Jan 17, 2020
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With today’s strong report on Housing Starts, homebuilders will be a focus today. The group was a leader throughout most of 2010 but has been in a period of consolidation since Q4 of last year. This week, though, the group was finally able to break out to new highs, and data like today’s should only help the group going forward.
Jan 16, 2020
While the pace of earnings season doesn’t really pick up until next week and the week after, today is an uncharacteristically busy day for economic data with November Retail Sales, Jobless Claims, the Philly Fed Manufacturing report, and Import and Export Prices at 8:30. If that wasn’t enough, at 10:00 AM, we’ll have Business Inventories and Homebuilder Sentiment. So far, the results have been positive as the Philly Fed came in much better than expected, Jobless Claims fell all the way down to 204K, and Retail Sales were slightly better than expected. With numbers like these, it appears as though Target’s sales miss announced yesterday was more of a company-specific issue than anything else.
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Jan 15, 2020
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It’s the second day of earnings season, and although only six companies reported this morning on a combined basis, they generated just under $108 billion in revenues. Relative to expectations, the results were also strong. The only company to miss top-line revenue forecasts was UnitedHealth (UNH) while the only one to miss EPS forecasts was Goldman Sachs (GS). In the case of Goldman, though, if you back out a litigation expense for that company, results were much stronger than expected. Despite the strong results from companies reporting, the initial reaction from investors has been to sell the news as most of these companies are trading down in the pre-market.
Outside of earnings, shares of Target (TGT) are down sharply after reporting weaker than expected holiday sales. The stock had been a darling in the retail sector over the last year, so this bad news is having an outsized impact on the stock which is trading down over 5% in the pre-market. While TGT is a large retailer, we would caution against extrapolating this as a sign of consumer weakness at this point.
In economic news, the December PPI missed expectations on both a headline and core basis, and that follows yesterday’s CPI which also missed forecasts at both the headline and core level. If the FOMC is looking for significant and persistent inflation, it’s going to have to wait a bit longer.
Investors have had somewhat of a ‘sell the news’ reaction to the initial reports this earnings season, and one big reason is that the markets have rallied sharply heading into the reporting period. As shown in our snapshot of S&P 500 sectors in our Trend Analyzer, every sector with the exception of Materials is currently trading at overbought levels including three that are at what we classify as ‘extreme’ overbought levels.
Jan 14, 2020
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Jan 13, 2020
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Last week was a good week for the Technology sector, and one catalyst for the sector was the Consumer Electronics Show (CES) which, as we highlighted in last Monday’s Chart of the Day, has historically provided a boost to the sector’s performance. With the CES now in the rearview mirror, this week may be the Health Care sector’s turn as the JP Morgan Health Care conference kicks off. Like the CES for Technology, this conference has historically been a positive catalyst for the Health Care sector.
Year to date, Health Care has already been the fourth-best performing sector and was the third best performing sector last week. Heading into this week, Health Care is already overbought (like just about every other sector), and its timing score in our Trend Analyzer is neutral. While the JP Morgan Health Care Conference is working in the sector’s favor, recent polling data that has Sanders and Warren in the top two spots in Iowa may limit some of that upside in the early going today.
Jan 10, 2020
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At its October meeting on 10/30, Fed chair Powell noted that “a significant inflation rise would be needed before any rate hike,” and ever since then markets have been in rally mode as even strong economic data hasn’t been taken as a signal that the FOMC would start to tighten policy. A perfect example is the monthly jobs report. As shown in the table below, on the day of the three Non-Farm Payrolls reports since the FOMC essentially took itself out of the picture, the S&P 500 has been up at least 0.90%. That’s quite a streak. The last time we saw three straight gains of 0.90%+ on the day of employment reports was back in July 2013 and going back to 1998, there have only been four other three-month streaks of 0.9%+.
