Without the Financials, Who Can Lead the Market?

03/14/2014 12:01 am EST


Jim Jubak

Founder and Editor, JubakPicks.com

With the major averages not far below their all-time highs, MoneyShow's Jim Jubak notes recent negative financial news and wonders which stocks can push the market higher.

For the week ahead, look to see whether any of the groups that were responsible for moving the US stocks up from, oh, the old high of 1,852, or so, on the S&P up to 1,875 or so, see if those groups are capable of providing any leadership and if they’re not, think about who’s going to replace them. That last stage of the market where we broke through the old all-time high and set a new all-time high was driven by some technology stocks, financials, consumer stocks, and some energy. It’s hard for me to see how those groups continue to drive the market. We’ve got, sort of, a mass warning from the financials, for example, where the big money center banks have said, “Hey, that, for the first quarter, it looks like revenue and income from fixed income trading is going to be down about 25%.”

It’s a big deal because the beginning of the year, it’s a huge lump of this money for banks like Goldman Sachs (GS) and JP Morgan and Chase (JPM) so if it’s not coming in now, not coming in January and February, it’s a really bad indicator for that first quarter and for the whole year. Financials are going to be kind of stressed, it looks like.

Energy stocks, well, I don’t see oil moving up a whole lot. It doesn’t look like it is going to be necessarily a bad time for energy stocks because oil is going to be dropping, but I don’t see a whole lot of energy in the sector. But the real problem, I think, is consumer stocks. These are kind of like the safe stocks that people go to when they want to be in the market but they’re a little worried about the market. You know the stocks I mean, McDonald’s (MCD), Coca-Cola (KO), Pepsi (PEP), the companies that have theoretically steadily growing earnings. The problem is we’ve had a lot of bad news from those stocks in the fourth quarter and in, sort of, month-to-month figures from companies like McDonald’s for January and February that we’re not seeing much in the way of growth. Two problems there, one of which is sort of general, which is that we’re not seeing a whole lot of increases in growth, sort of acceleration in the growth rate in emerging markets. In fact, we have seen a deceleration, and that has had an effect on companies like McDonald’s. The other is that we’re battling some individual, or sector trends, so that McDonald’s, for example, is fighting against a lot more competition, in the sense that, for some percentage of the market, they are really not very exciting anymore as destination restaurants. For Coke and Pepsi, we’re dealing with the fact that cola drinks and sweetened fizzy drinks, in general, are sort of losing market share, again, losing some pizzazz. If you look at all of these sectors and say, “Okay, so what’s going to drive the market higher from here,” a lot of the sectors that were doing the job in January, and the first half of February, seem to have run out of gas, and that may leave us with very little, other than technology, and it’s hard to see technology being sufficient in and of itself to drive the market from here and that is what I ‘d look for in the week ahead, what’s our leadership from this point on?

This is Jim Jubak for the Money Show.com video network.

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