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Morning Commentary

RED DAWN

By Charles Payne, CEO & Principal Analyst
6/14/2022 9:27 AM

Yesterday, there were 17 decliners for each advancer on the New York Stock Exchange (NYSE), and only one stock managed to close at a new high while the up the volume was shockingly abysmal. Investors sold out of the gate and never stopped.

Market Breadth

NYSE

NASDAQ Composite

Advancers

183

583

Decliners

3,166

4,239

52 Week Highs

1

22

52 Week Lows

801

1,131

Up Volume

116.1 million

840.0 million

Down Volume

5.68 billion

5.90 billion

Investors decided to sell everything, especially the heretofore winners.

COWZ

This has been a sizzling performer as investors found comfort in the top 100 names in the Russell 1000 Index (RUI) based on  free cash flow yield. Unfortunately, it’s been hammered and sold off yesterday big  time on a spike in volume.

Remember at the start of the year, Financials (XLF) were going to be a slam dunk based on higher bond yields?  For a split second, the Fin-Energy trade was working.

New York Fed Consumer Expectations

Over the next year, consumers expect incomes to decline as inflation edges higher and spending explodes (9.0 from 8.0, an all-time series high).

Thus, 10% of consumers see their household financial situation as much worse, and 28.6% see it somewhat worse off.

After the news, the 10-year and 2-year bond yields inverted.

And the CME Fed Watch tracker saw the probability of a 75-basis points (bps) hike rocket to 95.5%.

There are a number of camps with respect to the Fed’s decision tomorrow. I’m in the 75-bps camp and don’t understand the notion that the Fed shouldn’t surprise the Street. It’s like saying fire trucks shouldn’t have sirens. This is the moment of truth, not the moment to sugarcoat news that isn’t even really news.

Portfolio Approach

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

Today’s Session

Producer prices for May climbed 0.8% from April in line with consensus.

Prices of goods went up 1.4%, led by gasoline (8.4%)

Price of services went up 0.4% led by transportation and warehousing services surging 2.9%

PPI from a year ago +10.8% slightly less than consensus of 10.9%

The street is coming around to 75 bps hike.

Everyone should have cash and ready to make moves. This is mostly about emotions and worries the Fed will blow it. Even as earnings are adjusted lower, there are so many oversold stocks out there, particularly for investors looking for solid buy and hold positions.


 

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