So it Really Was the Weather

 | May 13, 2014 | 7:11 AM EDT
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So it really was the weather. That's what the action in so many stocks is saying. Take United Parcel (UPS). Here's a company that totally went out and said that the cause of its shortfall was the weather because of the overtime and the difficulty of getting packages to people.

Twice the company has blamed the weather for missed profit projections. Twice the company's stock was punished as if this were just a silly alibi. Not anymore. This stock is headed higher, and it has to be because people are realizing: Hey, wait a second -- maybe the weather was really terrible and UPS is now going to do quite well.

I thought the same thing about Gap (GPS) and Costco (COST). Once the weather improved, they put up terrific numbers.

I think we are going to see the same thing for most of the retailers when they report this week.

That's the chief reason that Action Alerts PLUS bought Macy's (M). The stock has been down because of word that sales were particularly soft during the bad weather. But when you look at the malls that were closed, and how much business was lost, you really have to say that it was a one-off event.

That even extends to home goods. For example, yesterday Whirlpool (WHR) reaffirmed its forecast. To me, that means people are back, out in the stores, fixing up their houses with new appliances.

Now, lots of market players have been doing these theoretical shorts that revolve around housing. They've been betting that, because of lackluster home sales, there's been a real degradation in retail home furnishings. I think we will find out that that's not the case, either. I do find it mystifying that more homes aren't being bought, but I think that's more of an inventory issue. But spending on homes? It seems unabated -- interrupted only by, yes, the weather.

So, with the weather getting better, we should begin to see interest rates going higher. Maybe that's what got started yesterday. Maybe that's why the bond-equivalent stocks were so weak. Maybe it is just dawning on people that there is no recession in store.

If that's the case, then Monday's rally can continue, provided that there is no new Russia news or breakdown in Chinese growth to an even lower level. Yep, the market's making a judgment. It really was the weather. The consumer's fine. Business is better than fine, and the bonds were wrong and are wrong -- meaning too high -- unless Russia-Ukraine tensions flare again.

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