In today's Action Alerts PLUS Daily Rundown, co-portfolio manager Bob Lang and TheStreet's J.D. Durkin discuss why a close eye on volatility is critical ahead of Fed Chair Jerome Powell's speech.
Bob also reviews the club's recent moves with ChargePoint (CHPT) and Energy Select Sector SPDR Fund (XLE) and takes a look at First Trust NASDAQ Cybersecurity ETF (CIBR) amid a selloff in CrowdStrike (CRWD) .
JD DURKIN: Good morning, Action Alerts PLUS subscribers. I'm TheStreet's JD Durkin, talking with Bob Lang here from the floor of the New York Stock Exchange. Bob, thank you for being here, as always. So we did get the latest on the economy with the release of both the ADP jobs report ahead of Friday's government figures, and we also got the JOLTS survey with regards to job opening and labor turnover. What is your read heading into Friday's jobs report, especially given the data points we learned today?
BOB LANG: Well, the ADP report, JD, was strong, but with lower expectations. This is the private payroll numbers. Of course, the NFP, which is put out on Friday morning before the market opens is going to reflect much more hiring, especially by the government. And we'll also see wages and their influence on the current inflation problem.
Now, far as the JOLTS are concerned, the market was jolted, actually, by this report, which came in at about 10.3 million job openings out there. I think the Fed is looking for this number to start coming down to create a little bit more slack in the economy. The jobs market is very tight right now, and this is a concern that the Fed has been raising for quite some time. The tightness of the labor market means that wages are going to start increasing at a higher pace that they're comfortable with.
I think we've been sitting around a 4.7% to 5% annualized rate on wage increases. I think it's a little bit too hot for what the Fed wants to see. They want to see that slow down a little bit. And the best way to do that is to have a little bit more slack in the jobs market, and that JOLTS is going to do it. So the reason why we're selling off a little bit this morning, among other reasons, is because of that report.
JD DURKIN: Is there any read on AMN Healthcare stock, specifically on this JOLTS number, on the JOLTS survey here? Especially because a lot of people may not cover the JOLT number when it comes out throughout the year.
BOB LANG: So that's a good question, JD. Of course, the AMN Healthcare is about hiring and nurses and health care workers. This report is likely going to express the fact that there are still many more openings. So this is an area that is really super tight in the labor market too. There's been a shortage of nurses and a shortage of health care workers.
And what's happening here is these hospitals and health care companies are having to pay higher wages for nurses and nursing care over the past-- certainly for the past 12 months. So I think that this JOLTS report is confirming the fact that companies like AMN Healthcare are still going to do well in a tight labor market.
JD DURKIN: Moving on over to the technical side of things, what is your top priority to watch on this admittedly very news-heavy market Wednesday?
BOB LANG: Well, JD, we're back into that range, the 3,900 to 4,000 range. And it's been stuck there since the most-- for the most part of November. We did have a couple of trips above 4,000, but those didn't last too long. A blast through 4,030 would be very bullish and tell the markets that there's some more upside, possibly up to 4,200.
4,065 is the 200-day moving average, but I think above 4,030 would tell us that there's plenty of energy and momentum to get through that level and pass it to that 4,200 level. Whereas if we get a move below 3,900, 3,907 right now is the 20-day moving average, JD. If we get a move below there, look out, because there are some heavy downside targets towards 3,800 and then actually filling that gap at 3,748.
What is that gap? That's from the CPI number that came out in the early part of November, where the markets took off to the upside. We managed to get up about 6% on that one day. We're still in that area right now of that big gap up. So I think that it's very important to pay attention to the market action right now and especially with words coming out later on from Chair Powell.
JD DURKIN: And speaking of Powell, I do want to ask you with regards to volatility in the VIX, they're at very similar levels to when Mr. Powell spoke at Jackson Hole in August. We certainly remember what the market reaction was after those comments. Is this a bit of a concerning sign, given the market did have that reaction the last time that he spoke or at least spoke at Jackson Hole?
BOB LANG: Very interesting here, JD. So many are saying that whatever Powell has to say today, and he's coming out at 1:30 Eastern Time, that whatever he might say that is hawkish is already priced in. Now, I'm not so sure about that. From my view, in fact, the VIX sitting where it was, as you mentioned, back in the mid to late part of August right before the Jackson Hole speech torpedoed the markets, has us thinking that the market is really not ready for any hawkish comments here.
Remember that after that speech, when it did blow a hole into the markets, it stopped the uptrend in its tracks right there, and we headed on back down towards those October lows. Took about six and a half, seven weeks to get there, but we did hit those October lows. Markets dropped about 15% from that mid-August level once we touched that 200-day moving average, all the way down to the lows. So I'm not so sure that people are prepared and ready for anything hawkish from the chairman today.
JD DURKIN: On the subject of the chairman, the Fed chair is expected to speak for the last time ahead of the next FOMC decision. Obviously, we get that in December. You've been closely listening to the increasingly hawkish rhetoric from not just Mr. Powell, but some of his Fed colleagues as well. We got comments from Mr. Williams and others here out of New York the last few days. This obviously, though, is all about the man himself. Is there anything that you are hoping to hear, I wonder?
BOB LANG: Well, if the chairman says that the Fed remains on track to fight inflation by using rate hikes as the weapon of choice, there's nothing better that we could hear than that. And how the market responds to that, of course, is another story. As we have seen, inflation remains too high. Even this morning's PCE number report showed a revision of prior forecasts for Q3, and they were all revised higher. It was a very hot number.
And weakness, of course, in manufacturing was also seen this morning at the 9:45 report on the PMI, levels, JD, we haven't seen since April, May, and June of 2020. So that PMI number, manufacturing in the Chicago region, 37. The expected number was supposed to be 47. Again, we haven't seen these numbers in the 30s since, again, April, May, and June of 2020.
What happened after that, we saw a lot of Fed liquidity dumped into the markets, and we saw a rebound in PMI. So this time around, with the numbers in the 30s, don't expect to see that sort of rebound happen due to the fact that the Fed is going to dump any liquidity in the markets. It's just not going to happen this time around.
JD DURKIN: And it's big day for the fans of the Beige Book. I don't know how many people fit into that category, but we do get this, if I'm not mistaken, eight times a year. Not something we oftentimes talk about. But for the big-time Beige Book fans, is it the time to start paying closer attention, and what might we get?
BOB LANG: Yeah. So after this manufacturing report that came out this morning, JD, the PMI, it's certainly something to pay attention to. Well, now, basically, what is the Beige Book? This is a release of manufacturing data across the districts in the Federal Reserve. There's 12 districts there. And we'll see what some of these districts have to say.
Of course, we saw some weakness in Chicago. We may see some weakness elsewhere in Dallas and Philly and Virginia area as well too and in the Northeast, which we've seen some weakness in the Philly Fed and the New York Empire State report. So we're going to see a cross-section of data around the country to see what the economic activity is looking like. And of course, the Fed chairman, who is going to be speaking later on today, already has his hands in this data. So it's probably going to be mixed into some of the comments that they're making in-- he's making later on today.
JD DURKIN: Absolutely. I do want to ask you about CrowdStrike. It's one of the largest positions in your cybersecurity place, CIBR. It's taking quite the hit this AM after issuing mixed guidance. Is this a bit of a concern for your position in that ETF, or is it just another reason to be in an ETF rather than any individual cyber stock?
BOB LANG: Yeah. Just more than mixed guidance. It was horrendous guidance. It's really hit the stock hard today. But remember, we bought the CIBR, C-I-B-R, which is the ETF for cybersecurity stocks, to limit our exposures to blowups like this. This is a-- this is a category that has the potential for this stuff to happen because there are high beta names in the CIBR, like Palo Alto Networks and the aforementioned CrowdStrike.
As it makes-- it just makes a little sense trying to pick the winners in the group. So while the stock has heavy weighting in the CIBR, C-I-B-R, we do have other names that are doing well and have talked it up, like Palo Alto and CyberArk, saying that companies are still spending gobs of money on cybersecurity, and they're going to need to keep doing that into the future. So this little hiccup from CrowdStrike, while it doesn't look pretty, is going to probably create another opportunity for us to add more cyber shares down the road.
JD DURKIN: All right. Finally, just yesterday, you noted the recent dip in ChargePoint. Is a bit of a buying opportunity. It's one you took advantage of. You added to both ChargePoint and your position in XLE. Lot of stocks facing recent weakness. Why did those two stand out to you?
BOB LANG: Yeah, so ChargePoint, JD, has dropped about 40% or so from the recent highs. We did take some profits on the stock up about $16 or $17 earlier in the summer before it slid. Now, it's come down quite sharply. It had a big multiple there. And there's been some talk that some of these charging stations need some work.
But I do think the opportunity is huge for them because when you look at companies like GM and Ford, Toyota and Honda, they have big plans for electric vehicles into the future. And you're going to need these charging stations to make these things run. So Tesla has already proved that point there. They're selling a ton of cars, and they're also selling a lot of charging stations as well too.
So I think that falling down to the $11.50 to $11.70 area was a great opportunity, let's call it a gift, for subscribers to go ahead and jump in and add some more shares here. We think that ChargePoint provides an excellent opportunity. They do have earnings coming out tomorrow after the close. We'll be watching what they have to say. But certainly, down at this $11 level, I think there's a little bit-- quite a bit less risk there is now than there was earlier in the year when it was $17, $18.
JD DURKIN: All right, Bob. Thanks a lot for taking the time to join us. Good to have you here, as always.
BOB LANG: Good to see you, JD.
JD DURKIN: All right, folks. And before we wrap up today, just a very quick reminder to keep sending all of your questions into firstname.lastname@example.org. We hope to answer as many as possible during next week's live members call. And that's going to do it for us here today. We will be back with another rundown tomorrow. We'll see you then.