Yesterday, Technology (XLK) and Communication Services (XLC) soared again but had coattails this time as other sectors began to flash buy signals.

The rally has been like watching a Michael Jordan highlight reel, and now we can add this amazing move: the rally has gotten stronger as Fed rate cuts assumptions have dissipated.

After establishing just one new all-time high in 2022 and none in 2023, the S&P 500 has now hit that milestone eight times.

One of Wall Street’s oldest axioms is ‘new highs beget new highs.’

The flip side to that is ‘new lows beget new lows,’and in the case of the Russell 2000, sideways can go on forever.

But Can The Consumer Go On Forever?

Wall Street has all kinds of axioms, rules, and truisms, but sometimes it simply stops using common sense.

Brilliant economists, strategists, and other ‘experts’ keep telling me that as long as people have jobs, they will keep spending, even in the face of higher inflation and punk wages.

You can’t spend what you don’t have, and even if there are still three trillion dollars in available credit card debt, most consumers feel maxed out. A record-high 22% interest rate will do that to folks barely keeping up with minimum payments.

That helps to explain the record decline in credit card debt growth. Just $1.0 billion in December, down from $17.9 billion and far below the consensus of $15.9 billion.

Another thing that will get folks to pull the reins is slower wage growth. Right now, the Atlanta Fed Wage Growth Tracker appears to be lurching toward a freefall.

A record Ten-Year Treasury Auction went off without a hitch as the high yield eased to 4.093% from 4.105% pre-auction. This added fuel to the rally into the close.

It was a record for the Ten-Year Notes offered. There is still enough demand – for now.

Lots of earnings out after the close. Remember when they were the “Mother’s milk” of stock market rallies?

Portfolio Approach

We added a new position to Technology yesterday afternoon in the Hotline Model Portfolio and are adding a new position in Technology this morning. If you are not a current subscriber to our Premium Hotline service, contact your account representative or email Info@wstreet.com to join today. 

Today’s Session

Retail investors remain bullish.

Wall Street has bought into ‘soft landing,’ hook line and sinker and the media is doing its part as well.

This is the emotional part of the market rallies that can generate enormous profits at an enormous increase in risk.

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