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10/4/2022 10:00:17 AM Eastern Time

RALLY CAPS ON  
By Charles Payne, CEO & Principal Analyst

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Yesterday was a great way to start the new quarter after three quarters of hell. History suggests the market will have a strong fourth quarter, as it’s only been down three times in the past two decades.

• S&P 500 (SPX) +2.59%
• Nasdaq Composite (IXIC) +2.77%
• Nasdaq-100 (NDX) +2.35%
• Russell 2000 (RUT) +2.65%
• Dow Jones Industrial (DJI) +2.66%
• West Texas Intermediate (WTI) +5.215
• Gold (GLD) +1.75%
• Silver (SLV) +9.2%
• U.S. Dollar (USDXY) -0.46%
• Bitcoin (BTC) +2.88%
• Ethereum (ETH) +3.48%

Market Breadth

Market breadth was solid, where the most convincing action was on the New York Stock Exchange, (NYSE) with up volume of 4.3 billion against only 523 million down volumes.

Interestingly, unlike most bounces from the abyss, the focus was on the best performing names in the Russell 1000 rather than the worst.

I’m not sure what that means other than it’s clear that even bottom-fishers are looking for quality, which underscores the kind of caution in this atmosphere. 

It has simply been brutal.

Great Start

It was the third-best October session going back to 1930, and there was some scalping into the close.

All eleven sectors were higher, led by Energy (XLE); oil popped on reports the Organization of the Petroleum Exporting Countries (OPEC) will announce a million-barrel output cut tomorrow in Vienna.

Musk Slides

As Elon Musk continues to get involved in everything under the sun, shares of Tesla (TSLA) were getting slammed, even after posting record deliveries.

Portfolio Approach

We are adding a new position in Financials this morning and have made some sector adjustments in our Hotline Model Portfolio. 

Today’s Session

Equity futures have been higher all morning long as more fence-sitters decide to kick the tires.  The question is will they get kicked back? I continue to focus on the ten-year yield as a proxy for the economy and the Federal Reserve.  I think it might have peaked with that parabolic move. For sure the market, especially tech stocks, love falling yields.

Long Idea: Visa, Inc. (V) @ $185.05
Industry: Financials; Payment Services
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BACKGROUND: Visa Inc. operates as a payments technology company worldwide. The company facilitates digital payments among consumers, merchants, financial institutions, businesses, strategic partners, and government entities. It operates VisaNet, a transaction processing network that enables authorization, clearing, and settlement of payment transactions. In addition, the company offers card products, platforms, and value-added services. It provides its services under the Visa, Visa Electron, Interlink, VPAY, and PLUS brands. Visa Inc. has a strategic agreement with Ooredoo to provide an enhanced payment experience for Visa cardholders and Ooredoo customers in Qatar. Visa Inc. was founded in 1958 and is headquartered in San Francisco, California.

SKINNY: V's profitability is its greatest strength, producing an annual free cash flow of at least $3 billion. The purchase volume as 2021, Visa has a 62% market share with about $5.21 trillion. In Q3, there were signs of a slowdown but overall, it was a good quarter, taking into consideration the current macroeconomic scenario. The stock is trading at a more than reasonable price. Our target $222.