Yesterday was hopeless out of the gate. However, I have to admit I’m surprised the market didn’t finish lower - and at one point, it made a noticeable move higher. By the closing bell, almost everything was lower except the U.S. Dollar (USDXY), which is already too strong for multinational companies.

• S&P 500 (SPX): -1.15%
• Nasdaq-100 (NDX): -2.19%
• Dow Jones (DJI): -0.52%
• Russell 2000 (RUT): -2.11%
• Bitcoin (BTC): -3.31%
• Ethereum (ETH): -4.54%
• West Texas Intermediate (WTI): -1.54%
• US Dollar (USDXY): +1.26

Only two S&P 500 sectors were higher – ultra-defensive Utilities (XLU) and Real Estate (XLRE).  

Tough Year Seeks Answers & Leadership

Energy (XLE) is the only winner thus far in 2022, but the last month has been difficult.  July, while young, has been more upbeat, with the biggest 2022 losers leading the way. These are the sectors that have to rally much higher to lift the market out of its tailspin.

Ultimately, the mega-cap names will take their short-term cue from the Federal Reserve, which seems to be backing away from their commitment to aggressively rate hikes. Atlanta Fed President Raphael Bostic reiterated the idea the Fed isn’t on autopilot and will take a look-see after the July 75-basis points (bps) hike.

Defensive names were safe havens, but I’m also spying  those credit card companies, which should be benefiting big time from the sharp increase in card usage.

Chart of the Week

The U.S. Dollar Index (USDXY) keeps getting stronger.  It now only has a small hurdle before rising to much higher levels that will foil profits for multinational companies, although providing some relief to U.S. consumers.

The dollar is too strong.

The NY Fed Consumer Expectations Survey saw expectations for the stock market drift to a series of lows, with lower-income households being the most pessimistic. Folks, this is the time to stay optimistic – don’t make the rich even richer by panicking at this point. If you want to join them, then get ready to join them.

Portfolio Approach

There are no changes to the Hotline Model Portfolio this morning.

Today’s Session

I like the action this morning, as stocks started under the gun and are trying to find footing.

The Nasdaq 100 (NDX) has been higher all morning in part to the action in the ten-year bond yield.  That’s the mega cap names – you have to have a couple as core positions.

Earnings estimates have come down so much that I feel very confident about bears coming in at higher rate than normal.  Of course, guidance is always key, especially with so much up in the air, including the Federal Reserve.  I’m inclined to say right now the Fed might put it on pause or go slower after the July meeting.

Let’s see if the S&P 500 can catch a bid.  The Dow will be bogged down with Energy names – not sure why crude got hammered this morning.  OPEC news suggests limited supplies to meet demand in 2023, and Iran cutting drone deal with Russia doesn’t help efforts to increase buyers for their oil.

 

Comments

Main street....51% of small businesses could not pay rent last month and state that they will be out of business in 6 months. 71% of restaurants will be out of business in the same time frame per a recent poll shared by Steve Cortes this date. Results of the regime in Washington. We are in dire straits if drastic changes are not made. We will be in the same arena as Venezuela economically. S. Dearing on 7/12/2022 10:25:10 AM

Chuck, I'm bearish on the dollar also. Holding UDN>>>>>>>>>>> Patrick J Pedley on 7/12/2022 12:20:36 PM

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