Good Friday evening to all of you here on r/stocks! I hope everyone on this sub made out pretty nicely in the market this past week, and are ready for the new trading week ahead. 🙂
Here is everything you need to know to get you ready for the trading week beginning September 26th, 2022.
Stocks tumbled Friday to cap a brutal week for financial markets, as surging interest rates and foreign currency turmoil heightened fears of a global recession.
The Dow Jones Industrial Average tumbled 486.27 points, or 1.62%, to 29,590.41. The S&P 500 slid 1.72% to 3,693.23, while the Nasdaq Composite dropped 1.8% to 10,867.93.
The Dow notched a new low for the year and closed below 30,000 for the first time since June 17. The 30-stock index ended the day 19.9% below an intraday record, flirting with bear market territory. At one point, the Dow was down more than 826 points.
The major averages capped their fifth negative week in six, with the Dow giving up 4%. The S&P and Nasdaq shed 4.65% and 5.07%, respectively. It marked the fourth negative session in a row for stocks, as the Fed on Wednesday enacted another super-sized rate hike of 75 basis points and indicated it would do another at its November meeting.
“The market has been transitioning clearly and quickly from worries over inflation to concerns over the aggressive Federal Reserve campaign,” said Quincy Krosby of LPL Financial. “You see bond yields rising to levels we haven’t seen in years — it’s changing the mindset to how does the Fed get to price stability without something breaking.”
The British pound hit a fresh more than three-decade low against the U.S. dollar after a new U.K. economic plan that included a slew of tax cuts rattled markets that are fearing inflation above all right now. Major European markets lost 2% on the day.
“This is a global macro mess that the market is trying to sort out,” Krosby said.
Bond yields soared this week following the Fed’s actions, with the 2-year and 10-year Treasury rates hitting highs not seen in over a decade.
Goldman Sachs cut its year-end S&P 500 target because of rising rates, predicting at least a 4% downside from here.
Stocks positioned to suffer the most in a recession led the week’s losses with the S&P 500′s consumer discretionary sector falling 7%. Energy slumped 9% as oil prices dropped. Growth stocks, including big technology names Apple, Amazon, Microsoft and Meta Platforms fell on Friday.
“Based on our client discussions, a majority of equity investors have adopted the view that a hard landing scenario is inevitable and their focus is on the timing, magnitude, and duration of a potential recession and investment strategies for that outlook,” wrote Goldman Sachs’ David Kostin in a note to clients as he cut his outlook.
This past week saw the following moves in the S&P:
S&P Sectors for this past week:
Major Indices for this past week:
Major Futures Markets as of Friday’s close:
Economic Calendar for the Week Ahead:
Percentage Changes for the Major Indices, WTD, MTD, QTD, YTD as of Friday’s close:
S&P Sectors for the Past Week:
Major Indices Pullback/Correction Levels as of Friday’s close:
Major Indices Rally Levels as of Friday’s close:
Most Anticipated Earnings Releases for this week:
(CLICK HERE FOR THE CHART!)
(T.B.A. THIS WEEKEND.)
Here are the upcoming IPO’s for this week:
Friday’s Stock Analyst Upgrades & Downgrades:
Market Atones for Sins Early
So, it might be a bit late for Sell Rosh Hashanah, but Buy Yom Kippur is looking like a good set up. A host of fears from inflation, hawkish Fed, bellicose Russia, global upheaval, US midterm politics is exacerbating the usual seasonal and 4-year cycle carnage.
The thesis is that folks sell positions on Rosh Hashanah the first of the Days of Awe to rid themselves of financial commitments and then return to the market after Yom Kippur, the Day of Atonement. It is no coincidence that this coincides with the seasonal September/October weakness.
Interestingly the Sell Rosh Hashanah/Buy Yom Kippur period is not so bad in midterm years, likely due to the fact it lands at the end of the Weak Spot and the beginning of the Sweet Spot of the 4-Year cycle – the best buying opportunity of the 4-Year Cycle.
Five Reasons Inflation Isn’t So Sticky
After the disappointing all around Consumer Price Index (CPI) report last week, the worries over inflation staying higher for longer (what they call sticky) is a very real worry. That report showed prices for many goods and services were increasing more than expected (even things like dental services were much higher than expected), while nearly every economist we saw on tv before the report was saying inflation had peaked and would be heading down, and in a hurry.
Full disclosure, I was in that camp as well, as I discussed with Yahoo! Finance here.
Well, it isn’t all bad news, as there are many signs inflation could still come back down quickly. For one thing gas prices continue to head lower, as my colleague Sonu Varghese recently wrote about. Sure, core consumer prices (excluding energy and food) are higher than anyone would like, but there are other types of inflation than just at the consumer level.
Here are five reasons that suggest inflation could still fall quite quickly and last month’s CPI data isn’t the beginning of a new trend.
First up, used car prices collapsed four percent last month according to the Manheim Used Car Value Index. This was the second largest monthly decline ever and the year-over-year change is down to 8.4%, the lowest since June 2020. This large drop wasn’t accounted for in the recent CPI report and will put downward pressure on prices over the coming months.
Second, how much companies are paying for things is going down and quickly. Looking at the prices paid component of the ISM services and manufacturing surveys show a big move lower the past few months. Prices paid tends to lead overall CPI by several months, and so this is another reason to think inflation could come down quickly before year-end.
Third, the ISM is a national survey, but regional surveys show similar results. The recent Philly Fed and Empire State surveys each show prices paid crashing lower.
Fourth, supply chain issues were a major reason for the huge spike in inflation. So, you would think once those supply chains begin to improve, so would inflation. The good news is we are seeing substantial improvements in supply chains. For instance, back in January more than 100 ships were caught in a logjam at the Port of Los Angeles, yet earlier this month there were less than 10 ships. And as the chart below shows, overall supply chain pressures have come down significantly. Another source of potential downward pressure on overall inflation.
Lastly, prices at the producer level have come back much quicker than at the consumer level. The Producer Price Index (PPI) year-over-year peaked at 11.6% in March, but it was already down to 8.7% five months later. Compare that with the CPI peaking at just over 9.0% and only at 8.3% currently.
So there you have it. Inflation is still a major issue, and that recent CPI report wasn’t pretty in any way. But there is light at the end of the inflation tunnel, as other aspects of inflation is showing some incredible improvement and not many people are noticing.
September to (Not) Remember
Hat tip George Noble @gnoble79 for this title from his superb Twitter Space today. He has been on point all year. Disappointing CPI and increasingly hawkish remarks and action from the Fed clearly brought the usual September peak early. But that does not mean we are out of the woods.
Late September is still a dangerous period for the market, especially month-end, and then there is Octoberphobia to contend with, which promises to be turbulent with all the market must digest. On top of the Fed, inflation, weaker fundamentals, fickle market internals, shaky technicals we have the negative seasonality from fund tax selling, end of Q3 window dressing and portfolio restructuring.
We have been cautious all year and mostly in cash, having honored our stops and indicators. June lows are only 1% away for the Dow, S&P 3.4%, NASDAQ 5.4%, Russell 2000 6.8%. Cash is still king. Patience is in order. We are sticking to our Seasonal Trading Playbook. If you’re not nimble and able to trade quickly, wait for our Best Six Months Seasonal MACD Buy Signal.
Worse Before It Gets Better
For those checking in on our Seasonality Tool in the past week, the current point of the year can either look like one of the worst, middling, or best times of the year depending on the time frame. As shown below, the median one-week performance of the S&P 500 from the close on 9/20 over the last ten years has been a decline of 95 bps loss which ranks in just the fourth percentile of all days of the year. Extending out to look at the S&P 500’s median one-month performance, the 105 bps median gain is about smack dab in the middle of the range of historical one-month returns. Moving out to three months, the S&P 500’s median gain of 578 bps ranks in the top 5% of all days.
To look at seasonality in another way, the charts below show the average S&P 500 5-day performance (including a smoothed look via a 7-day moving average) and the percentage of time the index has traded positively at each calendar day of the year going all the way back to 1945. The current week of the year has averaged some of the worst one-week returns for the S&P 500 across all years of the post-WWII period while the index has tended to fall more often than not.
Again, contrary to short-term seasonal weakness, taking a similar look but using a 3-month performance window, we are entering one of the best times of the year. As shown below, the second half of September into October sees the average 3-month performance rocket higher and by early October has tended to be the strongest of any point of the year.
The Biggest Pandemic Losers
With President Biden declaring that “the pandemic is over” on 60 Minutes last night, we thought we’d take a look at stock market performance since the pandemic began. At its peak on January 3rd, 2022, the S&P 500 was up more than 40% from its closing price on February 19th, 2020 — the peak reading for the index prior to the COVID Crash. After entering bear market territory in 2022, the S&P is currently only 14% above its pre-COVID high. In the Russell 1,000 — another large-cap index — 41% of stocks are now trading below their closing price on February 19th, 2020. 20% of stocks in the index are down more than 20%! Given that two and a half years have passed, we think it’s safe to say that any stock down 20% from pre-COVID levels has been a “pandemic loser.” At least at this point in time.
Below are stocks with market caps above $15 billion that are down at least 20% from their closing price on 2/19/20. Names like Boeing (BA), Delta (DAL), Uber (UBER), and Las Vegas Sands (LVS) were some of the initial “lockdown losers” that never really recovered, but other stocks that were initially viewed as “lockdown winners” are also on the list like Netflix (NFLX), Meta (META), Spotify (SPOT), and Zoom Video (ZM). Go figure.
Boeing (BA) and Intel (INTC) have been two of the biggest losers since pre-COVID with declines of more than 56%. Other “blue chips” that have been crushed since the pandemic hit include Biogen (BIIB), Citigroup (C), General Electric (GE), Verizon (VZ), 3M (MMM), Square (SQ), Disney (DIS), Adobe (ADBE), and salesforce (CRM). It’s interesting that there’s representation from nearly every sector of the economy on this list. The only sector that’s NOT included is Energy, which is crazy since the sector was one of the hardest hit in the early days of COVID as the price of oil even went negative for a day.
Of course, COVID isn’t the reason why all of these large-cap stocks are now down so much since the pandemic began, but the performance numbers are the performance numbers, and there’s no getting around it. Management at big travel & leisure companies have always wished COVID never happened, but more and more companies in sectors like Tech that thought the pandemic might be a game-changer for them in a positive way are now staring at big 2+ year declines thinking “what the hell just happened.”
Here are the most notable companies reporting earnings in this upcoming trading week ahead-
(CLICK HERE FOR NEXT WEEK’S MOST NOTABLE EARNINGS RELEASES!)
(T.B.A. THIS WEEKEND.)
(CLICK HERE FOR NEXT WEEK’S HIGHEST VOLATILITY EARNINGS RELEASES!)
(T.B.A. THIS WEEKEND.)
(CLICK HERE FOR MONDAY’S PRE-MARKET NOTABLE EARNINGS RELEASES!)
Below are some of the notable companies coming out with earnings releases this upcoming trading week ahead which includes the date/time of release & consensus estimates courtesy of Earnings Whispers:
Monday 9.26.22 Before Market Open:
(CLICK HERE FOR MONDAY’S PRE-MARKET EARNINGS TIME & ESTIMATES!)
Monday 9.26.22 After Market Close:
(CLICK HERE FOR MONDAY’S AFTER-MARKET EARNINGS TIME & ESTIMATES!)
Tuesday 9.27.22 Before Market Open:
Tuesday 9.27.22 After Market Close:
Wednesday 9.28.22 Before Market Open:
Wednesday 9.28.22 After Market Close:
Thursday 9.29.22 Before Market Open:
Thursday 9.29.22 After Market Close:
Friday 9.30.22 Before Market Open:
Friday 9.30.22 After Market Close:
(CLICK HERE FOR FRIDAY’S AFTER-MARKET EARNINGS TIME & ESTIMATES!)
(T.B.A. THIS WEEKEND.)
(T.B.A. THIS WEEKEND.) (T.B.A. THIS WEEKEND.).
What are you all watching for in this upcoming trading week?
I hope you all have a wonderful weekend and a great trading week ahead r/stocks. 🙂
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