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.
- Succinct Summation of the Day’s Events: Earnings are doing fine, there’s hits and misses but we’re off to a decent start. AMZN gonna be rocking TVs at BBY, Breadth looks good, ridiculous volatility seems to be waning. Oil continues to break out
- Anyone in this business who cares about Equity Market Structure should read Matt Levine’s piece today. Love his sense of humour: “The solution is for the real investors to trade on a platform that says it protects them from high-frequency traders, while also quietly having lots of high-frequency traders”.
- Think ESG investing is going to be popular? “The California Public Employees Retirement System (CalPERS) has invested $1 billion in a new internally managed environmental, social, and governance (ESG) global equity portfolio and added another $260 million to a second internally managed $7.5 billion synthetic equity portfolio. The documents show that the new ESG portfolio was funded in February 2018 and its investment methodology was developed by investment advisory firm QS Investors of New York, New York.”
- Things Michael should’ve invented #37. I swear we have so many shoes in my foyer.
- Like Carville said, I wanna come back as the bond market: “Don’t bother arguing with the hard-money gurus about the correct policy course. Just watch the yield curve. The market is smarter than all of us”.
- Barry telling us what has changed in 2018: “Combine above average returns, the passage of time and a very specific technical event and you create the right environment for reversion. The U.S. equity markets have risen for nine consecutive years, and during seven of those nine years, it rose by double-digit amounts. It is easy to see markets getting a little ahead of themselves, and needing to digest those gains. Those who look at the longer market cycle after this fantastic run wouldn't call a quarter or three of sideways action unexpected”.
- You think you’d ever get bored walking out the door and looking up? “Hey hon, the mountains sure look lame today” – said no one ever
I have two end links for you tonight so pick your poison!
Have a good night