Stocks Higher into Final Hour on Strong March Retail Sales

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Telecom longs, Biotech longs, Semi longs and Retail longs. I covered my (IWM)/(QQQQ) hedges this morning, thus leaving the Portfolio 100% net long. The tone of the market is positive as the advance/decline line is higher, almost every sector is rising and volume is above average. Yesterday, the Philly Fed reported its Leading Economic Index for February, which is a future gauge of activity for New Jersey, Pennsylvania and Delaware. It rose at a 3.4% rate, the best in at least a year and up from a 1.1% rate in November of last year. Biotechs are outperforming substantially today and Gilead (GILD) is hitting an all-time high. I remain long the stock. Same-store sales for March rose an above-estimates 5.9%. It was the best March since 2004, despite higher energy prices and the drag from housing. While better weather did contribute to this strong performance, many bears said weather wasn't an excuse for retailers during one of the coldest Februarys in U.S. history. Moreover, March sales were strong across the board, even at many lower-end retailers. I see little evidence that only high-end retail is doing well, which is a myth that has been perpetuated in many circles for several years now, even as most of the stocks have moved meaningfully higher. More than weather or the calendar, I suspect the very healthy job market is the main reason sales were strong.

Here are some examples of non high-end retailers that had exceptionally strong same-store-sales during March:

Company Actual Estimate
BJ's Wholesale (BJ) +5.5% 1.20%
Dollar General (DG) +5.5% +5.6%
Family Dollar (FDO) +5.8% +4.0%
Fred's (FRED) +4.4% +2.5%
JC Penney (JCP) +10.6% +7.4%
Kohl's (KSS) +16.8% 9.90%
Ross Stores (ROST) +6.0% +4.6%
Stein Mart (SMRT) +8.0% +5.0%
Target (TGT) +12.0% 12.00%
TJX Companies (TJX) +6.0% +4.6%
Wal-Mart (WMT) +4.0% +1.7%
Dress Barn (DBRN) +12.0% +5.0%
Costco (COST) +6.0% +5.0%

I expect US stocks to trade mixed-to-higher into the close on short-covering, more economic optimism, stable long-term rates and bargain-hunting.