September 20, 2024
What You Need to Know Today:
Looking backward: In Q2 the economy did better than we thought
The U.S. economy grew at a stronger pace in the second quarter than initially reported. Gross domestic product, GDP, rose at a 3% annualized rate during the April-June quarter, up from the previous estimate of 2.8%, the Bureau of Economic Analysis reported Thursday, August 29.
Now there’s officially an AI washing scam to watch out for
Since March, the U.S. Securities and Exchange Commission has accused three companies of misrepresenting how they use machine learning and other tools in what is being dubbed, by analogy with green washing, exaggerated environmental claims–AI washing.
Yesterday I made Broadcom Pick #3 in my Special Report on the 5 Next Big Things
I’d buy Broadcom even at this price as one of my three core AI stocks from the current generation of leaders. I’m adding it today to my long-term 50 Stocks Portfolio.
$51 trillion by 2034; the Federal debt is starting to sound like real money
Yesterday, Tuesday, June 18, the Congressional Budget Office projected that the federal debt would hit $50.7 trillion by 2034. That’s only 10 years from now. That year the federal debt will equal 122% of the United States’ annual economic output (GDP). That would far surpass the high set in the aftermath of World War II.
China needs more stimulus as housing slump drag on economy continues
Data Monday, June 17, show that China’s economy needs more stimulus to overcome the persistent drag from China’s housing slump. The most recent bit of bad news is that industrial output—-which has made up for slow consumer spending lately-—fell short of forecasts.
Is this the best the most bullish can do? A 3% upside for the S&P 500 by the end of the year?
On Friday, June 14, Goldman Sachs upped its year-end target for the Standard & Poor’s 500 to 5,600 points from 5,200. The idea closed at 5473 on Monday, June 17, for the 30th record high of 2024. Goldman’s forecast puts the investment company at the same expected price level as UBS Investment Bank and BMO Capital Markets. They’r talking about a roughly 3% gain from here through the end of the year. Three points to consider about the forecast.
Special Report: A New World for Dividends Pick #2 BEPC
Bookkeeping. I added this pick to my long Special Report post. I just want to make sure no one missed it. Dividend pick No.2: Brookfield Renewable Corp. (BEPC)
Live Market Report (20 minute delay)
S&P 500 earnings on track to grow by just 0.6% in 2023
FactSet calculates that Wall Street analysts expect the S&P 500 to report earnings growth of 0.6% in calendar 2023. That’s way below the trailing 10-year average (annual) earnings growth rate of 8.4% for 2021 through 2022. So far on a quarterly basis, 2023 has shaped up this way: earnings declines of 1.7% and 4.1% for the S&P 500 in the first nd second quarters of 2023, respectively. And earnings growth of 4.9% for the third quarter. FactSet calculates that analysts expect the stocks in the index to report an earnings growth of 2.4% for Q4 2023.
Apple hit with patent judgment that puts quarterly sales growth in question
The hope among investors and on Wall Street was that Apple (AAPL) would show revenue growth when it reported its fiscal first quarter earnings in January. That growth would be the first in a year after four straight quarters of falling sales. That’s the longest streak of declining quarterly sales in two decades. But now a patent decision against Apple will take some of its best-selling Apple Watch series, the Series 9 and the Ultra2, off the market just as the holiday selling season is peaking.
Saturday Night Quarterback says, For the week ahead expect…
I expect the Federal Reserve to continue to try talking back some of the enthusiasm that greeted its December 13 meeting and the release of a new set of Dot Plot projections showing that the median forecast of staff and policy makers at the U.S. central bank called for three interest rate cuts in 2024.
Finally–Costco declares special $15 a share dividend; is membership increase next?
Costco Wholesale (COST) reported earnings for its fiscal first quarter of 2024 and declared a long anticipated special dividend of $15 a share. The stock closed up 4.61% on Friday, December 15.
Is the Fed “sorry” that it set off the latest rally?
Today sure sounded like policy-makers remorse from the Federal Reserve. New York Fed President, the vice-chair of the Federal Reserve’s interest-rate setting Open Market Committee, said that central-bank policy makers weren’t actively debating when to cut interest rates. That’s sure not what the stock market heard on Wednesday.
How many interest rate cuts will we see in 2024?
In its December revision of its Dot Plot projections for interest rates in 2024, the median projection by the U.S. central bank’s staff and policy makers estimated three interest rate cuts by the end of 2024. The market, which had been hoping for exactly this news, cheered, and stocks moved to record or near record highs. And in reaction to the Fed’s news, Wall Street moved its forecasts to match the new projection. Barclays, for example, is calling for three cuts in 2024 and JPMorgan Chase moved its forecast for the start of cuts to June. But, on Wall Street nothing exceeds like excess so projections are pushing beyond the Fed’s median view.
Troubles aren’t over for electric vehicle sales–will EV stocks feel the pain?
Electric vehicle inventories on lots at U.S. dealers reached a new high in December. With a 114-day supply, the bloated inventory of electric vehicles is up from a 53-day supply a year ago and compares to 71-days worth of inventory for the overall auto industry.
Solar stocks rocket higher on Day 2 of the post-Fed meeting rally
Among today’s big stock market winners today: SolarEdge Technologies (SEDG), the biggest maker of inverters used in turning sunlight into electricity, closed up 16.67%, and Sunrun (RUN), a leader in the installation of residential solar systems, closed up 19.92%. This rally had absolutely nothing to do with any news out of the recently ended COP28 United Nations Climate Conference. It was a pure reaction to the signs in yesterday’s Dot Plot from the Federal Reserve that the central bank was looking to cut interest rates at least three times in 2024. Makes perfect sense.
Moderna shares jump today on positive results in skin cancer vaccine trials
Shares of Moderna (MRNA) closed up 925% today, December 14. A personalized vaccine developed by Merck and Moderna helped prevent the recurrence of severe skin cancer for three years, according to new results released today. Patients with severe melanomas who got the vaccine and Merck’s cancer drug Keytruda were 49% less likely to die or have their cancer return than those who got Keytruda alone. The news is especially important for Moderna.
The Fed catches up with the markets on interest rate cuts and stocks soar
Today, the Federal Reserve caught up with the financial markets. The Fed’s Open Market Committee kept interest rates steady at a benchmark 5.25% to 5.50%, as expected. And the Fed’s Dot Plot projections showed that the median projection expects three interest rate cuts in 2024. That’s a huge shift from the September Dot Plot and moves the Fed toward the current Wall Street hope for 4 cuts or more in 2024. The Dot Plot also projects that the unemployment rate would rise slightly next year, to 4.1%, from a recent 3.7% rate, and that inflation would continue to improve in 2024 but not reach the Fed’s 2% target. Stocks soared on the confirmation of the consensus hope. At the close, the Dow Jones Industrial Average jumped 512.3 points, or 1.4%, to a record high of 37,090.24. The S&P 500 index climbed 1.37%, and the Nasdaq 1.38%.
Special Report: 10 Great Growth Stocks that Are Getting Greater–today my 7th pick ASML
GREATER Growth Stock Pick #7: ASML Holding (ASML). ASML Holding is priced like a stock that owns 90% of the market for cutting edge photo lithography chip-making equipment. I want to own this stock as one of my 10 GREATER Growth Stocks, but I worry about paying that kind of multiple (35 times trading 12-month earnings per share), especially ahead of what is shaping up as a challenging 2024 for chip equipment makers in general and ASML in particular. But 2025 looks like a great year for chip equipment makers in general and ASML in particular. So timing is the key issue on buying this one.
Core CPI inflation numbers disappoint for November, illustrate why the Fed won’t rush to cut rates
If you follow the headline numbers (what’s known as All Urban Consumers) for the Consumer Price Index (CPI), you’d say, “See inflation continues to fall; the Federal Reserve will cut rates quickly in 2024.” But you’d be following the wrong CPI number.
Special Report: 10 Great Growth Stocks that Are Getting Greater–today my 6th pick Danaher
GREATER Growth Stock Pick #6: Danaher (DHR). Danaher is a smart (that’s key) serial acquirer–and asset divester–in the life sciences space. And that makes this stock very interesting in an environment where small, young life sciences companies might be looking for help/rescue/acquisition because they can’t raise capital in a tough part of the credit cycle. I like Danaher now, as well, because the stock looks to have just about completed its re-rating after a spike in sales during the Covid pandemic led to over enthusiasm about the stock.
China slips back into deflation in October–not a good sign for the global economy
China slipped back into deflation in October, according to government data released over the weekend. China had shown a recovery from August deflation in September readings, but that recovery now looks temporary. As worrying as the deflation tag itself is the cause: week domestic demand.
Saturday Night Quarterback says, For the week ahead expect…
Maybe. Must maybe. All eyes will be on the Federal Reserve meeting on December 13.
U.S. economy added stronger than expected 199,000 jobs in November
The U.S. economy added 199,000 jobs in November, the Labor Department reported today, Friday, November 8. The unemployment rate dropped to 3.7% from 3.9% in October That surprised economists who had expected the unemployment rate to hold steady. The bond market reacted in the morning hours after the report was released at 8:30 a.m. New York time by selling Treasuries. The yield on the 10-year Treasury gained 8 basis points to 4.233% as of 10 a.m. in New York as bond prices fell. The yield on the two-year Treasury jumped 78 basis points to 4.669%.
Today’s inventory report points to expected slower GDP growth for the fourth quarter
Ever since reports showed the U.S. economy grew at a 5.2% annualized rate in the third quarter, economists have been telling investors to expect lower growth in the fourth quarter. Some of that higher growth in the third quarter, they argued, was pulled from the fourth quarter.
Today’s report from the Commerce Department showing a 0.4% drop in wholesale inventories in October supports the economists’ argument.
Initial claims, continuing claims for unemployment show a modestly slower jobs market
It’s probably not enough to push the Federal Reserve to cut rates on the schedule that Wall Street is hoping for –with the first cut in March 2024–but it does make a “no increase in interest rates” result from the December 13 Fed meeting even more likely.
Special Report: 10 Great Growth Stocks that Are Getting Greater–My first 8 picks
Here are the first 8 picks for my GREATER Growth Stocks Special Report. More on the way.
Moody’s cuts China bond rating on worries over debt load
Moody’s Investors Service cut its outlook for Chinese sovereign bonds to negative from stable today, December 5. The rating company kept tws long-term rating on China’s government bonds at A1. You don’t have to be a forensic accountant to see what worries Moody’s.
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