It was another sluggish day for the market yesterday. But it wasn't a walk in the park, considering the mounting carnage in mega-cap stocks. These are names that shook off calls to be broken up and constant regulatory shakedowns on both sides of the Atlantic. Of course, there was always a sense they were overvalued, but I am not sure if anyone thought $5.0 trillion was overvalued!

I wasn’t in that camp. The onslaught has also pulled the entire market lower, but there is a growing chorus that says these names will never rekindle the magic. But they are oversold.

Heat Map

Yesterday, seven of eleven sectors were able to edge higher, led by Energy (XLE) names. Growth was in the green, and Communication Services (XLC) and Technology (XLK) crept into the plus column.

Tesla (TSLA) continues to stick out like a sore thumb. The sell-off is far beyond fundamentals and is all about the comeuppance of Elon Musk. At some point, the stock will be predicated on a rebound in China sales more than the politics of money managers.

Tough Sledding & Lots of Shredding

After the close, FedEx posted results that saw dramatic declines in guidance, but the shares edged higher on a promise to get cutting.

FedEx expects for the fiscal year:

• Earnings per diluted share of $12.50 to $13.50 before the MTM retirement plans accounting adjustments.
• Earnings per diluted share of $13.00 to $14.00 before the MTM retirement plans accounting adjustments and excluding estimated costs related to business optimization initiatives and business realignment activities.
• ETR of 25% to 26% prior to the MTM retirement plans accounting adjustments; and
• Capital spending of $5.9 billion, down from the prior forecast of $6.3 billion.

The management of FedEx is ready to ‘save’ $3.7 billion, and that means a lot of layoffs. The market likes these moves because the Federal Reserve likes these moves.  It seems perverse, but that is where we are after all that cheap and free money became an uncooperative beast known as runaway inflation.

Right now, navigating in the market is like walking on hot coals. Some say such an exercise builds character.

Portfolio Approach

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Today’s Session

There is no doubt December has gotten off to a rough start – enough to suggests the market is oversold.

The market is indicating higher as the street responds favorably to earnings results from FedEx (FDX) and Nike (NKE).  Or to be more precise, the street is reacting favorably to management teams finding ways to navigate what will be a rocky road of less demand.

Nike

• Revenue +17% to $13.30B consensus $12.56B

• EPS $0.85 consensus $0.64

But the market is reacting more to how management pulled this off by controlling what they could control:

Balance Sheet

Inventories are still high but accounts receivable grew slightly faster. Moreover, inventory was $9.6 billion in the prior quarter.

Income statement:

There is lots of pent-up demand for stocks and there is still time for a Santa Claus rally.

Comments

This will be more than coals to walk on, this is a moving river of lava and it is taking down everything in its slow moving path. The markets are so broken (naked shorts/dark pools), that they have now turned to celebrating Co's mediocrity on beating on 'lowered guidance' - but only if it is a Dow Component or NASD 100 - any other Co. that states similar of beating on much lower earnings, gets thrown in the lava... never to be seen again (or at least till 2025). HODL and wait... DO NOT SELL for losses, that is what WS wants you to do. Side note: CP, wanna take a look at all the nefarious stuffs going on in the OTC like COSM (RS on Fri and took 2.5 days to get shares to people, yet HF/MM bought and sold paper shares, and scalped millions from retail. Others they are screwing with as well (GTII, CRTD, FNGR & CGRA). They are stealing from retail on RS and countless other things. Markets are truly broken, and no one seems to hold anyone accountable EVER!!!! Brian W on 12/21/2022 12:14:33 PM

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