking for 76.5.

Housing Boom Restart?

Good news on the home front- the National Association of Home Builders (NAHB) Wells Fargo Housing Market Index, which gauges homebuyers ’sentiment, was a pleasant surprise. Most encouraging was the traffic of prospective buyers picking up to the highest read since December 2020.

NAHB Sentiment	Oct	Sep
Headline	80	76
Single Family (present)	87	82
Single Family (six months)	84	81
Traffic of Prospective Buyers	65	61

Key homebuilder exchange-traded Funds (ETFs) were higher, but the SPDR S&P Homebuilders ETF (XHB) trading volume surpassed the daily average.

ETF	Name	Assets Mil$	Change
ITB	iShares U.S. Home Construction ETF	$2,423.71	+1.7%
XHB	SPDR S&P Homebuilders ETF	$1,778.81	+1.5%

What’s interesting about this action is XHB only has one homebuilder among its top holdings. So, the play in the housing patch might be ancillary.

Holdings

Still holding back homebuilders is the lack of workers. There were stories about the skills gap for years, especially for construction workers after the housing crash.

Portfolio Approach

There are no sector weighting changes this morning.

Today’s Session

Earnings coming out are mostly beating, although I’m not very impressed some top line numbers this morning.

• Proctor and Gamble (PG) paid $2.1 billion more on transportation and raw materials
• Johnson and Johnson (JNJ) also beat

Housing Data	Actual	Estimate
Starts	-1.6%	-0.3%
Permits	-7.7%	-3.4%

Starts

Permits

I like the action this morning, but early gains ebbed on earnings, but mostly after the housing data.

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