The market exploded Wednesday on a rather nondescript day, devoid of the kind of news that many would consider catalysts. This is what I’ve been talking about - an organic move based on a shift in the bias to the upside, creating a mounting “fear of missing out.”
Stocks got stronger into the close, which is the ultimate sign that smart money and deep-pocketed investors are making their move.
Financials are finally beginning to live up to the hype, rallying with rising Treasury yields. The big money center banks are still acting odd as regional banks led the charge. There has been a lot of merger activity among community banks that could see these regional names come into play as well.
But the best performing sector, which I have been banging the table on, is Materials. This is perhaps the best value in the market right now.
Conversely, utilities stumbled big time on the move in Treasury yields. The good news is I don’t think there will be any freak-out in equities if the ten-year yield pierces 3.0% soon.
Consumer Discretionary names continue to rock. This time, it is in investor’s bottom-fishing names, such as Mattel (MAT) and Harley-Davidson (HOG). After the close, Five Below, Inc. (FIVE) shares exploded higher, up 10% in the after-hours. The stock could open +125% from January 2017.
Meanwhile, the trade deficit declined due to record U.S. exports of $211.2 billion. Goldman Sachs (GS) is now seeing current quarter Gross Domestic Product (GDP) at 3.8%.
Coupled with corporations that are making more money than ever, and bringing billions back home, we have the right formula for increased business investments and higher wages.
Stocks look higher at the open, although, the NASDAQ is slightly lower. I like the idea that money is seeking other sectors and industries, which eventually means luring more dollars off the sidelines.
Meanwhile, all eyes are on the Great White North, as the G7 meeting starts this week. It’s being billed as G6 +1, with the one being the United States, and the implication is leaders of the largest economies in the world are going to try to talk sense into Donald Trump.
Of course, that’s preposterous in the sense that the richest people in the world failed at Davos where President Trump put the Establishment elite on notice that he was going to do things to curb long term trends that lined their pockets with trillions of dollars while the average America saw their paychecks drifts for decades.
The meeting comes as there are more and more signs China is ready to deal.
The latest offer from China is to buy $70 billion in U.S. goods. China’s trade envoy, Gao Feng, told reporters at a briefing in Beijing that the U.S. and China have had “deep and detailed” discussions, and China does not want to escalate tensions.
The doom and gloom crowd in America forgets China has its own issues, including debt that’s more than 250% of GDP.
Then, there’s China’s foreign reserves, which have been declining since February. China wants to deal.
As for Canada, and the world ready to shame Donald Trump for increasing tariff rates, they might be throwing a lot of rocks in a glass house. As I pointed out on twitter this morning:
Charles V Payne
I know tariffs don't work but why does Canada have these tariffs?
- 270% dairy
- 69.9% Sausage
- 57.8% Barely Seed
- 49% Durum Wheat
- 26.5% Bovine/Meat
- 18% Table Linen
Why did Canada create "ingredient strategy" tariff in 2015?
To protect those important industries and curb US imports.