We are seeing what's known as a re-rating of some big sectors on the fly right now, meaning that institutional investors are pushing money toward groups that had been neglected or had stalled out that have suddenly come alive.
Take the banks. They are a huge part of the stock market and are very far behind the averages. That's because they have been stuck in interest-rate hell. They simply can't make all the money they once did on your deposits because rates are so low. Investors have pinned their hopes on the Fed to raise rates and generate higher profits in the classic risk-free fashion.
But today there's not much focus on the Fed. The focus is on fees, fees and more fees. Maybe enough fees to make it so people will want to own financials for more than just their net interest margins.
When giant deals like ZTO Express, a Chinese logistics company, come public -- the largest deal of the year -- we have to take notice, especially when it sounds like Snapchat, which will be a colossal deal, might not be all that far away.
There haven't been many initial public offerings, a very lucrative business, this year and it has hurt the equity sales and trading/corporate finance lines of brokers. That could change this quarter.
When you see deals like the $47 billion buy of longtime Action Alerts PLUS holding NXP Semiconductor (NXPI) by Qualcomm (QCOM) , a deal that has driven up the acquirer's stock dramatically, you can taste the big merger and acquisition fees, especially when this deal comes right on the heels of the $85 billion purchase of Time Warner (TWX) by AT&T (T) . (Qualcomm and AT&T are part of TheStreet's Dividend Stock Advisor portfolio.)
When you see the wild trading in currencies coupled with all the bond activity -- both issuance and trading -- you have to start thinking that maybe the Brexit turmoil that brought rich trading fees may not be so one-time-only.
And when you see the loan growth that we are getting at large banks like Bank of America (BAC) and JPMorgan (JPM) as well as the smaller regionals like KeyCorp (KEY) and Huntington Bancshares (HBAN) , you have to believe that gross margins could at last be climbing just from borrowing alone. (Huntington Bancshares is part of TheStreet's Stocks Under $10 portfolio.)
How big can the ripples be? I will go out on a limb here and say that if the Federal Reserve raises rates in December, you may see even the most beleaguered company in the universe right now, Wells Fargo (WFC) , see its stock go higher. Now that would really be something. In the meantime, the cheapest remains Action Alerts PLUS holding Citigroup (C) , which I think can vault 15 points before I would be concerned about its valuation. (Wells Fargo is part of TheStreet's Action Alerts PLUS portfolio.)
Similarly, we are seeing a re-rating of the oil service stocks. Once oil got to $50, domestic drilling has truly picked up in this country. The big dogs that provide assistance to the oil companies that work in the bigger shales like the Permian or in what's known as SCOOP in Oklahoma are seeing a revival. That's how the stocks of Halliburton (HAL) and Baker Hughes (BHI) have been such horses.
Finally, I remain firmly convinced that the airline stocks are back to stay. I say that because when one of the best-run airlines, Southwest Air (LUV) , says some pretty downbeat things about current business and the rest of the stocks in the cohort either down go down or are hit with just glancing blows or even go higher on the same day, that's just a plane of a different color. It's the much better-run United Continental (UAL) that remains the draw in the group.
The banks, the oil service companies and the airlines, all groups that the market had given up on for the last year, are all inching back, all primed to explode higher if just a few more things go well.