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Morning Commentary

YOUíRE A BAD STOCK MARKET - YOUíRE A VERY BAD STOCK MARKET

By Charles Payne, CEO & Principal Analyst
3/3/2023 9:59 AM

Yesterday was a remarkable session! Even before Atlanta’s Fed President Bostic put a spark into the market, it exhibited the kind of resolve that drives the experts on Wall Street mad with frustration. The stock market was supposed to implode. Instead, the marker rallied, and Wall Street mavens could only howl.

Volume was light, but up-to-down volume told the story of desire and who has the biggest axe to grind. But, again, buyers are more convinced than would-be sellers.

Market Breadth

NYSE

NASDAQ

Advancers

1,654

2,410

Decliners

1,416

2,121

New Highs

83

95

New Lows

51

163

Up Volume

2.46 billion

3.45 billion

Down Volume

1.67 billion

1.83 billion

 

Here Comes the Fed We Love…

The market got a boost from Atlanta’s Fed President Bostic, who now suggests a pause in rates mid to late summer.

Other observations are very intriguing:

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Later, Fed Governor Waller got in on the act as well:

Fed's Waller:

Data last month challenged my view in January that the FOMC was making significant progress in moderating activity and reducing inflation.

The Fed may need to raise rates beyond December's central tendency view of 5.1-5.4% if incoming job and inflation data does not pull back from strong readings for January.

Retail sales and spending data indicate that progress towards lowering demand may have stalled.

An excessively tight labor market complicates the path toward price stability.

There are some reasons for optimism, such as sharp deceleration in rent increases.

Right now, stock market bears and shorts are paging James Bullard, where the heck is James Bullard?

Remarkable Resolve

For the second session in a row, the S&P 500 slipped under the 200-day moving average intraday but found enough buyers to finish above this major test of support at the closing bell.

The last time this happened was in May 2018. That’s a very good sign.

Chart

But…

In addition to bond yields moving higher, the Dollar (USDXY) has been on the move as well. The Dollar index “DXY” is well off the low point hit at the start of February and trying to move even higher.

A weaker dollar is necessary for any kind of sustained rally in U.S. and global markets.

DXY

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Heat Map

Safe haven sectors outperformed yesterday, led by Utilities (XLU), which is still trailing the broad market by a significant margin.

For those with the urge to overload traditional defensive sectors, look at Materials (XLB) and Industrials (XLI).

Image

Two big red spots that matter:

S&P 500 Map

Silvergate has long been suspected of imminent collapse, participants in its network have gone down in a heap – one by one.

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I don’t think there is a contagion effect to other banks, but I’m unsure how this impacts crypto. Some tell me this will only strengthen the P2P part of trading, and is a blessing as most worry about traditional banks and exchanges in the aftermath of so many blow ups.

Image

Still Weary

Although the stock market rejoiced on Bostic’s comments, the probability of 50-basis points (bps) hike at the next Federal Open Market Committee (FOMC) edged up to 35% before settling at 31%.

We know the stock market is emotional, and other gauges of the economy and the intentions of the Federal Reserve are monitored by the experts.

But these gauges are just as volatile as the stock market these days.

Image

Tons of data today that will move this market, buckle up. We are not easing into the weekend.

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Portfolio Approach

There is no sector weighting change in our Hotline Model Portfolio.

Today’s Session

Equity futures edging higher ahead of important economic data out at 10:00.  The big move lower in bond yields (ten-year under 4.00%) is the main reason for optimism.

Not a lot to do here but wait.


 

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