You knew it was only a matter of time before we were so fed up with Europe that we would say, that's it, give me some good old-fashioned American stocks and I will be content.
Notice I said Europe, not Greece, because as far as I am concerned, it's a pox on everyone's house over there. I mean, come on, the Greeks borrowed too much, the Europeans, led by the Germans, lent too much. The Germans could end this charade right now by just booting Greece from the euro, but they almost seem to want to drag it out. Why not? The dithering keeps dragging down the euro, which is fabulous news for the German industrials, especially the autos.
Look, I am adamant that until this issue is resolved we are going to be in the soup and every rally, including the intraday one today, will be suspect. I got up at 3:30 this morning and the futures indicated that the market could open up as much as half a percent!
That's crazy. It was based on nothing except false optimism about a deal. Whoever else was awake with me, I have two things to say: First, buy a powerful sedative to knock yourself out, and two, don't buy this market up a half a percent because that's always been wrong.
Yesterday, we witnessed a real washout and a give-up in almost all stocks except for a couple of hot biotechs. Even though it wasn't as bad as some feared, it wasn't pretty, and it had a feel that said there's no reason to mess with the market as long as there's no deal in Europe.
Personally, I now feel that any deal -- Greece booted or Greece given debt relief -- will cause everything to rally. I am confident that the fabulous resilience and strength of the Greek people will allow them to triumph over any circumstances, and it would be best if they simply defaulted, took their drachmas and went home rather than stay forever a bunch of mendicants to richer nations.
Again, though, I just want a resolution.
However, today we see people taking action that says the situation in Europe won't be resolved any time soon. Today we saw bets that said we are about to go into earnings season with a roaring dollar in control and it will cause huge earnings estimate cuts for all companies that sell wares overseas. I have to tell you that we hear a lot about the euro but almost every currency's being crushed vs. the dollar, and that's going to cause lots of analysts to downgrade stocks when companies report.
In fact, I will go one step further: Big money's going to come back to these domestics because there will be way too much pain with internationals because of the super-freakin' dollar, and today's the first day I have seen that kind of positioning.
What's the tell for this rotation? Just watch the retailers and the restaurants. They were the standouts from the get-go. We saw Costco (COST) roar from the opening bell. Same with Kroger (KR). Home Depot (HD), Lowe's (LOW). All the drugstore stocks. J.C. Penney's (JCP) marching higher. That's amazing in itself until you look at Wal-Mart (WMT), which seems to have found a bottom. Hold it, let me repeat that. Wal-Mart may be putting in a bottom! Now, I am not a bottom-fisher unless I am going for flounder -- oh boy, did I pull in a big one on Sunday. But it does seem like Wal-Mart has reached the end of its downside rope.
How about restaurants? When was the last time we've seen Chipotle (CMG) rally big? Today it's screaming higher. Money's been flying back out of Jack in the Box (JACK) and Sonic (SONC). Now, after months of purgatory, the money is winding its way back. Same with Cracker Barrel (CBRL), that famous roadside stand of a store chain that dominates the interstate.
And there, of course, lies the answer. The interstate. These stocks, it turns out, march not just to Europe but to the price of gasoline. And the price of gasoline is plummeting and that emboldens the buyers to hide in the domestics. It's a twofer-no dollar exposure and a nice tailwind from the recent collapse in oil.
It's too juicy a thesis to ignore.
What else have they flocked to? Have you noticed the incredible decline in interest rates? They have plummeted since the Greek referendum. So housing stocks are back on the move. Why not? The last ones we heard from, KB Homes (KBH) and Lennar (LEN), were both stellar. They did terrifically with higher rates. Who knows how much better they can do with lower rates?
Of course, the utilities and real estate investment trusts, two totally out-of-favor domestic groups fit the bill of no strong dollar exposure and lower interest rate competition from Treasuries.
It's almost as if the whole market has fallen back to the pattern we saw when oil first started coming down. It's almost like you could expect the greeters at Wal-Mart to say, "Welcome back, stock buyers!"
Now, it isn't just the companies exposed to the super-freakin' strong dollar that are getting hammered. We've got some new fodder: takeover and speculative stocks that have fallen out of favor out of nowhere. What's happening? I think yesterday's downbeat reaction of Aetna's (AET) stock to its bid for Humana (HUM), a selloff that continued today, may have changed some sentiment here. This market has lapped up the stocks of the acquirers and the targets for ages. But worries about a newly vigilant antitrust department coupled with a belief that we've just gotten too excited by any acquisition has put a chill into this fevered group.
It shouldn't be lost on people that the most acquisitive semiconductor stock, Avago (AVGO), which is buying Broadcom (BRCM), has now come down from $148 to $131, and NXP Semiconductor (NXPI), which is in the process of acquiring Freescale (FSL), has declined from $112 to $94. This new pattern's got people concerned that the enthusiasm for deals, a key prop to the 2015 market, may be waning.
There's also some newfound revulsion to the big cult stocks, the ones that defy traditional valuations, notably Tesla (TSLA), which was downgraded today by Deutsche Bank, and Shake Shack (SHAK), which Morgan Stanley (MS) put a sell on. Crushing. The speculative biotechs and cybersecurity stocks are getting hammered, too. As are the much-loved Netflix (NFLX) and Amazon (AMZN), even as there was positive research about them. (Morgan Stanley is part of TheStreet's Action Alerts PLUS portfolio.)
I say take those moves with a grain of salt. They've gotten too hot. Nothing grows to the sky except perhaps my string beans. Let the sellers prune them for a couple of days. They will do just fine.
So a convenient combination of lower oil, lower yields and a higher dollar plus an instinctive revulsion to all things Europe have created this comeback. I like the washout. I like the rotation. But a house divided cannot stand for too long, meaning a rally based totally on the domestic stocks isn't going to take you where you want to go if you own a lot of stocks. However, it does serve as a reminder that next time the market's teetering and obliterated, as it was earlier this morning, people will come in to buy, not sell, the same stocks that rallied strongly off the bottom.