The prism's brilliant. But the prism might be wrong. Once again we are back in the world where stocks are done going up, the apocalypse is now and we can't satisfy the earnings beast.
Right about now in earnings season our confidence shifts. If the first two weeks were negative and we got hammered then we would have a change of heart right about now. We would start looking at bad as not so bad, good as great and great itself as a propulsion rocket of astounding proportions that has to be bought no matter what.
Now we are in the opposite situation. We've run the table in stocks this earnings period, oblivious to anything in the real world. We had one bad day a week ago and all it taught us was to buy the dip. We've been pretty much straight up for ages. But there's one thing for certain. After a run like this, it's time that the tide has turned and the prism's going negative. It's time to rally the utilities and the drug and food stocks because, well, I don't know, the CDC is going to recommend teachers and students wear masks.
Now I want you to put aside the fact that it's a good thing that schools are allowed to be open in the first place, with or without masks. Schooling from home had a very mixed-read bad-reputation. Lots of kids just didn't learn. The prospect that they will give COVID to each other or to their teachers does not trump the imperative of learning any longer. While schools can be a real breeding ground, the mask affords you some protection against the Delta variant.
The results? If you have had a K-through-6 kid at home chances are one of your household stayed at home with him or her. Single moms, a huge part of the workforce, disappeared. Whenever you hear where did all the workers go you can finger the hefty unemployment benefits but you should really talk about closed schools and the need for a parent to stay at home to be sure that class is attended. Millions of paid employees versus millions of unpaid truant officers. I know the commodities research bureau's indicator is flashing red and that aluminum and copper stay elevated. But what happens if the schools open, people wear a mask and not many get sick? Oops that positive doesn't fit the prism.
It doesn't matter that three industrial pillars, GE (GE) , Raytheon Technologies (RTX) , and 3M (MMM) all reported better than expected earnings. The prism kept them all down on the farm. Only Raytheon bucked the prism and I am wondering, to some degree whether that's because it has an excellent defense business that is very much about space where Greg Hayes, the CEO, is the more than likely place for the next war to take place. Given that we now presume that if it is going to be with anybody it will be China, then Raytheon fits the prism.
What really defines the prism? First, as usual it's the bond market, enjoying another rally, with rates down, flashing an unprecedented decline in economic activity. This jives with absolutely no statistic I have seen. Not one. Every Federal Reserve report, every indicator about housing or industrial or small business activity points to rates, the long not the rates the Fed doesn't control, going much much higher. But wait, the durable goods orders came in weaker than expected. Ah ah, that's the harbinger that verifies the bearish prism for certain. So maybe the Fed doesn't need to take action when it meets tomorrow.
That lack of Fed fear breeds a level of complacency tinged with overturns of anarchy that would have been ignored not that long ago when lower rates were good and provided needed liquidity into the system. Now the prism says that the variants will tear through us like hot axes through butter.
Now I have to tell you that the CDC, the NIH, and the FDA have provided plenty of moments of pain and hysteria that have often been shrugged off. This time the prism says go buy the drug stocks and the utilities for their yields and don't worry about a thing.
At this point in the earnings season cycle we choose to focus on the most negative things possible and lap up negativity as sage advice. This afternoon a bunch of traders on Scott Wapner's show talked a real negative game and I get that. You always want to have a boatload of puts on a day like today.
And who can blame them when you have a company like United Parcel Service (UPS) , so big, so omnipresent, blow-up although the blow-up was, again in the eye of the beholder. There's that prism again.
I hate to be a bear party pooper but that I could have said the same thing that the CEO, Carol Tome, had to say about that quarter and I could have had the stock up and now down 17 especially if the prism were a little more positive. But why don't you decide for yourself when Tome appears on the Mad Money?
(UPS is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells this stock? Learn more now.)