VIDEO: Why We're Eagerly Awaiting This One Key Report

In today’s Daily Rundown video, Chris Versace discusses the factors weighing on the market today, including Moody’s downgrade of the U.S. credit rating and rate-cut comments from Atlanta Fed President Raphael Bostic. 

Chris also explains why we are eagerly awaiting the May Flash PMI report from S&P Global later this week and how we aim to use this week’s retail earnings reports as fodder for our position in Costco COST. 

We also touch on the multiple reasons behind why we continue to favor shares of Waste Management WM, and where we would be interested in adding to the Pro Portfolio’s position.

Transcript

CHRIS VERSACE: Hey, folks. Chris Versace here. It is Monday, May 19. And as you've probably noticed, the stock market has opened a little bit into the red. If you remember our comments from last week, we talked about in the weekly roundup how exiting another strong week in the market, one that has seen just significant gains by both the S&P 500 and the NASDAQ composite over the last few weeks, both of those market indicators were either bumping up against or in overbought territory according to their respective relative strength index or RSI levels.

We also talked about how exiting last week coming into this week, the fear and greed index was starting to bump up against extreme greed, and that's a combination we've seen in the past. And typically, it doesn't take, as we say, a lot to upset the Apple cart in the short term, potentially, in our view, taking some of the recent froth out of the market. Again, just look back at the chart from the early April rebound. Significant moves in these two market barometers and other parts of the market as well.

So it stands to reason that the market could be looking for a reason to give back a little bit of those gains, as short-term traders, kind of, book their profits. But remember, we are longer term in nature. We will remain disciplined and prudent investors when it comes to the portfolio. But as I explained in the alert, there are other factors at play that could lead the market to move deeper into overbought territory. So for that reason, we're, kind of, hanging on to the sidelines for now.

But we have to remember as well that second factor that I mentioned that is weighing on stocks today. In my opinion, it was the reminder that we got from Atlanta Fed President Raphael Bostic that he still sees just one rate cut between now and the end of the year, very different picture compared to the CME FedWatch tool that still shows-- hard to believe-- three rate cuts. What I liked about Bostic's comments, though, is he was a little more mindful sharing, I think, his rationale for why he sees just that one rate cut between now and the end of the year.

And he did have some favorable things to say about tariffs, about budget conversations, trade deal conversations. But as he notes, the Fed is not one to react quickly if it does not have to. In other words, it's going to want to take its time, see the impact of what is being negotiated now, and then d its next move from there. He, kind of, said, it could take anywhere from three to six months, and I think that speaks to why he says, perhaps, one rate cut this year.

Now, we are going to get a lot more data in the coming weeks, specifically, as it relates to the month of May. We're still in May. But before too long, we will be getting that information. And again, it'll tell us, for the second month of Trump tariffs, what's the vector, the velocity, the economy, employment, and most importantly, inflation.

Here's the thing. Later this week, we will get S&P's flash May PMI data. So we'll get this first look at how S&P sees the US economy faring from a manufacturing services inflation and employment perspective. One thing I will say is we will want to note the survey dates for this report and how do we match that up against the potential rollback that we saw with Trump tariffs against China but potentially others as well. So we'll have to be thinking about that as we chew through the data.

Also this week, we do have another array of retailers coming. And by and large, as you know, our retail plays are very limited, Costco, Amazon, indirectly American Express. But we do think that the comments that we will get this week from retailers and the following one are likely to largely reiterate, reflect upon what Walmart had to say about the need to increase prices even after Trump dialed back the reciprocal tariffs on China.

If you remember the comments we shared last week, Walmart management said, nice job, Mr. President, but still there's pain. We will be forced to raise prices later this month. Again, we expect to hear more of that. But at the same time, though, when we go through the earnings reports that we will be getting, we'll be sizing up what their comp sales are. And I strongly suspect that when we compare them against the monthly reports that we've gotten from Costco, it's going to show us that Costco continues to take consumer wallet share.

However, as we talked about recently with you, we would not chase Costco sales-- Costco's shares here, sorry. Rather, if we see a pullback, that could be an opportunity to take advantage of. We had the same message out this morning in our alert with our opening comments about waste management. We don't really talk about waste management enough, I think, but I will say this. It is a quality management team that knows how to grind cost out of a business. It is a wonderful business in the sense that it is very inelastic because people will pay what they have to pay to have their garbage and trash hauled away.

We see waste management and its nonresidential business as an indirect beneficiary for all the building that we're seeing, whether it's infrastructure or data center or others that are powering our shares of United Rentals, Vulcan Materials, and Eaton. And remember, too, that in a couple of weeks, waste management is going to have an analyst meeting. They're going to talk a little bit more about the Stericycle acquisition that has pushed them into the medical waste business. And I suspect that they're going to talk a lot about the synergies and the cross-marketing marketing opportunities between the core business and this new business that they have. And I think that could get the market really excited in the shares.

Perhaps, we will have to raise our price target after that event. But between now and then if we see waste management shares pull back, in the alert, I called out of the 222 level. That would be a good place to pick it up. But if we see market forces pull it back a little further, we will want to watch that 200 day moving average right around 216.

So we do have office hours coming up later today between 4:00 and 5:00 in the forum. I will be on Fox Business today, too, sometime in the 2 o'clock hour. I don't know exactly when. And tomorrow morning, I will be guest hosting the Catalyst program between 10:00 and 11:00 on Yahoo Finance.

So please tune in. We're going to be talking about a lot. But as you can tell, we will have a lot more coming your way as well. So please be sure to check your emails, your alerts. We want to make sure you're getting our latest thoughts. Thanks for watching.

At the time of publication, TheStreet Pro Portfolio was long COST and WM.