• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing

CHIPS Act, Charting the S&P, Breadth, Russia and the Black Sea, Boeing Delivers

Right now, we have a market well off of its lows, being driven by cyclicals and technology. That's a very good thing.
By STEPHEN GUILFOYLE
Jul 20, 2022 | 07:19 AM EDT
Stocks quotes in this article: XLI, XLU, BA, DAL, AER, ABT, ASML, BIIB, CMA, CSX, LVS, TSLA, UAL

Not only did it pass its first procedural vote in the Senate, it passed with broad, bipartisan support. The Chips for America (CHIPS) Act cleared its first procedural hurdle by a 64-34 vote in the US Senate late on Tuesday as legislators worked into the night negotiating other elements of a larger "competitiveness" bill known as the United States Innovation and Competition Act (USICA). The CHIPS Act, if passed into law, would provide roughly $52B in subsidies to encourage the building of semiconductor chip foundries on US soil, while also broadly investing in the industry domestically.

There is agreement on both sides of the political divide that onshoring as much manufacturing of chips as possible is a matter of national security. There is little dispute that the US needs to add more capacity at home in order to counter the supply chain issues that cropped up during and due to the pandemic, particularly at the pandemic's height. Final passage of this CHIPs bill, if it stands as is, could come as soon as early next week.

This procedural vote only needed a simple majority (51 votes) to pass, buy given that it passed with more than 60 votes (making it filibuster-proof), lawmakers set out to see how much support there was on the right for the increased spending asked for in the USICA Act for scientific research into such areas as quantum computing and artificial intelligence.

Why the hold up on the larger bill? The Senate USICA bill in its entirety, would authorize about $190B in spending in addition to the subsidies meant for the chip industry. The House version, passed earlier this year, would authorize $350B in new spending.

On That Note...

Treasury Secretary Janet Yellen continued her trip to eastern Asia, speaking from Seoul, South Korea on Tuesday after also speaking in Tokyo last week. Yellen talked up strengthening trade relationships with "trusted" allies... mentioning "friend-shoring" as an alternative to the present and recent past, and in cases where bringing production home is unrealistic. Yellen said, "Friend-shoring is about deepening relationships and diversifying our supply chains with a greater number of trusted partners to lower risks for our economy and theirs." Yellen added... "We cannot allow countries like China to use their market positions in key raw materials, technologies or products to disrupt our economy or exercise unwanted geopolitical leverage."

Stacking Fifties

It's not like we weren't told. If you thought the action got hot as the broader equity indexes (as well as enough individual stocks) took back their 50 day SMAs, just wait till you see the action up around the 200 day SMA, should we get there. Portfolio managers typically add and shave exposure at these two levels. However, while the 50 day simple moving average is certainly key (Tuesday's action is but the latest example), there is no moving average in our financial universe that gets both portfolio and risk managers as fired up as does the 200 day SMA. For now, we'll celebrate what we have, and watch to see if the markets can hold this newly won ground.

Does this mean that the bottom is in? So many are asking. This action is certainly constructive. That's for sure. Markets created a tradable bottom in mid-June. That has been, and remains our narrative. Too much can still happen, and too much can still change, for us to go way out on a limb and force the issue. Take it as it comes. Right now, we have a market well off of its lows, being driven by cyclicals and technology. That's a very good thing.

The S&P 500 added 2.76% on Tuesday, and now stands down just 17.4% for the year. The S&P 500 closed last night up 8.25% from its June 17th low, and as mentioned... took back its 50 day SMA. Relative Strength has just ticked above "neutral", while the daily MACD continues to improve, albeit with 12 day and 26 day EMAs still stranded in negative territory.

There are a lot of similarities here. One notable difference, the Nasdaq Composite appears to have taken back that 50 day line with a little more vigor than has the S&P 500. The Nasdaq Composite rallied to the tune of 3.11% on Tuesday, and is now down 25.13% for 2022. This index closed last night up 10.87% from its June 16th low.

Remember that the Nasdaq Composite is composed of many technology names and smaller cap stocks as well. Both of these kinds of stocks have been strong. On Tuesday, the Russell 2000 soared 3.5%, took back its 50 day SMA, and now stands both down 19.86% year to date and up 9.63% from its June 16th low.

The Philadelphia Semiconductor Index screamed 4.61% higher on Tuesday, closing down 28.97% for 2022, but up a whopping 17.48% from the July 5th low. (Remember my pitchfork portfolio model for surviving these markets... Staples, Semis, Defense? Well, the semis have worked beyond perfection.) The "SOX" also took back its 50 day SMA on Tuesday, but just by a smidge.

Breadth

Going up and down the list of US equity indices for Tuesday, about the only red I can find came from the VIX. The day was that good for the net long crowd. All 11 S&P sector-select SPDR ETFs shaded green for the session on Tuesday. Seven of the 11 sector ETFs gained at least 3% for the day, led by the Industrials (XLI) . In fact, for a second consecutive day, the top seven performing sectors were made up of the five cyclical and two growth sectors, while the bottom four places on the daily tables were taken by the four defensive sectors. That said, even those four defensive sectors showed gains, with the Utilities (XLU) finishing in last place at +0.64%.

Winners beat losers at the NYSE by about 5 to 1, and at the Nasdaq Market Site by roughly 7 to 2. Advancing volume took a commanding 89.4% share of composite NYSE-listed trade, and a 71.4% share of that metric for Nasdaq-listed names. Aggregate trading volume, while still not truly heavy, did increase day over day across NYSE-listings, Nasdaq-listings, and constituent names for both the S&P 500 and Nasdaq Composite.

Fact is that the Nasdaq Composite experienced its most heavily traded regular session of July. What you thought you heard was the sound of at least some portfolio managers who had been quiet, deciding that they may have missed the bottom. I am not saying that they definitely did. I am saying that some of them are now nervous.

Warning!

The White House is warning that Russia is likely beginning to roll out plans to annex large parts of Ukraine currently under their control. US National Security Council head of strategic communications John Kirby spoke from the While House on Tuesday: "Already Russia is installing illegitimate proxy officials in the areas of Ukraine that are under its control, and we know their next moves. First, these proxy officials will arrange sham referenda on joining Russia, then Russia will use those sham referenda as a basis to try to claim annexation of sovereign Ukrainian territory."

Understanding that this follows the Russian playbook for the Crimean peninsula in 2014. Understanding that much of Ukrainian territory currently under Soviet occupation is in the east and in the south, and understanding that in peacetime, the agricultural base of Ukraine is fairly evenly spread throughout the country... I have a question. With Russia in control of much of Ukraine's bread basket, while also potentially in control of global access to trade via the Black Sea, what does this do to global food security, or rather insecurity going forward?

Opinion... NATO needs to secure the western half of Ukraine, establish a "no-fly" zone over "free" Ukraine and help reinforce the port city of Odessa.

Anyone Else...

Noticing Boeing's (BA) success in Farnborough? On Monday, Delta Air Lines (DAL) placed an order for 100 737 MAX jets, which is the latest version of that aircraft, with options to buy 30 more. On Tuesday, private investment firm 777 Partners decided to purchase 30 737 MAX 8 jets in December with a commitment to purchase 36 more at a later date. 777 Partners will try to place these jets with discount carriers. Then, also on Tuesday, Boeing sold five 787 Dreamliners to aircraft leasing company AerCap Holdings (AER) . Deliveries of the 787 have been halted for the most part for almost two years. Is the worm about to turn? It appears it already has.

Economics (All Times Eastern)

07:00 - MBA 30 Year Mortgage Rate (Weekly): Last 5.74%.

07:00 - MBA Mortgage Applications (Weekly): Last -1.7%.

10:00 - Existing Home Sales (Jun): Expecting 5.39M, Last 5.41M SSAR.

10:30 - Oil Inventories (Weekly): Last +3.254M.

10:30 - Gasoline Stocks (Weekly): Last +5.825M.

13:00 - Twenty Year Bond Auction: $14B.

The Fed (All Times Eastern)

Fed Blackout Period.

Today's Earnings Highlights (Consensus EPS Expectations)

Before the Open: (ABT) (1.14), (ASML) (3.54), (BIIB) (4.13), (CMA) (1.77)

After the Close: (CSX) (.47), (LVS) (-.28), (TSLA) (1.83), (UAL) (1.89)

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Stephen Guilfoyle had no position in the securities mentioned.

TAGS: Economy | Investing | Markets | Stocks | Technical Analysis | Trading | Aerospace | China | Russia

More from Investing

Market Holds Its Own Amid the Chaos

James "Rev Shark" DePorre
Mar 20, 2023 4:53 PM EDT

Let's check the rotation turning under the surface, the likelihood of rate hikes and why investors are scratching their heads over this action.

UBS Tries to Save the Day, but I Would Withdraw From Buying the Bank

Bruce Kamich
Mar 20, 2023 2:56 PM EDT

Is UBS Group AG a white knight or something else? Let's check the charts and take a gut check.

Market's Giving Us a Gut-Check, but Not Necessarily a 2000, 2008 Replay

Brad Ginesin
Mar 20, 2023 2:26 PM EDT

Here's why, despite the unravelling of several major banks, Apple can still be owned and AI is still worth investing in.

Trading Foot Locker Now Comes With a Risk

Bruce Kamich
Mar 20, 2023 2:08 PM EDT

Let's see what the outlook looks like after earnings.

How to Trade China's E-commerce PDD Holdings Now

Bruce Kamich
Mar 20, 2023 1:17 PM EDT

Previously know as Pinduoduo, weak consumer spending has plagued the stock.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 10:28 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    There are exceptions to conventional trading wisdo...
  • 05:43 PM EDT CHRIS VERSACE

    Latest AAP Podcast

    I'm joined by Real Money contributor Peter Tchir a...
  • 08:20 AM EDT PETER TCHIR

    Pre-CPI Thoughts

    I believe the risk to CPI is "asymmetric." It ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login