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Morning Commentary

MAJOR BULL SIGNAL MARKET BREATH GETTING (MUCH) BETTER

By Charles Payne, CEO & Principal Analyst
1/9/2023 9:43 AM

It was a great Friday session that brought back the notion of a potential soft landing. It pushed all the major indices higher to start the year on a positive note. But, perhaps the most encouraging aspect of the week is market breadth.

Market Breadth

NYSE

NASDAQ

Advancers

2,717

3,368

Decliners

433

1,315

New Highs

79

130

New Lows

25

101

Up Volume

3.28 billion

3.47 billion

Down Volume

616.70 million

1.69 billion

In late December, there were 600 more new lows than highs, up from -1800 in October and -2400 in September. Last week, it was +86 and positive each session of the week. This is big.

Heat Map

It looks as though we exited Christmas and entered St. Patrick’s Day. It felt like the luck of the Irish as the market surged into the weekend. Every sector was higher on Friday, led by Materials (XLB) and Technology (XLK).

Technology was led by Google (GOOG) and Apple (AAPL), while other mega-caps came on strong as well.

Are We Value Stocks Yet?

Look at forward price-to-earnings (F P/E) ratio on those mega-cap names that never had to worry about justifying any valuation metric. It’s only a matter of time before a different set of investors may kick the tires on these giants that have been kicked around differently.

Microsoft (MSFT) got a downgrade last week, and Apple (AAPL) has stumbled on every headline out of China. Meanwhile, Amazon (AMZN) is still sporting a forward P/E ratio, which back in 2000, we  would have been proud of.

Fed Watch

Everything will be seen through the eyes of Jay Powell with greater hopes he might accept victory sometime this year (maybe in the first half).  I’m very excited about consumer credit – revolving credit has spiked at the fastest pace in a couple of decades. But unfortunately, that does not speak to a ‘strong’ consumer.

Today’s Session

Futures slightly higher all morning as the market moves back to wait-and-see mode.  Comments flooding in mostly suggest the Fed will keep the steamroller on blast.  The House finally has a Speaker, so gridlock officially begins.

Last week, Costco popped on sales update, and I mostly chalked it up to benefit from general belt-tightening.  What caught my eye was online sales were weak while brick and mortar held up nicely.

This morning, Abercrombie and Fitch (ANF) posted results above consensus and raised guidance. The retailers cited it saw the highest fourth quarter sales ever for women’s business while men’s was accelerating. I didn’t know they had women’s business – guess all those customers from back have grown up.

Obviously, this stock won’t carry the market but it’s a compelling sign as we head into earnings season.


 

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