Sometimes the weight of the evidence does, indeed, tip toward what this market is made up of -- i.e., the stocks of individual companies -- and away from some lockstep, by rote move, like everything gets put on sale because oil goes down.
Today is one of those days.
It sure didn't start out that way. In the early morning hours we saw that China literally had given up the ghost, plummeting 6% and finishing at 2749, well below the 3000 line in the sand that the Chinese government had tried to maintain. Either the Communists decided the whole effort was futile and they didn't want to spend any more money propping up stocks, or the sellers at last overwhelmed the buyers, including the People's Republic of China, but it was looking darned ugly.
Oil, after being pole-axed for $2 yesterday and falling back down to $30, was flirting with $29. Just insanity.
Plus, with a Federal Reserve meeting on the horizon tomorrow, it seemed like we were set for another hideous day just like yesterday.
At 4 a.m. it seemed etched in stone that we would be down at least three quarters of a percent and the futures traders seemed to have their hearts set on repealing all the gains of last week.
Then, next thing you know, oil catches a bid and climbs back to $31.29 a barrel and "bam" comes a move that simply wasn't in the cards.
I could say I have given up saying "why" when it comes to anything oil. Forgive me, though, for coming back to comments by oil service giant Schlumberger (SLB) that exploration and production budgets are coming down so fast that oil should come into balance later this year. Plus, despite a Page One story in The Wall Street Journal about the coming decline in gasoline demand in China, we always seem to forget that decline is not the right word. It's the decline in the rate of the advance, not an absolute decline.
I liked what I heard from Schlumberger and was pleasantly surprised when Halliburton (HAL) said the same thing. You don't get these two behemoths to agree that drilling budgets are running dry -- remember that investors want to hear the opposite -- without there being some truth to it.
It's tough to get oil to plummet through the mid-$20s if that's the case because you'd have to believe that actual buyers -- those who need to lock in permanently lower prices, such as the big users, airlines and cruise ships -- don't lock in what they must all acknowledge could be a windfall that might not last. Remember there are companies that want to remove this variable cost from their balance sheets and they can take advantage of the decline. It's not just more driving that determines the price of oil.
Now we know that in Crazy Town there's the ridiculous disconnect where all the restaurants and retailers see their stocks levitate when oil goes higher. What can I say? It happened again. They zoomed.
Panera Bread (PNRA), which is part of the Action Alerts PLUS portfolio, and Buffalo Wild Wings (BWLD) tack on three points. McDonald's (MCD) rallies again after that boffo quarter from yesterday. Foot Locker (FL), goosed by Merrill Lynch, jumps a couple percent and Deckers Outdoor (DECK), Columbia Sportswear (COLM), Lululemon (LULU) and PVH (PVH) all power higher. Even lowly worms GameStop (GME), Best Buy (BBY) and Bed Bath & Beyond (BBBY) -- the worst of the worst when it comes to earnings -- all jump to the tune of their customers' nemesis, the price of oil.
But that's just how it's been.
The one thing we would really like to hear, though, is actual quality earnings from big international companies that aren't turnarounds, just plain old great companies with good management. Suddenly, we got them.
First, Procter & Gamble (PG) put up numbers substantially better than we expected, with organic growth up nicely when we were expecting a decline on that key line. I think that once people saw that number they circled back to Kimberly-Clark (KMB), which really did report a great number yesterday and got killed for it. Today the market rethinks and the stock gets back half its losses.
Then we get two more surprises, 3M (MMM) and Johnson & Johnson (JNJ). Here are two prized stocks in the Dow Jones Averages where the growth has been criticized of late. The last quarter brought out sellers in both. Now one quarter does not a stock make. But you had to be impressed with how much better these two companies are doing than we thought. Given how beaten down both were going into the quarter, you can see how, on any good news, such as Procter & Gamble, they can really zoom ahead.
Now, does that mean we are back, so to speak, and that tomorrow will be another good day?
Hold your horses -- we still have the Fed and China and oil inventories and Apple (AAPL), which also is part of the Action Alerts PLUS portfolio. But today shows you that when oil is good and the Fed is under embargo, if a few companies issue better-than-expected quarters when you least expect it, you'll trigger a rally that may last, oil forbidding, the entire session, and that's a big deal versus most of what has been happening in 2016.