Yes, bulls should be thrilled that the NASDAQ remains strong. You always love a rally that's lead by tech, as it represents 25% of the S&P 500. Without it things are hopeless.
However, what about everything else? The truth is that tech's leading. But very few stocks away from tech are following and that's threatening the advance and will, most assuredly end it if there isn't some more following, especially because we are beginning to see some fraying in the tech fabric already.
Sure, Apple's (AAPL) up again. It's really closing in fast on one trillion dollars in market cap as the evidence keeps mounting that the apps and the ancillaries are going to lead to stronger revenue than what is in the numbers.
Amazon's (AMZN) making its move in the proverbial trillion dollar horse race, but it may have started too late, because it has to make up $180 billion whereas Apple only needs to traverse another $50 billion. Who would ever think that the word only would be linked with $50 billion? But most of the rest of NASDAQ tech is struggling with fractional gains and losses.
Netflix (NFLX) stock's off to the races again for no apparent reason. I can't even gin one up, as so many analysts on Wall Street do, even though they really are simply trying to rationalize price target bumps as the stock gets away from them.
Cloud prince Coupa's (COUP) on the move after a beautiful quarter reported just yesterday. Broadcom's (AVGO) stock is on the move as analysts fall over each other to tell you to buy it ahead of Thursday's earnings report.
Now, if you want to see a group that's got the bullish fever look no further than retail. The stocks of Gap (GPS) and Macy's (M) soared today on the strength of bullish notes from Matthew Boss of JP Morgan. I loved the Macy's note because it confirmed my belief that we are in the early innings of the move that CEO Jeff Gennette, the turnaround artist of the year, is engineering. We said it is time to run toward, not against the Macy's tide because the dividend is safe and the hiring is sage, namely the hires that Gennette has selected from e-commerce. It's truly a stellar group including a couple of brilliant folks from eBay (EBAY) .
We told you that Kohl's (KSS) had a good quarter but the bears controlled the narrative on reporting day and drove the stock down from $65 to $60. Next stop? How about $75 as it is dawning on people that the turn is for real, as real as the stewardship of Michelle Gass. Next time the story has to be told in a more forceful tone so the bulls can be bulls.
There's no stopping Burlington (BURL) which is the unsung hero in the group up another 26% this year after rallying from $90 last year at this time to the $155 level. I went to my Brooklyn Burlington this weekend to see what the hubbub is all about and the place was wall to wall people with prices to beat the band. The line was thirty deep waiting for registers. Oh my.
And let's not forget Target (TGT) with a stock that is fractionally off its 52-week high after plummeting when it reported, a la Kohl's. I thought the quarter was spectacular with amazing growth online and fantastic private label entries. The market totally disagreed with me, at least for 24 hours. The stock of Best Buy (BBY) is clawing its way back after that so-called negative guidance. They always play it that way.
I know, the bulls have retail and the bulls have tech, that means the consumer is smoking and the most important sector is showing amazing strength.
Sadly, though, that's where it ends. There are so many other groups out there that aren't in sync with these and we have to go over them so you know how hard the assault on new highs will be, even if it is backed by that stellar employment report from last week.
Let's start with the financials, one of the most important large sectors after tech. We know that business is very good in the country and lots of people have jobs. That means that loan growth should be superb, and defaults close to nil. So why aren't the banks doing better? Simple: rates keep going lower. We have now entered the theatre of the most absurd where the only thing that matters to this group is what ultimately will slay it: interest rates going higher.
I can't stress to you how reckless and stupid this is as these stocks have a magnificent amount of earnings power and are selling at extremely low price-to-earnings levels. JP Morgan (JPM) , the best of the bunch, has a stock that sells at 12 times next year's earnings. Bank of America (BAC) trades at 11 times. Citi's (C) at 10 and Goldman Sachs (GS) is at 9!!
Citigroup isn't just cheap on earnings. It's tangible book value, what it would be worth if it were basically to close its doors, is $61. It is buying back 7% of its stock this year.
Nevertheless, it doesn't matter. There is no price these stocks seem to stop at on the way down. It is incredible. My hope is that after the government issues its formal CCAR stress test results at the end of June we will see big buybacks and dividends but, man, oh, man, these are hated.
Drugs can get no traction whatsoever. I thought I saw some nascent strength in biotech yesterday but that was awfully short-lived. It's always difficult to catch a bottom in the group when the best of the best of consistent pharma, Johnson & Johnson (JNJ) , can't catch a break. What the heck is that all about. I don't know if you are willing but if you are capable of putting a stock away for a kid, then JNJ with a 3% yield, makes a ton of sense.
All of the stocks seem on the ropes, from the ones with the hottest drugs, like Merck (MRK) with Keytruda, to ones with the greatest value like Amgen (AGN) with a huge percentage of cash, might as well be trash.
The health insurers are just treading water. The device makers are getting hammered. We will hear from Medtronic (MDT) later today in the wake of what I thought was a very successful analyst meeting. I feel very alone in making that judgment, though.
The transports are in brutality mode. The other day we had Union Pacific (UNP) on "Mad Money" and the stock was flying right into a fabulous analyst day. But a few days after the shindig the stock is plummeting despite levering up in order be able to be even more aggressive than before to buy back stock.
Southwest (LUV) , American (AAL) , Delta (DAL) and United (UAL) are in some sort of spiral that their stocks can't pull out of. Fedex (FDX) , UPS (UPS) and even XPO Logistics (XPO) find advances too hard to mount.
It is mortifying to watch the cruise stocks go down off of a very negative Morgan Stanley note questioning much of what the CEOs of Carnival (CCL) and Norwegian (NCLH) recently told us. Future bookings are weakening according to a Morgan survey and that's crushing the stocks. I want to trust the CEOs but the market sure doesn't. They're banking with Morgan Stanley.
There's still no real lift to the staples. The group is pathetic: Procter & Gamble's (PG) stock is down an astounding 19%. Kellogg (K) after making a mini run now has given up the ghost. Hershey's (HSY) stock is pennies away from a new low.
Now it shouldn't take much to turn things around. Oil a few dollars lower should ignite the transports. Interest rates a tad higher could put a floor under the banks. But without more than the techs and the retailers, you can't expect the assault on new highs so many are now counting on after the Nasdaq and Russell 2000 records. The bulls can say it's a work in progress but the bears would say it's just not working.