Can You Blame People For Selling A Bit?

Equities start the day lower for a whole host of reasons so let’s poke fun at them shall we? SPX has been up for 4 days in a row and the DJIA has been higher for 8 sessions in a row so can you blame people for selling a bit? I mean maybe they have Lamborghini payments or Amex payments after they went on a trip to the Portland wine country with friends who all like to drink nice wine from 9am to Midnight and eat dinners where they serve foam and goat eggs. Wait, where was I going with this? Yields are still grinding higher and the 10yr hit its highest level since 2011. Should you be worried about that? I’ll say yes, but not “keep you up at night” worried. As all good finance geeks know, in the present value calculation interest rates are in the denominator so it’s not like we want them to rip higher. HD reported its first top line miss in a while and blamed “weather”. Now I’m as cynical as the rest, when some random retailer that no one shops at anymore says “it rained too much so we whiffed” I just shake my head and mock them on TWTR. But as @jeffmacke pointed out, we legit had one of the worst April’s on record, I shoveled 8” of heavy wet snow after Easter for crying out loud. I’m gonna go ahead and say no one was buying begonias or potting soil in April. Maybe a few people in San Diego but I haven’t dug that far into the report. Look, let’s end on a positive note. The Rus2k is dangerously close to printing a new all-time high and breadth continues to be in the bulls favor. Grind higher, pause, take a breath, start again. We’d all be happy with that kind of price action in May.

After the open, we spent most of the day struggling with rising 10yr yields. Housing stocks? Shewacked. REITS? Smizacked. Utilities? Slamacked. 3.07% by lunch had the entire market like “where do I go from here?” But it wasn’t a wholesale disaster; while rate sensitive stuff acted poorly other sectors of the market actually did fine. The Russell 2000 flirted with green most of the session while Financials led the way for the obvious reason. HD only fell 1.6% so my faith in the investing public going beyond headlines has been reaffirmed, Tesla lost 2.6% after saying they were shutting down Model 3 production for a few days (man the Bears are gonna eat this up) and other than every single homebuilder losers were CELG, TAP, NVDA, and A which fell the most in 13 years. #ThingsCEOsNeverWannaHear. Ok what else moved? UAA actually fought with MAT for the top spot in the S&P and a lot of smart technicians I follow are looking at this one closely. Turnaround stories can take a long time to play out but risk reward (based on the chart) has people perked up (my guy Altschwager rates outperform). By lunch we sat on 2,708 down 78bps. You know what stock hit an all-time high today? Best Buy. $BBY. I swear 3-4 years ago the place was a ghost town filled with CDs, DVDs, and 14 vacuums. I would’ve shorted it thinking “AMZN killed this place” and lost all my money. Kudos to the mgmt team for their strategic planning and execution.

The afternoon saw 10yr yields hit 3.08% so I guess the Fed is now rewarding savers!!! Yay!! We can finally put that stupid criticism to rest. Today was awful for anyone running a risk parity fund but come on, how many people are actually doing that and reading this recap? 0 or 0? We closed at 2,709 down 77 bps as we grapple with ever higher rates. Look, none of us are re-fi’ing again for a long time, get used to the fact that rates have bottomed and the Fed no longer cares what we think. Can stocks do well in rising rate regimes? @econompic shows we can so let’s stop doing this knee jerk reaction thing. Thanks. 

Final Score:  Dow -78bps, S&P500 -68bps, Nasdaq -81bps, Rus2k flat (this is good)   

News Highlights:

We’re going to end tonight on some of the best sleight of hand I’ve ever seen.

Have a good night

The Most Critical Day In Market History Is Upon Us

Equities start the day higher as the most critical day in market history is upon us!! Wait, is that really true?  Not really but I needed a hook to keep you reading, sorry. We are at the top of this “triangle” that everyone’s been talking about for a month so if you believe stocks penetrating an imaginary line on a chart is important you’ve come to the right place!! But what’s the narrative around this breakout? Has anything meaningfully changed with all those headwinds I’ve been prattling on about? Not really, they are all still with us, but right now they’ve taken a back seat because that’s just how markets work. Things matter until they don’t. There isn’t a person on the planet that knows exactly why we are breaking out of this sideways malaise and that’s ok (@ryandetrick even labeled it the “Charlie Brown shirt bottom”.  If you’re always on the hunt for clarity you’re going to be sadly disappointed because frustration and angst is the price we pay to invest in stocks. The notion that earnings were “as good as it gets” was a popular theme for about a week, now no one mentions it anymore. What’s the new theme going to be?  Stick around and we’ll create one ourselves. When I write this blog I do it for “edutainment”. I want you to come here and learn a thing or two about markets all while laughing at my final link and awful grammar. Josh Brown says you are what you read:  “A delicate balance is required – pay some attention but not too much. Read the news but don’t get carried away in thinking that a reaction to the news is necessary”. That’s right, I 100% agree. Come here, read a bit about the market but don’t feel like you need to rush out and make a trade. Most of the time we are just swinging around like a kid on a playground blissfully enjoying our lives so don’t make this more complicated than it is. Understanding this game is a lifelong pursuit and hopefully you spend 3 to 4 minutes of your day with me so we can do it together.

After the open Maverick chased Jester above the hard deck as the S&P went ballistic.  Up 1% to 2,723 in pretty much a straight line. What about other indices though? We talk about the S&P way too much so let’s look at the NASDAQ and the RUSSELL2000. Both back near all-time highs but the move in Small Caps is particularly juicy.  To have them lead the way higher would be fantastic from an overall breadth / momentum point of view because we won’t have to hear the bears say “it’s only AAPL and AMZN”  Ok, let’s switch gears here for a second and talk about TWTR.  The President of the United States announced the location of his NK summit on Twitter. TWITTER. A potentially world changing historic event between two nations and it wasn’t announced at a press conference or on a major news website. TWITTER. Like if we find a way to lasting peace with NK are they going to have to print out that Tweet and put it into the Smithsonian? Imagine if FDR announced the Pearl Harbor attack on Snapchat (actually ignore that, only millennials would’ve found out). What an amazing time to be alive, if you truly want to sit front row to breaking news you gotta be on TWTR and you have to follow @bullandbaird (so so shameless). Winners CTL, EVHC, DISCA, CAH, and Emrging Mkts (EEM). Losers FTI, M, COTY, BKNG, and LB. Have you looked at LB lately? Did Victoria Secret start selling dot matrix printers instead of bras? The fall from grace (down 68% from its high) has been absolutely breathtaking (Baird rates outperform). 

We saw a small profit taking move late in the afternoon but eventually bounced back to close near the highs, 2,722, up 0.9%. The VIX has been crushed back to 13 and the question now is “has the correction run its course?” Sentiment has been reigned in, valuations have dipped, and the euphoric move on January seems a lifetime ago. What I’d really like to see is a return to the boring grind of 2017, an air of normalcy where FB isn’t shooting itself in the foot, Trump isn’t slamming one of our greatest companies, and the CFO of CAT isn’t being misunderstood.  If that happens then yea, I think the correction is over and we can start to push back towards the high in a “non-spikey” way (January was ridiculous). Today is Baird’s Annual Meeting so I’m going to leave this here desk and head over to a giant arena where I’ll spend a few hours talking with the best people on the planet.   I’ll tell you what, working for a small financial services firm that has a laser focus on clients and a management team committed to REAL VALUES is refreshing in this day and age. I hope they don’t lay me off because of MIFID, I have such big plans for this place.  

Final Score:  Dow +80bps, S&P500 +94bps, Nasdaq +89bps, Rus2k +48bps

News Highlights:

Gotta jet so watch people hurt themselves.   We’ll switch back to inspirational videos next week.

Have a good night

Our Journey On The Struggle Bus Continues

Equities start the day lower as our journey on the struggle bus continues. You know I sit at my desk everyday fielding questions like “why won’t the market go up anymore?” and “why don’t you write more?” and “how can you have so many followers when your grammar is so bad? (I need an editor badly).  Let’s ignore the last two for a second and focus on the first one. Why aren’t things as easy as they were in Jan when up 1% days happened all the time. Well, let’s rattle these off. We are in a late stage economy with a brand new Fed chair. Right said Fed is going to hike 4 times this year and they don’t care what the market thinks. We have a turbulent White House ready to start a trade war and drop tariffs on anything and everything. Tech is struggling mightily as it goes from “must own” to “source of funds”. We have a midterm election coming in which it appears the party in control might lose its majority. Earnings “beats” appear to have ZERO effect on both sentiment and market direction which has led to the notion that this might be “as good as it gets” for US corporates. I mean how high am I building this wall of worry? Pretty high right? Now we know bull markets climb those walls and we very well might climb this one too but the uptrend has been put on hold while assess just how much Patagonia gear we need (how good was that all you outdoorsy types?) Something has to happen on this chart…a direction needs to be chosen. We are endlessly chopping around a tiring range because the market cannot figure out a way forward. Make no mistake, those kind of markets eventually resolve themselves. I’m still in the camp that it will resolve upward but it appears that earnings will NOT be the catalyst I was hoping it would be. We need something…

After the open, not even a gigantic beat by AAPL was enough to make this dead cat bounce. The fruit company so many people love hating on managed to beat expectations while announcing a $100B buyback. 100 BILLION DOLLARS. What do we think the commission being charged on that buyback is at Goldman or JPM or wherever it’s done? Zero dollars or negative zero dollars? Michael Batnick talked a bit about it here and if you’re in the camp of “why don’t they just spend it on R&D” know this: they’ve spent $41B in the last 19 quarters on guys in a room saying “what should we build next?” What an absolute juggernaut run by a Hall of Fame CEO. Other winners APTV, CNC, GRMN, MA, and CAH. What else? SNAP fell 21% to a new all-time low. Remember in their prospectus how they said one of their biggest risks was that “we may never make money”? Alllrighty then.  Other than an app that turns your face into a puking unicorn the two biggest losers were UNM -16% and TAP -15%. Hold on ONE SECOND HERE. TAP down 15%?  Miller LITE is a fantastic beer for a warm summer night and we got plenty of those ahead! (don’t @ me with your flowery tasting 7.5% single barrel brewed red chair quadruple saison IPA from the foothills of Oregon. I get it. LITE is still good). By lunch we were waiting for the Fed to give us some guidance about the future.

At 2pm ET we got the Fed meeting and I’m going to point you to Tim Duy because the guy literally knows everything about Fed policy. The market reacted positively to what it viewed as a dovish statement but in the end all those things I mentioned earlier are more important right now. My gut also tells me that “dovish Fed statements” don’t have the punch they used to because we aren’t in “easy mode” anymore. The dollar initially dropped but ended the day on its high but that’s a topic for another recap (not good). Look, if you’re a stock market bull you have to hope that this correction is just the start of a path towards new highs because Bears are going to rage about the first paragraph. Price action is HORRENDOUS right now, it is F level bad. I mean @northmantrader put it best: “The 2 largest companies on the planet with a combined market cap of over $1.7 Trillion have rallied 7.8% and 8.8% respectively in the past 6 days yet $SPX is flat”. 

Final Score:  Dow -72bps, S&P500 -72bps, Nasdaq -42bps, Rus2k +30bps.

News Highlights:

Ok look, you guys know I love these end links. I love finding stuff that excites you and makes you go “ooo”  “ahhh”  “ouch”. Tonight I have one to grip your heart. PLEASE watch this whole thing, it isn’t even that long and you’ll get a huge kick out of it. SOUND IS NECESSARY

Have a good night


*Avengers Spoilers Follow*

Equities start the day higher and if you haven’t seen the new Avengers movie you might want to hit delete on this email faster than you normally do. Ok, one last warning here before I continue **spoilers follow**, but how AMAZING was that flick? A roller coaster spectacle masterfully curated by the incredible talent at Disney. My family and I sat stunned as the death of Spider Man rocked us like we had just missed earnings by a trillion dollars. The narrative created around Thanos, the motivation for what he did was so nuanced and deep that he was truly a wonderful villain to behold. But what if I told you the comic book version of Thanos had a different narrative? Instead of trying to kill half the universe to solve some overpopulation problem Thanos wants to kill everyone to impress Lady Death. He falls in love with her and to show his true devotion sets out to obtain the stones to wipe out everyone and everything. Different narratives but both have merit on their own. Now think about what we’re trying to do here on a daily basis. Each person is crafting their own version of market events to help explain what’s going on but, like Thanos shaving that chin, it’s really hard to do correctly (if not impossible). Bottom line beat rates have been incredible so far, world beating (+24%). Top line has been good too (+10%) but the market is going nowhere. One narrative is that we might be at peak earnings, that things just couldn’t get any better than this. That tech is peaking and Dr Strange should’ve just used the dumb green stone and rewound time to when Thanos was born and killed him. The other is that earnings are doing just fine, that the economy continues to expand and the next few years should bring further gains. Like the story of Thanos there are two different versions each with their own merits. I guess we’ll have to wait a year or two to see this all play out. Who else is excited to see what Captain Marvel brings to this story? She’s incredibly powerful so her movie, plus her appearance in the final chapter of Infinity War, should be epic (we need more powerful women characters). 

After the open we entered one of those “hey a Fed decision is a few days away, let’s just randomly go up and down for no reason” type of markets. SPX up 0.5% for the first hour, then flat for an hour, then down 0.5% thru lunch, just noise surrounded by noise. Plus I’m sure people are reading those stupid “sell in May and go away” articles that are popping up everywhere so the first half of the day was fairly sloppy. DIS gained 1.1%, I guess the biggest movie opening of all time was actually worth something to shareholders. Speaking of worth something, they paid $4.2B for Marvel in 2009 and with this latest movie have passed $15B in box office receipts. Wow. I wish I had a couple stocks to make fun of but there wasn’t much news to be honest. The biggest loser was an Aluminum company that cut guidance (ARNC -21%), an refiner that bought another refiner (MPC -7%), and a drug stock with this headline “Metabolite noise on Ozanimod” so yea have fun with that health care geeks (CELG -3.6%). Winners were the refinery that got bought (ANDV +13%), MCD +5% because I had a double QP with cheese on Sunday to cure a hangover, and MAT +5% because who doesn’t love toys? By lunch no one could explain why the market fell from 2,680 to 2,650 so I’ll go with “algo driven selling.” Prove me wrong!

The rest of the day was more senseless selling as all those dog like things that broke thru the shield overwhelmed buyers. We closed at 2,648 which puts April squarely into the “nothing burger” camp for performance (ended last month at 2,640). Look, a lot of stocks are starting to act they’ve been snapped out of existence. We’re going to need leadership to undo all this negative energy and it has to come from the AMZNs, the AAPLs, the BAs, and the GSs of the world (among others). If anyone wants me to spoil them on how the comics resolved Thanos hit up your boy! I love talking about stocks, pop culture, travelling to Australia, why volume doesn’t matter anymore, how Baird is a great place to work, and why Nebula is the key to all of this… 

Final Score:  Dow -61bps, S&P500 -82bps, Nasdaq -75bps, Rus2k -92bps

News Highlights:

Do you have any idea how big the “World’s Biggest Surfed Wave” was?   Would you believe 80 feet?  8 stories?   Marky  Mark and Batman ain’t got nothing on this thing

Have a good night.

Stocks Go All St. Elmo's Fire On Us

Equities start the day higher as stocks go all St Elmo’s Fire on us. My main man Doug Hafemann, top shelf Industrial trader, dropped some hot 80s beats on me this morning and I knew the recap had its theme. St Elmo’s Fire is one of those 80s songs you run across while driving to the supermarket and you sit there until it’s complete. The video is absolutely epic and the movie was filled with 80s icons. Who didn’t love those “coming of age” sagas where we root for the burnout to become something greater? Anyway…what does this have to do with stocks? The line goes “Soldier of…only you can do what must be done” (you sang it in your head didn’t you). How good is that!!  LET’S GO! These companies are the only ones who know what must be done: they have to report strong earnings, raise guidance and say “the economy is strong, we have a big tailwind from tax reform and we plan on spending some of this money to grow”. If they do that then all of us will be singing “I can hear the music playin’ I can see the banners fly” because we’ll finally have a real reason to rally. I mean check the facts jack: 51 companies in the S&P have reported so far and we’re currently rocking a 30% bottom line growth rate. 30%! If you’re looking for broad sweeping conclusions based on very little data you’ve come to the right place!! Oh and guess what, we haven’t even seen a single Energy company report and Crude just touched $68!! What if those guys start pumping out positive forward guidance because oil stopped being a train wreck? “I can see a new horizon…underneath the blazing sky” (love that part).

After the open we saw a big test of bullish sentiment as the market got whacked almost instantly. Two or three weeks ago that early drubbing would’ve been the start of a 1.5% decline but not on April 18th my friends, no no no, we saw dip buying show up and the market raced higher. #thingswewanttosee. Let’s put aside market commentary though and talk stocks and jocks. IBM reported last night, opened up another downside gap on their chart, and went on to be the worst performer on the day. Maybe these guys should just change their ticker symbol to UGH (h/t lindzon). Thing has more gaps on its chart than a 2yr olds mouth. AMZN announced they are going to sell a FIRE TV thru BBY and both of the stocks rallied.  How is AAPL gonna sit by and let AMZN take the smart TV space from them after they took the home speaker crown? AMZN is gonna lock in every millennial cord cutter into its TV app ecosystem for life. Feels like AAPL is missing out on a couple things that seem like no brainers (55mm cord cutters) and if you feel the same way hit up my boy @Colin_Sebastian on TWTR to complain like I do. A whole slew of transports did well today (UAL, CSX, AAL, R) and if you’re looking for things to root for this sector should be tops on your list. Losers other than IBM included LRCX, MO, AMAT, GPS, JNPR, and this guy who was naked punching cars in a Publix parking lot. I swear if I saw that headline and I didn’t know Publix was in Florida I still woulda said Florida. By lunch we sat on 2,714 up 0.30%.     

The rest of the day saw a small selloff and a close at 2,708 +0.08%. Now I’m on record saying the economy is late stage, probably like 7th or 8th inning, but I’m not a stock market bear. There’s runway left and if you ran for the hills today it would probably be a mistake. @andrewthrasher points out that Advance/Decline lines are making new highs and that’s just not the kind of thing you see in a downtrend so let’s stay constructive here, watch earnings come in, watch the yield curve and other macro indicators, and be satisfied with the notion that no one will ever call the top. I won’t, you won’t, no one on Twitter will, no equity strategist will, Trump won’t, but my Dad might because he’s the best fade of all time.  

News Highlights:

I have two end links for you tonight so pick your poison!

The first one will make you ooo and ahhh

The second one will make you angry at adults.

Have a good night