I hope everyone is having a festive time embracing those things that matter most. The market is open again today, and there will be light volume that could lead to exaggerated moves.  But no one will complain if it is to the upside. Last Friday, the market edged higher as all eleven sectors of the S&P 500 were in the green, while the same old safe haven names led the way. Again, growth mostly brought up the rear, although Communication Services (XLC) names fared better.

 

It's unlikely the market could rally enough to challenge the downside trendline that has been consistent throughout the year.

Christmas Sales

I was one of the few hitting stores on Christmas Eve, and the mall was remarkably empty. Best Buy (BBY) was relatively crowded but horribly unorganized and understaffed. A favorite jewelry store manager said business was “okay,” but I was the only one in the store for half an hour.

My experience seemed to match data from Mastercard (MC), which saw +7.6% retail sales from November 1 to December 24, down from +8.5% during the same period last year.

• In-store sales only +6.8% 
• Online was +10.6% from +11.0% in 2021

All those cars in mall parking lots were about restaurants, which continue to enjoy big business from folks looking for local experiences.

This is the kind of thing the Federal Reserve wants to see, although in a more severe manner. Unfortunately, that’s what we are dealing with, going into 2023 – the need for economic destruction to get Powell & Co. to call a truce.

Hope You Made it Home

For years, one of the biggest jokes on Wall Street was never to invest in airline stocks. There have been times when airline names stood out. Jet Blue (JBLU) was hot at one time, and Southwest (LUV) was so well run that it once boosted half of the entire industry’s market-cap.

Those were the good old days - until Southwest showed its customers no love, and they had company.

It’s hard to have the “You Only Live Once” (YOLO) lifestyle of travel and living in the moment when the planes are grounded.

Portfolio Approach

We are adding a new position in Energy to our Hotline Model Portfolio. If you are not a current subscriber to our Premium Hotline Service, email Info@wstreet.com to get started today. 

Today’s Session

The futures were green for most of the morning, but the Nasdaq has now turned negative. Investors seem to like the news from China that it plans to reopen its borders to international travel on January 8, after being closed due to Covid-19.  It also intends on lifting its quarantine requirements on international arrivals. Travelers will need to present a negative Covid-19 test at least 48 hours before arriving in China.  If all this truly happens, this could help boost economies globally and help ease inflation.

Bond yields here at home are up slightly with the 10-year Treasury trading at 3.822%, and the greenback giving up some ground.

WTI is rising this morning above $80.  Easing of Covid-19 restrictions coupled with extreme weather has lifted oil to a three-week high. 

Watching Housing

The Case Schiller report is out today, and shows U.S. home prices declined for the 4^th consecutive month.  It’s not my favorite report, because it’s too narrowly focused. But it is highly regarded on the street.

Intriguingly, as the housing market has begun to implode, two key housing - related ETFs have found support.

• XHB is mostly housing support companies (top holdings: FND, LEN, NVR, CARR, JCI, HD, DHI, LOW, FBHS and ALLE).
• ITB is mostly homebuilder

The market will know the housing bottom before it’s in official data. The carnage is only just beginning for housing.  But these stocks are down more than the broad market and could be a good 2023 gauge on when there might be turn in the overall economy. 

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