If you knew at the start of this year that several large U.S. banks would collapse, Credit Suisse (CS) would fall below $1 a share and the Fed would continue to raise interest rates, and that all this would happen during the first quarter, you'd probably have cashed in your stocks and invested the proceeds in CDs.
Despite all the turmoil, the S&P 500 gained about 7% during the just-ended first quarter. The good news is that this market doesn't seem to care about bad news.
Stocks continue to grind higher despite production cuts by OPEC+, which caused West Texas Intermediate crude oil to jump 6% higher on Monday. James Bullard, president of the St. Louis Fed, remarked that the surprise production cuts could make the Fed's job of trying to rein in inflation "a little more difficult." Yet the market appears unconcerned.
The beef many investors have with the current rally is that it's driven by just a handful of stocks.
For example, Nvidia (NVDA) is up more than 95% year to date. This stock has climbed 37% since we recommended it in late January (arrow).
Source of charts: TradeStation
Apple (AAPL) has gained nearly 33% this year. The stock is up 10% since we recommended adding shares nearly a month ago (arrow). Our target for Apple remains $185.
Apple, Nvidia, Tesla (TSLA) (up 80% year to date), Meta Platforms (META) (up almost 71% year to date) and a few other big names are driving the action. Meanwhile, most stocks languish. In order for the indexes to move higher, we'll need to see rotation into other sectors. The energy sector could be one of the beneficiaries.
I've stayed on the sidelines recently, waiting for the dust to settle. As indicated earlier, I've been selling into rallies and raising cash. Now that the financial system appears to be stable, I'm willing to put some of that cash to work.
I scanned the energy sector and found Marathon Petroleum (MPC) . Marathon Petroleum was once part of Marathon Oil Corp. (MRO) . The former entity was created by a spinoff from the latter in June 2011.
Marathon Petroleum closed at an all-time high on Monday. MPC's chart features a bullish trend line dating back to July 2022 (black dotted line) and upward-sloping 50-day (blue) and 200-day (red) moving averages. It's a strong stock in what could become a strong sector.
Because the stock is already at an all-time high, there is no overhead resistance on the chart. I'm opening a half-size position in Marathon Petroleum. I'll consider adding to that position after MPC reports earnings on May 2.
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