Category: Market Recap

Categories
Earnings Economics Market Recap Market Update Stock Market

Stock Market Recap & Outlook (1/20/22) – PPI and Earnings Brings a Whipped Week

This weekly market recap is brought to you by Koyfin, a powerful analytical tool that I am proud to partner with. Their platform is entirely customizable for whatever data you want to look at including stocks, ETFs, mutual funds, currencies, economic data releases (one of my personal favorites used often for these posts), crypto, and even transcripts of company events! Click the link above to get a special offer only for Dividend Dollar readers or go give my product review a read if you’re interested!

Weekly Review

The 2023 rally hit a speedbump week as investors may have been looking to take some money off the table after the gains from the last two weeks. Growth and rate hike concerns, which had been put on the backburner to start the year, seemed to be back in play. 

Early on Wednesday, the market initially reacted positively to the slowdown in inflation reflected in the December Producer Price Index (PPI) of -0.5% that beat expectations by 0.4%. Any optimism that may have come from the pleasing PPI report quickly faded as weak retail sales and manufacturing data was released thereafter.

Retail sales fell 1.1% month-over-month in December compared to expectations of -0.8%. This comes off of a revised 1.0% fall in November.

Industrial production fell 0.7% month-over-month in December compared to a -0.1% expectation. This, also, comes off a revised decrease to 0.6% for November.

Following these releases, the main indices sold off on Wednesday. Selling efforts had the S&P 500 take out support at its 200-day moving average. It could be argued that data is suggesting that the Fed is likely to remain on its rate hike path in spite of a weakening economic backdrop, increasing the risk for a policy mistake to trigger a deeper setback and therefor increasing the selling efforts.

Market participants also received official commentary on the economy when the FOMC released its latest Beige Book on Wednesday afternoon. “On balance, contacts generally expected little growth in the months ahead.”

St. Louis Fed President Bullard (non-FOMC voter) added fueled the market’s concerns saying that he would prefer that the Fed stay on a more aggressive path but added that the prospects for a soft landing have improved.

Thursday’s trade, a mostly choppy and sideways day, looked a lot like Wednesday’s trade with investors reacting to more data and commentary pointing towards weakening growth and the possibility of the Fed making a policy mistake.

Building permits decreased for the third consecutive month in December to 1.330 million. One surprising positive note out of the report was that single-family starts grew 11.3% month-over-month.

Weekly initial claims were released at the same time, which decreased to 190,000, their lowest level since late September. There are no major weaknesses in the labor market that could put a stop to the Fed’s hiking path.

JPMorgan Chase CEO Jamie Dimon said in an interview Thursday morning “I think there’s a lot of underlying inflation, which won’t go away so quick,” adding that he thinks rates will top 5.0%.

As earnings season progresses, the main concern for the market is the potential that weaker growth will translate to cuts in earnings estimates and downward guidance.

Goldman Sachs ($GS) sold off sharply on Tuesday after reporting below-consensus earnings (Actual EPS 3.32 vs 5.77 Average Estimate) and revenue (Actual 10.59B vs 10.91 Average Estimate), along with increased provisions for credit losses.

So far, however, quarterly results have generally received positive reactions from investors. In contrast to Goldman Sachs, Morgan Stanley ($MS) received a positive reaction despite a Q4 earnings miss.

Another notable earnings report was Netflix ($NFLX), which surged 8.5% on Friday and led to interest in the tech/growth space. It felt like this pushed a sentiment shift and produced the rally effort on Friday.

The rebound effort to close out the week had the Nasdaq Composite recoup all of its losses while the S&P 500 and Dow Jones Industrial Average put a nice dent in their weekly losses. The S&P 500 was able to climb back above its 200-day moving average by Friday’s close.

Only three S&P 500 sectors were green this week — communication services (+3.0%), energy (+0.7%), and information technology (+0.7%) — while the industrials (-3.4%), utilities (-2.9%), and consumer staples (-2.9%) sectors had the largest losses.

The 2-yr Treasury note yield fell two basis points this week to 4.20% and the 10-yr note yield fell three basis points to 3.48%. The U.S. Dollar Index fell 0.2% to 101.99.

WTI crude oil futures rose 2.3% to $81.69/bbl and natural gas futures fell 5.3% to $3.03/mmbtu.

Separately, Treasury Secretary Yellen notified Congress via a letter that the debt ceiling has been reached, prompting the Treasury Department to begin employing extraordinary measures.

Dividend Dollars’ Outlook & Opinion

That’s it for the recap. Now for my opinion!

As I mentioned in the last market update, I predicted a red week this week but that we wouldn’t break below the 100 day SMA. I was correct, but I was not expecting a rally as strong as we got on Friday. After rejecting against the downtrend line and falling under it, we only stayed there for a day before trying again. Truly some wild price action!

My main reason for predicting this is due to my assumption that quarterly earnings this season will show slowing growth. Earnings so far has been mixed, but that slowing growth is starting to as we get deeping into this earnings season. This week 26 companies in the S&P 500 reporting earnings, 15 of them beat consensus EPS expectations. 55 companies of the 500 have reported Q4 results so far and have beaten EPS 69% of the time and revenue estimated 55% of the time.

Year over year, Q4 earnings are -4.5% lower versus a -4.1% estimated from Schwab Managing Director of Trading and Derivatives. Revenues are +7.4% higher year over year versus a 3.8% estimate.

Though there was lots to talk about, this week was a moderate week for economic data materially. The key was the inflation report in PPI which eased quite a bit, it pushed the market higher very briefly before falling down sharply. A slowdown in inflation should be great news for markets since it means the Fed’s rate hikes are having effects. So that brief downturn (and the sideways movement following the CPI) doesn’t make much sense to me, unless you believe inflation expectations were already baked in.

So I believe the movement was mainly a technical one as we rejected hard off the strong downtrend line. After pushing higher through the 50 day SMA last week (dark blue line), the market stalled at the convergence of the 200 day SMA (white line) and the downtrend. The market has failed to break above that line 5 times now.

Given how firmly that line has held, I believe a significant breakthrough above it will be needed before the beginning of the next longer-term uptrend. And next week could be the deciding week for that! Next week is the biggest week for earnings in this earnings season so far.

SPX open interest change for the past week was larger to the put site (call OI +3.0% and put OI +4.4%) as was the aggregate changes in exchange traded products (includes SPY, QQQ, DIA, etc.). This could be interpreted to be bearish. However, open interest participation as a whole is +19.2% greater than 2022 levels which may be bullish for the long term. VIX levels seem neutral in the near-term, however, the VIX IV Gap is lower is moderately bullish.

Price action through Wednesday should be mostly indicative of only earnings releases as there are no noteworthy economic reports through then and the indicators mentioned above are a bit mixed. Thursday brings us the first estimate of GDP for Q4 and durable goods orders for December, both of which can cause a market reaction. Then Friday does a one up and brings us the Core PCE reading for December and a sentiment report for January.

This PCE report is about the only item left that could affect the outcome of the next Fed rate hike, which I predict to be 0.25%, but those results would have to be extremely significant to even put a 0.50% rate hike on the table.

I’m thinking risk off continues into next week after a possible brief approach up to the downtrend line again followed by a rejection down. However, be ready flip sides if earnings beats are common next week as that may be push strong enough to break above. And if we break above its off to the races.

That’s it for my recap! If you would like to see how I am building my dividend portfolio using my predictions/strategy written here, you can read about my buys in my weekly portfolio update on this link.

And if you like updates like this, follow my Twitter or my CommonStock page where I post updates on the economic data throughout the week.

Regards,

Dividend Dollars

Categories
Earnings Economics Market Recap Market Update Stock Market

Stock Market Recap & Outlook (1/13/22) – CPI Report & Q4 Earnings Kicks Off

Apologies for missing the review last week, travel makes it hard! We are back and don’t have any more plans for a little while, so writing mode is fully engaged!

Anyways, this weekly market recap is brought to you by Koyfin, a powerful analytical tool that I am proud to partner with. Their platform is entirely customizable for whatever data you want to look at including stocks, ETFs, mutual funds, currencies, economic data releases (one of my personal favorites used often for these posts), crypto, and even transcripts of company events! Click the link above to get a special offer only for Dividend Dollar readers or go give my product review a read if you’re interested!

Weekly Review

The stock market decided to keep the heat on high for the second week of 2023. We logged decent gains on the basis that the Fed won’t have to raise rates as much as feared and that the U.S. economy may see a “soft landing” after all.

The first half of the week was a snooze-fest, as most traders were waiting for Fed Chair Powell’s speech on Tuesday, the December Consumer Price Index (CPI) on Thursday, and bank earnings reports on Friday that marked the official start to the Q4 earnings reporting season.

Fed Chair Powell gave a speech titled “Central Bank Independence” Tuesday morning. Powell’s speech made no mention of any kind of policy that would harm markets, he did, however, acknowledge that, “…restoring price stability when inflation is high can require measures that are not popular in the short term as we raise rates to slow the economy.”

The latter point notwithstanding, the S&P 500 was able to close above technical resistance at its 50-day moving average.

By Thursday’s open, the market had received the much anticipated CPI report. It was in-line with the market’s hopeful expectations that it would show continued disinflation in total CPI (from 7.1% year/year to 6.5%) and core CPI (from 6.0% year/year to 5.7%).

Those were pleasing headline numbers, but it is worth noting that services inflation, which the Fed watches closely, did not improve and rose to 7.5% year/year from 7.2% in November.

That understanding did not seem to hold back the stock or bond market. After a brief dip, the price action on Thursday generally supported the view that the Fed will pause its rate hikes sooner rather than later. In fact, the fed funds futures market now prices in a 67.0% probability of the target range for the fed funds rate peaking at 4.75-5.00% in May versus 55.2% a week ago, according to the CME FedWatch Tool.

The move up in the stock market was particularly notable considering the big move leading up to the CPI report. The S&P 500 was up 3.7% for the year entering Thursday and up 4.4% from its low of 3,802 on January 5.

Ahead of the open on Friday, the market gave back some gains and featured a series of mixed quarterly earnings from Bank of America ($BAC), JPMorgan Chase ($JPM), Wells Fargo ($WFC), and Citigroup ($C). Those stocks languished out of the gate due to higher-than-expected credit loss provisions. But true to form for 2023 so far, buyers returned and bought the weakness. Before long the bank stocks were back in positive territory and so was the broader market.

The S&P 500 moved above its 200-day moving average (3,981) on the rebound trade and closed the week a whisker shy of 4,000.

Only one of the S&P 500 sectors closed with a loss this week: consumer defensive (-0.74%) — while the heavily weighted consumer cyclical (+5.94%) and information technology (+5.58%) sectors logged the biggest gains.

The 2-yr Treasury note yield fell five basis points to 4.22% and the 10-yr note yield fell six basis points to 3.51%. The U.S. Dollar Index fell 1.6% this week to 102.18.

WTI crude oil futures made strides to the upside this week rising 8.5% to $80.06/bbl. Natural gas futures fell 4.8% to $3.23/mmbtu.

Dividend Dollars’ Opinion

That’s it for the recap. Now for my opinion!

As I mentioned in the last market update, after basing around the 3,825 level for a while, the next move was a significant one. I expected that dip buyers would step in with tax loss harvesting over, earnings season approaching, and the next rate hike still a few weeks away.

I said, “they could push the market higher for next week, or even the week after that” and that’s exactly what’s happened! The January Effect is in full swing. Last week I was correct in not expecting any major move in one direction or the other.

I predicted a short-term bounce before drawbacks are caused by possible earnings disappointments, the next rate hikes, and key economic data misses. We saw this week that two of those items are losing steam.

The CPI report showed that falling inflation is confirmed, but not overly impressive.

Then, the banks kicked off earnings. Even though they beat expectations, their results were a mixed bag. But weren’t enough to push the market lower. Many more key earnings are to come, but if the banks were any indication, this earnings season may not be the “make it or break it season”.

So far, 6% of companies in the S&P 500 have reported Q4 results with an 86% beat on EPS and 57% beat on revenue. The earnings so far show 4% growth on a year-over-year basis compared to a -4.1% estimated when Q4 ended. The season is still early, so let’s not extrapolate on these results too much. Rather, lets look at the technicals!

A lot has changed since the last time we did weekly update. The bear market low is still intact and 4,292 is the target for a new bull market to start. These two items are now -10% and +8% away from the current level.

For weeks I have been pointing out the resistance at the 50-day SMA (dark blue line) and the 100-day SMA (light blue line), the market finally broke above them. It did not take long for the next level, the 200-day SMA (white line), to come into play. Our last daily candle still encompasses the line, which is not yet a clean break. This line also converges with long-term downtrend area that began at the last all time high. The prior four failures at this level suggests it won’t be easy to break.

I think we have seen the short-term bounce that I last wrote about. This resistance we are heading into is the mother-of-all-resistance! Bargain buyers came in strong in the first two weeks of 2023, but steam may run out soon if earnings season disappoints and resistance proves heavy. I wouldn’t be surprised to see profit taking, and a red week next week, but I don’t believe we will fall under the 100 SMA now turned support.

That’s it for my recap! If you would like to see how I am building my dividend portfolio using my predictions/strategy written here, you can read about my buys in my weekly portfolio update on this link.

And if you like updates like this, follow my Twitter or my CommonStock page where I post updates on the economic data throughout the week.

Regards,

Dividend Dollars

Categories
Economics Market Recap Market Update Stock Market

Stock Market Week in Review (12/30/22) – 2022 End Without a Bang

This weekly market recap is brought to you by Koyfin, a powerful analytical tool that I am proud to partner with. Their platform is entirely customizable for whatever data you want to look at including stocks, ETFs, mutual funds, currencies, economic data releases (one of my personal favorites used often for these posts), crypto, and even transcripts of company events! Click the link above to get a special offer only for Dividend Dollar readers or go give my product review a read if you’re interested!

Weekly Review

The last week of 2022 shaped up to be a disappointing one, similar to the whole of the year. With all the major indices finishing the year off quite lower than where they started. The S&P 500 ended down 18.2%, The Nasdaq 100 ended down 33.6%, and the Dow Jones Industrials ended down 8.6% .

The Santa Clause Rally never really seemed to kick off and Q3 earnings season is now over, with the next not starting for about two more weeks.

The major indices remained under pressure from continued weakness in some of the most beaten-up names this year. Specifically, mega cap losses accelerated this week on lingering valuation concerns and presumably tax-loss selling activity by participants who bought into the seemingly invincible stocks last year.

Some of the mega cap names aren’t so “mega” any more given the massive loss in market capitalization they have suffered this year. The Vanguard Mega Cap Growth ETF $MGK fell  0.3% this week and 34.0% for the year.

The Santa Claus rally period, which is the last five trading days of the year and the first two trading sessions of the new year, has gotten off to an uneven start. It is believed to be a good sign for how the new year will start when this period produces a cumulative gain over that stretch. 2022 was a definite exception to that belief. Recall that the 2021 Santa Claus rally produced a net gain of 1.4% for the S&P 500 and yet the S&P 500 declined 5.3% this January and 5.0% in the first quarter.

It looked like Santa Claus might come charging to town following Thursday’s rally. The S&P 500 closed the session just a whisker below the 3,850 level, where it has remained since mid-December, but then backed off again in Friday’s trade.

When this year’s Santa Claus rally period began, the S&P 500 stood at 3,822.39. The S&P 500 closed Friday’s session at 3839.50 after visiting the 3,800 level.

It was also a disappointing week in the Treasury market. The 2-yr note yield rose 10 basis points to 4.42% and the 10-yr note yield rose 13 basis points to 3.88%.

The bump in yields was another headwind for equities, particularly the growth stocks, which was the case all year. The Russell 3000 Growth Index fell 0.3% this week, and 29.6% for the year, versus the Russell 3000 Value Index which rose 0.1% this week and fell 10.1% for the year.

Separately, Southwest Air $LUV was an individual story stock of note after the airline canceled thousands of flights due to the winter storm. Tesla $TSLA was another focal point, trading in roller-coaster fashion. The stock hit 108.76 at its low on Tuesday, leaving it down 69.0% for the year, but managed to rebound and hit a high of 124.48 in Friday’s trade.

Only 3 of the 11 S&P 500 sectors closed with a gain this week in thin trading conditions. The financials sector rose 0.74%, the energy sector rose 0.47%, aided by a bump in oil prices above $80.00/bbl, and the communication sector rose 0.40%. Meanwhile, the materials and consumer staples sectors were the worst performers with losses of 1.07% and 0.84%, respectively.

The economic calendar was light on major releases this week. Featured reports included the November Pending Home Sale Index, which declined 4.0%, and continuing jobless claims for the week ending December 17, which hit their highest level since February (1.710 million). Next week will see many major releases that includes the December ISM Manufacturing Index, the December Employment Situation Report, and the December ISM Non-Manufacturing Index.

Dividend Dollars’ Opinion

That’s it for the recap. Now for my opinion!

Last week I was correct in not expecting any major move in one direction or the other. The SPX ended only 6 points lower this week than where it ended last week!

It appears that the Bear Market level is being confirmed as a key level of resistance. And with all major moving averages above the that level, there is not much happening in form of support below our level.

We have been basing at this level for 8 days, which makes me think the next move in either direction will be a significant one.

With the next earnings season still two weeks away and the next rate hike still about four weeks away, the dip buyers are likely to step in again, now that the tax-loss harvesting season has ended. Most people like to buy things when they are on sale, and right now the SPX is 20% off.

Data releases on the ISM Index and Unemployment next week could be the items that have the largest impact.

January will be the month the watch for next year. Given the end of tax-loss harvesting and the fact that we are a few weeks away from key economic data releases and the next Fed hike, I think bargain buyers could push the market higher for next week, or even the week after that putting the January Effect in full swing.

The January Barometer also shows that January overall will be the month to watch. The barometer is: If the Standard & Poor’s 500 market index ends January higher than it started, the rest of the year will follow suit, and vice versa. the January Barometer has registered only 11 errors between 1950 and 2021, giving the indicator an accuracy ratio of 84.5%.

With all of that in mind, I think we see a short-term bounce before possible drawbacks caused by earnings disappointments, Fed hike, and other key economic data bring the market down to a lower level in January.

That’s it for my recap! If you would like to see how I am building my dividend portfolio using my predictions/strategy written here, you can read about my buys in my weekly portfolio update on this link.

And if you like updates like this, follow my Twitter or my CommonStock page where I post updates on the economic data throughout the week.

Regards,

Dividend Dollars

Categories
Economics Market Recap Market Update Stock Market Strategy

Stock Market Week in Review (12/23/22) – A Weak Week to Lead Us Into The “Santa Rally”

This weekly market recap is brought to you by Koyfin, a powerful analytical tool that I am proud to partner with. Their platform is entirely customizable for whatever data you want to look at including stocks, ETFs, mutual funds, currencies, economic data releases (one of my personal favorites used often for these posts), crypto, and even transcripts of company events! Click the link above to get a special offer only for Dividend Dollar readers or go give my product review a read if you’re interested!

Weekly Review

Well, this was a disappointing week, and one that solidifies the absence of a Santa Clause Rally to end the year. The S&P 500, which touched 4,100 last Tuesday, was drawn to the 3,800 level all week which proved to be a key support area.

With tax loss harvesting likely to be beginning and with sentiment falling over all due to 2023 earnings estimates feeling too high, the market was lower this week. Many analysts suggest downward earnings revisions in the coming weeks and months as the economic environment shifts.

The week started on a weaker note as the market digested a weaker-than-expected NAHB Housing Market Index report for December on Monday.

Treasury markets moved on a surprise policy change from the Bank of Japan (BOJ) on Tuesday. The BOJ announced a change to its yield curve control (YCC) policy to allow the 10-yr JGB yield to move +/- 50 basis points from 0.00% versus its prior band of +/- 25 basis points as part of an effort “to improve market functioning.”

This announcement, which came in conjunction with the BOJ’s decision to leave its benchmark rate unchanged at -0.1%, also caused some upheaval for the Nikkei (-2.5%) on Tuesday and the currency market in addition to sovereign bond markets. The yen surged as much as 4.0% against the dollar.

The Market also had to deal with some disappointing housing data before Tuesday’s open, namely an 11.2% month-over-month decline in November building permits (a leading indicator) to a seasonally adjusted annual rate of 1.342 million (consensus 1.480 million).

The S&P 500 dropped below 3,800, scraping 3,795 at Tuesday’s low before buyers showed up for a small rebound effort that ultimately left the main indices with modest gains. At this point, the indices were in a short-term oversold position. At their lows Tuesday morning, the Nasdaq Composite and S&P 500 were down 9.7% and 7.5%, respectively, from their highs last week. That oversold posture triggered some speculative buying interest in a bounce.

Things really took off Wednesday when some well-received earnings reports from Dow component Nike ($NKE) and leading transport company FedEx ($FDX) triggered some decent buying interest.

The market also got some better-than-expected consumer confidence data for December, which was another support factor for the broader market. That report overshadowed a weaker than expected existing home sales report for November that was released at the same time.

Unfortunately, the rebound move soured promptly on Thursday following some disappointing earnings results and commentary from Micron ($MU) and CarMax ($KMX), a sour Leading Economic Indicators report, and some cautious-sounding remarks from influential hedge fund manager David Tepper say he is ‘leaning short’ on the stock market.

He expects the Fed and other central banks to keep tightening and for rates to remain high for a while, making it “difficult for things to go up.” His comments resonated with market participants who recalled the hugely successful “Tepper Bottom” call he made in March 2009.

The resulting retreat was broad in nature with the major indices moving noticeably lower right out of the gate, dealing as well with rate hike concerns after the third estimate for Q3 GDP showed an upward revision to 3.2% from 2.9%. The Nasdaq, S&P 500, and Dow were down 3.7%, 2.9%, and 2.4%, respectively, at Thursday’s lows.

The S&P 500 was stuck below the 3,800 level and Tuesday’s low (3,795) for most of the session before the main indices managed to regain some of their losses in the afternoon trade. There was no specific news catalyst to account for the bounce, possibly just speculative bargain hunting.

Friday’s session also started on a downbeat note after the November Personal Income and Spending Report showed no growth in real spending and PCE and core-PCE inflation rates that are still too high on a year-over-year basis (5.5% and 4.7%, respectively) for the Fed’s liking.

This report meshed with a Durable Goods Orders Report for November that was weaker than expected and was subsequently followed by economic data that showed new home sales were stronger than expected in November and that easing inflation pressures helped boost consumer sentiment in December.

Once again, the S&P 500 slipped below the 3,800 level, but soon found support as the new home sales and consumer sentiment data bolstered investor sentiment and spurred some bargain hunting interest. The major indices finished modestly higher on Friday, taking a positive first step during the Santa Claus rally period (last five trading days of the year plus the first two trading sessions of the new year).

Separately, the week concluded with the House passing the $1.7 trillion government funding bill after the Senate passed it, leaving it to be signed by the president early next week.

Overall, sector performance was mixed this week with 6 of the 11 sectors in the S&P ending green. Energy, financials, utilities, and a few others finished higher. The weakest links were consumer discretionary and technology which were dragged down by their mega cap components.

Dividend Dollars’ Opinion

That’s it for the recap. Now for my opinion!

Last week I was half-way right in expecting a near term bounce, however I was not expecting it to only last two days (Tuesday and Wednesday). We broke back under the bear market line and stayed there Thursday through Friday.

This here is the key to me. We are under all major moving averages AND the bear market line. There is significantly more resistance than there is support.

Next week, the 3,800 level will be key. We found substantial support at that level as everything under it was just a long wick. There are no major economic releases next week, which make me think we won’t see any crazy catalytic moves in one direction or the other.

We have some claims and housing reports, but that’s about all that’s worth watching, domestically that is. China and Japan have some releases that could bleed over into the US market.

With that, I will just reiterate what I said last week: “With the next earnings season on the way, Fed commentary continuing to spark volatility, and mixed economic data, the next move is anybody’s guess. I think a near-term bounce is likely with more downside to follow after the new year. Then, January will be the month to watch as history shows that it sets the market’s mood for the rest of the year.”

I think the action we saw on Tuesday and Wednesday very well could be the bounce, leaving more downside as my expectation. There are no huge economic releases next week, the Santa Rally so far has been week, therefore I think next week will be red mostly off of tax-loss harvesting.

However, if we open significantly higher in the earlier days of next week, I could see buyers coming in heavy off of the hopes of a strong Santa Rally to push us up through the end of the year. I think this scenario is less likely.

I would love to see more red next week so that I can buy more discounted stocks like I did this week. You can read about my buys in my weekly portfolio update here.

And if you like updates like this, follow my Twitter or my CommonStock page where I post updates on the economic data throughout the week.

Regards,

Dividend Dollars

Categories
Earnings Economics Market Recap Stock Market

Stock Market Week in Review (12/9/22) – This Week’s PMI and Next Week’s CPI

This weekly market recap is brought to you by Koyfin, a powerful analytical tool that I am proud to partner with. Their platform is entirely customizable for whatever data you want to look at including stocks, ETFs, mutual funds, currencies, economic data releases (one of my personal favorites used often for these posts), crypto, and even transcripts of company events! Click the link above to get a special offer only for Dividend Dollar readers or go give my product review a read if you’re interested!

Weekly Review

It was a trend-down week for the stock market after the quick run we experienced in the end of last week. At the start of the week, the S&P 500 was up over 10% for the quarter, the Dow Jones Industrial average was up over 18%, the NASDAQ composite was up over 6%, and the Russel 2000 was up over 11%

These gains have primarily been predicated on the notion that the Fed may soften its approach, a view that was presumably aided by Fed Chair Powell’s speech last week at the Brookings Institute.

This optimism was cooled this week as concerns resurfaced that the Fed might overtighten and trigger a period of much weaker growth or even recession. The main sticking point for the stock market is that a weaker growth outlook does not bode well for 2023 earnings.

A stronger-than-expected ISM Non-Manufacturing Index for November (56.5% vs 54.4% prior and a 53.3% expectation) also supported the idea that the Fed may rise rates higher and hold them there for longer.

Going into the historically strong “Santa Rally” month, this week was a disappointing start. The S&P 500 had the worst start to a month (five consecutive losses) since 2011.

Concerns that the Fed is going to trigger a deeper economic setback have been evident in the Treasury market for some time now. An inversion of the yield curve, which deepened this week, has often been a leading indicator of a recession. The 2s10s spread is now the widest it has been since the early 1980s. The 2-yr note yield rose to 4.37% and the 10-yr note yield rose to 3.63%.

Those growth concerns started to register more noticeably for the stock market this week. All 11 S&P 500 sectors lost ground, but the slimmest losses were registered by the counter-cyclical utilities, health care, and consumer staples sectors. The sharpest losses were logged by the energy, communication services, and consumer discretionary sectors.

Collapsing oil prices were another manifestation of the market’s growth concerns. WTI crude oil futures fell 10.8% this week to $71.29/bbl despite reports that China is easing up on zero-COVID related policies.

There was some economic data that reflected a welcome moderation in wage-based inflation. The revised Q3 Productivity Report showed a softer 2.4% increase in unit labor costs than the preliminary estimate of 3.5%. Stocks did not rally on the data, though.

The role of wage based inflation in the Fed’s policy decisions was highlighted this week by an article in The Wall Street Journal from Nick Timiraos, who some believe is the Fed’s preferred journalist for providing breaking information. Mr. Timiraos suggested that wage inflation could ultimately compel the Fed in 2023 to take its benchmark rate higher than the 5.00% the market currently expects.

In other news this week, the FTC is seeking to block Microsoft’s ($MSFT) acquisition of Activision Blizzard ($ATVI).

Looking ahead to next week, the market will be focused on the November Consumer Price Index (CPI) on Tuesday after the Producer Price Index (PPI) for November came in high this Friday. Then the FOMC decision and release of updated economic projections follows on Wednesday and could very well provide a volatile market for the week.

Dividend Dollars’ Opinion

That’s it for the recap. Now for my opinion!

Last week we had a clean rejection off of the major trendline on Monday, fell to the 100-day simple moving average on Tuesday, bounced a bit on Thursday, and fell back down to the 100 SMA on Friday.

This 100-day SMA has been triple-confirmed as support (small white arrows below) and will now be tested again this next week. Resistance at the 200-day SMA proved to work again this week. SPX ran into resistance at the 200-day SMA in August and couldn’t hold over it Monday morning.

Right now, the market is in a little bit of straddle under the 200SMA and the 100SMA. Break over the 200SMA and bulls could have a hayday until the meet the trendline again for the next task. Break under the 100SMA and bears could see a quick drop to 3,815 area as a gap fill.

Last week did not show much strength for buyers, so I think breaking down or hugging onto the 100SMA is a more likely path.

Economic events next week could bring huge momentum into the market in either direction depending on how they play out.

On Monday we have the treasury budget which shouldn’t be too significant. If anything, Monday price action will be fairly uneventful as the market awaits the CPI reading on Tuesday. If the CPI comes in higher than expected, the market could drop fast. If CPI comes in better than expected, investors will still wait for the FOMC rate decision on Wednesday to truly bring in heavy buying power.

Wednesday will be the key to next week. As we get closer to the Fed Funds target rate with each rate hike, the subsequent rate hikes become more and more important as clues to tell us if the Fed over or undershot. The market expects a 50-bps hike on Wednesday, if we see higher or low expect volatility.

Then, Thursday will bring us retail data which will give input on the state of the consumer. All of these big items together will make next week one to remember (and be cautious of).

Add to that, next week is also the last week of earnings season with a couple of big tech names ($ADBE and $ORCL) reporting. Q3 earnings, from the 497 S&P 500 companies that have reported so far, have a 59% beat of the top line and 69% beat of the bottom line. This was 63% and 76% last quarter, respectively.

Big misses by the earnings next week could enhance any downward moves that are predicated by the economic events. Any surprises won’t carry much weight into what appears to be a very bearish week next week.

What’s more important is drop in earnings beats from last quarter. This is a clear sign that the Fed driven growth slow down is occurring. Expect more lack luster earnings seasons, and to greater degrees, while we stay in this high-rate environment.

Overall, next week’s performance lies greatly with the CPI and Fed rate change. Those things are tough to predict, therefore, outside of those events and looking only at technicals, I think next week is a red one. But only time will tell! Be ready either way!

I was ready for the move down last week and made some favorable adds to my portfolio. You can read about these moves in my weekly portfolio update here.

And if you like updates like this, follow my Twitter or my CommonStock page where I post updates on the economic data throughout the week.

Regards,

Dividend Dollars

Categories
Economics Market Recap

Stock Market Week in Review (11/25/22) – Thanksgiving & FOMC

This weekly market recap is brought to you by Koyfin, a powerful analytical tool that I am proud to partner with. Their platform is entirely customizable for whatever data you want to look at including stocks, ETFs, mutual funds, currencies, economic data releases (one of my personal favorites used often for these posts), crypto, and even transcripts of company events! Click the link above to get a special offer only for Dividend Dollar readers or go give my product review a read if you’re interested!

Weekly Review

Despite the low volume from this holiday week, the markets were still able to extend their green streak. Thanksgiving week has averaged 0.6% returns since 1945, so this was not uncommon.

The seasonality helped to offset the market’s ongoing growth concerns which may prove to be exacerbated going forward with China re-engaging in COVID-related measures.

China confirmed their first COVID-related death in six months. New lockdown measures have been reported in Beijing.

Ignoring seasonality, the upside this week was encouraged by better-than-expected earnings from retailers like Best Buy ($BBY), and Abercrombie ($ANF) as well as some tech names like Dell ($DELL) and Analog Devices ($ADI). Deere ($DE) the farm equipment company also was among the more notable earning reports this week.

Disney ($DIS) was also a winner this week off of the news that CEO Bob Chapek stepped down with former CEO Bob Iger reclaiming the roll for two years.

Like earnings, some economic reports were better than expected this week. The October Durable Goods Orders, October Home Sales, and the November University of Michigan Index of Consumer Sentiment read well. On the other hand, Weekly Initial Claims and Preliminary November IHS Markit Manufacturing and Services PMIs were worse than expected.

The FOMC minutes for the November 1-2 meeting was revealed on Wednesday. The report showed that “a substantial majority of participants judged that a slowing in the pace of increase would likely soon be appropriate.” This supports the market’s notion that the Fed is likely to raise rates by 50 basis points in December rather than a 75-point hike. Before the minutes were released, the CME Fedwatch Tool showed an 80% chance that the next hike is for 50 basis points.

All 11 sectors of the S&P closed with a gain this week. Materials and Utilities making the largest gains while energy showed the thinnest gain.

Dividend Dollars’ Opinion

That’s it for the recap. Now for my opinion!

As I stated last week, due to positive seasonality the S&P could push above the 200-day EMA. I also stated that volume would be low, so if it pushed higher, it would be slow. And that’s exactly what happened this week.

We barely broke above and held the 200-day EMA this week, and that was with low volume. That makes me think there’s not much strength behind it.

However, this seasonality could continue through the end of the year. I wouldn’t be surprised if we see a gap fill to the $4,080 area or even test the trend line drawn down from the ATH in January.

But after that, it could be anybody’s guess.

Over the medium term, I am bearish. I think that inflation is still a larger problem than the market anticipates. We have seen the market move higher on “better-than-expected” inflation readings where inflation is still over 7% and CPI has yet to peak.

The Fed may lessen the size of the rate hikes, but we are a long way away from ever having rates decreased. Till then, the market is at risk of entering a very serious recession.

The Fed is trying to engineer a soft-landing and so farthey have done a great job of it.

However, the longer rates stay high, the closer we may get to seeing the Fed’s planned economic slow down go too far. GDP, employment, real incomes, etc. These things will start to waiver, earnings will start to miss, and the market will start to look quite overbought at these levels which will kick off some serious selling and capitulation.

Recession indicators such as GDP forecasts, yield curve inversion, falling PMI, and tightening lending standards suggest it is more likely to go that route rather than the preferred soft-landing.

Because of this, I am short with positions in $SDS and $SPXS and am holding more cash than normal. The short is only 1.3% of my portfolio and the cash is 7.1%. I’ll be adding to this short and cash position through to the end of the year if we remain trending up.

I will be writing a portfolio update later this weekend, so stay tuned for that in order to read more about my positions and plans.

And if you like updates like this, follow my Twitter or my CommonStock page where I post updates on the economic data throughout the week.

Regards,

Dividend Dollars

Categories
Economics Market Recap Stock Market

Stock Market Week in Review – 9/9/22

This weekly market recap is brought to you by Sharesight, a portfolio tracking tool that I am happy to partner with. Their platform makes tracking trading and dividend history, understanding your performance, and saving time a breeze. Click the link above to get a special offer only for Dividend Dollar readers!

Weekly Review

Hope everyone had a great Labor Day! The shortened week in the market made it feel as if stocks had something to prove after having the extended weekend to think about their 3-week losing streak. Tuesday looked as if that streak was going to continue, however sentiment turned and powered a strong move through the rest of the week. Both the S&P and Nasdaq ended the week back above their 50-day moving averages.

What’s even more impressive is that the market continued to push higher this week, regardless of the spattering of news headlines which could’ve had more adverse effects than they did. China extended its lockdown of Chengdu, Russia claimed that the shutdown of the Nord Stream 1 pipeline could be long term and pointed blame to western sanctions, a handful of large reserve banks announced aggressive rate hikes, and the Fed and other officials continued to emphasize the need to fight inflation.

The market was immune to bad news this week! It also pushed higher despite a jump in market rates, volatile foreign exchange movements, and a Wall Street Journal report that predicts a 75-basis point rate hick at the next FOMC meeting.

Still, stocks stayed strong under the weight of rising rates and press that confirms it. The market’s bullishness even seemed to become its own self-fulfilling catalyst as a sign that the market had already priced in the next rate hike.

What’s especially odd, is that the market was particularly bearish on Tuesday but quickly turned that around. The American Association of Individual Investors Survey showed unusually low bullish sentiment and unusually high bearish sentiment. Bearish sentiment among investors hit 53.3% versus a historical average of 30.5%. Bullish sentiment fell to 18.1% versus an average of 38%. Those readings and their widespread must’ve been taken as contrarian indicator to buy/swing trade beaten up stocks. The view that the market was in an oversold condition sparked some bargain buying efforts that picked up pace later in the week.

Mega-caps led this week. The Vanguard Mega-Cap 300 Growth ETF ($MGK) jumped 3.99% this week. All 11 S&P 500 sectors made gains for the week, 8 of them making at least +3.2%. With the market’s strength this week, the CBOE Volatility Index fell 10.5%.

Next week’s data releases could prove to be significant if strength can’t carry through from this week. We have the next CPI reading which could give further insight into the next Fed action, a sentiment reading, and retail sales.

I personally think this rally may continue for another week or so, but I am still of the longer term bearish mindset. Maybe I am just biasedly a pessimist because I would love to be able to keep buying dividend stocks on deep discount! I tried to do that this week with my buys in Intel $INTC, $SCHD, and a few others you can read about in the portfolio update here.

Regards,

Dividend Dollars

Categories
Economics Market Recap

Stock Market Week in Review – 9/2/22

This weekly market recap is brought to you by Sharesight, a portfolio tracking tool that I am happy to partner with. Their platform makes tracking trading and dividend history, understanding your performance, and saving time a breeze. Click the link above to get a special offer only for Dividend Dollar readers!

Weekly Review

Sorry for missing my articles last week! I was away in Vegas for a long bachelor party weekend, and by the time I was back home I didn’t see the value in writing my regular weekly articles for you guys. Sorry for the lack of heads up, but I am back now and ready to rumble! And boy was it a fun week to come back to!

This week included the end of August and the beginning of September, which is historically the worst month for the stock market. Stocks sold off on Monday, Tuesday, and Wednesday which had the S&P close down -4.2% for the month of August. The Nasdaq was also down those three days and lost -4.6% for the month. Thursday was a little better for the indexes, except NASDAQ which extended its losing streak to 5 days that day. That streak went to 6 days on Friday after some concerning Nord Stream 1 news undercut a possible rebound that was being pushed following the August jobs report.

The August jobs report, though weaker than July’s, was not weak per se. 315,000 jobs were added to nonfarm payrolls, average hourly earnings were up 5.2% year-over-year, and the unemployment rose 0.2%. Regardless of the numbers, there was a belief after the report that it could compel the Fed to begin to be less aggressive with their rate hike at its next September meeting. The Nord Stream 1 news that put a damper on that positivity was a report that Gazprom is going to keep the pipeline shut down due to a technical issue that involves an oil leak. There is no indication of when it will be reopened. This decision came after G7 members agreed to put a price cap on Russian oil exports.

This news brought the week further down, with all of indexes ending the week with loses over -3.0% for the third straight losing week. The catalyst for a lot of the selling interest was a fear of the Fed that carried over from Powell’s stern policy speech in Jackson Hole. The Cleveland Fed President Mester heightened the market’s response with an acknowledgement that she thinks the fed funds rate should be above 4.00% by early next year with no indication of 2023 rate cut. This was a reality check for the market. The Fed’s focus is on fighting inflation with rising interest rates and reducing its balance sheet, this approach slows economic growth and diminishes earnings, putting the Fed’s goals and the market’s goals in conflict.

That understanding has created a sell into strength mindset in the market, which was evident this week along with rising treasury yields and a strong dollar. Growth concerns were evident this week. Copper futures fell almost 8% and oil futures fell 6.4%. This was driven by lower demand concerns that occurred after the Chinese city Chengdu was locked down for Covid-19 reasons. Accordingly, the materials sector was the worst performing sector this week at -5.0% with information technology also at -5.0%. The latter was hurt by losses in mega-cap semiconductor stocks which flushed after news announced a governmental restriction on chip sales to China. The Philadelphia Semiconductor Index fell 7.1%.

Next week is very scarce on the data release front, except for the ISM Services PMI.

As for the way the markets have been moving, my prior bearishness is looking to come to fruition. It is looking like there is still more room to go down as the Fed continues to stand by its hawkish approach and data is beginning to show the slowing effects of that. I think the market has some room to move down and stay down for a decent period of time. Maybe I am just biasedly a pessimist because I would love to be able to keep buying dividend stocks on deep discount! I tried to do that this week with my buys in Bank of America ($BAC), Electronic Arts ($EA), and a few others you can read about in the portfolio update here.

Regards,

Dividend Dollars

Categories
Economics Market Recap

Dividend Portfolio: 9/2/2022 Week in Review

Welcome back to the weekly Dividend Dollars portfolio review! Sorry for my absence last week, I was away in Vegas for an extended bachelor party weekend! I lost all of my money so here I am again, back to the grind. Just kidding I didn’t lose much, but am grinding nonetheless!

This portfolio update is brought to you by Sharesight, a portfolio tracking tool that I am happy to partner with. Their platform makes tracking trading and dividend history, understanding your performance, and saving time a breeze. Click the link above to get a special offer only for Dividend Dollar readers!

Here at Dividend Dollars, our investing approach is a dividend growth strategy with aspects of value investing and fundamental analysis. I am a young investor in my 20’s and by sticking to this strategy over the long term, the magical powers of compounding are on my side. This allows me to more easily build substantial positions in dividend paying stocks over time, which will one day help me reach the ultimate goal of being financially free through the sources of passive income they provide. You can read more about the strategy here. Let’s dive into the portfolio review!

Portfolio Value

To date, I have invested $11,050 into the account the total value of all positions plus any cash on hand is $10,540. That’s a total loss of -4.62% The account is down $310.76 for the week which is a -2.86% loss.

We started building this portfolio on 9/24/2021 and, even with this rough last week, when compared to the S&P 500 we are outperforming the market so far! Within that same timeframe, the S&P 500 is down -11.92% whereas our portfolio is down -4.62%! I love tracking my portfolio against a benchmark like the S&P. The above chart comes from Sharesight which makes portfolio and dividend management a breeze!

We added $250 in cash to the account over the last two weeks.

Portfolio

Above is a dashboard of the portfolio that tracks annual dividend income, yield, beta, dividend growth, and more.

Below is a table of everything we are invested in so far. There you can see my number of shares, shares bought through dividend reinvestments, average cost, gains, and more. The tickers in green are positions that I bought shares in this week and the blue ones are positions that I reinvested dividends into. The moves that we made over the last two weeks increased our annual dividend income by $8 at a yield of 4.54%.

Dividends

For the last two weeks we received $13.78 from five dividends: $2.29 from $SMHB, $2.47 from Starbucks ($SBUX), $1.01 from Aflac ($AFL), $5.88 from Intel ($INTC), and $2.14 from Cummins ($CMI).

In my portfolio, all positions have dividend reinvestment enabled. I don’t hold onto the dividend, I don’t try to time the reinvestment, I just let my broker do it automatically.

Dividends received for 2022: $237.97

Portfolio’s Lifetime Dividends: $255.90

Trades

Below is a breakdown of my trades this week!

  • August 22nd
    • $SCHD – added 0.131787 shares at $75.88 ($10 recurring investment)
    • $SPY – added 0.024166 shares at $413.80 ($10 recurring investment)
    • $XYLG – added 0.367175 shares at $27.24 ($10 recurring investment)
    • $SMHB – dividend reinvested
  • August 23rd
    • $BAC – added 0.8 shares at $34.46
  • August 24th
    • $EA – added 1 share at $126.41
  • August 26th
    • $SBUX – dividend reinvested
  • August 29th
    • $SCHD – added 0.134848 shares at $74.16 ($10 recurring investment)
    • $SPY – added 0.024707 shares at $404.74 ($10 recurring investment)
    • $XYLG – added 0.374133 shares at $26.73 ($10 recurring investment)
  • August 30th
    • $XYLG – dividend reinvested
  • August 31st
    • $O – added 0.5 shares at $68.60
  • September 1st
    • $INTC – dividend reinvested
    • $CMI – dividend reinvested
    • $AFL – dividend reinvested
  • September 2nd
    • $SMHB – added 0.5 shares at $8.60

Next week I will continue to add $10 into each ETF ($SPY, $XYLG, and $SCHD) and will look at deploying the rest of the money either into $MO or $BBY for the upcoming ex-dividend date.

Summary

That is it for the update this week. Let’s kill it next week. Stay patient and be ready to buy income producing assets at a discount!

Read the weekly market review to get a recap of the week and what economic events are coming in order to help arm yourself with a strategy for your future buys!

Let me know what you think of the progress so far, share with me your progress and questions, interact with me on twitter and Instagram using the links below!

Thank you for reading! See you next week and stay safe!

Regards,

Dividend Dollars

Categories
Economics Market Recap

Stock Market Week in Review – 8/5/22

The first week of August ended green for the stock market, carrying forward with the positive mindset that shown throughout July. The week started slowly. There were assumptions that the market was facing selling pressure after the big move in July, however that assumption did not hold through in the end of the week. The selling slump was overcome on Wednesday and paved the way for a winning week.

The week started poorly coinciding with the weak ISM Manufacturing Index report for July, a drop in oil prices on demand concerns, and Pelosi’s visit to Taiwan on Tuesday. China’s actual response to the visit paled in comparison to what they had expressed beforehand. On Friday, China announced that they would be sanctioning Pelosi and her family and cut back on cooperation with the US on certain matters like climate change initiatives.

The lack of a more severe consequence and OPEC announcement of more output were the catalysts for the rally on Wednesday and beyond. WTI crude prices fell below $90 this week and settled just under $89 on Friday. This move undercut the energy sector which was the worst performing sector this week with a 6.8% decline. The best sectors were information technology, consumer discretionary, and communication services.

The rally of mega-cap stocks brought widespread support to the indexes this week, evident in the performance of the Vanguard Mega-Cap Growth ETF ($MGK). It gained 1.8% this week versus a 0.4% gain for the S&P. This shows the continued outperformance of the growth stocks and indexes.

The week also had some flair with some major short squeezes in several stocks and AMTD Digital ($HKD) went from $13.00 per share on July 15th to $2,555.30 at its highest on Tuesday. There was no news behind this move.

Earnings continued this week, but it seemed like less eyes were homed in on them. They generally had better-than-feared results. Unlike the prior weeks, economic news seemed to be more important than earnings as seen with the July employment numbers. Non-farm payrolls increased by 528,000, hour earnings were up 5.2% year-over-year, and unemployment fell to 3.5%. The takeaway here was that the fed can turn friendly with their policy decisions sooner rather than later.

The Treasury market embodied this with 2-year yield increasing 33 basis points this week and the 10-year moving 20 basis points. Most of this movement came after the release of the jobs data. Initially, the market was worried by the report and the move in rates with the logic being that if jobs are so strong the Fed can continue to be aggressive on policies if needed. However, that school of thought was traded for the alternative friendlier Fed that was mentioned earlier.

There are two possible outcomes regarding the Fed. The continued strength of the job market shows that the economy can handle the Fed’s rate hikes without putting us into “hard landing” territory. The other take is that employment is a lagging indicator and given the lag effect of the rate increases, there will be much weaker numbers in the coming months that will motivate a shift in policy sooner rather than later.

I, personally, think the latter situation makes more since. However, I have been saying that in these recaps for weeks now and keep getting proved wrong! It’s hard to say what the ultimate driver of market sentiment has been for these past few weeks. Lack of factors is irrelevant though, because the market is standing its ground with its third straight winning week this week.

Next week we have CPI measures, a new consumer sentiment reading, and retail data, most of which are forecasted to improve. Overall, next week has a small calendar, but if these three items report well we could be heading for another green week!

My bearishness on the last week was incorrect. I’m also beginning to change my mindset with the market. Over the long term, I am still bearish as I believe the Feds rate hikes take a good amount of time before their effects are felt, let alone reported in data. However, in the short term, data and sentiment are trending in the right direction and it looks like we are set up for a good week next week.

Maybe I’ve just been spoiled by buying so many cheap dividend stocks in this market that I want things to stay bearish! Regardless of the way things move, we will buy structurally sound companies that pay safe dividends and have a promising future. We did this last week with some buys in $INTC and $CMCSA to name a few. Read the portfolio update here.

Regards,

Dividend Dollars