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3/6/2024 10:15:29 AM Eastern Time

TOUGH IT OUT  
By Charles Payne, CEO & Principal Analyst

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It happens, and that’s a good thing. I understand the last couple of sessions has ruffled some feathers, but that’s like getting ready to dash out of boot camp after two days. Market breadth was negative as new lows sprang higher. This is the atmosphere where bad news and not-so-bad news get amplified.

The chart suggests further weakness could see the S&P 500 fill the gap below 5,000. I don’t think that happens, but if it does, I think major buyers would show up, so make sure they aren’t buying the stock you sold for a loss because you panicked.

As oil hints at a major breakout, Energy (XLE) continues to act better.

Key Sectors

Yesterday, discount retailers led the way, sparked by Target’s (TGT) earnings and an upgrade on the Dollar Tree (DLTR). This could also be a signal on the general economy.

Financials (XLF) on the other hand, are saying if there is a recession, it would be shallow.

The Institute for Supply Management (ISM) data is not looking great – particularly the employment trends.

Portfolio Approach

We closed a position in Consumer Discretionary (THO) and are adding a new position in Technology (PSTG) in the Hotline Model Portfolio.

Today’s Session

Powell hints at rate cut (s) this year but will need a lot more convincing.

Current Economic Situation and Outlook

Economic activity expanded at a strong pace over the past year. For 2023 as a whole, gross domestic product increased 3.1 percent, bolstered by solid consumer demand and improving supply conditions.

The labor market remains relatively tight, but supply and demand conditions have continued to come into better balance.

Inflation has eased notably over the past year but remains above the FOMC’s longer-run goal of 2 percent. Longer-term inflation expectations appear to have remained well anchored, as reflected by a broad range of surveys of households, businesses, and forecasters, as well as measures from financial markets.

Monetary Policy

After significantly tightening the stance of monetary policy since early 2022, the FOMC has maintained the target range for the federal funds rate at 5-1/4 to 5-1/2 percent since its meeting last July. We have also continued to shrink our balance sheet at a brisk pace and in a predictable manner. Our restrictive stance of monetary policy is putting downward pressure on economic activity and inflation.

We believe that our policy rate is likely at its peak for this tightening cycle. If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year. But the economic outlook is uncertain, and ongoing progress toward our 2 percent inflation objective is not assured.

We remain committed to bringing inflation back down to our 2 percent goal and to keeping longer-term inflation expectations well anchored. Restoring price stability is essential to set the stage for achieving maximum employment and stable prices over the longer run.

To conclude, we understand that our actions affect communities, families, and businesses across the country. Everything we do is in service to our public mission. We at the Federal Reserve will do everything we can to achieve our maximum employment and price stability goals.

Thank you. I am happy to take your questions.

ADP

The ADP jobs report came in at 140,000 from 107,000 and against consensus of 150,000.

Long Idea: Pure Storage, Inc. (PSTG) @ $56.47
Industry: Technology; Computer Hardware
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BACKGROUND: Pure Storage, Inc., together with its subsidiaries, provides data storage technologies, products, and services in the United States and internationally. The company's Purity software is shared across its products and provides enterprise-class data services, such as data reduction, data protection, and encryption, as well as storage protocols, including block, file, and object. Its products portfolio includes FlashArray for block-oriented storage, addressing databases, applications, virtual machines, and other traditional workloads; FlashArray//XL; and FlashArray//C, an all-QLC flash array. The company also provides FlashBlade, a solution for unstructured data workloads of various types; FlashStack that combines compute, network, and storage to provide an infrastructure platform; FlashRecover, an all-flash modern data protection solution; and AIRI, a full-stack AI-ready infrastructure. In addition, it offers evergreen storage subscription and Cloud Block Store, as well as Portworx a cloud-native Kubernetes data management solution It also offers technical and professional, training and education, and certification services. The company sells its products and subscription services through direct sales force and channel partners. The company was formerly known as OS76, Inc. and changed its name to Pure Storage, Inc. in January 2010. Pure Storage, Inc. was incorporated in 2009 and is headquartered in Mountain View, California.

SKINNY: Guidance for PSTG is bright with the company expecting growth to accelerate in the current fiscal year, unusual for a mature tech company. PSTG continues to excel in profitability with pro form gross margins rising to an impressive 73.7% in the quarter driven by strong subscriptions and product gross margins. Our target is $69.