Question of the Week

The presidential election season is here. Which one of these matters to you most in deciding whom to support?

Economy
Immigration
Abortion
Foreign Policy

Last week was a strong week, but it finished with a whimper. Still, the shaky start to 2024 is fading, and the focus is back on opportunities. Also, the assumption that the change in the calendar automatically changes the investing script hasn’t been the case.

Right now, it is still all about the “Mag Seven.” And when the “Mag Seven” aren’t dominating, we see semiconductors or Software as a Service (SaaS) step up to the plate.

Friday's session had a defensive tone. Energy (XLE) got a boost as the risk-reward dynamics have become more favorable.

Sellers are still more motivated than buyers (see down versus up volume).

Moreover, the swings among individual names on the NASDAQ Composite are wilder and more prone to be to the downside,

Market Breadth	NYSE	NASDAQ
Advancers	1,543	1,998
Decliners	1,262	2,195
New Highs	107	134
New Lows	23	86
Up Volume	1.58 billion	2.21 billion
Down Volume	1.86 billion	2.73 billion

The Tip of the Spear Narrows

And just like that, the rally broadening has narrowed once again, as less than 50% of the companies in the S&P 500 are changing hands above their 20-day moving average.

Heat Map

Health Care (XLV) enjoyed a strong week, but the focus was on drugmakers. Oil company stocks are catching bids, although hedge funds have been shorting.

Economic Calendar

The consumer has been resolute but at a higher borrowing cost at record interest rates. It’s living on borrowed money and expensive time. 

Today’s retail sales report will be the week's most influential economic data release.

Election Season

Former President Donald Trump ran away with the Iowa Republican primary as voters focused on the economy and immigration (a major economic and security story).

Don’t miss my live town hall special, “Unbreakable Investor,” on January 18, 2024.

Today’s Session

Big bank financial results stemmed a pre-opening rout, but equity futures remain under pressure. 

Goldman (GS) and Morgan Stanley (MS) beat Wall Street consensus. These reports are so convoluted, it takes time to correlate with Main Street.

Moreover, the Empire State Fed report on manufacturing released this morning is an absolute disaster. 

The report is littered with red flags.

Highlights

Headline Index Plummets

Manufacturing activity shrank significantly in New York State, according to the January survey.

After falling twenty-four points last month, the general business conditions index shed another twenty-nine points, coming in at -43.7, its lowest level since May 2020.

 The new orders index fell thirty-eight points to -49.4, and the shipments index fell twenty-five points to -31.3, pointing to a large decline in orders and shipments.

The unfilled orders index held steady at -24.2, a sign that unfilled orders continued to fall significantly. The inventories index came in at -7.4, suggesting that inventories shrank modestly, and the delivery times index remained below zero at -8. .4, indicating shorter delivery times.

The report will be dismissed out of hand by the experts. It is an eye-opening move that shows the sharpest pullback in history outside of the Covid19 shock.

Comments

Immigration should be tied directly to the economy. The American taxpayers are flipping the bill as the illegals pour into our country. This pace is not sustainable. Tax increases to come to pay for all the "freebies". Meanwhile, citizens are losing services and falling further behind. Art B on 1/16/2024 12:32:04 PM

Immigration is a major problem our President seems to care more for the ILLEGALS than the citizens of the U S .We have senior citizens who worked all their lives struggling to make ends meet when the ILLEGALS are receiving free benefits. DALE on 1/24/2024 3:34:56 PM

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