Morning Market Thoughts

by DAN Good morning. We are looking at a stronger open, with the S&P futures up 5 points, and the Nasdaq up 25 points. An open that’s just 5 points higher than yesterday’s close puts us right back at Thursday’s intraday high. Today is the last trading day of the money, and I suspect there will be an upward bias as money managers do their best to create May account statements that tell their clients that they are invested in the “right” stocks.

In the months ahead (at least, in THE month ahead) I’m expecting a bit more volatility than we are used to. The Fed may (and probably will) hike rates. If so, the financial sector should get some action. You’d expect a rally in the financial sector as a result of higher rates, but don’t be so knee-jerk reflexive that you commit to buying the banks. Instead, wait to see whether the financials catch a bid, and then be very selective. After looking at the charts, I’d say that Citigroup (C), Visa (V) and MasterCard (MA) are in a good position to move higher. The others? Lots of resistance overhead, which should put a damper on any rally.

The retail sector continues to struggle, with Michael Kors (KORS) reporting some tepid numbers this morning. Their EPS beat by 3 cents, while revenues fell below estimates and guidance was depressing. So there’s no safe place to invest in retail.

One sector that I haven’t been discussing (at least for the last week) is the Aerospace/Defense sector. Our military executed a successful test of our “star wars” air defense system. An ICBM shot from the Kwajalein Atoll in the Marshall Islands was intercepted by a missile fired from Vandenberg Air Force Base in California. That’s pretty cool (though it’s a shame that this test is being run because some crazy fat guy with a really bad haircut is flexing his muscles and threatening to launch a nuclear warhead at the mainland. So this successful test helps the following companies, who were instrumental in our air defense technology: Boeing (BA) — prime contractor. Northrop Grumman (NOC), Orbital ATK (OA) and Raytheon (RTN) — subcontractors.

If you look at their charts, you’ll see that they are pretty steady climbers and are worth a look.

If you have questions about them, let’s chat them up in the Forum today.

See you there.

–Dan

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