May 27, 2022
What You Need to Know Today:
This is the kind of bear market rally that tries portfolio discipline
On Tuesday, Snap (SNAP) fell 43.08% as the company lowered guidance for the remainder of 2022. Today, the shares were up 4.59%. At today’s close of $14.81 they’re still trading well below the 50-day moving average of $29.86. Should you chase them here? Macy’s (M) picked up 19.31% today on an earnings beat and higher guidance. Should you chase the shares higher? Or how about Nvidia (NVDA), which gained 5.16% on the day after an earnings beat and some positive statements about future products and product sales after the close yesterday. Should you buy the shares at today’s close of $178.51? That’s quite a bargain from the $333.76 that the stock sold for on November 29, 2021. A day like today when the market looks set to break a seven-week losing streak is tempting. Time to put some cash to work, no? Look at all the bargains? And the bear market is over–at least for a while, right? Bear markets are typically punctuated by days like today and a rally inside a bear market can go on for a while. This one, for example, could easily run into June or even July. And that means repeated temptation to jump back in. And repeated episodes of hard to suffer pain as stocks that you’ve sold for sound reasons climb well above your selling price. Bear market rallies are, I just want to remind you, exactly what make bear markets so damaging. Investors and trades face the losses from the overall market drop plus extra losses generated by buying into what looks like a rally off a bottom that turns out to be just a temporary step to even lower prices.
This is the kind of bear market rally that tries portfolio discipline
On Tuesday, Snap (SNAP) fell 43.08% as the company lowered guidance for the remainder of 2022. Today, the shares were up 4.59%. At today’s close of $14.81 they’re still trading well below the 50-day moving average of $29.86. Should you chase them here? Macy’s (M) picked up 19.31% today on an earnings beat and higher guidance. Should you chase the shares higher? Or how about Nvidia (NVDA), which gained 5.16% on the day after an earnings beat and some positive statements about future products and product sales after the close yesterday. Should you buy the shares at today’s close of $178.51? That’s quite a bargain from the $333.76 that the stock sold for on November 29, 2021. A day like today when the market looks set to break a seven-week losing streak is tempting. Time to put some cash to work, no? Look at all the bargains? And the bear market is over–at least for a while, right? Bear markets are typically punctuated by days like today and a rally inside a bear market can go on for a while. This one, for example, could easily run into June or even July. And that means repeated temptation to jump back in. And repeated episodes of hard to suffer pain as stocks that you’ve sold for sound reasons climb well above your selling price. Bear market rallies are, I just want to remind you, exactly what make bear markets so damaging. Investors and trades face the losses from the overall market drop plus extra losses generated by buying into what looks like a rally off a bottom that turns out to be just a temporary step to even lower prices.
Nvidia beats on earnings , lowers guidance, falls 6.6% in after-hours trading
Nvidia (NVDA) reported fiscal first quarter 2022 earnings after the after the bell close today, Wednesday, May 25, of $1.36 a share against Wall Street projections of $1.30. Revenue of $8.29 billion beat projections of $8.10 billion. Revenue fromm the data center unit was $3.75 billion, topping estimates of $3.63 billion. Game revenue of $3.62 billion beat expectations for $3.53 billion.
But the company guided lower for the fiscal second quarter with revenue of just $8.1 billion against Wall Street projection of $8.4 billings. The war in Ukraine and COVID lockdowns in Chia will cost the company $500 million in revenue, the company said.
In after-hours trading Nvidia shares were down 6.62% as of 5 p.m. today, May 25.
Please watch my new YouTube video: Quick Pick WEAT
My one-hundredth-and-thirty-sixth YouTube video “Quick Pick WEAT” went up today. I’m continuing my recent focus on wheat prices as they continue to rise. Higher wheat prices are the result of a perfect storm: the ongoing war in Ukraine, a blockade of Black Sea exports, and reduced yields from India (the 2nd largest wheat producer) due to temperatures and export bans. Teucrium Wheat Fund is the only ETF I’ve found that is focuses exclusively on wheat futures. I think this is a good time to buy and I’ll be adding this ETF to my Jubak Picks Portfolio tomorrow.
Fed’s minutes from May meeting reassure markets; everybody is on the same page on interest rates
Minutes from the Federal Reserve’s May 4 meeting shows central bank officials in agreement on the ned for 50-basis-point interest rate increases at the June and July meetings. And then, the minutes say, the Fed would respond to developments in the economy either with more interest rate increases or a pause to let the economy recover. That’s essentially in line with market sentiment–although Wall Street may be more convinced of the need for a September interest rate increase. That agreement was reassuring to the stock market today.
Albemarle as a test case: Can a “special situation” go up in a bear market?
Lithium producer Albemarle (ALB) has been staging a very important experiment over the last few days. Here’s the question being tested: The overall market is in a serious decline–a bear or almost bear market depending on what index you track–that looks likely to go on for a while. In this environment can any individual stock deliver enough good news to buck the market trend and post gains for more than a day or two? On May 4 Albemarle raised its sales guidance for 2022 when it reported first quarter earnings. And then Monday, May 23, the company raised estimates again to a range of $5.8 billion to $6.2 billion. That was up from a previous estimated range of $5.2 billion to $5.6 billion. In total, the midpoint for the company’s estimate of 2022 revenue 38% higher than it was a month ago. And what happened to the shares?
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Live Market Report (20 minute delay)
| Symbol | Name | Last Price | Jubak's Gain/Loss | Jubak's Gain/Loss % |
|---|---|---|---|---|
This is the kind of bear market rally that tries portfolio discipline
On Tuesday, Snap (SNAP) fell 43.08% as the company lowered guidance for the remainder of 2022. Today, the shares were up 4.59%. At today’s close of $14.81 they’re still trading well below the 50-day moving average of $29.86. Should you chase them here? Macy’s (M) picked up 19.31% today on an earnings beat and higher guidance. Should you chase the shares higher? Or how about Nvidia (NVDA), which gained 5.16% on the day after an earnings beat and some positive statements about future products and product sales after the close yesterday. Should you buy the shares at today’s close of $178.51? That’s quite a bargain from the $333.76 that the stock sold for on November 29, 2021. A day like today when the market looks set to break a seven-week losing streak is tempting. Time to put some cash to work, no? Look at all the bargains? And the bear market is over–at least for a while, right? Bear markets are typically punctuated by days like today and a rally inside a bear market can go on for a while. This one, for example, could easily run into June or even July. And that means repeated temptation to jump back in. And repeated episodes of hard to suffer pain as stocks that you’ve sold for sound reasons climb well above your selling price. Bear market rallies are, I just want to remind you, exactly what make bear markets so damaging. Investors and trades face the losses from the overall market drop plus extra losses generated by buying into what looks like a rally off a bottom that turns out to be just a temporary step to even lower prices.
Nvidia beats on earnings , lowers guidance, falls 6.6% in after-hours trading
Nvidia (NVDA) reported fiscal first quarter 2022 earnings after the after the bell close today, Wednesday, May 25, of $1.36 a share against Wall Street projections of $1.30. Revenue of $8.29 billion beat projections of $8.10 billion. Revenue fromm the data center unit was $3.75 billion, topping estimates of $3.63 billion. Game revenue of $3.62 billion beat expectations for $3.53 billion.
But the company guided lower for the fiscal second quarter with revenue of just $8.1 billion against Wall Street projection of $8.4 billings. The war in Ukraine and COVID lockdowns in Chia will cost the company $500 million in revenue, the company said.
In after-hours trading Nvidia shares were down 6.62% as of 5 p.m. today, May 25.
Please watch my new YouTube video: Quick Pick WEAT
My one-hundredth-and-thirty-sixth YouTube video “Quick Pick WEAT” went up today. I’m continuing my recent focus on wheat prices as they continue to rise. Higher wheat prices are the result of a perfect storm: the ongoing war in Ukraine, a blockade of Black Sea exports, and reduced yields from India (the 2nd largest wheat producer) due to temperatures and export bans. Teucrium Wheat Fund is the only ETF I’ve found that is focuses exclusively on wheat futures. I think this is a good time to buy and I’ll be adding this ETF to my Jubak Picks Portfolio tomorrow.
Fed’s minutes from May meeting reassure markets; everybody is on the same page on interest rates
Minutes from the Federal Reserve’s May 4 meeting shows central bank officials in agreement on the ned for 50-basis-point interest rate increases at the June and July meetings. And then, the minutes say, the Fed would respond to developments in the economy either with more interest rate increases or a pause to let the economy recover. That’s essentially in line with market sentiment–although Wall Street may be more convinced of the need for a September interest rate increase. That agreement was reassuring to the stock market today.
Albemarle as a test case: Can a “special situation” go up in a bear market?
Lithium producer Albemarle (ALB) has been staging a very important experiment over the last few days. Here’s the question being tested: The overall market is in a serious decline–a bear or almost bear market depending on what index you track–that looks likely to go on for a while. In this environment can any individual stock deliver enough good news to buck the market trend and post gains for more than a day or two? On May 4 Albemarle raised its sales guidance for 2022 when it reported first quarter earnings. And then Monday, May 23, the company raised estimates again to a range of $5.8 billion to $6.2 billion. That was up from a previous estimated range of $5.2 billion to $5.6 billion. In total, the midpoint for the company’s estimate of 2022 revenue 38% higher than it was a month ago. And what happened to the shares?
For such a scary day, the market was amazingly “normal”; look at what went up
Of course, there’s nothing even vaguely normal about a day when a stock falls 43% and takes much of the market with it.Snap’s (SNAP) plunge did take some surprising candidates along for the ride. Tesla (TSLA) dropped 6.93% on yet more bad news on production in its Shanghai factory. Disney (DIS) fell 4.01% just because. SentinelOne (S) was lower by 8.11% since everyone knows that cybersecurity stocks are just a fad.
But on balance, on the green side (and yes, there was a green side to the market) the market did what markets are supposed to do in the face of bad news and an increase in fear.
Snap shocks market, plunges 43%, closes below 2017 IPO price
Snap (SNAP), the online company best known for its SnapChat platform, closed down 43.08% today, May 24. Roughly a month ago the company had forecast second quarter revenue growth of 20% to 25%. That was already below Wall Street estimates. Today, the company cut that guidance. “We believe it is likely that we will report revenue and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) below the low end of our Q2 2022 guidance range,” Snap said in a written statement. The warning hit the shares of other stocks, dependent on advertising revenue hard. Pinterest (PINS) fell 23.6%. Metaplatforms (FB) lost 7.62%. But the damage extended to advertising shares and to technology stocks in general. For more on today’s market action, you can wait for tomorrow’s 5 p.m. email or check the site at 6 and 8 p.m. when I expect to have new posts.
We’re a long way from a capitulation
Looking for the bottom on this plunge or bear market (true bear in the NASDAQ and near bear market in the Standard & Poor’s 500)? Despite the pain we’re all feeling in our portfolios, I think we’ve got a way to go. I base that conclusion on both the major economic trends still ahead of us and recent stock market action.
Saturday Night Quarterback (on a Monday ) says, For the week ahead expect…
The most important indicator of market direction and sentiment this week will be Nvidia’s (NVDA) earnings report for the quarter that ended in April on Wednesday, May 25\ Wall Street analysts and expect earnings of $1.09 a share. Last year Nvidia reported 78 cents for the quarter so hitting the analyst target this year would represented year over year earnings growth of 39.7% That kind of earnings growth is what investors expect from a stock trading at 43.76 times trailing 12-month earnings per share. In a normal market I’d expect traders to bid up Nvidia shares and Call options ahead of earnings
Palo Alto Networks beats, raised guidance again, gains 10.7% in after-hours trading
I’m actually surprised that shares of cyber-security company Palo Alto Networks (PANW) rose only 10.7% in after-hours trading after the company reported adjusted fiscal third quarter earnings of $1.79 a share. That was ahead of the adjusted earnings of $1.68 a share expected by analysts and it was up from $1.38 a share in the fiscal third quarter of 2021. Revenue of $1.39 billion, up from $1.07 billion a year ago, was ahead of analyst projections of $1.38 billion. Billings rose to $1.8 billion from $1.27 billion in 2021. But the big news, the news that powered the after-hours gains, came when executives at Palo Alto raised their full-year outlook for the third time in as many quarters
Selling a commodity ETN and replacing it with a commodity ETF in my Jubak Picks Portfolio
Barclays has suspended sales of 30 ETNs including the iPath Series B Bloomberg Agriculture Subindex ETN. That has increased the volatility of the ETN and so I’m selling it out of my Jubak Picks Portfolio and replacing it with the Invesco DB Agriculture Fund ETF.
Please watch my new YouTube video: Quick Pick Invesco Agriculture ETF
My one-hundredth-and-thirty-seventh YouTube video “Quick Pick Invesco Agriculture ETF” went up today. My Quick Pick this week is the Invesco DB Agriculture ETF. If you follow me my JubakPicks.com and JubakAm.com sites, you’ll know I’ve been looking for good vehicles to ride the increases in commodity prices due to inflation and the war in Ukraine. I’m switching in this ETF to replace commodity ETNs managed by Barclays currently in my portfolio because of some really bone-head mistakes by Barclays that have increased volatility in an already volatile asset. I don’t need more volatility, thanks!
Selling U.S. Bancorp out of my Jubak Picks Portfolio
Back on April 11 when I sold Wells Fargo (WFC) and the Invesco KBW Bank ETF (KBWB) out of portfolios to reduce my exposure to a slowing economy caused by the Federal Reserve interest rate increases, I kept my position in U.S. Bancorp (USB) because I wanted to collect the dividend due to be paid out on April 15 (and because I thought super-regional U.S. Bancorp, as one of the best managed banks in the country, was less exposed to the downward trend in the sector.) Well, as of May 19, I’ve certainly collected my quarterly dividend (the stock current yields 3.75%) and the downward trend in financial stocks has picked up speed with the Fed announcing (well, as close to “announcing” as the Fed ever does) interest rate increases for the June, July and September meetings of the central bank, so I’ll be selling U.S. Bancorp out of my Jubak Picks Portfolio tomorrow May 20.
Initial claims for unemployment tick upward, but backward looking numbers don’t capture layoff trend
Initial claims for unemployment moved up to 218,000 last week . That was the highest level since the week that ended on January 22. And an increase of 21,000 from the revised total of 197,000 the week before. But even though the official report is only a week old, it’s not capturing what seems to be an upward trend in the announcement of layoffs.
My candidates for gains tomorrow after some of today’s more mindless selling? Coke and Pepsi
Ok, the bad news on profit margins from Target (TGT) was a big deal. No argument. When you’re operating margin falls to 5.37% when Wall Street was projecting 9.5%, it’s a big deal. And after yesterday’s earnings miss from Walmart (WMT), it’s reasonable to extrapolate and say the entire economy and stock market has a cost, inflation, and margin problem. But that doesn’t mean that every company has the same degree of problem. And it certainly doesn’t justify selling everything–and selling to the tune of big losses–shares of every company that sells stuff to consumers. And tomorrow, or the next day, I expect a little more analysis and discrimination in the market. Some of the stocks hit hardest today should rebound handily on that rethink. I’d put PepsiCo (PEP) and Coca-Cola (KO) at the head of that group.
Please watch my new YouTube video: Looking for a wider credit crunch
My one-hundredth-and-thirty-sixth YouTube video “Looking for a wider credit crunch” went up today. I think last week’s video worrying about a credit crunch in the consumer economy was a bit too optimistic. I’m now seeing signs in the market of a wider credit crunch. In this video, I look at the junk bond market and its reflection in Bausch (BHC) as a test case as well as the trend in profits for the S&P 500. And another default in China’s property development sector as well as the possibility that the default by Sri Lanka is just the first sign of emerging market distress
Inflation takes a huge bite out of Target income–and the market worries, big time
As of 3:30 p.m. Wednesday May 18 shares of Target (TGT) were down 25% for the day after the company reported a big earnings miss for the first quarter. Let’s be clear. The sales picture at Target was very positive for the quarter. Same store sales were up 3.3% in the quarter. That was about three times higher than Wall Street analysts had expected. Revenue was up 4%. Here again Target’s $25.2 billion in revenue beat expectations for $24.3 billion in revenue. But earnings were terrible at $2.19 a share versus forecasts for $3.05 a share.
A day after bad news of an economic slowdown in China, officials talk up China’s Internet giants
Today, Tuesday May 17, China’s top economic official, Vice Premier Liu He, said that the government will support the development of digital economy companies and their public stock listings. The comments delivered after a symposium with the CEOs of some of the country’s largest private technology companies came just a day after the National Bureau of Statistics reported that industrial output fell 2.9% in April from April 2021, and that retail sales contracted 11.1%. Financial markets in China and the United States interpreted the remarks as a public show of support for China’s Internet companies
Everything EV was up today on news of soaring new registrations
New registrations for electric vehicles jumped 60% in the first quarter of 2022 from the first quarter of 2021. according to Experian Automotive. Electric vehicles made up an all-time record 4.6% of the total market. The news was even more positive given that overall new vehicle registrations were down 18% in the quarter from the first quarter of 2021.
Today it looks more like a bear market rally
In my weekend Saturday Night Quarterback I said that this week would, probably, answer the question of whether Friday’s big bounce was just a bounce, the start of a buy on the dip rally, or even a bear market rally with a bit of staying power. Two days into the week I think the market action is moving in favor of a bear market rally, one of those often quite powerful upside moves that punctuate extended bear markets.
