Monday was the toughest session of 2018 with the Dow Jones Industrial Average taking a 177-point drubbing. That hit to the market was followed by the biggest single-session loss since June 24, 2016.  The two-day decline was orderly even as would-be buyers finally moved out of the way and resisted the urge to buy the dip.

The market had been going straight up for such a long time it was actually on pace to double this year, so a pullback was expected. Still, when these things happen even when it feels as though we are braced for them, questions linger, and doubts grow.

Compounding the situation was the announcement about Berkshire Hathaway, JPMorgan, and Amazon’s plan to revolutionize health care. The three corporate behemoths would bring different skills to an area where no one has been able to curb costs. It shocked the entire health care universe as all those stocks took it on the chin.

• Healthcare Insurer
• Medical Device Markets
• Drug Companies

There were compelling action and bright signs, including names that would benefit big time from infrastructure spending.

Industrials

United Rentals (URI) and Caterpillar (CAT) are some of the names I’ve frequently mentioned on my show. United Rentals erased a big loss, and Caterpillar rebounded almost $6.00 to finish higher. Caterpillar was one of just two winners on the Dow Jones Industrial Average. Airline stocks United (UAL) and Delta (DAL) have been eking out gains on a pre-open upgrade.

Material

Air Products & Chemicals (APD) and Vulcan Materials (VMC) shook off early weakness to close higher.

Healthcare

HCA Healthcare (HCA) posted strong earnings to finish higher, and Cerner Corporation (CERN) climbed higher on rumors of a bid from Amazon.  It stands to reason that if Jeff Bezos is serious, he will need to buy some expertise and existing footprint. 

Deteriorating Breadth

I’ve talked about this potential dip for the last week as there have been increasing signs (including market breadth) that the rally was acting tired. New lows have mounted on the NYSE from just 67 last Thursday to 252 on Tuesday, against only 46 stocks closing at new 52-week highs.

Key Parameters are the same as yesterday’s Afternoon Note, but I would also like to see the lows hold on a closing basis.

Dow Jones Industrial Average Key Support Points:

• 26,028 (yesterday’s low)
• 26,017 (recent resistance breakout point)
• 25,027 (50- day moving average)

S&P 500 Key Support Points:

• 2,818 (yesterday’s low)
• 2,798 (recent breakout point)
• 2,719 (50-day moving average)

NASDAQ Key Support Points:

• 7,373 (yesterday’s low)
• 7,296 (recent breakout point)
• 7,078 (50-day moving average)

Economic Data

While the market was falling through a trapdoor, there were more signs of economic strength via corporate earnings reports and economic data, including homeownership data. After a decade of gimmicks and government programs to spur more homebuyers, it failed to stem the tide of declining ownership. The turn has finally happened as fourth-quarter homeownership increased year-over-year for the first time since 2004.

Highlights

• Under 35 years old: 36.0% from 34.7%
• Overall ownership:  64.2% from 63.7%
• Households less median income: 50.2% from 49.5%
• Black households: 42.1% from 41.7%
• Hispanic households: 46.6% from 46.3%

Hail to the Chief

That was the speech America needed to hear last night.  The tone was right, the message was clear and strong, and it should move the chains. The nation desperately wants to finally get a handle on immigration, to fix our roads and bridges, and to secure the border.  I was especially happy to see all the heroes and I wept after hearing the stories about the slain children.

I know the political divide is as wide as the Pacific Ocean, and there are powerful forces that profit from disunity, but I can only hope the shared goals of prosperity and safety will chip away at those not wedded to ideology but just want a better country. 

For now, the stock market should be fine despite the horror stories you’ve heard about it being so good that it can only lead to things like a hard landing or aggressive Fed actions.  Let’s cross those bridges if they materialize; for now, let's enjoy the great American revival.

Today’s Session

The homerun speech, coupled with homerun earnings from Boeing, and homerun data on jobs, has the market set to open strong, and perhaps make an effort to erase all of yesterday’s losses.  Of course, with the Fed decision, and government jobs numbers on Friday, there could still be some caution. However, there is no denying the great news.

The 234,000 jobs from ADP are well above the 185,000 expected and will add pressure for Friday to be a huge number.  Moreover, there are more signs wages are on the move higher as well.  (More details on all these data points on the afternoon note.)

Comments

Speaking of health care ... is anyone (tech firms consulting with health providers) seriously working on a huge administrative savings opportunity for providers and patients, namely, a consolidated health information database, seamless, HIPPA compliant and better than redundant paperwork being filled out everywhere you go and papers left in view that should not be visible to patients? Might want to invest in this, if there is a viable/available public opportunity. Larry Danna on 1/31/2018 7:28:44 AM

Very inspiring and revealing of the true state of the Democratic Party Bob on 1/31/2018 9:20:17 AM

Those sad and mean mugs said it all even on news that seem to be what they supposedly stand for...prison reform, record low unemployment rates, earned tax credits and paid maternity leave... Charles Payne on 1/31/2018 9:32:12 AM

The State of the Union Speech was A+, but it's most revealing point was to publicly display the fact that the Democrats could care less about helping the average people in this nation. Who, I ask would not like to share the benefits that will come from Trump's agenda. Jerry on 1/31/2018 9:59:46 AM

Democrats in difficult position first not voting for tax cuts then dismissing bonuses as "crumbs" and now trying to give credit to President Obama who actually raised taxes. Finally they are saying $2,000 is good but management keeping more...its class warfare by the gang that can't shout straight. Charles Payne on 1/31/2018 10:04:43 AM

President Trumps speech was well presented and extremely relevant for today's issues. The areas of economy, immigration and defense were spot on to improve our country's domestic and foreign status. It was a pleasure hearing him speak so plainly and to the point. John Ficula on 1/31/2018 9:59:58 AM

I am a democrat. My business has increased 20 fold. I will never vote democratic again. Thank you Mr. President! Dan on 1/31/2018 10:08:44 AM

Potus state of the union speech was excellent, and truly addressed the needs of this great nation roger allen on 1/31/2018 10:13:36 AM

Buffet, amazon & jpmorgan are BIG TIME globalists. While their idea for healthcare sounds very good, I worry that this step is moving toward "one world government". I'd be more receptive if other corporate leaders were initiating this move. judi on 1/31/2018 10:25:19 AM

YOU CAN ONLY HOPE THAT THOSE PEOPLE WHO VOTED DEMOCRATIC, WATCHED THEIR REPRESENTATIVES SIT ON THEIR HANDS WHEN PRESIDENT TRUMP LISTED HIS ACHIEVEMENTS IN THE FIRST YEAR, THEN LISTED THOSE REMAINING PLANS TO MAKE THIS COUNTRY GREAT AGAIN J CHRIS MILLER on 1/31/2018 12:21:30 PM

Great speech and this is the Trump I have been waiting to hear from. It appears to me that the Democrats aren't for much of anything except to resist Trump and America. Very sad on their part. John Stegner on 1/31/2018 1:59:52 PM

SOTU speech was excellent. It was actually enjoyable to sit and listen to it. I too was moved by the stories of the guests seated with the First Lady. While the Democrats continued political stubbornness is welcome from a political competition standpoint, my heart would really like to see our political leaders exercise more unity of purpose for the good of the USA. Thank you, Charles. You are a Rock. Greg Sober on 1/31/2018 2:08:53 PM

Thanks Greg I really appreciate it so much and I agree the swamp is murky which might explain the mass exodus of lawmakers like Trey Gowdy- if we can't get good people to stay and fight we are in trouble. CP Charles Payne on 1/31/2018 2:54:10 PM

Trumps speech was an A+! But the rebuttal by Joe Kennedy was a bad joke, he has his head buried in the sand & is like a bump on the log! He did not offer 1 good constructive thing! The best thing for the Republicans is to offer up him for President. billy bob hospo on 1/31/2018 2:38:12 PM

Billy I couldn't watch the democrat response. The chap stick thing was tough but he was too eager and ran over himself so much it was unwatchable plus it was old scary grievances that didn't portray the country I live in. CP Charles Payne on 1/31/2018 3:13:29 PM

Excellent speech! He is a great leader. I would like to see a budget passed now - no more CR's. Getchel on 1/31/2018 4:07:06 PM

Last night's event left me with the unsettling thought that, contradicting my long-held belief that I'm a slightly right-of-center moderate, I may indeed be an actual conservative. It was great to hear strength, hope and direction after all those years of murky, guilt-inducing obfuscations. Also, how does the chorus on the left get by when they don't have Nancy around to tell them when to sit down and be still? Patricia Flynn on 1/31/2018 4:32:24 PM

I was a democrat fm L.B.J. up to Clinton 2, voted that way; then changed course, Repubs just a shade better. Then along comes Trump, and the whole logarithm changes; a guy w/a NewYork'ATTITUDE' and America First (and foremost) the LIBS can't stand it..to bad. :-) David I. Horen on 1/31/2018 8:18:15 PM

I'm a NAM VET = old ! I thot was one of the best EVER!! I just don't get this (dangerous) HATRED for PRES. TRUMP & it REALLY PISSES me OFF. I cannot for the life (whats left) of me understand DIMMS &ESP. LIBS...Then there is THE MEDIA..use to be backbone of DEMOCRACY !! johnnyg on 2/6/2018 2:23:39 AM

Today, when Charles Payne could not possibly have known the outcome of the indices, he said the market would be up by 500 points - an astounding piece of market insight - Charles Payne has a gut instinct missing from many of his peers and I will pay close attention to his recommendations from now on. Neil Mason on 2/6/2018 9:16:20 PM

Illegals have always had a "path to citizenship", and any of those who are not pursuing that path should be given a limited time to start the process or face deportation. DACA illegals should be included in this group... Start the citizenship process or get deported. Illegals who commit criminal acts, especially felonious acts, should be deported immediately. Lamar Reeves on 2/18/2018 4:51:24 PM

The speech was built on simple Common Sense goals. The "resistance" has a natural aversion to sensible proposals, especially those that don't result in voter increases for their side. They will fight it every bloody inch of the way! Russell Hall on 2/22/2018 12:12:03 PM

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