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The market has a strong week with all three major indexes posting gains of over 4.5%! Price action in the Treasury market was very influential over the price action we saw in the stock market.
Monday started off on the right foot with Mike Wilson of Morgan Stanley (who has been right this year with his bear market call) saying that the S&P could hit 4,150 in a technical rally if a recession or earnings capitulation can be avoided. A BofA fund manager survey also showed cash holdings at their highest level since April 2001, acting as a contrarian buy signal.
The rally slowed midweek with market participants listened to a slew of speeches from Federal authorities. Fed President Kashkari said that he could argue for the fed funds rate to go above 4.75% if he doesn’t see improvement in inflation. Fed President Harker said he expects the fed funds rate to be well above 4.00% by end of the year. These comments coincided with the 10-year note yield hitting its highest level since 2008 and the stock market falling back.
Fed President Daly said she thinks stepping down on the pace of rate hikes will help preserve market structure. Fed President Bullard said he hopes to get a deflationary process going in 2023, adding that the job market stays strong.
The Wall Street Journal published an article that predicted that the Fed will raise rates by another 75 basis points at the November meeting, but will then consider a smaller increase at the December meeting. The author, Nick Timiraos, is thought by some to be the Fed’s preferred source for leaking insight on monetary policy in order to gauge the market’s reaction to their plan.
Earnings were generally better than expected this week which helped keep stocks higher this week. Bank of America (I wrote a piece on this earnings report for our position) and Goldman Sachs were standouts in the financial sector; AT&T and Verizon in communication; United Airlines and Lockheed Martin in industrials; IBM and Lam Research in IT. Snapchat and Tesla disappointed.
Other news this week had Liz Truss, the new UK Prime Minister, resigning after about 6 weeks in office.
I was wrong on prediction for the week last week, as we ended much higher than I would have guessed! This coming week could be the same if GDP surprises.
This week I only had some deep red adds in $INTC and $CMCSA plus some other moves that you can read about the portfolio here. Use that update to help you put together a shopping list of some solid dividend stocks to pick up for the long term.