The former bond king doesn’t like the fixed-income security that’s the lynchpin of the financial world.
Bill Gross, the retired fund manager and co-founder of Pacific Investment Management, took to the social-media service X to say that the 10-year Treasury
BX:TMUBMUSD10Y
is “overvalued” with a yield of 4%. Yields move in the opposite direction to prices.
Through Monday, the yield on the 10-year Treasury has fallen 99 basis points from its late October peak.
He said the 10-year Treasury inflation-protected yield at 1.80% is the better choice. “If you need to buy bonds. I don’t,” said Gross.
Gross also continued to talk of his idea to go long 2-year bonds
BX:TMUBMUSD02Y
while shorting the 10-year. “Stick with the return to a positive 10 year/2 year yield curve. Earns carry while you wait,” he said. In previous posts, he talked of making such trades via Treasury futures contracts.
Gross said he was taking a bow for his recommendation of regional bank stocks six months ago and mortgage REITs in December. The SPDR S&P Regional Banking ETF
KRE
has climbed 49% from its May 4 low, and the iShares Mortgage Real Estate ETF
REM
has gained 21% from its late October low. Gross in November highlighted Annaly Capital Management
NLY,
and AGNC Investment Corp.
AGNC,
as mortgage REITs he likes for 2024.
Gross said he still likes Capri Holdings
CPRI,
as a merger arbitrage target. Tapestry
TPR,
in August agreed to buy Capri for $57 per share, and on Monday, Capri closed at $50.49.
Media tycoon Shari Redstone is in talks to sell controlling interesting in Paramount parent National Amusements to media and entertainment company Skydance, Puck and the New York Times reported Sunday.
On Friday, shares of Paramount Global Inc. rallied 13% after Deadline reported Skydance and private-equity firm RedBird Capital were kicking the tires on National Amusement, which has a 77% stake in Paramount.
According to the Times, Redstone — the daughter of late Paramount CEO Sumner Redstone — has held talks with Skydance in recent weeks, though the Times said it was unclear if a deal would be reached.
Skydance, which is led by David Ellison, son of Oracle founder Larry Ellison, is one of Hollywood’s top independent studios, and has produced Paramount blockbusters such as “Mission: Impossible — Dead Reckoning” and “Top Gun: Maverick.” RedBird is a financial backer of Skydance.
A sale would be a major reversal for Redstone, who waged a bitter battle for control of the company in 2016, and who later led the effort to merge CBS Corp. and Viacom, which led to the creation of the current Paramount Global.
Deadline had reported that Skydance would be more interested in Paramount’s IP and movie studio, and could look to sell its TV assets, including CBS.
A deal could signal the start of a major shakeup across the media industry, as traditional TV companies are struggling to make money in the streaming age. Comcast Corp.
CMCSA,
which owns NBCUniversal, could be looking to expand, while Warner Bros. Discovery
WBD,
could be a potential seller. Disney
DIS,
CEO Bob Iger recently floated the idea of selling ABC, but quickly walked that back.
Paramount Global shares
PARA,
have surged nearly 40% in the past month, but are still about flat year to date.
Two things investors can be sure about: Nothing lasts forever and the stock market always overreacts. The spiking of yields on long-term U.S. Treasury securities has been breathtaking, and it has led to remarkable declines for some sectors and possible bargains for contrarian investors who can commit for the long term.
First we will show how the sectors of the S&P 500
have performed. Then we will look at price-to-earnings valuations for the sectors and compare them to long-term averages. Then we will screen the entire index for companies trading below their long-term forward P/E valuation averages and narrow the list to companies most favored by analysts.
Here are total returns, with dividends reinvested, for the 11 sectors of the S&P 500, with broad indexes below. The sectors are sorted by ascending total returns this year through Monday.
| Sector or index | 2023 return | 2022 return | Return since end of 2021 | 1 week return | 1 month return |
| Utilities | -18.4% | 1.6% | -17.2% | -11.1% | -9.6% |
| Real Estate | -7.1% | -26.1% | -31.4% | -3.0% | -8.8% |
| Consumer Staples | -5.4% | -0.6% | -6.0% | -2.2% | -4.4% |
| Healthcare | -4.2% | -2.0% | -6.1% | -1.7% | -3.3% |
| Financials | -2.5% | -10.5% | -12.7% | -2.5% | -4.7% |
| Materials | 1.3% | -12.3% | -11.2% | -1.9% | -7.0% |
| Industrials | 3.5% | -5.5% | -2.1% | -1.8% | -7.3% |
| Energy | 4.0% | 65.7% | 72.4% | -1.9% | -1.4% |
| Consumer Discretionary | 27.0% | -37.0% | -20.0% | -0.6% | -5.2% |
| Information Technology | 36.5% | -28.2% | -2.0% | 0.8% | -5.9% |
| Communication Services | 42.5% | -39.9% | -14.3% | 1.1% | -1.3% |
|
S&P 500 |
13.1% | -18.1% | -7.4% | -1.1% | -4.9% |
|
DJ Industrial Average |
2.5% | -6.9% | -4.5% | -1.7% | -4.0% |
|
Nasdaq Composite Index COMP |
28.0% | -32.5% | -13.7% | 0.3% | -5.1% |
|
Nasdaq-100 Index |
36.5% | -32.4% | -7.7% | 0.5% | -4.2% |
| Source: FactSet | |||||
Returns for 2022 are also included, along with those since the end of 2021. Last year’s weakest sector, communications services, has been this year’s strongest performer. This sector includes Alphabet Inc.
GOOGL
and Meta Platforms Inc.
META,
which have returned 52% and 155% this year, respectively, but are still down since the end of 2021. To the right are returns for the past week and month through Monday.
On Monday, the S&P 500 Utilities sector had its worst one-day performance since 2020, with a 4.7% decline. Investors were reacting to the jump in long-term interest rates.
Here is a link to the U.S. Treasury Department’s summary of the daily yield curve across maturities for Treasury securities.
The yield on 10-year U.S. Treasury notes
jumped 10 basis points in only one day to 4.69% on Monday. A month earlier the 10-year yield was only 4.27%. Also on Monday, the yield on 20-year Treasury bonds
rose to 5.00% from 4.92% on Friday. It was up from 4.56% a month earlier.
Market Extra: Bond investors feel the heat as popular fixed-income ETF suffers lowest close since 2007
The Treasury yield curve is still inverted, with 3-month T-bills
yielding 5.62% on Monday, but that was up only slightly from a month earlier. An inverted yield curve has traditionally signaled that bond investors expect a recession within a year and a lowering of interest rates by the Federal Reserve. Demand for bonds pushes their prices down. But the reverse has happened over recent days, with the selling of longer-term Treasury securities pushing yields up rapidly.
Another way to illustrate the phenomenon is to look at how the Federal Reserve has shifted the U.S. money supply. Odeon Capital analyst Dick Bove wrote in a note to clients on Friday that “the Federal Reserve has not deviated from its policy to defeat inflation by tightening monetary policy,” as it has shrunk its balance sheet (mostly Treasury securities) to $8.1 trillion from $9 trillion in March 2022. He added: “The M2 money supply was $21.8 trillion in March 2022; today it is $20.8 trillion. You cannot get tighter than these numbers indicate.”
Then on Tuesday, Bove illustrated the Fed’s tightening and the movement of the 10-year yield with two charts:
Bove said he believes the bond market has gotten it wrong, with the inverted yield curve reflecting expectations of rate cuts next year. If he is correct, investors can expect longer-term yields to keep shooting up and a normalization of the yield curve.
This has set up a brutal environment for utility stocks, which are typically desired by investors who are seeking dividend income. In a market in which you can receive a yield of 5.5% with little risk over the short term, and in which you can lock in a long-term yield of about 5%, why take a risk in the stock market? And if you believe that the core inflation rate of 3.7% makes a 5% yield seem paltry, keep in mind that not all investors think the same way. Many worry less about the inflation rate because large components of official inflation calculations, such as home prices and car prices, don’t affect everyone every year.
We cannot know when this current selloff of longer-term bonds will end, or how much of an effect it will have on the stock market. But sharp declines in the stock market can set up attractive price points for investors looking to go in for the long haul.
A combination of rising earnings estimates and price declines could shed light on potential buying opportunities, based on forward price-to-earnings ratios.
Let’s look at the sectors again, in the same order, this time to show their forward P/E ratios, based on weighted rolling 12-month consensus estimates for earnings per share among analysts polled by FactSet:
There is a limit to how many columns we can show in the table. The S&P 500’s forward P/E ratio is now 17.94, compared with 16.79 at the end of 2022 and 21.53 at the end of 2021. The benchmark index’s P/E is above its 10- and 15-year average levels but below the five-year average.
If we compare the current sector P/E numbers to 5-, 10- and 15-year averages, we can see that the current levels are below all three averages for four sectors: utilities, real estate, financials and communications services. The first three face obvious difficulties as they adjust to the rising-rate environment, while the real-estate sector reels from continuing low usage rates for office buildings, from the change in behavior brought about by the COVID-19 pandemic.
Your own opinions, along with the pricing for some sectors, might drive some investment choices.
A broader screen of the S&P 500 might point to companies for you to research further.
We narrowed the S&P 500 as follows:
Here are the 20 companies that passed the screen, for which analysts’ price targets imply the highest upside potential over the next 12 months.
There is too much data for one table, so first we will show the P/E information:
| Company | Ticker | Current P/E to 5-year average | Current P/E to 10-year average | Current P/E to 15-year average |
| SolarEdge Technologies Inc. | SEDG | 89% | N/A | N/A |
| AES Corp. | AES | 66% | 75% | 90% |
| Insulet Corp. | PODD | 18% | N/A | N/A |
| United Airlines Holdings Inc. | UAL | 42% | 50% | N/A |
| Alaska Air Group Inc. | ALK | 51% | 57% | N/A |
| Tapestry Inc. | TPR | 39% | 49% | 70% |
| Albemarle Corp. | ALB | 39% | 50% | 73% |
| Delta Air Lines Inc. | DAL | 60% | 63% | 21% |
| Alexandria Real Estate Equities Inc. | ARE | 59% | 68% | N/A |
| Las Vegas Sands Corp. | LVS | 96% | 78% | 53% |
| Paycom Software Inc. | PAYC | 61% | N/A | N/A |
| PayPal Holdings Inc. | PYPL | 33% | N/A | N/A |
| SBA Communications Corp. Class A | SBAC | 27% | N/A | N/A |
| Advanced Micro Devices Inc. | AMD | 58% | 39% | N/A |
| LKQ Corp. | LKQ | 92% | 44% | 78% |
| Charles Schwab Corp. | SCHW | 75% | 54% | 73% |
| PulteGroup Inc. | PHM | 94% | 47% | N/A |
| Lamb Weston Holdings Inc. | LW | 71% | N/A | N/A |
| News Corp Class A | NWSA | 93% | 73% | N/A |
| CVS Health Corp. | CVS | 75% | 61% | 67% |
| Source: FactSet | ||||
Click on the tickers for more about each company or index.
News Corp
NWSA
is on the list. The company owns Dow Jones, which in turn owns MarketWatch.
Here’s the list again, with ratings and consensus price-target information:
| Company | Ticker | Share “buy” ratings | Oct. 2 price | Consensus price target | Implied 12-month upside potential |
| SolarEdge Technologies Inc. | SEDG | 74% | $122.56 | $268.77 | 119% |
| AES Corp. | AES | 79% | $14.16 | $25.60 | 81% |
| Insulet Corp. | PODD | 68% | $165.04 | $279.00 | 69% |
| United Airlines Holdings Inc. | UAL | 71% | $41.62 | $69.52 | 67% |
| Alaska Air Group Inc. | ALK | 87% | $36.83 | $61.31 | 66% |
| Tapestry Inc. | TPR | 75% | $28.58 | $46.21 | 62% |
| Albemarle Corp. | ALB | 81% | $162.41 | $259.95 | 60% |
| Delta Air Lines Inc. | DAL | 95% | $36.45 | $58.11 | 59% |
| Alexandria Real Estate Equities Inc. | ARE | 100% | $98.18 | $149.45 | 52% |
| Las Vegas Sands Corp. | LVS | 72% | $45.70 | $68.15 | 49% |
| Paycom Software Inc. | PAYC | 77% | $260.04 | $384.89 | 48% |
| PayPal Holdings Inc. | PYPL | 69% | $58.56 | $86.38 | 48% |
| SBA Communications Corp. Class A | SBAC | 68% | $198.24 | $276.69 | 40% |
| Advanced Micro Devices Inc. | AMD | 74% | $103.27 | $143.07 | 39% |
| LKQ Corp. | LKQ | 82% | $49.13 | $67.13 | 37% |
| Charles Schwab Corp. | SCHW | 77% | $53.55 | $72.67 | 36% |
| PulteGroup Inc. | PHM | 81% | $73.22 | $98.60 | 35% |
| Lamb Weston Holdings Inc. | LW | 100% | $92.23 | $123.50 | 34% |
| News Corp Class A | NWSA | 78% | $20.00 | $26.42 | 32% |
| CVS Health Corp. | CVS | 77% | $69.69 | $90.88 | 30% |
| Source: FactSet | |||||
A year may actually be a short period for a long-term investor, but 12-month price targets are the norm for analysts working for brokerage companies.
Don’t miss: This fund shows that industry expertise can help you make a lot of money in the stock market
Ford Motor Co. said late Monday it has halted work on a $3.5 billion battery factory in Michigan, just days after the carmaker made concessions to its striking workers.
“We’re pausing work and limiting spending on construction on the [Marshall, Mich.] project until we’re confident about our ability to competitively operate the plant,” a Ford
F,
spokesperson said. “We haven’t made any final decision about the planned investment there.”
Ford said in February it was investing $3.5 billion to build the facility in Marshall, about 100 miles west of Detroit. The plant, which Ford called BlueOval Battery Park Michigan, is part of Ford’s “commitment to American manufacturing,” the company said then.
The plant was expected to employ about 2,500 workers at the start of production, scheduled for 2026. The $3.5 billion investment is part of Ford’s commitment to invest more than $50 billion in electric vehicles globally through that year.
Employees in some parts of a Michigan Ford plant making Broncos and Rangers have been on strike since Sept. 14, part of a first wave of United Auto Workers’ labor action also hitting one plant each of General Motors Co.
GM,
and Stellantis NV
STLA,
after the union’s contract expired without progress in the negotiations.
Read more: UAW strike: 5 things to know
The UAW on Friday expanded the strike to 38 GM and Stellantis distribution centers across 20 states, but didn’t extend the labor action at Ford because it said it had won some concessions for the automaker, such as a return of cost-of-living adjustments.
Ford was showing the UAW that it was “serious about reaching a deal,” union leadership said at the time.
The strike comes at a time the legacy automakers are stretched thin to make investments in EVs, with batteries an especially critical — and pricey — components.
Anheuser-Busch InBev is planning to cut jobs in the U.S. after a sharp deterioration in sales following a boycott that’s still impacting Bud Light.
The industry publication Brewbound said the company was going to cut 2% of its U.S. workforce, where it employs 19,000. The company told the publication that front-line workers, including warehouse staff and field reps, will not be impacted. The company did not specifically identify slumping Bud Light sales as the cause of the layoffs.
Bud Light sales have tumbled after the company’s ill-fated social media promotion with Dylan Mulvaney.
Citing Nielsen U.S. beer data, analysts at Bank of America said volumes at the brewer tumbled by 15.3% year-over-year in the four weeks ending July 15, compared to the 2.7% decline for the broader U.S. beer category.
Bud Light sales over that same time period skidded 29.8%, and Budweiser volumes skidded 14%. In contrast, Coors Light sales rose 17% in the last four weeks, Miller Lite volumes rose by 12.5% and Yuengling sales surged 38%.
Anheuser-Busch InBev’s U.S.-listed shares
BUD,
have dropped 2% this year. In its home market of Belgium, shares
ABI,
rose 0.6% on Thursday.
The 2023 FIFA Women’s World Cup kicks off this week in what is expected to be the biggest sporting event of the summer.
The tournament favorite, the United States Women’s National Team, plays its first game on Friday against Vietnam at 9 p.m. EST.
Here’s everything you need to know about this year’s highly anticipated World Cup:
The tournament started on July 20 and ends on Aug. 20.
The first games took place on Thursday when host nations New Zealand and Australia each won their matches.
See also: The top 5 highest-paid women’s soccer players at the 2023 Women’s World Cup
The 2023 Women’s World Cup is being co-hosted by Australia and New Zealand.
Matches will be held in nine cities including Sydney, Melbourne, Brisbane, Adelaide, Perth, Auckland, Wellington, Dunedin and Hamilton. The championship match will be held in Sydney.
The tournament’s location presents a major time difference for viewers in the U.S.
Wellington, New Zealand, is 16 hours ahead of New York, and 19 hours ahead of Los Angeles. And Sydney, Australia, is 14 hours ahead of Eastern Standard Time.
Most of the group stage games will start late at night or early in the morning for east coast viewers.
For U.S. viewers, the World Cup will be broadcast by Fox
FOX,
and games will appear on the flagship Fox channel, Fox Sports 1, as well on Telemundo in Spanish.
Fox is part of nearly all major cable bundles, and cord-cutters can stream the games on YouTubeTV, FuboTV
FUBO,
Hulu + Live TV, and Sling TV.
As noted above, the USWNT plays its first group stage game on Friday, July 21, against Vietnam at 9 p.m. EST.
The U.S. will then compete against the Netherlands on July 26 and Portugal on Aug. 1, and then compete in the knockout stage if they advance.
The U.S. won the 2019 Women’s World Cup in France, after beating the Netherlands in the final, as well as the 2015 World Cup in Canada.
The U.S. has a total of four Women’s World Cup titles, the most of any nation in the world, while the U.S. men’s team has never won the World Cup.
There have only been eight Women’s World Cups in history with the first tournament occurring in 1991, while the men’s version of the tournament first started in 1930.
Only four countries have won the women’s tournament: the U.S., Germany, Norway and Japan.
Below are the betting odds for the 2023 World Cup from DraftKings
DKNG,
Sportsbook prior to the start of the tournament:
For those not familiar with oddsmaking, a “+” symbol indicates an underdog. For example, a $100 bet placed on a +450 side would net a $450 profit, in addition to getting back your original $100.
The 2023 Women’s World Cup has $150 million in prize money, up 300% from the $30 million in total given out in 2019.
While a significant increase, the amount is still much lower than the $440 doled out at the 2022 men’s tournament in Qatar. FIFA, which organizes the World Cup, said it’s an “objective” to achieve pay parity between the men’s and women’s tournaments by 2027.
Below are the player and nation financial allocations for the 2023 Women’s World Cup:
Each player is guaranteed $30,00 for participating in the tournament, up from $14,000 in 2019.
That’s significant for many of the players, who in some cases don’t have club teams that pay salaries, are semi-pros or even amateurs.
As stated above, pay equity for tournament prizes is not the same for World Cup winners between the men and women’s tournaments, but what about in the U.S.?
U.S. women soccer players last year reached a landmark agreement with the sport’s American governing body to end a six-year legal battle over equal pay, a deal in which they are promised $24 million plus bonuses that match those of the men.
The U.S. Soccer Federation and the women announced a deal that will have players split $22 million, about one-third of what they had sought in damages. The USSF also agreed to establish a fund with $2 million to benefit the players in their post-soccer careers and charitable efforts aimed at growing the sport for women.
The USWNT routinely advocated for pay parity during tournament appearances over the past decade.
In addition to equal pay, high-profile players on the USWNT like Megan Rapinoe, Alex Morgan and Carli Lloyd, among many others, have publicly opposed forms of discrimination off the soccer field. These causes include advocating for gender rights, LGBTQ+ rights, voting rights and the Black Lives Matter movement.
U.S. stocks finished mostly lower Thursday, with the Nasdaq and S&P 500 dragged down by disappointing earnings, while the Dow Jones Industrial Average rose for a ninth straight day for its longest winning streak in nearly six years.
After lagging behind the S&P 500 and Nasdaq for most of the year, the Dow Jones Industrial Average has climbed over the past two weeks. The blue-chip gauge is now heading for its longest streak of daily gains since Sept. 20, 2017, according to Dow Jones Market Data.
It’s the latest milestone as value stocks and other lagging sectors of the market appear to be playing “catch up,” said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest Wealth Management, during a phone interview with MarketWatch. Although the Dow’s year-to-date gains are still well behind those of the S&P 500, with the blue-chip gauge up 6.6% since Jan. 1, FactSet data show.
On Wednesday, the S&P 500 and Nasdaq closed at their highest levels in nearly 16 months.
“We’re finally seeing the rotation to value,” he said. “The Dow is playing catch up with the S&P 500 and the Nasdaq.”
See: Stock-market bubble trouble? Check out the 3-year view on Nasdaq, S&P 500 returns.
Technology stocks were lagging following earnings from Netflix Inc.
NFLX,
released late Wednesday, which showed that revenue fell short. Shares fell 8.4%.
Tesla Inc.
TSLA,
shares fell 9.7% after the electric vehicle maker beat Wall Street expectations for its second quarter but not in the blowout fashion that some market observers were expecting.
“Netflix missed sales estimates and issued lower-than-expected Q3 guidance, while Tesla’s results showed shrinking profitability with squeeze on margins,” said Henry Allen, strategist at Deutsche Bank.
Semiconductor shares also took it on the chin, with the PHLX Semiconductor Index
SOX,
falling 3.6%. The drop came after Taiwan Semiconductor Manufacturing Co.
TSM,
topped second-quarter earnings expectations but reported margins that contracted, while providing a somewhat downbeat outlook.
Meanwhile, shares of IBM Corp.
IBM,
and Johnson & Johnson
JNJ,
drove the Dow higher after both companies beat earnings expectations.
Bad news for Netflix seemed to infect other megacap technology names, as Alphabet Inc. Class A
GOOGL,
and Alphabet Inc.
GOOG,
retreated, as did shares of Apple Inc.
AAPL,
and Microsoft Corp.
MSFT,
after the latter hit a record this week.
Investors also digested earnings from American Airlines Group Inc.
AAL,
and Blackstone Inc.
BX,
which reported before the opening bell. After the close, investors will hear from Capital One Financial Corp.
COF,
CSX Corp.
CSX,
and First Financial Bancorp
FFBC,
along with a few others.
In U.S. economic data, weekly jobless benefit claims data showed the number of Americans applying for first-time unemployment benefits fell to a two-month low. Meanwhile, the Philadelphia Fed’s gauge of manufacturing activity came in at negative 13.5 in July, up from 13.7 during the prior month.
Existing home sales fell in June, while leading index of economic indicators dropped 0.7% in June, falling for the 15th month in a row.
Bud Light sales are still falling, as the impact of a boycott against the beer continues to stick. But Morgan Stanley analysts on Thursday said that impact was already reflected into shares of its parent company, Anheuser-Busch InBev, and that AB-InBev’s global footprint and the falling costs of beer ingredients would help sales and margins up ahead even if struggles in the U.S. spill over into next year.
Morgan Stanley assumed coverage of AB-InBev
BUD,
with an overweight rating, a step up from its prior equal-weight rating. The firm bumped its price target on the stock higher, to $68.50 from $64. Shares of AB-InBev were up 0.4% on Thursday.
The analysts also said that AB-InBev’s second-quarter results, set for Aug. 2, could be a clarifying moment for investors.
“While investors are currently sitting on the sidelines, waiting for the company to fully quantify the impact of the Bud Light situation, we see upcoming H1 results as likely timing for such clarification,” the analysts said in a research note.
“We think ABI shares now price in the U.S. Bud Light challenges, which have stabilised, but not the gross margin recovery and de-leveraging upside into next year,” they added later.
The conservative-led boycott against Bud Light began in April, after the brand briefly partnered with Dylan Mulvaney, a trans influencer. That anti-trans anger has translated into weeks of sharp declines, generally above 20%, for Bud Light sales. Mulvaney said Bud Light never reached out to her, despite what she said was “more bullying and transphobia than I could have ever imagined” as a result of the partnership and calls for a boycott.
The fall-off has spread to some of other AB-InBev’s other beer brands, and benefited its rivals. Modelo Especial has recently dethroned Bud Light as the best-selling beer in the U.S.. Constellation Brands Inc.
STZ,
sells Modelo beer in the U.S., after a deal a decade ago to acquire Grupo Modelo’s U.S. beer business from AB-InBev.
Still, the Morgan Stanley analysts emphasized Anheuser-Busch’s worldwide reach, and said that even a 13.5% drop in U.S. yearly sales — broadly, where things stand in the U.S. now — would only mean a 4% drop for the company’s sales overall. And they said double-digit growth expected elsewhere, in regions like South America and the Asia-Pacific, would drive organic sales growth of 6% for the company overall in its fiscal 2023. They also said a “wind-back” on commodity costs and sales incentives to U.S. beer sellers would help margins up ahead.
Still, they didn’t expect much of a break for sales trends in the U.S. They said they expected the 13.5% drop in U.S. sales to ease to a 12% drop in AB-InBev’s fiscal 2024.
Overall, however, the analysts were upbeat on beer sales and profits for next year. Falling ingredient costs would help brewers overall. A pandemic-era jump in U.S. demand for spirits — or hard liquor like gin, Scotch and vodka — had now “normalized,” they said.
Shares of Anhueser-Busch InBev are down 1.4% so far this year. By comparison, the S&P 500 Index
SPX,
is up 18.9% over that period.
The summer haze settling over stocks doesn’t look ready to budge Thursday, with the S&P 500 index
SPX,
in the throes of its longest losing streak since May.
On the bright side, the index is looking at a 6% gain for the June quarter, whose end is just a few days away.
In other corners of the market, the quarter has been less forgiving. Consumer staples, those things you can’t live without, have lost over 1%, perhaps reflecting the tougher economic times we are living in. Within that sector, though, is beer and one name that has indeed had a quartarius horriblis.
Anheuser-Busch InBev’s
ABI,
BUD,
U.S.-listed shares are down about 15%, as Bud Light sales have tumbled following consumer backlash to a social-media campaign featuring trans activist Dylan Mulvaney in April.
But our call of the day from Deutsche Bank says it’s time to buy this unloved stock, even if those Bud Light sales never recover. A team of analysts led by Mitch Collett have upgraded Anheuser-Busch shares to buy from hold and lifted their price target to €60 euros from €59 euros (they didn’t offer an ADR price target).
Recent underperformance of the stock “implies a permanent reduction in ABI’s U.S. business. Our proprietary survey data suggests these headwinds are likely to fade even if we do not expect the U.S. business ever to fully recover from its current challenges,” said Collett.
The analysts pointed to recent Nielson data that showed ABI’s U.S. business currently down 12%, with Bud Light sales off 24% and the rest of its portfolio down 7%. But an analysis of distribution data shows ABI itself isn’t “losing shelf presence” as sales velocity is the primary driver of the decline, which bodes well if consumer sentiment improves, said Deutsche Bank.
Those declines are about a 12% headwind to ABI’s annual net income, which is in line with European underperformance seen by the stock, added Collett and the team.
Read: Bud Light dethroned as top-selling beer by Modelo, as boycott cuts into sales
Deutsche Bank conducted its own survey that showed 24% of Bud Light consumers are no longer buying that brand, with 18% buying less, but 21% buying more and 37% buying the same amount. Those findings are largely consistent with Nielson;s, said the analysts.
Deutsche Bank’s own survey also showed that 42% of Bud Light drinkers expect to be buying Bud Light again in three to six months, versus 29% who see that as unlikely. And 50% expect that battered beer’s reputation will recover in time, versus 30% who says it won’t. “We believe this bodes well for the brand, recapturing some of its lost share,” said Collett and the team.
Analysts at RBC Capital also recently pushed back on the selloff for the stock, saying the hit to the shares and forecasts for the stock are “excessive,” as they don’t see Bud Light’s troubles hurting AB InBev outside the U.S.. They said AB InBev is a “nerve-racking buying opportunity.”
Ahead of Thursday’s open, U.S.-listed Bud shares were up about 1.3%, tracking gains from its Belgian shares.
U.S. stock index futures
ES00,
NQ00,
are drifting lower, with bond yields
TMUBMUSD02Y,
TMUBMUSD10Y,
on the rise and oil prices
CL.1,
also weaker. The Norwegian krone
USDNOK,
is up 1.5% against the dollar after the country’s central bank hiked interest rates 50 basis points. Switzerland also hiked rates, but the Swiss franc is steady
USDCHF,
The British pound
GBPUSD,
is higher after the Bank of England also hiked interest rates by 50 basis points. The Turkish lira was falling slightly after the central bank, under new management, hiked interest rate to 15% from 8.5%, against forecasts for a hike to 20%.
China markets were closed for a holiday, with losses elsewhere, such as Japan
NIK,
and Australia
XJO,
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Federal Reserve Chair Jerome Powell’s second day of testimony on Capitol Hill kicks off at 10 a.m. Eastern. On Wednesday, he said higher interest rates should be expected , but didn’t offer any clues on timing. U.S. weekly jobless benefit claims and current account data are due at 8:30 a.,m. ET, with leading indicators also at 10 a.m., alongside a speech from Cleveland Fed President Loretta Mester. Richmond Fed President Tom Barkin will speak at 4:30 p.m.
The Bank of England will announce an interest-rate decision at 7 a.m. ET and after worse-than-expected inflation data on Wednesday, a 50 basis-point hike hasn’t been ruled out.
Darden Restaurants
DRI,
will report ahead of the open, with Smith & Wesson
SWBI,
due after the close.
Tesla stock
TSLA,
is down 2% in premarket trading on the heels of the EV maker’s worst loss in two months.
Joining recent actions by other big stakeholders cashing in on big gains for Nvidia
NVDA,
a board member just sold $51 million in stock.
A giant drilling machine is moving Stockholm toward an emissions-free future
These were the top searched tickers on MarketWatch as of 6 a.m. :
| Ticker | Security name |
|
TSLA, |
Tesla |
|
MULN, |
Mullen Automotive |
|
NVDA, |
Nvidia |
|
AMC, |
AMC Entertainment |
|
APE, |
AMC Entertainment preferred holdings |
|
NIO, |
Nio |
|
PLTR, |
Palantir Technologies |
|
MANU, |
Manchester United |
|
SPCE, |
Virgin Galactic Holdings |
|
AAPL, |
Apple |
Are Elon Musk and Mark Zuckerberg ready for a cage match?
It’s summertime. Let your kids get bored.
Tokyo streets now offer the chance to snuggle an alpaca
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A spokesperson for JPMorgan Chase & Co. on Friday has confirmed statements on social media that some customers are seeing duplicate transactions and fees on their checking accounts.
“We’re sorry,” the spokesperson said in an email to MarketWatch. “We’re working to resolve the issue and will automatically reverse any duplicates and adjust any related fees.”
JPMorgan Chase
JPM,
customers on Twitter and other social-media outlets said payments made through Zelle were showing up twice.
“PSA!!!,” said Twitter user @haunteraIIA. “Anyone waking up to duplicate zelle charges from chase, my call just went through and was told the duplicate charge should be credited within 24hours. they’re having issues with this today. i was on hold for an hour, so just in case anyone else wakes up freaked out lol.”
Zelle is jointly owned by six banks: JPMorgan, Truist Financial Corp.
TFC,
Capital One
COF,
U.S. Bancorp
USB,
PNC Financial Services Group Inc.
PNC,
and Wells Fargo & Co.
WFC,
A spokesperson from Chase clarified that the problems are confined to its customers.
Also Read: Banks explore reimbursing customers who send money to scam Zelle accounts
Weston Blasi contributed to this report.
Bud Light’s recent troubles should worsen in the summer, to the benefit of its competition’s brands, enough to turn Roth MKM analyst Bill Kirk bullish on the stocks of Constellation Brands Inc. and Boston Beer Co. Inc.
Kirk raised on Tuesday his rating on Modelo, Corona, Pacifico beer parent Constellation Brands to buy, after being at neutral since January 2021, while boosting his stock price target to $270 from $216.
Kirk said a lot of the market share Anheuser-Busch InBev SA’s Bud Light lost, amid backlash from the beer brand’s partnership with trans influencer Dylan Mulvaney, went to other premium light products, but he expects that to shift to Constellation’s favor.
“As the weather warms, we expect the share gains for Modelo Especial and Corona to accelerate,” Kirk wrote in a note to clients.
Constellation Brands’ stock
STZ,
rose 1.5% in afternoon trading Tuesday toward the highest close since Dec. 12, 2022, while Anheuser-Busch shares
BUD,
slumped 4.5% toward the lowest close since Nov. 10.
He noted that weekly scanner data has shown that Constellation’s beer portfolio outperformed the broader beer market by seven percentage points in early 2023, and that outperformance improved to 10 percentage points at the beginning of Bud Light’s market-share losses in April.
“With temperatures warming and substitutability with Bud Light increasing, recent weeks have seen 13 [percentage points] of outperformance,” Kirk wrote. “This trend should continue as Bud Light [declines/peak] over summer holidays.”
For Samuel Adams, Truly, Twisted Tea parent Boston Beer, Kirk raised his rating to buy, after being at neutral for at least the past three years. He raised his stock price target to $386 from $274.
Boston Beer’s stock
SAM,
jumped 6.8% toward the highest close since Feb. 15.
Earlier this year, Kirk was concerned that Truly hard seltzer’s weakness continued, offsetting Twisted Tea’s success, and that gross margins weren’t improving even after moving more production in-house.
Read more: Bud Light crisis: It’s unclear how U.S. volume drop will end, analysts say
“Now, we believe seltzer and Truly will benefit in the summer from Bud Light share losses (occasion overlap increases with warmer weather) and gross margin lift from production shift will be realized in 2Q (given inventory days timing),” Kirk wrote.
He believes that will shift investor focus away from Truly’s weakness and toward Boston Beer’s brands that are growing.
And while Wall Street expects the trends Boston Beer saw in the first quarter to continue throughout 2023, Kirk now believes the company will beat expectations for shipments and depletions, and sees opportunities for margins to also beat forecasts.
“While we had written at 1Q that the ‘timing of upside surprises remains unclear,’ we now believe the timing is Summer 2023,” Kirk wrote.
Constellation Brands’ stock has gained 5.7% over the past three months and Boston Beer shares have advanced 4.8%, while Anheuser-Busch’s stock has dropped 10.1% and the S&P 500 index
SPX,
has gained 5.9%.
Atmus Filtration Technologies Inc.’s stock soared 14% Friday in its trading debut, after the Cummins Inc. spinoff priced its initial public offering in the middle of its proposed price range.
The Nashville, Tenn.-based company sold 14.1 million shares priced at $19.50 each to raise $275 million. With 83.3 million shares to be outstanding after the deal, the company’s valuation is $1.6 billion.
The stock
ATMU,
is trading on the New York Stock Exchange under the ticker ATMU. Goldman Sachs and JPMorgan Chase were lead book-running managers on the deal, with 10 other banks acting as co-managers.
Although the company is issuing primary shares, Atmus will not receive any of the IPO proceeds; all of the proceeds will go to debt-for-equity exchange parties, namely underwriters Goldman Sachs and JPMorgan, and will indirectly pay down parent Cummins’
CMI,
debt, according to the filing documents.
Atmus makes products for on-highway commercial vehicles and off-highway agriculture, construction, mining and power-generation vehicles and equipment, mostly under the Fleetguard brand. The company had pro forma net income of $34.9 million in the first quarter on sales of $418.6 million.
About 16% of its 2022 sales went to original-equipment manufacturers, where its filters are used for new vehicles and equipment, and about 84% were aftermarket sales.
The company was created by Cummins, a maker of diesel and natural-gas engines, in 1958.
The IPO comes in a thin year for deals. There have been just 44 IPOs this year to raise $7.3 billion in proceeds, according to Renaissance Capital, a provider of IPO exchange-traded funds and institutional research.
That’s up 29.4% from the same period in 2022, when deal flow slowed to its lightest in decades.
“Deal flow started at a decent pace but failed to pick back up after the February lull, as hawkish signals from the Fed, renewed recession fears, and turmoil within the banking industry caused a spike in volatility,” Renaissance wrote in April commentary.
The biggest deal of the year to date was that of Kenvue Inc.
KVUE,
a spinoff from Johnson & Johnson
JNJ,
which is parent to a number of household brands, including Tylenol, Band-Aid, Listerine and Benadryl.
For more, see: Kenvue stock cheered in Wall Street debut, as Tylenol and Band-Aid brand parent is valued at $48 billion
Kenvue raised $3.8 billion after pricing above range and achieving a valuation of $41 billion.
The Renaissance IPO ETF
IPO,
has gained 18% in the year to date, while the S&P 500
SPX,
has gained 9%.
Berkshire Hathaway Sold U.S. Bancorp, Bank of New York Stock. Here’s What It Bought.
Warren Buffett’s Berkshire Hathaway Inc. made a change in banking targets for investment, sending two banks’ shares in opposite directions Monday afternoon.
Capital One Financial
COF,
shares rallied more than 5% in after-hours trading while Bank of New York Mellon Corp.
BK,
sold off in the extended session Monday after filings with the Securities and Exchange Commission showed Berkshire
BRK.B,
BRK.A,
switched its position. The quarterly filing showed a new stake of 9.9 million shares in Capital One as Berkshire sold off its 25.1 million-share stake in Bank of New York Mellon.
At Berkshire’s annual meeting, Buffett weighed in on recent scares for regional banks.
“In terms of owning banks, events will determine their future and you’ve got politicians involved, you’ve got a whole lot of people who don’t really understand how the system works,” he said.
Other changes included an increased stake in HP Inc.
HPQ,
which grew by 16% to about 121 million shares. That growth was part of a combination of the holdings of General Re Corp., which Berkshire has owned since 1998 but had previously reported its holdings separately as part of New England Asset Management Inc.
“Beginning with the Form 13F to be filed later today, the holdings of Gen Re will be included in Berkshire’s 13F filing,” Berkshire said in a news release earlier Monday. “The NEAM Form 13F filings will no longer include Gen Re’s holdings but they will continue to include NEAM client holdings where NEAM is acting as an investment manager.”
Other holdings affected by that change included Apple Inc.
AAPL,
Bank of America Inc.
BAC,
and Chevron Corp.
CVX,
Berkshire said in its news release.
Other stocks that Berkshire made moves with during the first three months of the year included the former Restoration Hardware — RH
RH,
shares fell 3% after Berkshire disclosed selling off its 2.4 million stake. Berkshire also officially reported selling of its 8.3 million stake in Taiwan Semiconductor Manufacturing Co.
TSM,