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Morning Commentary


By Charles Payne, CEO & Principal Analyst
6/17/2022 9:41 AM




S&P 500



NASDAQ Composite






Russell 2000




Market Breadth









52-week highs



52-week lows



Up volume

369.1 million

1.38 billion

Down volume

5.28 billion

4.27 billion

Heat Map

Sector Focus

Yesterday, everything got slammed again, with Consumer Staples (XLP) holding up the best. Growth sectors got crushed once again, although Energy (XLE) was by far the hardest hit.

Slick Stuff

Crude oil edged higher +1.98%, but oil stocks continue to come in rapidly, now down 16% from last week’s high. So, investors are blinking, and taking profits is the better part of valor at this point.

Philly Fed Manufacturing Survey

The current activity was -3.3% against the consensus of +4.8% and +2.6% in the prior month. Future activity was also abysmal.

It looks like ‘prices paid’ have finally peaked as prices received also turned lower.

Special Questions

I like the special questions in these reports, as they give a better glimpse into the future and the degree of challenges facing manufacturers. The good news is the total production was higher in the second quarter (2Q) vs. first quarter (1Q).

Financing isn’t an issue, but labor and supply chains continue to create headaches.

Staying the Course

Investor sentiment continues to erode big time, with Bearishness surging to 58.3%.

Wall Street has always considered this to be a contrarian indicator at some point.

This brings me to a question some have asked: why we don’t sell everything instead of enduring this pain.

Here Are Some Facts

If you decide you want to be an investor, you are going to go through periods like these.

If you’ve ever looked at a stock that’s erupted over a ten-year period and wish you owned it (especially if it’s a name you love), then you have endured a few periods like this.

You are not going to pick the bottom or the turn, and more than likely, if you took a massive hit right now, you would be far too timid to get in later.

This is not a game!  You own the companies in your portfolio.  Either they are great companies, or they are not. And yes, it’s that simple over time. But the market has become a 24-hour cycle like the news.

It’s too late to take reasonable losses on great names because their valuations are adjusting for this moment in time. So, near-term pain should be temporary. Meanwhile, you have dumped some positions already and have the cash to eventually buy the turn.

History points to great things over the next 12 months (sidebar).

Portfolio Approach

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

Today’s Session

Equity futures were much higher but began drifting lower an hour ago, as bond yields are edging higher. Interestingly, Jeffrey Gundlach made this observation yesterday:  30-year yield took out the 2018 closing high today only to powerfully reverse by 25 bps.  This action is called a “throw over” and often marks an important trend reversal.

This was the move: 30-Year hit 3.494% (2018 high 3.438%), hit intraday low of 3.228%, closed at 3.273%.

The same kind of reversal happened with the 10 Year, which hit 3.50%, swooned to 3.18%, and closed at 3.22%.

Let’s keep an eye on the bond market as yields have gone parabolic.

Of course, watching an oversold market move to a new tune from the street about earnings needing to come down.  What’s intriguing is prices are moving lower without major adjustments in earnings consensus, so to suggest such an adjustment would seems odd.

Sure, it would bring valuation metrics lower, but wherever fair value is, the market should find it even if the street is wrong on its consensus estimates - the street is always wrong about earnings by underestimating results.

The margin degradation from inflation is legit, but again, share prices are getting hit whether it’s reflected in certain metrics.  So much hinges on whether the economy is in recession or will official enter one this year.  I thought recession was avoidable earlier in the week, although, the ultra-rosy projections by economist centered on that mysterious pool of $2.5 trillion seems misplaced to me.

A reversal on a Friday into a long weekend would be a big sign…let’s see what happens, and we’ll touch base in the afternoon note.

Saw you on Fox this morning.PLEASE,don't ever lose your passion,or most important,your love for this country.Hope the elite will hear your message.Sadly,it may not matter.Keep the faith.Never quit!

Kevin Begley on 6/17/2022 10:28:53 AM
Liked previous comment.

Bob Pinard on 6/17/2022 5:36:34 PM

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