Yesterday was a monster session that lured some fence-sitters that didn’t mind chasing the same names they probably sold at much lower prices and multiples.

It wasn’t all around panic buying, but enough investors climbed out of their foxholes to get a piece of the action – just in case. 

Communication Services (XLC) continues to work its magic riding the shooting star, Meta. Consumer Discretionary (XLY) was intriguing as well. Hasbro (HAS) was the big percentage winner, but Amazon (AMZN) carried the load into its earnings release after the closing bell. That stock has been a perennial disappointment after leading the market for years. Its size is critical, but the magic has faded.

Heat Map

Yesterday, 87% of names finished in the green, with most decliners coming from earnings misses.

Year-to-Date, it’s all about mega-cap.

The discrepancy between the index’s performance and the internals is even more pronounced for the NASDAQ Composite. It’s an untenable situation.

 

 

Despite its resolve, the NASDAQ Composite looks vulnerable. The inability to break out could lead to a big pullback. However, key moving averages must hold because there isn’t a lot of nearby support.

Amazon isn’t Amazing, Anymore

Amazon (AMZN) posted financial results and the stock popped more than 10%. Then the conference call began, and all the air came out of the balloon.

Truthfully, the air has been coming out of the stock for a long time. I think Jeff Bezos will have to come back, and the minute he does, I’m putting a ton of money in the stock. Until then, legacy positions are fine…but another S.O.S. has been flared.

What’s in Your Wallet?

Capital One posted the results and the CEO got very frank on the call:

“Based on what we see in our delinquencies, we think the monthly charge-off rate will get back to 2019 levels around the middle of this year. Our credit metrics tend to move a quarter or two ahead of the industry we saw that in the global financial crisis, and we saw it in the pandemic, and we're probably seeing it again here. We are assuming a material worsening of labor markets with the unemployment rate rising from today's very low levels to above 5% by the end of 2023.”

The company also saw provisions for loan losses climb to $2.8 billion from $112 million a year earlier. Samuel Jackson would have some choice words from this report and call.

Today’s Session

Lots of data out this morning.

PCE at 4.2% was slightly higher than consensus of 4.1% but a major decline from prior month read of 5.1%.  It was the lowest read since May 2021.

• Goods +1.6% from +4.7%
• Services +5.7% from 5.6%

Monthly core came in unchanged from prior month at +0.3%.

Income & Spending

Personal income increased $67.9 billion, or 0.3 percent at a monthly rate, while consumer spending increased $8.2 billion which is considered unchanged.

Rainy Day or Deluge?

Something is scaring the heck out of households. The savings rate was 2.7% last June and 3.0% last September and has since taken off like a rocket.

Savings rate at highest level since December 2021.

Households are concerned.  People smell recession or worse in the air and are preparing.

Good News

Jay Powell’s favorite gauge of inflation is beginning to come down faster.  If the market keys off this news, we might finish higher today. 

Bond yields are listening.

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