On Monday, the Dow was up 190 points. It was a solid session, and market breadth continues to improve on the NYSE, as investors continue to rotate into high-quality names, with strong cash flows and lower valuations.
- 1,930 advancers - 1,064 decliners
- 30 new highs - 543 new lows
It’s really happening. The market is learning how to move higher even when the biggest names, once the engine of the market rally, continue to fall back to earth.
Consumer Staples, which has suffered from lack of pricing power, has a couple of stalwarts, including McCormick (MKC), up 44% year-to-date.
Energy was higher after stumbling with plunging oil, but Exxon Mobil (XOM) and Chevron Corp (CVX) reminded investors of the attraction of a massive cash flow.
Consumer Discretionary fended off weakness from Amazon (AMZN), which represents 20% of the index. After the close, Booking Holdings (BKNG) crushed Wall Street consensus, and guidance was well above the Street. The shares rocketed $125 points in after-hours trading.
Select Sector SPDR Fund
As much as I’m cheering the fact the market can move higher with new leadership, a lot of those high-flyers or former high-flyers are looking very attractive, and at some point, these names will turn higher as well.
This entire exercise has a lot of inputs from the strong dollar to Fed policy, and now potentially harmful regulations and antitrust actions from the Trump administration. It’s not going to happen, so I feel for those that might have bolted from the shares for that reason.
On the other hand, these companies are looking more vulnerable to competition than they did at the beginning of the year, so we are going through a new price-discovery phase.
There were reports yesterday of Amazon splitting its plan for a second headquarters to two cities instead of one. There might be political ramifications if those cities are in Northern Virginia (near Washington, D.C.) and NYC, but the move also underscores the lack of enough skilled workers in one single city.
This is a huge and growing problem that must be addressed. This morning, we’ll get an update on job openings, which could see another record amount of job openings. The last report saw a record 7.1 million. The problem is filling those jobs.
Portfolio Balance Changes
20 equally-weighted positions
Material names Mosaic (MOS) and Nutrien (NTR) posted results after the close and traded higher.
Consumer Discretionary name Marriott International (MAR) missed on revenue and Revenue Per Available Room (RevPAR) was +1.9%; consensus was 3.1%. The stock tumbled hard.
Industrials looked great yesterday. While it’s not a component of the S&P Industrial sector, Manitowoc (MTW) beat on revenue and earnings, and management raised its dividend to $0.43 from $0.40.
Martin Marietta Materials (MLM)
The company posted mixed results in part to the impact of Hurricane Florence and record rainfall in Texas. But, it’s the company’s guidance and preliminary outlook for 2019 that investors should focus on, especially the part about infrastructure activity.
I think no matter what the outcome of today’s election, we are going to see more spending at the federal and state level on infrastructure. I don’t know where the money comes from, but then again, our federal government has spent $21 trillion it didn’t have, so something will happen.
The public-private partnership outlined by President Trump might have to be reconfigured, but there will be some kind of funding scheme reached. Martin Marietta Materials mentioned the FAST Act.
FAST Act or Fixing Americas Surface Transportation Act was passed on December 3, 2015.
- House 359 -65
- Senate 83-16
The act provided $305 million in funding over five years through a combination of funding changes in passports rules, Federal Reserve Bank dividends and privatized tax collection. This was all done to avoid hiking the federal highway tax.
Preliminary View of 2019
Martin Marietta Materials
November 5, 2018
Infrastructure construction activity should benefit from the funding provided by the FAST Act as state DOTs and contractors continue to address labor constraints and the benefits of further regulatory reform emerge. Additionally, state and local initiatives that support infrastructure funding, including gas tax increases, bond programs and other ballot initiatives, continue to garner voter approval at historically attractive levels and will play an expanded role in public-sector activity.
Nonresidential construction activity should increase in both the commercial and heavy industrial sectors for the next several years across many of the Company’s key markets as supported by third-party forecasts. Continued federal regulatory approvals, supported by higher oil prices, should notably contribute to increased aggregate consumption from the next wave of energy-sector projects, particularly along the Gulf Coast. Construction activity for these projects is expected to begin in earnest in 2019 and beyond.
Residential construction should continue to grow. Management believes a shortage of single-family housing units exists, particularly for entry-level homes; a need the homebuilding industry is now beginning to address. Martin Marietta’s leading positions in southeastern and southwestern states offer superior opportunities for gains in single-family housing driven by a multitude of factors, such as affordable land, lower taxes and fewer regulatory barriers. Residential housing starts of 1.2 million units for the trailing twelve months ended September 2018 remain below the 50-year average of 1.5 million annual starts.
Martin Marietta remains confident in its near- and long-term outlooks given the disciplined execution of its strategic plan and its attractive geographic footprint. Underlying market fundamentals, including employment, population growth and state fiscal health, are robust and the Company’s markets show no signs of either a slowdown or being overbuilt.
Why I Vote
My grandmother was fiercely independent and hard-working. She was born and raised in Alabama. She had no formal education but learned to read and loved newspapers and listening to news on radio.
She and my grandfather had a nice size farm in Uniontown where they raised a dozen children. It was back-breaking working with a couple of mules, a horse and hand plows as their only tools. They had some chickens, pigs, hogs, and cows as well as crops like okra.
My grandfather built a store that was really a shack, but it was his, and he wanted it to be a success. The Klan burned it down. But my grandparents never stopped. That doesn't mean they weren't afraid. My grandmother slept with her arms crossed, never using pillows so she could listen for night riders.
One year, she decided she wanted to exercise her right to vote. Blacks in the town had been warned not to show up or they would be physically harmed. Nobody thought it was an idle threat because it had happened before. Still, my grandmother wanted to vote.
She was tough. They had an old wood-burning stove, and I would watch her take red-hot pieces of wood embers with her bare hands and shift them around.
On Election Day, she went to vote along with a few others and were greeted with anger. My grandmother and others were placed inside a small room and told to wait. As the clock ticked, they wondered if they made a mistake and began to think they were going to be taken somewhere and beaten up, or worse.
After some time, the door finally opened and in walked Martin Luther King Jr. His first words were “everything is going to be alright.” We all have stories of those that did brave acts for a better future for their family. In the process, they made it a better future for all Americans.
This is why we owe it to them to exercise our right to vote and to make sure we are making it a better future for our families and our country.
It's fine if we have different opinions on what makes the country better, today is the day to civilly and proudly act on those opinions.
God Bless America.