We've got some sort of sweet spot going on here today. What defines a sweet spot? That's a market where Chipotle's (CMG) up $10 and Chevron's (CVX) flat. It's a market where Monster Beverage (MNST) is up four bucks even though it was downgraded today, because Monster is the convenience store drink when convenience stores are doing amazingly well because gasoline has cratered. At the same time, it's a market where Marathon Oil (MRO), an exploration and production company, is actually rallying.
It's a market where aerospace is red hot because Alcoa's (AA) CEO Klaus Kleinfeld raised his expectations for the industry even though Alcoa itself is down, no doubt because the stock ran so much into the quarter. It's a market where people seem to forget or dismiss the 14% decline in SanDisk (SNDK) yesterday and embrace Avago Technologies (AVGO), Skyworks Solutions (SWKS) and Qualcomm (QCOM). That's incredible; the market has no memory whatsoever for what happened 24 hours ago. Most incredibly, it is a market that has put the 14% decline in Tiffany (TIF) stock in the past and embraced Macy's (M), Nordstrom (JWN), Williams-Sonoma (WSM) and even Restoration Hardware (RH), all places where there's some very pricey merchandise.
How can this be? How can it be that we can have such a buoyant market? I think there are six components to the reversal from yesterday's poor session.
First, Alcoa said a number of industries are strong, including aerospace, which then moves up Boeing (BA), United Technologies (UTX), Honeywell (HON) and even Lockheed Martin (LMT). And Boeing right now is giving a briefing on orders that confirms what Alcoa's Kleinfeld said. Any sign that the aerospace business is strong then allows people to go buy the airline stocks, even as American Airlines (AAL) reported a not-so-hot revenue number yesterday. How quickly we forget that disappointing number. But then again, that was 24 hours ago, just enough time for this market to forgive and forget. It didn't hurt that Southwest Airlines (LUV) reported a decent number, not as good as I was looking for but enough to make people feel more confident about the group.
Alcoa said that non-residential construction's gotten stronger, which allows names such as Eaton (ETN) and PPG Industries (PPG) and Emerson Electric (EMR) to run. Alcoa praised the truck and auto cycles and all of those sectors and the companies within them, such as Lear (LEA), Magna International (MGA) and Johnson Controls (JCI) and Cummins (CMI), get bought. Non-residential construction is a huge industry that puts plenty of people to work.
General Electric (GE) catches a bid because of a reversal to the positive in turbine fortunes. And even Anheuser-Busch InBev (BUD), Molson-Coors (TAP) and Constellation Brands (STZ) rally off of a side comment by Klaus Kleinfeld that beer sales are strong! All from one company's quarter.
Second, this J.P. Morgan healthcare conference is almost a coming out party for every biotech imaginable. I have seem moments with this conference where the stocks sell off because of the hype going into the event. Not this time. They are rallying. Isis Pharamaceuticals (ISIS), Regeneron Pharmaceuticals (REGN), Celgene (CELG), Agios Pharmaceuticals (AGIO), you name it; they just are roaring. It is exactly like NPS Pharmaceuticals (NPSP) CEO Francois Nader, the man who just sold NPS Pharma for a huge price to Shire (SHPG) said: this group has no economic sensitivity and unassailable franchises, the holy grail of investing.
Third, we are getting plenty of signs, suddenly, that our overseas partners, which have all been weak are suddenly benefiting from the price of oil. We are getting ample anecdotal evidence that China's slowdown in growth may be abating. We know that India's getting an energy windfall. We see that Germany just balanced its budget because the economy is so strong. Odd, I have to say, that a balanced budget is what Angela Merkel, Herbert Hoover in a pantsuit, seems to want every country in Europe to have. I think they should adopt a "Hey Ya" attitude, "Lend me some sugar I am your neighbor." Or is that too Outcast for Germany.
Fourth, we are seeing the comments from Terry Lundgren, the CEO of Macy's play a role in this market. We had been worried about Macy's after what was regarded as a somewhat tepid quarter followed by a big restructuring. Surely there had to be some benefit from lower gasoline, no? This morning, he said there has been and it had been obscured by the fact that you needed to fill up several times before you seem to get the impact and now we've got it. There are so many retailers that had been going down off of Tiffany, and now they are reversing, even Costco (COST), which caught a downgrade from Goldman Sachs today. In the meantime, the restaurants, led by Domino's Pizza (DPZ), won't quit and the whole group has been the leader in this moment.
Fifth, the fast-growing tech stocks are rallying off of a couple of research comments and suppositions. Consider that ChannelAdvisor (ECOM) has been cut more than in half because it basically said that it's not needed as much as it once was when it comes to advertising clients that want to figure out how best to use the web. I think that's because they have figured out that you just give a ton of money to Google (GOOGL) and they will spam it out, if not carpet bomb it, to wherever is necessary to get the most customers. We had an upgrade of Amazon (AMZN) from Citigroup largely because it had come down to below $300 despite strong holiday sales. I though the note was a little obtuse. Since when is $300 a magic number? But even alchemy has its day in the sun now and then. This group had become the bane of the market's existence as of late. Something that's pretty frightening when you realize we are about to get the earnings reports of a lot of these companies. I think, in an odd way, it's good news because the expectations have been wrung out of a lot of these and today's rally doesn't do enough to restore them to where they were. Room to rally if they are any good.
Finally, Credit Suisse went to buy from hold on Apple (AAPL), citing a strong iPhone number and a ton of cash as well as a suggestion that it could earn as much as $10 a share next year. Wow, does that make this $112 stock cheap, the cheapest large-cap stock in technology? Deserving? Obviously, the market doesn't think so. And what a well-timed upgrade coming right on the heels of a disappointing SanDisk quarter, which implied weakness for all cellphones but now seems to be laid on the feet of Samsung, which could be bumping out SanDisk and putting in its own flash. Makes sense. Anything, by the way, that moves up an Apple and an Amazon, can have a salient and sanguine impact on stocks like salesforce.com (CRM), Tableau Data (DATA), Workday (WDAY) and even Netflix (NFLX), as the high multiple group does trade together.
Put all of these positive data points in one stew and you get a darned tasty concoction -- one that tastes very different from the unsavory mixture that we tasted yesterday and Friday. The one thing that is certain, though, is that this market takes its cue from whoever spoke last and tomorrow we hear from the banks, always dangerous when we have interest rates as low as they are. So expect the action to be as inconsistent as possible, with all of the positives from today being undercut, say, by a decline in oil off of tomorrow's inventory announcement and a group of unpalatable bank earnings which, alas, will undo everything that happened today.
