So the markets love Hillary Clinton?
No, the markets were building in a Trump victory and the news from the FBI that there would be no indictments from these new emails makes voting for Hillary seem less futile, which is why we rallied.
Today Joe Kernen asked me in my morning crosstalk with him before "Squawk on the Street" whether I missed just talking about earnings.
What a blessing of a question because I sure do. I long for the market to be, well, the market again, where we value companies on how well they are doing, not as part of a vast basket that goes up or down depending upon how certain we are about the White House.
I admit that for the first time in about 30 years I didn't even crack open the charts book, or at least didn't bother to download the charts that the S&P 500 sends me each weekend.
What was the point, I figured? We don't know who is going to win so we don't know what we should be looking at.
But if the futures are right, and there is a lot of money betting that way, and this isn't like Brexit where so many people got it wrong, then we are going to return as we normally would after this week and ask, "Ok, who had good earnings and who didn't?" That's right, we will begin to make judgments about companies themselves, not about the ballot box.
So who did the best so far, keeping in mind that we still haven't heard from the retailers, which is this week's business?
First, hands down, it was the banks. They simply generated much bigger profits than we thought possible. JPMorgan Chase (JPM) delivered a stellar quarter with excellent loan growth, good sales and trading and some excellent merger and acquisitions advisory. Just superb.
Bank of America (BAC) blew out the numbers and built out a ton of capital. I thought that both loan growth and credit concerns were about as great as you can get. Deposit growth remains strong.
Citigroup (C) may have been the biggest upside surprise, both in earnings and in prospects for the future. It has a book value that is scrubbed clean and it's got $15 points of upside just to catch up to the rest of the group.
Goldman Sachs (GS) and Morgan Stanley (MS) delivered excellent numbers and can still travel far before they run out of gas.
The regionals had extraordinary numbers and I would highlight Key KEY as having the best growth and the best net interest margin. BB&T (BBT) was no slouch either.
In fact the only disappointment came from Wells Fargo (WFC) , which not only had one of the most lackluster quarters but is now regarded as the most scandalized of banks. I am grateful that my charitable trust, Action Alerts PLUS, owns shares in Citigroup but horrified that it has a big position in Wells Fargo. We have told club members to Action Alerts PLUS in our bulletins that it can do well in a raised interest rate environment and that's what we will get in December considering the strong employment number that printed on Friday, with the non-farm payrolls report.
Of the soft financials you had to be impressed with numbers from Visa (V) , MasterCard (MA) and American Express (AXP) . All of them were much better than I was looking for and remain reasonably valued given their excellent earnings and guidance.
The second group that performed well? The social mobile and cloud stocks, including Alphabet/Google (GOOGL) and Facebook (FB) and Amazon (AMZN) discussed elsewhere, but also Adobe Systems (ADBE) , Workday (WDAY) and in many ways, the best of the best, ServiceNow (NOW) . Best of the best meaning fastest growing. These stocks are widely perceived as not hostage to politics, even as we know that if Trump is elected president we have to presume that some of their international business could be in the line. Let's not forget that the semiconductor companies, with the exception of Intel (INTC) , had uniformly fabulous quarters and are subjected to oodles of mergers and acquisition talk.
One other darling: Accenture (ACN) . This consulting company has become the "Teflon Don" of the group.
The next sector's a puzzler: the transports. I can't think of a single rail or airline that made its numbers but I can't think of a single one that won't be better next year and when it's November that's what we care about. I like United Continental (UAL) as a comeback kid in the airlines and I think that Norfolk Southern (NSC) truly impressed as a carrier that should have had far worse numbers than it did.
The basic industrials surprised in a lot of ways, but three that stand out are for an increase in Chinese business, a turn in Europe and a robust airline cycle. Boeing (BA) was the leader here and I think it can go higher. United Technologies (UTX) and Honeywell (HON) also delivered good numbers.
We got mixed numbers from the consumer packaged goods group and I would call out only PepsiCo (PEP) and Procter & Gamble (PG) as two that really were compelling, both because of excellent top-line numbers, the latter really surprising. They are both buys here.
Energy was profoundly mixed, too. If you had fantastic growth as EOG Resources (EOG) in the independents or Chevron (CVX) in the majors you were saluted with higher prices. But if you had no growth or spent too much, think Exxon Mobil XOM and Occidental (OXY) respectively, you did yourself no favors.
Now let's talk disappointing. The restaurants were miserable. Other than Cheesecake Factory (CAKE) the results were simply nothing to write home about. The group seems to have very little upside. Starbucks (SBUX) was mixed last week. You didn't get the upside surprise we were so spoiled by but it wasn't disappointing. It's being carried up by the tape, I fear, though, and could drop back if the futures take a header. Domino's (DPZ) ? What can I say, best in show but it really is a technology company that delivers speedy pizzas. (Visa, Alphabet, Facebook, PepsiCo, Occidental and Starbucks are holdings in Action Alerts PLUS.)
The home improvement thesis took a huge step backward this quarter with weak numbers from Masco (MAS) , Sherwin-Williams (SHW) and PPG Industries (PPG) . I was very let down by that group. I know that Home Depot (HD) is still a long-term buy but let's face it, the luster seems lost for now. My charitable trust picked up some Newell Brands (NWL) after CEO Mike Polk's presentation on "Mad Money" but it seems like only the futures are powering it higher today. I don't sense real buyers, meaning funds that want hundreds of millions of dollars in Newell's stock, just managers who want exposure to equities via the futures.
The apparel segment got hit hard led by Nike (NKE) and Under Armour (UA) , which have gotten into some weird Claymation death match without winners.
And then there's health care. We are getting a nice snap-back rally in the group, which got severely oversold, but it is time to recognize that there are winners and losers in a group that had formerly just had the former. Of the drug stocks Merck (MRK) delivered the best that I saw and was understated about the possibilities of Keytruda being a true anti-cancer blockbuster franchise. I am still reeling from the lack of respect given to Celgene (CELG) , although it was able to put up some reasonable amount of points today. Johnson & Johnson (JNJ) reported eons ago and it was fantastic, totally undeserving of the punishment meted out to it. Valeant (VRX) which reports tomorrow, remains a total mystery.
The cost containers, meaning the health maintenance organizations away from UnitedHealth (UNH) and the pharmacy benefit managers and the generics, were almost all universally miserable and any lift to me means that you have to examine how yours did in the current quarter but there were more losers than winners.
So, if you look at where the money wants to go, and you figure that this election will pass and a week from now we are going to talk about companies again provided there is no contested election, I think that the above description of the earnings season to date will hold up until year-end. It's where the justified gains are. It's where they will be.
