Markets Are Getting Nervous

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Posted: Feb 21, 2020 11:53 AM
Markets Are Getting Nervous

Source: AP Photo/Richard Drew

The market showed a little moxie yesterday after an early morning scare that had sell programs and those sitting on the edge of their seats hitting the sell button, even as it was unclear why they were bailing. Selling begets selling. For a split second, the market tipped into a downward spiral before finding terra firma. 

I know every dip, no matter how small, triggers headlines of “Market Down on Coronavirus Fears.” If the market was in a state of fear, the selling would be more significant – much more significant. That said, the market is aware of the problem, and investors have shifted their focus to countries battling the virus outside of China, particularly Japan and Singapore.

Apple (AAPL) stock is becoming the proxy for the economic hit from the virus after management acknowledged that the quarter would miss recent guidance (which was a guess, to begin with). The downgrade of Advanced Micro Devices (AMD) also pressures Technology, especially chip stocks.

The major indices finished down for the day; however, off session lows and the market breadth was slightly bullish.

There were slightly more advancers than decliners and up volume to down volume, while higher highs dwarfed new lows on the NYSE and the NASDAQ.

Market Breadth

NYSE

NASDAQ

Advancing

1,787

1,696

Declining

1,159

1,504

52 Week High

223

211

52 Week Low

59

53

Advancing

1.90B

1.21B

Declining

1.43B

1.18B

 

The Message of the Market

The Technology sector, along with momentum-driven Communication Services stocks, took the biggest hit yesterday. I suspect Health Care was down on Bernie Sanders, coming out unscathed in the most-watched Democratic debate ever.  The Defense sector rules, as investors still want equity exposure.

S&P 500 Index

 

-0.38%

Communication Services (XLC)

 

-1.02%

Consumer Discretionary (XLY)

+0.04%

 

Consumer Staples (XLP)

+0.08%

 

Energy (XLE)

 

-0.11%

Financials (XLF)

 

-0.19%

Health Care (XLV)

 

-0.64%

Industrials (XLI)

 

-0.14%

Materials (XLB)

+0.17%

 

Real Estate (XLRE)

+1.12%

 

Technology (XLK)

 

-1.04%

Utilities (XLU)

+0.36%

 

 

(Too) Strong Dollar

I’m concerned the U.S. dollar (DXY) is getting too strong with key economies struggling, as money from around the world continues to seek shelter in American investments.

Earnings Parade: Let’s Eat Out

There were more earnings after the close, and restaurants continue to rock:

Texas Roadhouse (TXRH)

  • Beat on revenue:
  • Beat earnings by $0.12
  • Comp-sales: +4.4%

BJs Restaurants (BJRI)

  • Inline revenues:
  • Beat on earnings by $0.08
  • Comp-sales: +0.4%

You know I love it when restaurants do well, because it’s a great gauge of discretionary spending, especially fast-casual restaurants.

Portfolio Approach

We continue to take profits on ideas, where the underlying fundamentals buy signals are stalling. Most are up more than the broad market, and it allows us to raise cash in the model portfolio.

Today’s Session

The futures have been in the red all morning as investors continue to mull over news from other companies and countries about the coronavirus. We are watching all the news and studying the market. 

Meanwhile, Gold is hitting multi-year highs, topping $1600 an ounce, while the U.S. 10 year Treasury is down to 1.48% and the yield curve is close to inverting.

Existing home sales is out at 10 ET.