Yesterday, the market surged on positive headlines, and the rally morphed into “having our cake and eating it too” phase. If the economy is perceived as being strong, stocks go up. If it's perceived as the wheels coming off, the Fed is coming to the rescue.

Heat Map

Those big squares and rectangles needed for immense sessions didn’t disappoint, but this market was more than large-cap names.

Investors leaped back into small-caps across the board, which was intriguing since many of the July rallies were predicated on a sense of impending rate cuts and Donald Trump’s lead over President Biden.

Yesterday's action was more about the search for value, which is not to be confused with value stocks.

Seeking Value

Inspired by hedge funds and Warren Buffett, investors flocked to recently beaten-down names, particularly in the Consumer Discretionary (XLY) Sector.

Consumer Discretionary is the only sector in the red this year, even after yesterday’s remarkable session.

Here’s the deal.  We have been focused on retailers.

Americans are going to spend trillions of dollars, even in a recession. Folks can take one hundred bucks and pick up a couple of things. It's not the same as going on a cruise liner, but it still feels good for a nation that needs to find materialistic ways to feel good.

I’m unsure how much momentum and renewed excitement can carry the sector, but the 50-day moving average looms large as a resistance point.

Chips Stacking

Semiconductors remain the most important niche of the stock market, as they represent the power of the Fourth Industrial Revolution.

The surge in the VanEck Semiconductor ETF (SMH) has been hard to believe.

Chip Leaders

Economic Data So Great GDP Estimates Plunged

• Did you hear about the big miss in industrial production yesterday?
• Did you hear about the big miss in the Housing Market Index yesterday?
• Did you know the so-called ‘control’ part of the retail sales report was less than one-third the headline?

Then, you would be surprised the third quarter of 2024 (Q3’24) Gross Domestic Product (GDP) estimate at the Atlanta Fed GDPNow swooned to 2.4% from 2.9%. The economy is much weaker than what the cheerleaders are willing to admit or maybe even know (it's shocking how much the financial media settles for the headlines as the news).

It wasn’t just the Atlanta Fed that lowered its GDP outlook. Goldman Sachs (GS) took down their numbers as well. They point to the weather, but it is much more.

Conclusion

The fix is in for the stock market. Too much money is sloshing around, coupled with amazing changes that will change how humanity works and lives.

However, significant issues cannot be ignored, and there will be no amount of financial engineering to put Humpty-Dumpty back together after falling off the wall.

Here’s the rub—nobody knows when that will happen. We will recover from that long overdue debt if we keep most of our capitalistic ethos. However, embracing things that belie our work ethic, faith, and addiction to winning could be a different story.

For now, all arrows point north.

Today’s Session

More bad news from the housing sector.

Housing starts in July fell by 6.8% m/m to an annualized 1.238M and below estimates of 1.33M, this is the sharpest decline since March.

Building Permits for July fell by 4% to an annualized rate of 1.396M and below consensus of 1.43M, this is the lowest level in four years. The results show further signs of weakness in the housing market.

Comments

The words of caution, speaks volumes and it's not over yet. It's still a trader's market, around what is next to come out and promoted by the talking heads providing the headlines. Late last year, when the Fed-R said they might cut rates 3x this year, they promoted the idea that 7 would occur. Then a couple weeks ago, after the unemployment rate jumped unexpectedly to 4.3%, they were running around like chicken little, and the sky was falling, with recession just around the corner. How quickly have they flip-flopped on that and some still pushing for emergency rate cuts are needed. Agree that the Fed-R is late to the party, but how the media swings from one side to the other around influencing a market reaction, leaves a lot to be desired. Terry Dowler on 8/16/2024 1:36:56 PM

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