September 20, 2024
What You Need to Know Today:
Consumers more confident–but more worried about jobs
U.S. consumer confidence rose to a six-month high in August. The Conference Board’s gauge of sentiment increased to 103.3 from an upwardly revised 101.9 a month earlier, data out Tuesday showed. The median estimate in a Bloomberg survey of economists called for a reading of 100.7. But…
Fed’s newest Dot Plot: Just one rate cut in 2024
While a slight dip in CPI inflation kept hopes alive for an interest rate cut in 2024, the Federal Reserve”s newest Dot Plot economic projections, released today, showed the central bank forecasting just one rate cut in 2024.
CPI inflation slows slightly keeping alive hopes for rate cut in 2024
However, as all dedicated inflation watchers know, the Federal Reserve watches the core inflation rate and not the all-items rate. That index, which excludes more volatile food and energy prices, rose 0.2% month over month in May, after rising 0.3% month over month in April. The core index rose at a 3.4% rate over the last 12 months. While the dip in core inflation is surely encouraging to the Federal Reserve as it fights to get stubborn inflation down to the central bank’s target 2% rate, today’s data show a continued problem the housing prices. The shelter index–the stand-n for housing prices in this index–increased at a 5.4% annual rate in May. That accounted for over two-thirds of the total 12-month increase in inflation.
Moderna finally proves it has a post-Covid vaccine life
Can you say rollercoaster? In 2022, the biotech company generated sales of nearly $18.9 billion, all of it from sales of its Covid-19 vaccine but it expects revenue of only $4 billion this year. On February 14, 2023, shares sold for $175.62. On $86.04 on February 14, 2024 they traded at $86.04. Today, June 11, they closed at 148.39. I added them to my Volatility Portfolio at $157.10 on April 14,2023. That position was still down 5.54% as of the close on June 11. But I think the rally is still in its early stages. Why the turnaround now?
A big difference of opinion on Apple today–and I’d sell
Traders and investors reacted to Apple’s (AAPO) AI announcements during the first days of the company’s World Wide Developers Conference with enthusiasm today sending the stock up 7.26% in June 11 trading. That’s a new all-time high for the stock. Technology analysts were at best mixed. Their more tepid response set the tone yesterday when the stock dropped 1.9%. Typical was this from KeyBanc Capital Markets analyst Brandon Nispel in a client note: Apple’s AI enhancements aren’t compelling enough for the average consumer to purchase a new device. I’m with the tech folks on this and today I made Apple a sell in my Special Report: Trade Wars! Trade Wars!
Hold India ETF Through Election Volatility
Over promising and undelivering is never a good recipe. In India’s recently concluded election Prime Minister Narendra Modi's Bharatiya Janata Party (BJP) bragged that it would win more than 400 seats, enough to give the party outright control of parliament. When the...
Special Report: It’s a new world for dividend income investors: 3 trends (all now posted) and 10 picks (all first now posted PFE, BEPC, NKE, EQNR, V, HON, T, VZ, RTX, ABBV)
Let’s say you’re a dividend income investor. You need cash income in retirement. Or you want your portfolio to generate cash now so you can invest in new opportunities. Or you just want the extra safety and lower risk that owning a stock with a substantial dividend can bring. Whatever your reasons–and I can think of a lot more–this is a particularly challenging financial market for dividend income investors.But I do think there are strategies dividend income investors can successfully pursue even in this challenging market. In the rest of this Special Report I’m going to explain the three ways I think you should be thinking about dividend income investing in this market. And then I’m going to give you 10 dividend stocks that I think are especially well-suited to producing income (and price appreciation, which is always nice even if you’re an income investor) in this market environment. First pick just posted–Pfizer
Live Market Report (20 minute delay)
Nothing new in Fed’s November 1 minutes: Careful on rates
Federal Reserve officials at their November 1 meeting were agreed on a strategy to “proceed carefully” on future interest-rate moves and base any further tightening on progress toward their inflation goal. “All participants agreed that the committee was in a position to proceed carefully and that policy decisions at every meeting would continue to be based on the totality of incoming information,” according to minutes of the November 1 Federal Open Market Committee meeting released today, Tuesday, November 21. At the meeting the Fed held its benchmark lending rate in a range of 5.25% to 5.5% for the second straight meeting.
Rally or bear trap: Concentration in megacap tech stocks reaches a record high
I’m trying to decide if we’re watching a legitimate rally or a classic bear trap. If this rally is real, and likely to run for a while, investors should be putting cash to work even at market highs. If it’s a bear trap-you know one of those upward moves designed to pull in cash from the sidelines just before green turns to red in the market, then you ought to be using this moment as a selling opportunity, taking profits, and building cash for better barging down the road. A new survey by Goldman Sachs shows concentration in big tech stocks is at a record high. What does that mean?
Saturday Night Quarterback says, For the week ahead expect…
Nvidia’ earnings report after the close on Tuesday, November 21, will be the big event of the short Thanksgiving week.
And now it’s May–market moves up date of first Fed interest rate cut
Until this week, the consensus was that the Federal Reserve would begin to cut interest rates in July (or maybe June.) As of Friday, November 17, however, the CME FedWatch Tool, which calculates the odds of a Fed move from prices in the FedFunds Futures market, put chances of a interest rate cut at the central bank’s May 1 meeting at better than 50%.
Walmart says the D (deflation) word
In the company's Thursday earnings outlook Walmart CEO Doug McMillon uttered the D word. McMillon told investors that the world's biggest retailer is ready for a period of deflation in the United States over the coming months. The company plans to reduce prices on...
If this is such a great economy, why did Cisco and Palo Alto just cut cut guidance for 2024?
More real world dissent to Wall Street’s view that everything looks great for 2024. On Thursday Cisco Systems (CSCO) shares closed down 9.83% after the networking giant offered up significantly weaker-than-expected guidance for 2024. Wall Street analysts called the guidance “disappointing.” And the same day cybersecurity favorite Palo Alto Networks (PANW) dropped 5.42% after the company lowered its billings forecast for the fiscal 2024 year.
New claims for unemployment climb to three-month high
More news this morning pointing to a slowing economy. Initial claims for unemployment for the past week rose 13,000 to 231,000, the Labor Department Reported this morning. That’s the highest weekly figure in three months. And is yet another sign that the economy is cooling. Which would encourage the Federal Reserve to call an end to it interest rate increases and, maybe even, start to cut rates relatively soon. At least that’s how the bond market read the numbers.
Bond market pauses: Are bond prices ahead of themselves? Have yields dropped too far?
Today stocks and bonds both paused to think about yesterday’s huge rally.
Congress averts shutdown–kicks the can down the road to January
Well, you could knock me over with a feather! The House of Representatives passed a clean Continuing Resolution to continue funding the federal government after Friday at midnight. Don’t get all dewy-eyed and start talking about a return of functional government. The House bill, which is expected to pass and Senate in the next day or two and be signed by the White House with well over 10 hours to spare before the government shut down, only extends funding until January 19 (for 20% of the government) and February 2 (for the other 80%.)
Will Tuesday’s rally continue? 3 things I’m watching
One day fluke? The next step in an end of year Santa Claus rally? Huge bear market trap? The beginning of the next big Bull market?Tough questions to answer but important for figuring out an investment strategy for NOW. So here are three things that I’ll be watching in the next few days.
Core CPI inflation beats expectations by 1 basis point and stocks rocket higher
Core Consumer Price Index inflation came in at a 4.0% annual rate in October, the Bureau of Labor Statistics reported this morning, November 14. Economists had projected a 4.1% annual rate for October. And that 1 basis point, small as it was was enough to send stocks and bonds soaring. At the close, the Standard & Poor’s 500 was up 1.91%.
Saturday Night Quarterback (on a Sunday) says, For the week ahead expect…
I expect Tuesday’s Consumer Price Index report for October to be critical in determining whether the Christmas rally narrative can be sustained.
Moody’s cuts outlook for U.S. credit rating to negative
Moody’s Investors Service turned negative on the United State’s credit rating outlook Friday after the market close, citing risks to the nation’s fiscal strength and political polarization. The credit rating company lowered the outlook to negative from stable, even as it affirmed the nation’s rating at Aaa, the highest investment-grade notch.
Don’t give up on your volatility hedges yet–look what’s on the horizon
My bets on rising volatility have been hammered in the last few days. The December 20 Call Options on the CBOE S&P 500 Volatility Index (VIX) at $280 a contact dropped another 21% today to $121 a contract. The January 17 Call Options at 17 that I bought for $268 closed at $211, down another 16%.The VIX itself ended the day at 14.23, down 7% for the session. It’s sure hard looking at losses like this. But I would remind you that the VIX is very volatile. The volatility index was at 21.71 on October 20. And that the calendar is marked with two big events that could reunite financial market volatility, one courtesy of the House of Representatives and the other courtesy of the Federal Reserve.
What the Fed giveth, the Fed taketh away
Eight days ago Federal Reserve chair Jerome Powell set off a financial market rally when the markets thought they heard him signal that the Fed was done with interest rate increases. Today, November 9, Powell very clearly said (at an International Monetary Fund conference in Washington) that the Fed won’t hesitate to raise rates if a hike is needed. Other Fed officials have recently said the same thing.
The big pay off for Eli Lilly is still ahead
On Wednesday the Food and Drug Administration approved Mounjaro from Lilly, as an obesity drug, after clinical trials showed that patients lost an average of 18% of their body weight. The drug will be marketed as Zepbound in the obesity market. This puts Lilly into direct competition with the wildly popular Wegovy weight-loss drug from Novo Nordisk (NVO)
Is the job market weakening? Look for a hint in tomorrow’s initial claims report
It’s not a big shift, but it may be a trend. The weekly initial claims for unemployment report–a new one comes out on November 9–has recently shown a very gradual weakening of the U.S. jobs market. Last week in the November 2 report for the week ended October 28, the number of new claims for unemployment rose to 217,000, an increase of 5,000 from the previous week. The four-week moving average, which smooths week to week noise–climbed 2,000 from the four-week moving average the prior week. Will tomorrow’s November 9 report show a continuation of this very subtle trend?
Oil rally is over–pending any explosion in the Middle East
Oil prices fell again on Wednesday, November 8. West Texas Intermediate, the U.S. benchmark, lost another 2.30% to $75.59 a barrel. International benchmark Brent dropped 2.19% to $79.82 a barrel. The cause? A drop in China's exports that fueled fears that demand from...
A good auction for Treasuries sends 10-year yield to 4.51% today
Stocks had a mixed close today, November 8. The Standard & Poor’s 500 was up just 0.03% and the NASDAQ Composite actually fell by 0.05%. The small-cap Russell 200 lost 1.17% as small company stocks continue to send a warning sign about the economy and bond yields. I think it would have been much worse without a strong action for 10-year Treasuries today A successful auction–lots of demand at lower yields–of $40 billion in 10-year notes took the yield on the 10-year Treasury down 6 basis points to 4.51%.
What a surprise! Consumers are in debt trouble
Credit card debt surged again during the third quarter and so did the number of people missing payments, according to data released today, November 7, by the Federal reserve Bank of New York. Credit card balances rose by $48 billion in the third quarter to a record high of $1.08 trillion The $154 billion year-over-year gain in debt was the largest such increase since of this beginning of this data in 1999.
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