Morning Commentary
Yesterday was another one of those touch-and-go sessions, which is a relief in some ways. But at this stage of the game, the suspension and angst are on par with waiting in the dentist’s reception area. So, if the market must go lower, let’s get there sooner rather than later. But this drawdown has become a sport with its own play-by-play announcers, making each session longer and each faded rally more depressing.
Deciding which sport this has become is the hard part, but it increasingly feels like a fishing competition, with the folks in charge guessing as much as the viewers. I’m serious; a very candid Fed Jay Powell made the most astonishing of statements yesterday: “I think we now understand better how little we understand about inflation.”
Say what???
It got me thinking, what else don’t we understand that seems like we would have figured it out already? So, I hit Google and found the Top Ten websites and the ten simple things that we don’t fully understand:
10. Some People Don’t Need Sleep
9. We Still Don’t Know How Many Species There Are on Earth
8. We Know Dreaming is Important, but We Don’t Know Why
7. Laughing: A Universal Language?
6. Yawning Cools the Brain
5. Mosquitoes Like Some More Than Others
4. Blushing May Have Started as a Social Custom
3. What’s the Deal with Pubic Hair?
2. Kissing Isn’t Universal
1. Consciousness is a Puzzle That’s Ever-Changing
Other sites mentioned water, time, and plants (they can communicate and do complex arithmetic and Pi).
Source of the Pain
According to Goldman Sachs (GS), the risk-free rate is the main reason for the decline in the S&P 500 this year. As interest rates climb, it alters the dynamics of risk-free investing, which by some estimations have made stocks too expensive to own.
Meanwhile, the spike in the ten-year yield (seen on chart inverted) has correlated perfectly with the decline in forward price-to-earnings (F P/E).
After the close, Restoration Hardware (RH) warned and lowered its earnings guidance. It’s a move that will continue but a lot of it is built into the market in general, although such an announcement will always initially send individual stocks lower.
Heat Map & Breadth
Market breadth wasn’t awful, but it was decidedly negative.
Market Breadth |
NYSE |
NASDAQ |
Advancers |
1,144 |
1,650 |
Decliners |
2,059 |
2,914 |
New Highs |
9 |
13 |
New Lows |
199 |
349 |
Up Volume |
1.07 billion |
2.67 billion |
Down Volume |
3.15 billion |
3.00 billion |
Cyclicals Continue to Disappoint
Defensive names continue to dominate, although tire-kickers emerged to nibble at those mega-cap names even after JP Morgan (JPM) lowered its target on Amazon (AMZN) to $175 from $200.
With the economy slowing down, it stands to reason cyclical names would be under the gun, but this was the trade everyone said would rule in 2022.
The nibbling in mega-cap names is noticeable, but the intraday reversal in oil stocks was the big story. Of course, the structural issues are not going away, but near-term efforts to crush the so-called wealth effect will leave no sector unscathed.
Breakouts or Not
Failure to break out is so painful for the market, and one of the reasons we use charts and fundamental research.
Check out the last two times the S&P 500 failed to take out a prior support point that became the resistance. Failure lurched into disappointment and even a smidgen of panic.
The question now is whether a lower low is in the cards – it’s not a pretty chart.
Portfolio Approach
There are no sector weighting changes this morning to our Hotline Model Portfolio.
Today’s Session
Personal income and spending numbers are out. Income came in +0.5% against consensus of +0.4%.
Spending, however, only increased +0.2% against consensus of +0.4% and down dramatically from two months earlier. PCE core at 4.7 continues to edge lower down for the third consecutive month and slightly below consensus 4.8.
The news stalled the mounting selling pressure on equities but only momentarily. But the ten-year bond yield reacted as if it’s paying attention to the potential for peak inflation. The 10-year under 3.00% would be an important signal for the stock market.
Tweet |
3/28/2024 9:50 AM | LISTEN TO THE MARKET |
3/27/2024 1:40 PM | Mostly Higher |
3/27/2024 9:32 AM | U-TURN? |
3/26/2024 1:08 PM | Everything Is Up |
3/26/2024 9:42 AM | TAPPED OUT (I HOPE YOU AT LEAST GOT A T-SHIRT) |
3/25/2024 1:33 PM | Not A Mutiny |
3/25/2024 9:35 AM | STAYING THE COURSE…BEYOND TECH |
3/22/2024 12:56 PM | Toll on Americans |
3/22/2024 9:38 AM | A TAD TIRED |
3/21/2024 1:55 PM | Building on Gains |
3/21/2024 9:30 AM | A COMFORTING FED |
3/20/2024 1:33 PM | Pivotal Moment |
3/20/2024 10:00 AM | HERE COMES THE FED |
3/19/2024 1:33 PM | Picking Up Steam |
3/19/2024 9:35 AM | RUMBLINGS IN THE BOND MARKET |
3/18/2024 1:48 PM | Mag 7 is Back |
3/18/2024 9:39 AM | THE PARTY IN SAN JOSE WILL BE LIT |
3/15/2024 1:38 PM | Realtors Settle |
3/15/2024 9:33 AM | AN UNEASY PAUSE |
3/14/2024 1:43 PM | Sticky Inflation |
3/14/2024 9:48 AM | GOING TO A GO-GO |
3/13/2024 2:16 PM | Taking a Breather |
3/13/2024 9:51 AM | ALL SO EPIC |
3/12/2024 1:42 PM | Marching Higher |
3/12/2024 9:25 AM | ROTATION IN FULL SWING |
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