Tag: STOCKS

Bulls had to slow their roll on Tuesday as the immediate +3.5% rally was shaved by 80% into the close. Why did the rally fritter away? And what does it mean next for the stock market (SPY) going forward? 40 year veteran Steve Reitmeister shares his timely market outlook, trading plan and 8 top picks to generate gains in the weeks ahead.

shutterstock.com – StockNews

It felt like every trader on earth hit the buy button at 8:30am ET Tuesday morning as the softer than expected CPI report came out. This led to a shocking +3.5% surge in stock futures. If that held up it would have put the S&P 500 all the way up at 4,130.

But that didn’t hold up…neither did the recent high of 4,100…neither did the 200 day moving average at 4033…instead stocks only closed up modestly higher at 4,019.

Why did the rally fritter away? And what does it mean next for the bull/bear battle going forward?

That will be the focus of this week’s Reitmeister Total Return commentary.

Market Commentary

First, and foremost a reminder to watch my “2023 Stock Market Outlook” if you have not already. That’s because it covers the following vital topics:

• Why 2023 is a “Jekyll & Hyde” year for stocks
• 5 Warnings Signs the Bear Returns in Early 2023
• 8 Trades to Profit on the Way Down
• Plan to Bottom Fish @ Market Bottom
• 2 Trades with 100%+ Upside Potential as New Bull Emerges
• And Much More!

Watch Now: “2023 Stock Market Outlook” > 

The above outlook provides an important backdrop in which to discuss all new information including the CPI report from Tuesday morning. Assuming you have watched it already…then let’s pick up the story from there.

Yes, the Consumer Price Index (CPI) came in softer than expected this morning (7.1% yearly increase vs. 7.3% expected). And yes, this softer than expected trend is happening more and more often.

Now the wakeup call.

7.1% is not the same as 2% target (for those with who did poorly in math class).

Also the Producer Price Index last week was higher than expected. And that is the leading indicator of where CPI will be in the future. That’s because these are the input prices for manufactures and service providers which shows up in their offerings down the road. Meaning this softer than expected read may give way to higher readings in the future given the foreshadowing in PPI.

On top of that many of the forms of “sticky” inflation remain, well…STICKY.

Things like wages and rents are still too hot. The former issue of high wage inflation was on display in the 2X higher than expected monthly increase for wages found in the Government Employment Situation report back on 12/5…and helped spark a 4% selloff the following week.

Think of it this way…CPI looks backwards and PPI looks forward. So which is more important? (he asks rhetorically).

Yes, PPI. And that is telling you quite clearly that problem of high inflation is far from solved.

I sense that as the early morning excitement wore off, and investors sobered up, they began to realize that it was a bit too early to celebrate the death of inflation. And perhaps they need to wait to see what the Fed says Wednesday afternoon.

That’s because inflation is like a horror movie monster. You can’t just shoot it once and assume it’s dead. It will keep getting up each time you think the job is done and the death defying chase resumes.

In fact, Powell has discussed this many times over that the worst thing they can do is take their foot of the brakes too soon and inflation comes back with a vengeance. Inflation needs to be “dead and buried” before the Fed reverses course with lower rates.

As great proof of that notice how every time that we have one of these big stock rallies on news of softening inflation that commodity prices soar…which yes, speaks to inflation rising once again. The exact problem we are trying to solve.

Here was the early morning read for energy and key commodities as stock futures soared:

Long story short, the Fed has splashed cold water on exuberant traders several times this year. Thus, it pays to see what happens with the rate hike and announcement on Wednesday afternoon.

50 basis points is the expectation. The real key is the “dot plot” of where rates likely go in the future (how high…for how long) along with any statements they make that foreshadows future plans.

There we will find out if the Fed agrees with traders that inflation is moderating nicely and they do not have to be as hawkish for as long as previously expected. On the other hand, they may state quite clearly that they continue to see inflation as being more sticky and persistent than they would like, keeping them on the job much longer…with more pain to the economy…and likely lower stock prices.

The answer to that tells you whether stocks are truly ready to break out above the all important 200 day moving average (4,033). Or if it is time to head lower once again?

However, we are getting foolishly sucked into the investing worlds myopic fixation on inflation and the Fed. There is much more going on…like the health of the overall economy that is moving closer and closer still to recession. That was the central theme of my 2023 Stock Market Outlook presentation from last week with several leading indicators pointing in that darkening direction.

A prime example of this recessionary concern was on full display Tuesday morning from another low reading for the NFIB Small Business Outlook. Here is the key statement from their report:

“…most of the readings were still consistent with a recession and weak economic activity.”

So as the recessionary storm clouds keep circling…and inflation is far from dead…with the Fed still to keep their foot firmly on the brakes with higher rates on the way …then I see no wisdom in chasing this rally as stocks going down over the next 3-6 months makes a lot more sense then new bull market emerging now.

The only thing at this moment to change my mind is a clear Fed pivot on Wednesday to say indeed inflation is coming under control and they do not need to be as Hawkish as previously advertised.

This is possible…but highly improbable given the slew of statements that have made in the recent past. And that we have already seen the data they are looking at which includes too hot readings for PPI and wage inflation. And the nature they are slow and deliberate. Added altogether and it would be the shock of shocks for them to say “Mission Accomplished” on Wednesday.

Worst case scenario is another 2-3% upside into year end thanks to current momentum plus bullish bias of Santa Claus rally.

On the other hand, if still a bear market…which is the base case…then retreating to the previous lows of 3,491 in the New Years is still in the cards. And likely much lower.

What To Do Next?

Watch my brand new presentation: “2023 Stock Market Outlook” covering:

• Why 2023 is a “Jekyll & Hyde” year for stocks
• 5 Warnings Signs the Bear Returns in Early 2023
• 8 Trades to Profit on the Way Down
• Plan to Bottom Fish @ Market Bottom
• 2 Trades with 100%+ Upside Potential as New Bull Emerges
• And Much More!

Watch Now: “2023 Stock Market Outlook” > 

Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO, Stock News Network and Editor, Reitmeister Total Return

 

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SPY shares fell $0.22 (-0.05%) in after-hours trading Tuesday. Year-to-date, SPY has declined -14.39%, versus a % rise in the benchmark S&P 500 index during the same period.

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About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

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The post Why Did the Tuesday Rally Shrink So Much…So Fast? appeared first on StockNews.com

MarketBeat.com – MarketBeat

Biotech stocks are often among the market’s most volatile, and Harpoon Therapeutics Inc. (NASDAQ: HARP) offers a perfect example of that.

The stock rocketed to an eight-month high Monday, advancing as much as 191% intraday before settling down to a gain of 22.61%. Shares closed at $1.41 Monday, up $0.26. Tuesday, the stock closed lower after gapping down at the open. 

Monday’s huge upside action followed the company’s release of updated interim results for its myeloma drug that’s in Phase 1 clinical trials. The treatment is currently known as HPN217.

According to Harpoon’s news release, “The interim results, as of the data cut-off date of October 17, 2022, showed that HPN217 demonstrated continued evidence of clinical activity and a tolerable safety profile in heavily pre-treated patients”  with relapsed/refractory multiple myeloma. 

Relapsed/refractory multiple myeloma occurs when a patient has received treatment for a cancer called multiple myeloma, a rare cancer that affects bone marrow. It’s currently incurable, with the most common path being remission interspersed with periods when the disease becomes active. It’s termed relapsed/refractory multiple myeloma when the patient’s condition is especially difficult to treat.

Meaningful Clinical Benefits

“The encouraging initial clinical activity with deepening and durable responses observed in patients who have received multiple prior lines of therapy, combined with a generally well-tolerated safety profile, suggest the investigational T cell engager HPN217 may offer meaningful clinical benefits for patients with relapsed/refractory multiple myeloma,” said Al-Ola A. Abdallah, a doctor at the University of Kansas Medical Center, a principal investigator in the study. 

“I look forward to continuing to study this promising drug candidate in these patients with advanced disease for whom there remains a significant unmet need for new treatment options,” Abdallah added.

Remarks like those gave investors hope.

San Francisco-based Harpoon went public in February 2019 at $14. The stock essentially meandered sideways until June of last year, when shares began declining. 

On a rolling one-week basis, Harpoon is up 95.67%, although shares reversed lower in Tuesday’s season. 

That type of action suggests quick profit-taking in the face of clinical-trial news that doesn’t directly lead to the monetization of a drug. 

That’s especially true with a small company like Harpoon, whose market cap is just $31.1 million. Consistent with a company this size, Harpoon’s beta is 1.72, meaning it’s 172% more volatile than the broader market, as measured by the S&P 500 over a 12-month period. 

Of course, a stock with a market cap of $31.1 million isn’t directly comparable to an index of the largest U.S. companies, but that still offers an indication of Harpoon’s propensity toward volatility. 

Industry Home To Top Performers

The biotech industry is home to several large, well-established companies, including Amgen Inc. (NASDAQ: AMGN), Gilead Sciences Inc. (NASDAQ: GILD), Regeneron Pharmaceuticals Inc. (NASDAQ: REGN), Vertex Pharmaceuticals Incorporated (NASDAQ: VRTX) and Moderna Inc. (NASDAQ: MRNA). All are components of the S&P 500, and all are outperforming their index.

With many smaller companies within the industry also boasting market-beating performance, the group as a whole is outpacing most others. Pharmaceutical wholesalers and medical device makers are also showing higher returns than the broader market in recent months.

Harpoon remains a speculative stock. It’s often the case that biotechs become attractive acquisition targets if they have a treatment that a larger company wants to market. That could well be the case with Harpoon, although buying a stock with that strategy in mind is risky, as an investor may incur a large opportunity cost while waiting. 

Harpoon has never been profitable, and analysts don’t see that changing anytime soon, although losses are narrowing and estimates have been revised higher recently. 

In November, the company announced a corporate restructuring designed to slash operating expenses and better focus on clinical programs, including HPN217, that are expected to drive long-term growth.

Revenue for the most recent quarter came in $13.6 million, up 204% from the year earlier. The company attributed the increase to research and development services performed in a collaborative agreement with AbbVie Inc. (NYSE: ABBV). 

MarketBeat.com – MarketBeat

Like other department stores, Kohl’s Corporation (NYSE: KSS) is hoping consumer confidence improves during the holiday shopping season. The Fed, on the other hand, would rather not see Americans getting more positive about the economic environment. This runs the risk of inflation heating back up at a time when Chairman Powell and company are trying to keep it down.

Retailers and investors alike are therefore left to decipher when good news is truly good for the stock market — or just another reason for the Fed fire extinguisher to raise rates. 

The latest University of Michigan sentiment survey is a prime example. A better-than-expected 59.1 reading revealed that consumers are in better spirits. Price increases are moderating and gift deals aplenty.

This should mean Kohl’s is in for a strong fourth quarter that carries over to 2023, right? Not so fast. 

The company still has several challenges to work through that go beyond consumer confidence. Even though its shares have dipped back to within a few bucks of a 52-week low, investors should not be loading up the shopping cart just yet.

How Did Kohl’s Perform in the Third Quarter?

There’s a reason that ugly Christmas sweater is marked down 50%. Kohl’s profits were down by the same percentage in Q3. 

Management acknowledged that inflation continues to hit hard. Faced with higher prices everywhere, the middle-class households in Kohl’s wheelhouse simply aren’t spending as much. They are buying fewer items and shifting to cheaper value brands. 

In a way, the trade-down is a positive. About one-third of Kohl’s sales come from private label and exclusive merchandise which typically carry higher margins. These brands outperformed national brands for the second straight quarter. 

Unfortunately, this hasn’t been enough to help the bottom line because of Kohl’s rising cost structure. When you operate more than 82 million square feet of retail space mostly located in strip malls, leasing, utilities, wage and other expenses can add up. Along with increased freight costs and promotional activity, the Q3 gross margin dropped from 39.9% to 37.3%.

What Other Headwinds is Kohl’s Facing?

Kohl’s chunk of the retail sales pie has been declining for years. The Amazon effect and the emergence of other online retailers have made it difficult for the department store to be relevant. Given the accelerated shift to e-commerce caused by the pandemic, Kohl’s uphill battle has only become steeper.

Yes, Kohl’s does have an online storefront and has made improvements in this arena over the last couple of years. The problem is digital sales are trending backward when other traditional retailers have strong digital growth offsetting brick-and-mortar weakness. Kohl’s digital sales fell 8% last quarter, a significant result because they accounted for nearly 30% of total sales.

The sales mix is also an issue in this economy. With consumers spending more on groceries and other essentials, little room is left for discretionary purchases. For Kohl’s, it’s a recipe for failure given roughly one-half of all sales are derived from clothing and another one-fifth from home goods. Nudist colonies aside, clothes are arguably essential — but when budgets are stressed, existing wardrobes get called upon to go the extra mile.

Another major question mark is leadership. CEO Michelle Gass is leaving Kohl’s for Levi Strauss where she is expected to eventually take on the same role. This has created a void that has yet to be filled and an air of uncertainty around the new leadership team’s strategy. How the new CEO meshes with activist investor Macellum Advisors is another big matzo ball of uncertainty.

What are Wall Street’s Revenue Estimates for Kohl’s?

An unexpected management upheaval and a tough economic climate prompted Kohl’s to withdraw its fourth-quarter and full-year guidance. Never a comforting move, especially considering the importance of the holiday shopping period. Consumers may be gaining confidence, but Kohl’s shareholders sure aren’t.

For Q4, Wall Street is forecasting a fourth straight quarter of lower revenue. Consensus estimates for the next three quarters call for goose eggs, i.e. 0% growth. Annual sales have yet to return to pre-Covid levels, so the lack of forecasted growth is especially troublesome — and spells further market share losses to the Amazons of the world. 

The trailing P/E ratio of 6x may seem to put Kohl’s on the bargain rack but this is a value trap. Cost inflation, a secular shift to e-commerce and an interim CEO at the helm amount to a lot of uncertainty. The valuation is where it is because a Kohl’s investment carries a ton of risk. Sales have barely budged from 2019 levels, so for the stock to be hovering near its pandemic low makes perfect sense.

Kohl’s board contemplated a sale in July 2022 but decided a retail slowdown and rising interest rates didn’t add up. Since then, the stock has gone sideways as the market awaits the next potential catalyst. It doesn’t appear M&A will come to the rescue anytime soon, so Kohl’s will likely be a ‘show me’ turnaround story two-plus years in the making.

Stronger-than-expected jobs data might lead to the Fed lifting rates higher than investors expect. Increased recessionary fears have sparked a market sell-off lately. Given a highly uncertain market backdrop, we think it could be wise to avoid fundamentally weak popular stocks Block (SQ), Roku (ROKU), and Lucid (LCID), which investors have been recently selling short. Keep reading….

shutterstock.com – StockNews

The stock market and economy have struggled significantly this year due to multi-decade high inflation, aggressive monetary policy tightening by the Federal Reserve, the economic fallout from Russia’s invasion of Ukraine, and the growing possibility of a recession.

The Fed raised interest rates this year at the fastest since the 1980s, including 75 basis point hikes in the last four meetings to combat persistently high inflation. Since the Consumer Price Index (CPI) data for October came in cooler than expected, Fed Chair Jerome Powell hinted that the central bank is prepared to downshift the size of rate increases at its meeting this month.

While Fed officials signaled plans to raise their benchmark interest rate by 50 basis points this week, the strong November jobs report underscores the risk that the Fed will take the terminal rate above 5%. Moreover, the central bank seems willing to cause a recession to fight against stubborn inflation.

Continued fears of a recession have turned 2023 stock market predictions unusually bearish. Most big shots, including Bank of America (BAC) and Morgan Stanley (MS), expect stocks to crash more than 20% next year.

Given the current challenging market conditions, investors are short-selling popular yet fundamentally weak stocks Block, Inc. (SQ), Roku, Inc. (ROKU), and Lucid Group, Inc. (LCID). So, these stocks could be best avoided now.

Block, Inc. (SQ)

SQ creates tools enabling sellers to accept card payments and offers reporting, analytics, and next-day settlement. It provides various hardware products, software products, and a developer platform. The company serves the United States, Canada, Japan, Australia, France, Ireland, Spain, and the United Kingdom.

SQ has seen an unusual options activity lately. Around 993 put options were traded on December 9, indicating a bearish sentiment surrounding the stock.

For the fiscal 2022 third quarter ended September 30, 2022, SQ’s total operating expenses increased 45.6% year-over-year to $1.62 billion. Its operating loss came in at $48.79 million, compared to an operating income of $22.99 million in the prior-year period.

In addition, the company’s net loss attributable to common stockholders came in at $14.71 million, compared to a net income attributable to common stockholders of $84,000 in the year-ago period. In addition, its total liabilities were $12.59 billion as of September 30, 2022, compared to $11.71 billion as of December 31, 2021.

SQ’s trailing-12-month gross profit margin of 32.72% is 34.3% lower than the industry average of 4.77%. Also, its trailing-12-month ROCE, ROTC, and ROTA of negative 5.18%, 1.51%, and 1.73% compare to the industry averages of 5.00%, 3.34%, and 1.66%, respectively.

Analysts expect SQ’s EPS and revenue for the fiscal period ending December 31, 2022, to decline 36.8% and 0.9% year-over-year to $1 and $17.50 billion, respectively. The stock has slumped 60.6% year-to-date and 65.4% over the past year to close the last trading session at $64.60.

SQ’s POWR Ratings reflect bleak prospects. The stock has an overall rating of D, equating to a Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

Within the F-rated Financial Services (Enterprise) industry, it is ranked #84 out of 104 stocks. The company has a D grade for Momentum, Stability, and Quality.

Click here to see the additional POWR Ratings of SQ for Growth, Value, and Sentiment.

Roku, Inc. (ROKU)

ROKU operates a TV streaming platform through two segments: Platform and Player. Its platform enables users to discover and access various streaming content and content publishers to build and monetize large audiences. ROKU’s streaming players and TV-related audio devices are available through direct retail sales and licensing arrangements with service operators.

On December 9, around 5,185 put options for ROKU were traded, indicating bearish sentiment.

For the fiscal 2022 third quarter ended September 30, 2022, ROKU’s gross profit declined 2% year-over-year to $356.79 million. Its operating expenses increased 70.7% from the year-ago value to $503.78 million. Its income from operations came in at $146.99 million, compared to income from operations of $68.85 million in the prior year’s quarter.

The company’s net loss came in at $122.18 million and $0.88 per share, compared to a net income of $68.94 million and $0.48 per share in the year-ago period, respectively. 

ROKU’s trailing-12-month gross profit margin of 46.61% is 7.4% lower than the industry average of 50.3%. The stock’s trailing-12-month ROCE, ROTC, and ROTA of negative 8.68%, 4.78%, and 5.40% compare to the industry averages of 6.18%, 4.13%, and 2.30%, respectively.

Analysts expect ROKU’s loss per share for the first quarter of fiscal 2023 (ending March 2023) to widen 449.1% year-over-year to $1.04. The consensus revenue estimate for the same quarter indicates a decline of 2.4% year-over-year to $716.16 million. Also, the consensus loss per share estimate of $4.28 for the next fiscal year (ending December 2023) indicates a worsening of 19.7% year-over-year.

The stock has plunged 44% over the past six months and 77.8% year-to-date to close the last trading session at $51.74.

ROKU’s POWR Ratings are consistent with this bleak outlook. It has an overall F rating, equating to a Strong Sell in our proprietary rating system.

It has an F grade for Growth and a D for Stability and Sentiment. Within the Consumer Goods industry, it is ranked #55 out of 59 stocks. To see the other ratings of ROKU for Momentum, Value, and Quality, click here.

Lucid Group, Inc. (LCID)

Technology and automotive company LCID develops electric vehicle (EV) technologies. The company builds and markets electric vehicles, EV powertrains, and battery systems. It operates more than 20 retail studios in the United States. The stock has seen unusual options activity lately. On December 9, about 791 put options for LCID were traded, indicating a bearish sentiment.

For the fiscal 2022 third quarter ended September 30, 2022, LCID’s total cost and expenses increased 77.6% year-over-year to $882.98 million. Its loss from operations widened by 38.3% from the previous year’s quarter to $687.52 million. The company’s adjusted EBITDA loss came in at $552.90 million, worsening 125.7% year-over-year.

In addition, the company’s net loss widened by 1.1% year-over-year to $530.10 million, while its net loss per share attributable to common stockholders came in at $0.40. Its non-GAAP free cash outflow was $859.53 million, up 123.6% year-over-year.

LCID’s trailing-12-month gross profit margin of negative 213.72% compares to the industry average of 35.41%. Its trailing-12-month asset turnover ratio of 0.06% is 94.3% lower than the industry average of 1.01%. In addition, its trailing-12-month ROCE and ROTC of negative 46.49% and 27.38% compare to the industry averages of 12.92% and 6.59%, respectively.

Analysts expect LCID’s loss per share to widen 45.6% year-over-year to $0.43 for the current quarter ending December 31, 2022. Also, the consensus loss per share estimate of $1.31 for the next fiscal year indicates a worsening of 10.9% year-over-year. The company has a disappointing earnings surprise history since it missed its consensus EPS estimates in three of the trailing four quarters.

Over the past six months, the stock has declined 54% and 78.8% year-to-date to close the last trading session at $8.68.

LCID’s poor fundamentals are reflected in its POWR Ratings. The stock’s overall F rating translates to a Strong Sell in our proprietary rating system.

LCID has an F grade for Value, Quality, Stability, and Sentiment. Within the D-rated Auto & Vehicle Manufacturers industry, it is ranked #56 out of 62 stocks. 

Click here to see the additional POWR Ratings for Momentum and Growth for LCID.

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SQ shares fell $0.60 (-0.93%) in premarket trading Monday. Year-to-date, SQ has declined -60.00%, versus a -16.24% rise in the benchmark S&P 500 index during the same period.

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About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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The post 3 Popular Stocks Investors Have Been Busy Selling Short appeared first on StockNews.com

MarketBeat.com – MarketBeat

Interactive entertainment restaurant operator Dave & Buster’s Entertainment, Inc. (NASDAQ: PLAY) is proving that its possible to mitigate both inflationary pressures and falling consumer discretionary spending. They are in a sense the last man standing when it comes to stand-alone video game arcades combined with dining.

While movie theaters like AMC Entertainment Holdings, Inc. (NYSE: AMC), Cinemark Holdings, Inc. (NYSE: CNK) and Cineworld Group plc (OTCMKTS: CNNWF) are struggling to rebound back to pre-pandemic levels due to the migration to streaming movies at home, Dave & Busters is purely an experience that can only be had away from home.

They have pioneered the concept of huge, bold, blaring, bright, action-packed carnival-like video game entertainment with prizes, a sports bar, pool tables, skeeball, and a restaurant all packed into one huge coliseum-sized location. It overwhelms the senses the moment you step into Dave & Buster’s as if entering another world.

It’s the experiential factor that has driven their business back up through pre-pandemic levels. Rather than a pullback during normalization, the pent-up demand has actually cemented a higher baseline proving that consumers will still spend on truly experiential entertainment and dining.  

A Beautiful Union

On June 29, 2022, Dave & Busters acquired dining and entertainment franchise Main Event Entertainment based out of Dallas, TX, for $835 million. They expect to generate up to $25 million in cost synergies as the complementary businesses target the full demographic of customers from kids to Gen-X-ers. Dave & Busters has been around for over 40 years and understands the concept of generational customers.

The Gen-X-ers that grew up with them now have children they can bring into the restaurants. While Dave & Busters itself caters more to the sports bar and older gaming crowd, Main Event caters to families and younger children. This makes the union between Dave & Busters and Main Event a logical and synergistic match-up.

Truly Experiential

Unlike movie theater chains, Dave & Busters doesn’t rely on third-party content suppliers like movie studios including The Walt Disney Company (NYSE: DIS) , Comcast Corporation (NASDAQ: CMCSA) or Warner Bros Discovery, Inc. (NYSE: WBD) for big releases to draw people to their locations. It’s even worse when they’re competing with the very same studios for eyeballs as they release their movies on streaming even quicker now. While the movie theater experience can be emulated at home with ever cheaper 4K LED televisions and sound bars, Dave & Busters has to be experienced away from home. It’s truly an experiential dining concept that has stood the test of time and economic backdrops.

Descending Triangle Looms

The weekly candlestick chart on PLAY stock shows progressively lower highs on bounces against a flat low on falls. This sets up a descending triangle where the lower highs is the unstoppable force versus the immoveable object of the flat lows near the $30.50 baseline. As the range gets closer to the apex point, shares will eventually either breakdown through the $30 level making new 52-week lows or breakout through the falling trend line.

The 20-period exponential moving average (EMA) has been choppy at $37.46 along with the weekly 50-period MA at $38.59. The weekly stochastic is starting to cross over back down as selling volume was heavy after its Q3 2022 earnings release. The market structure high (MSH) sell triggers under $36.02 and the market structure low (MSL) buy triggers above $33.26, which also happened to be the support level it bounced off during the earnings sell-off.

Pullback support areas sit at the $33.26 weekly MSL trigger, $30.92 triangle support, $29.60 swing low, $28.05, $25.52, and $23.96.

Record Sales and Cost Savings Growing

On Dec. 6, 2022, Dave & Buster’s released its third-quarter fiscal 2022 results for the quarter ending October 2022. The Company reported an earnings-per-share (EPS) profit of $0.04 excluding non-recurring items. Revenues rose 51.3% year-over-year (YoY) to $481.21 million and beating consensus analyst estimates for $470.78 million. Pro forma comparable sales at Dave & Buster’s and combined Main Event locations rose 13.3% YoY and 17.5% compared to same quarter 2019 pre-covid.

Dave & Busters is on track to realize its $25 million annual cost synergy savings having already implemented $17 million to date. The Company opened 3 new locations in California. The Company ended the quarter with $599.3 million in liquidity including $108.2 million in cash and $491.1 million in $500 million revolver.

Dave & Buster’s CEO Chris Morris commented, “We are pleased to report strong financial results for the third quarter. We delivered record revenue driven by double-digit comparable sales growth, resulting in record Adjusted EBITDA.” He concluded, “The future is incredibly bright for this new organization, and I am excited about sharing our progress with you over the next few years.”

A Sneak Peek at Q4 2022

As has been a custom lately, Dave & Buster’s provided a sneak peek into the first five-weeks of Q4 2022. Comparable store sales during the period rose 3.1% YoY and 9.2% over Q4 2019. Pro forma comparable combined walk-in store sales fell (-2.4%) YoY but was up 15.7% over Q4 2019. Pro forma Special Events comparable sales rose 65.3% YoY but fell (-21.7%) versus Q4 2019.

 

Comcast is a part of the Entrepreneur Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.

Luxury athletic clothing retailer Lululemon Athletica Inc. (NASDAQ: LULU) was trading 12% lower mid-session Friday, after gapping down at the open. The move followed the company’s warning of higher-than-anticipated inventory levels.

MarketBeat.com – MarketBeat

Is Lululemon a harbinger of problems ahead for clothing retailers, in an era of inflation and remaining supply-chain issues? 

Other clothing retailers, such as Levi Strauss & Co. (NYSE: LEVI), American Eagle Outfitters Inc. (NYSE: AEO), Gap Inc. (NYSE: GPS) and Nike (NYSE: NKE) have said inventories were up in the past quarter, compared to a year ago. 

However, as a group, apparel retailers have outperformed the vast majority of stocks, led by strong price performance of companies including Lululemon and fellow large caps Ross Stores Inc. (NASDAQ: ROST) and The TJX Companies Inc. (NYSE: TJX). 

Topping Last Year’s Numbers 

At first glance, Lululemon’s quarterly numbers look pretty good. 

After the bell Thursday, the Vancouver, British Columbia-based company said third-quarter revenue came in at $1.86 billion, a 28% year-over-year increase. Earnings were $2, up 23% over the year-earlier quarter.

Those results beat both top and bottom-line views. MarketBeat earnings data show that Lululemon has a solid history of beating, or at least meeting, analysts’ expectations. 

But the holiday cheer was quickly soured by the company’s mention of higher inventory levels. That sent shares skidding in after-hours trading and plummeting in heavy volume at the open Friday. 

While same-store sales, a common retail metric, increased in the quarter, they fell below Wall Street’s expectations. 

Holding Above 200-Day Line 

Even with Friday’s price drop, which sliced through the 50-day moving average, shares remained above the longer-term 200-day line. If that holds, it’s a signal that institutional investors still have conviction about the stock and aren’t bailing out en masse. 

Certainly, the news was mixed. The company increased its revenue and earnings guidance. It now sees sales in a range of $7.944 billion to $7.994 billion for the full year, up from an earlier forecast of a $7.865 billion to $7.940 billion range. 

It expects net income between $9.87 to $9.97 per share, better than a previous forecast of $9.82 to $9.90 per share. 

Even so, investors weren’t ready to look at the bright side Friday. There’s a case to be made that Thursday’s report gave some investors a reason to take profits. Shares are up 4.01% in the past month and 8.31% in the past three months. 

The stock has been trending near its 10-day moving average since rallying to a structure high of $370.46 on November 11. That represented the most recent technical buy point, but Friday’s action put the stock about 12% below that point. 

Widespread Inventory Glut

The increase in inventories worried investors. 

It’s not a problem that’s unique to Lululemon. For much of this year, retailers across various categories have reported higher inventories due to rapidly changing consumer buying habits throughout the various phases of the pandemic. Despite offering deep discounts, some items aren’t moving off the shelves as fast as companies had anticipated, based on earlier buying patterns. 

Supply-chain and freight delays complicated the problem. High-demand items took a long time to arrive, and once they were available, consumers were no longer interested. 

For their part, Lululemon’s management team maintains that ongoing demand will justify high inventory levels, rather than necessitating steep markdowns. 

The company has a history of charging full price more than offering discounts. Some analysts appear to have confidence that the company can maintain its pricing power, as evidenced by MarketBeat analyst data for Lululemon, which show that four analysts boosted their price targets after the third-quarter report. 

Analysts’ consensus price target for Lululemon is $413.12, a potential upside of 26.30%. That’s up from a price target of $400.74 a month ago. 

Although clothing retailers as a group fell on Friday, one day does not make a trend. Holiday-season and fourth-quarter sales will reveal much more about changing buying habits, and the medium-term effects of inventory oversupply.

Bolster the Warren Buffet “Fear and Greed” mantra with three more reliable indicators to increase your odds of sucess in trading.

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“Be Fearful When Others Are Greedy And Greedy When Others Are Fearful” is a famous stock market adage of famed investor Warren Buffet. The CNN Fear and Greed Index certainly epitomizes that notion. The chart below shows how greed and fear tend to swing back and forth from one extreme to the other.

Following in the footsteps of Mr. Buffet is never a bad decision, in my opinion. Getting greedy when others are fearful and fearful when others are greedy has worked well in 2022. Adding in a few other tried and true methodologies to that philosophy can make it even more robust. Here are three more ways to increase the odds of success in trading.

 

Technicals

The chart below shows the one-year price action for the S&P 500 (SPX). It is evident that the SPX continues to be in a well-defined downtrend, with a series of lower highs and lower lows. Indeed, the recent strong rally we saw off the lows ended right at the trend line before beginning to reverse course.

How far the current pullback will go is anyone’s best guess. However, if previous history is any guide, then $3400 would be a good guess.

I pulled off the numbers from the prior three times the SPX fell from the downtrend line before bottoming out and heading back up, as seen in the table below.

The average of the three drops so far this year has been just over 16% and took roughly a little over two months. That would equate to a drop that ends up around $3400 in the S&P 500 by about February option expiration on 2/17/2023-if the averages hold.

Seasonality

Certainly, many are still waiting for the so-called “Santa Claus Rally” to take stocks higher on a seasonal basis into Christmas. Given the red-hot rally since October, Santa may have already come early for the markets. But seasonality is a two-edged sword. Once Kris Kringle leaves town, stocks tend to suffer.

January has been the worst performing month for stocks over the past two decades. The S&P 500 has shown an average loss of 0.5% in that time frame and has dropped 55% of the time. February has been a laggard as well.

Stocks may have trouble finding their footing until springtime if seasonality is any guide.

The VIX

The VIX is a measure of 30-day implied volatility in the S&P 500 options. It is also referred to as the fear gauge since it tends to rise when stocks drop and fall when stocks rally. I recently wrote an article that showed how you can use the VIX to time the market.

The chart below shows just how pops and drops in the VIX have corresponded almost precisely to similar drops and pops in the S&P 500. Also note how the VIX extremes correspond to the CNN Fear and Greed Index extremes noted at the start of this article.

The latest fall in the VIX from highs at 34 to the recent lows under 20, followed by a subsequent rally to nearly 23, generated another VIX-based sell signal for stocks. Each of the previous moves off the lows in the VIX ended up finally stalling at the 34 area. If history holds, the VIX has much further to head higher-and stocks have much further to fall.

As you can see in the chart, each new VIX-based Buy signal corresponded with a new low in the SPY, which is the S&P 500 ETF.

Everything being equal, stocks may not bottom out and be a buy until they make new lows on the year.

Trading is all about probability, not certainty. Using these three measures discussed in your decision making will help put probabilities-and therefore the odds- in your favor.

POWR Options

What To Do Next?

If you’re looking for the best options trades for today’s market, you should check out our latest presentation How to Trade Options with the POWR Ratings. Here we show you how to consistently find the top options trades, while minimizing risk.

If that appeals to you, and you want to learn more about this powerful new options strategy, then click below to get access to this timely investment presentation now:

How to Trade Options with the POWR Ratings

All the Best!

Tim Biggam

Editor, POWR Options Newsletter

 

 

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SPY shares closed at $393.28 on Friday, down $-2.96 (-0.75%). Year-to-date, SPY has declined -16.24%, versus a % rise in the benchmark S&P 500 index during the same period.

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About the Author: Tim Biggam

Tim spent 13 years as Chief Options Strategist at Man Securities in Chicago, 4 years as Lead Options Strategist at ThinkorSwim and 3 years as a Market Maker for First Options in Chicago. He makes regular appearances on Bloomberg TV and is a weekly contributor to the TD Ameritrade Network “Morning Trade Live”. His overriding passion is to make the complex world of options more understandable and therefore more useful to the everyday trader.

Tim is the editor of the POWR Options newsletter. Learn more about Tim’s background, along with links to his most recent articles.

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The post 3 Big Reasons Why Stocks Are Primed For A Probabilistic Pullback appeared first on StockNews.com

40 year investment veteran Steve Reitmeister shares his most complete and up to the minute analysis of what lies ahead in 2023. First a return of the bear market with the S&P 500 (SPY) making news lows. Yet just at the darkest hour the new bull market will emerge ushering in tremendous gains to investors who time it right. Steve shares his trading plan along with top 8 picks to profit on the way to bear market bottom. Next he shares a plan to buy the market bottom with 2 top picks set to rally 100%+. Get the full story below.

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It’s that time of year again for investors.

To put the past behind us in order to focus on the year that lies ahead.

This led me to record a timely presentation and trading plan that you should watch now:

2023 Stock Market Outlook >

I truly expect this to be a “Jekyll & Hyde” year for stock prices.

Meaning that no matter how impressive the recent rally looks it will fade fast in early 2023 finding newer and deeper lows for the bear market.

I have a trading plan and 8 specific picks to help you profit on the way down.

But just at the darkest hour is when the new bull market emerges ushering in tremendous gains.

Those who come late to the party will miss out on the best returns of the decade.

Gladly I have a trading plan for finding bear market bottom to enjoy serious profits as the new bull market emerges.

This includes details on 2 stellar picks that have 100%+ upside potential in 2023.

The time to prepare your investing plan for the year ahead starts now.

Your first step in that journey starts by watching my timely presentation shared below:

2023 Stock Market Outlook >

Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO, Stock News Network and Editor, Reitmeister Total Return

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SPY shares fell $0.43 (-0.11%) in after-hours trading Friday. Year-to-date, SPY has declined -16.24%, versus a % rise in the benchmark S&P 500 index during the same period.

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About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

More…

The post 2023 Stock Market Outlook appeared first on StockNews.com

The S&P 500 (SPY) has been shedding weight all week long because inflation is looking too “sticky”. What does that mean? And why does it matter? 40 year investment veteran Steve Reitmeister spells it all out in this timely commentary that includes market outlook, trading plan and top picks. Read on below for the full story.

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Inflation and the Fed once again are taking center stage for investors. First, were signs of wages inflation being hotter than expected last Friday. Next comes an unwelcome increase in the Producer Price Index this Friday.

These are signs of “sticky inflation”. The kind that doesn’t fade so easy. The kind the Fed warned us about.

Oddly traders tried to shrug off the early losses this Friday…but came to their senses by selling with gusto into the close.

Let’s ponder why that is the case, along with the broader investment outlook, in this week’s commentary below…

Market Commentary

In my last commentary I discussed the catalysts at play for investors. Both the factors that cause bullish rallies as well as bearish drops.

The nutshell version of the article is to appreciate that the key ingredient for stock prices is the state of inflation and therefore how long the Fed will have to remain hawkish. The longer inflation stays around…the longer the Fed has high rates…the more likely to have recession and lower stock prices.

Most investors talk about the Consumer Price Index (CPI) when discussing inflation. However, the leading indicator of where that will be in the future is the related, Produce Price Index (PPI).

That’s because this report reviews the costs being taken in by companies now, that will show up as higher prices for their products and services down the road. Now you appreciate why the higher than expected reading for PPI Friday morning was not a welcome sign leading S&P 500 (SPY) futures to immediately drop from +0.5% to -0.5%…and then closing at -0.73% on the session.

What should really jump off the page for investors is to appreciate that the +0.3% month over month increase in PPI came at the same time that gasoline prices were down a full 6%. This is exactly what the Fed fears…that inflation is becoming “sticky” in other places.

Meaning more permanent. Meaning higher rates from the Fed on the way. Meaning still a long term battle to fight inflation which increases odds of hard landing (recession). And yes, meaning lower corporate earnings which begets lower stock prices.

Now let’s remember that on Friday 12/5 we learned in the Government Employment report that wage inflation was higher than expected. And wage inflation is about the stickiest category.

The release of that information had stock futures down about -1.5% at the time of the open. Oddly bulls kept bidding up stocks into the finish to a nearly breakeven result.

Over the weekend investors sobered up to the realization that this news was indeed quite bearish. That is why stocks trimmed over 3% in the first 3 sessions of the week.

This action is somewhat similar to the reaction to PPI this Friday morning. Stock futures dropped like a rock on the news. But somehow fought their way back until the final hour when the bears took the wheel.

Perhaps that is because some traders don’t fully appreciate that PPI is the leading indicator for the more widely followed CPI report which comes out Tuesday 12/13. Perhaps they want to roll the dice and see what happens there.

Or perhaps they want to wait for the next Fed rate decision on Wednesday 12/14. Let me remind investors that what happened at the last meeting. They foolishly rallied 2% within minutes of the announcement that future rate hikes would be lower.

However, when Powell took to the podium thirty minutes later, he reminded folks of the long term battle ahead. And the odds of creating a soft landing for the economy had greatly diminished. That speech turned that 2% rally all the way down to a -2.5% finish on session.

Long story short, investors can stay bullish if they want rolling the dice on what is in the 12/13 CPI report or 12/14 Fed announcement. However, when you pull back and look at the entirety of what is going on, which is what I did in my “2023 Stock Market Outlook”, then you will appreciate that odds still point firmly to recession forming early next year with lower lows on the way for stock prices.

What To Do Next?

Watch my brand new presentation: “2023 Stock Market Outlook” covering:

• Why 2023 is a “Jekyll & Hyde” year for stocks
• 5 Warnings Signs the Bear Returns in Early 2023
• 8 Trades to Profit on the Way Down
• Plan to Bottom Fish @ Market Bottom
• 2 Trades with 100%+ Upside Potential as New Bull Emerges
• And Much More!

Watch Now: “2023 Stock Market Outlook” >  

Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO, Stock News Network and Editor, Reitmeister Total Return

 

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SPY shares fell $0.43 (-0.11%) in after-hours trading Friday. Year-to-date, SPY has declined -16.24%, versus a % rise in the benchmark S&P 500 index during the same period.

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About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

More…

The post Stock Investors in a “Sticky” Situation appeared first on StockNews.com

One has to laugh at the macho stock rally the bulls pulled off last week as they ONCE AGAIN misunderstand the statements of the Fed. As clearer heads prevail the stock market (SPY) have erased all of last weeks gains and then some. That is the past. What matters is how to invest going forward. 40 year veteran Steve Reitmeister shares his timely market outlook, trading plan and 8 top picks to generate gains in the weeks ahead.

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Hey, do you remember that awesome rally after Powell’s speech last week…and how the bulls were claiming victory as stocks went soaring above the 200 day moving average?

Yes, that bout of irrational exuberance is over as foretold in my last commentary: Is the Bear Market Over??? (spoiler alert…NO IT AINT OVER!).

The more updated, educated, and elucidated version of that story is shared with you below…

Market Commentary

Indeed, it looks like Mike Wilson of Morgan Stanley called it right when he previously predicted stocks would rally to a range of 4,000 to 4,150 before the bear market resumes in earnest. Thus, after reaching those temporary heights last week he is now reminding everybody to prepare for bottom somewhere between 3,000 to 3,300 by April 2023.

This outlook is not a surprise to Reitmeister Total Return members as I have been beating the drum about this being a long term bear market where we have not yet seen bottom. And not to be suckered in by any of these seemingly impressive bear market rallies as they are all just mirages.

This explains why I still have a hedged portfolio in place to profit as the serpentine pattern of this market eventually winds lower. Just like the +1.86% gain the past 3 brutal sessions for the overall market.

The oddity of recent action is what has become bullish vs. bearish catalysts. I thought it would be useful to summarize that for you folks today to appreciate the events that lead to rallies…and those that get us back in bear market mode.

NOTE OF CAUTION: What I am about to share is the current triggers for price action. However, there is a bizarro world inverse logic being used by bulls that wont last over the long haul. More on that in the next section.

What Are the Bullish Catalysts for Today’s Market?

Anything that points to softening inflation.

This can come in many forms. First, is actual inflation reports like the early November CPI/PPI reports that came in lower than expected. This potential signaling that inflation has peaked was like drinking 5 Red Bulls for traders to bid up prices.

Yes, 7.7% inflation is better than the previous 8% rate. But a long, long, long way from the 2% Fed target which is why Powell has been clear that they will stay hawkish for a long, long, long time.

Also in this category of disinflationary news is weak economic reports. This is the bizarro world concept I referred to early. That’s because normally the chain reaction works like this:

Weak economic data > greater likelihood of recession > lower corporate earnings > lower share prices

Yet at this stage, when investors are myopically focused on only inflation, then they see the equation as follows:

Weak economic data > greater likelihood of recession > tamps down inflation > less hawkish Fed involvement > the sooner the Fed will lower rates in the future > the more bullish long term for stocks > let’s buy stocks NOW!

This latter equation may seem logical on the surface, yet completely misses the superior, and more historically accurate aforementioned version of the bearish chain reaction to this news. And thus it explains why the market too easily sloughed off the truly weak ISM Manufacturing report last Thursday.

Typically the first reading under 50 would have investors rushing to hit the sell button. Yet investors were more than happy to be drunk with bullishness last week as this report came in at 47.7.

This “bad news is good news” mantra is the same flawed logic that had investors buying up stocks in November and December of 2008 as they saw it leading to more favorable Fed actions. However, as we can clearly see in the chart below that rally gave way to a much nastier drop in early 2009 given how decimated the economy was demanding lower stock prices.

That final leg down in Q1 of 2009 became the true and lasting bottom before the next bull market emerged. And yes, I sense that same kind of formation may be taking hold now with lower lows in early 2023 before it is truly time to be bullish once again. (Thus mirroring the view shared by Mike Wilson of Morgan Stanley).

Now let’s consider the flips side of the coin…

What Are the Bearish Catalysts for Today’s Market?

The inverse of above. That being anything that points to inflation remaining too high for too long.

The perfect example is what happened Friday when the Government employment report showed robust job gains of 263,000. Well above expectations.

But what really got investors choked up was the sticky wage inflation that Powell discussed in his most recent speech. Year over year it came in at 5.1% when only 4.6% was expected. That is because the month over month increase was 2X expectations.

The initial reaction to this news was a -1.5% sell off premarket. Yet bit by bit the bullish momentum from earlier in the week returned to eat away at those losses leading to a nearly breakeven close.

Over the weekend investors were clearly stewing on this information as they came out of the gate this week in a selling mood.

-1.79% on Monday

-1.44% on Tuesday

-0.19% on Wednesday

Added altogether we have wiped off the board the entirety of last week’s illogical and ill-fated rally.

To me there is little doubt that the odds of recession and deepening of the bear market have increased given recent economic data. Heck, even just the Chicago PMI coming in at 37.2 last week should have been enough for most investors. That’s because 8 out of the last 8 recessions have been signaled by this report coming in under 40.

And don’t forget the deepening of the inverted yield curve which is as tried and true in calling a recession as any indicator. That got kicked into high gear the past couple weeks as the 10 year Treasury rate has tumbled.

Interesting to note that even the 2 year rate is down of late because it is widely believed the recession is in the works for 2023 which has disinflationary properties (like wiping out many jobs > lower income > lower demand (spending) > lower prices).

For as obvious as these bearish catalysts appear to be, it would also not surprise me to see a repeat of 2008/2009 cycle as noted earlier. That being a market staying aloft on the “bad news is good news mantra” coupled with a dose of Santa Claus rally.

The point being that this week’s decline may be nothing more than taking some froth out of the recent rally…but not necessarily a sign that investors are ready to retest the October lows. In fact, I would bet on us settling into a temporary range between the bear market designation line of 3,855 on the low side and the 200 day moving average on the high side (4,040).

In the meantime, the following reports will be closely watched given their focus on inflation and likely Fed actions:

12/9 Producer Price Index (PPI)

12/12 Consumer Price Index (CPI)

12/13 Fed Interest Rate Decision

The long term trend is still bearish. Very little doubt about that. The only real question is when that comes back into play and we retest the October lows.

That could start in December if the above reports point to sticky inflation that keeps the Fed raising rates much further, which only exacerbates already declining economic activity. However, if bulls continue to read the signals wrong, then they may have one more burst of activity in December to close at near term highs before the rug gets pulled out in early 2023.

All the above explains why I remain decidedly bearish with a portfolio built to not just weather the storm…but actually accumulate gains as the overall market heads lower. That includes our 3 day gain of +1.86% as the market tanked.

With the market closing today at 3,933 and a likely bottom 20% lower in the coming year, explains why it is not too late to employ the strategies advocated in Reitmeister Total Return if you have not already.

What To Do Next?

Discover my special portfolio with 8 simple trades to help you generate gains as the market descends further into bear market territory.

This plan has been working wonders since it went into place mid August generating a robust gain for investors as the market tanked.

And now is great time to load back as we deal with yet another bear market rally before stocks hit even lower lows in the weeks and months ahead.

If you have been successful navigating the investment waters in 2022, then please feel free to ignore.

However, if the bearish argument shared above does make you curious as to what happens next…then do consider getting my updated “Bear Market Game Plan” that includes specifics on the 8 unique positions in my timely and profitable portfolio.

Click Here to Learn More >

Wishing you a world of investment success!

Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
CEO, Stock News Network and Editor, Reitmeister Total Return

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SPY shares fell $0.14 (-0.04%) in after-hours trading Wednesday. Year-to-date, SPY has declined -16.26%, versus a % rise in the benchmark S&P 500 index during the same period.

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About the Author: Steve Reitmeister

Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.

More…

The post Are You Ready for the Bear Market to Return? appeared first on StockNews.com

The question of a Fed pivot isn’t if, it’s when because the FOMC can’t continue to hike rates indefinitely. In that scenario, economic activity would grind to a halt and recede, GDP would shrink and the global world order would collapse. No, the FOMC’s mission is to maintain economic stability through price stability and its dual mandate of labor market support.
In this light, the FOMC needs to contain inflation not destroy it and that means a careful balance of policy. The question of when the Fed will pivot is a different story and it may be sooner rather than later. 

MarketBeat.com – MarketBeat

Economic Activity Lags FOMC Policy By 1 to 2 Years 

It is a generally accepted phenomenon that central bank policy takes 1 to 2 years to take effect. This is because the big spending budgets that are impacted by central bank policies are usually set well before the policies are put in place and those policies are changed ever so slowly (usually).
Because the first post-pandemic interest rate hike was put in place in March 2022 it’s likely the true impact of the first interest rate hike is yet to be felt. Now, 8 months and 350 basis points of increase later, it won’t be until late in 2024 that the impacts of what the Fed has done to date will be fully integrated into the economy. And they are still raising rates. 

The latest indications from the Fed are that 1) they will (or could) slow the pace of interest rates as soon as next week and 2) the peak of interest rates could be higher than the market is forecasting and may stay at that level for longer than anticipated.
In the first scenario, the FOMC is already pivoting or trying to pivot in case they’ve already gone too far. We’ll call this the first pivot. In the second scenario, they leave the door open for an even more aggressive policy that may not fully impact the US and the global economy until well into 2025 and that’s where the 2nd pivot will come into play. 

Expect A 2nd Fed Pivot Sometime Late In 2023. 

The FOMC likes to cling to its data and that is a good thing. If they’d done that in early 2021 when inflation started to increase maybe we would be where we are now. The point is that inflation is so hot and has been running so high for so long that the FOMC needs to be sure it’s tamped down.
The talk from that quarter is rates will need to come down to at least 2% to make them happy and, by that time, they may well be behind the curve once again. The target rate indicated by the CME’s Fedwatch Tool is 475 to 500 basis points by July 2023. That will have sent the US economy into a recession that is being led by the housing sector.
When this data shows up in the broader economy the Fed will have to start cutting rates because, guess what, it could take up to 2 years for economic activity to catch up with the new, easier policy. 

The question now is how bad will the downturn be. The word from the C-suite is that it could be very bad and the housing data backs that up. While strength was shown in the current quarter and current year, Toll Brothers (NYSE: TOL) F23 guidance is indicating a 15% to 23% decline in volume sales compounded by an 11% decline in home prices.
This is bad news for home builders, home sellers and every industry affected by the home building industry which is virtually all of them. 

When Will The FOMC Pivot? 

The FOMC is trying to pivot now, but the data may not let them. If consumer-level inflation doesn’t stay down or if it lingers at new lower but still high levels the Fed will be forced back onto the track of interest rate hikes. The risk for the market is that economic activity will contract so quickly and/or so sharply the FOMC will be forced to pivot again and start cutting rates. So much for them being in charge of the money. 

In 1857, John Henry Hopkins Jr. wrote “Three Kings of Orient,” the popular Christmas carol more commonly known today as  “We Three Kings.” Based on the Biblical Magi who bore gold, frankincense, and myrrh, the song is about the importance of sacrifice — and believe it or not, it has investing connotations.

MarketBeat.com – MarketBeat

In stock investing, there are always choices to be made. At the core, picking prospective winners is a tradeoff between risk and reward. Then there are other decisions — U.S. versus international companies, growth versus value, and high or low volatility. Not to mention an array of industry groups.

Of course, the total return of a stock is ultimately what we’re after as investors. This includes both price growth and dividend payments. Opting for growth typically requires sacrificing stable income, and vice versa. 

Investors that prefer stability should consider the Dividend Kings, the “perfect light” of perpetually increased dividends. These are companies that have raised their dividend in each of the last 50 years or more. 

This elite group of 37 stocks comes from all sorts of sectors and has a range of yields, but have one thing in common — they are great long-term wealth builders. Yes, the tradeoff is usually lower price appreciation. However, given this year’s market selloff, for some, the near-term upside is better than usual. 

Here are “Three Kings” that the wise men and women on Wall Street feel have a particularly good upside. 

What is National Fuel Gas Company’s Annual Dividend Payout? 

National Fuel Gas Company (NYSE: NFG) is a relatively new member of the Dividend Kings club having reached the 50-year mark in 2020. Yet the company carries a more distinguished trait. It is the only energy sector name to appear on the list. 

Yes, it operates similarly to a utility, of which there are several among the Dividend Kings — but it is the only one classified as energy by virtue of its oil and natural gas production arm and pipelines.

The stock combines the steady nature of a regulated gas company with the growth potential of an E&P business. National Fuel has paid a dividend for 120 years with strong cash flow generation enabling it to raise its payout for 52 straight years. The $1.90 per share annual payout equates to a 3% forward yield.

Sell-side research firms are mostly bullish on National Fuel because of the rare combination of growth and shareholder value. It ended fiscal 2022 on a high note with 80% adjusted earnings growth, but management lowered its fiscal 2023 outlook on moderating natural gas prices. The Street sees this as a long-term opportunity. The consensus price target of $81.50 implies 29% upside.

What is ABM Industries’ Dividend Growth Streak?

ABM Industries Incorporated (NYSE: ABM) is a mid-cap company that provides building maintenance services. The steady nature of its service contracts generates consistent profits, a portion of which are passed on to shareholders in the form of dividends. ABM Industries is riding a 54-year dividend hike streak after boosting its quarterly dividend to $0.195 per share.

While the 1.7% dividend yield is roughly on par with the broader S&P 400, ABM Industries has above-market upside according to analysts that actively cover the stock. Current price targets range from $52 to $65 and the $58.50 average points to 29% upside. 

ABM Industries is a late earnings season reporter scheduled to announce fiscal Q4 results on December 13th. The Street is forecasting 4% year-over-year EPS growth on 16% revenue growth. Not overwhelming figures but considering the company has topped EPS estimates in 7 straight quarters, it could be a good earnings play.

More importantly, ABM Industries screams stability and low risk. Its facilities management solutions — including engineering, electrical, lighting, HVAC, janitorial, and even landscaping and parking — are employed by a wide range of customers from hospitals and schools to airports and data centers. A track record of profitable growth, dividend increases and buybacks make this one to own for at least the next 12 months.

Does Nordson Corporation Have Good Upside?

Nordson Corporation (NASDAQ: NDSN) is another lesser-known industrials Dividend King. The diversified coatings and adhesives conglomerate is a poor man’s 3M — which is a fellow Dividend King along with sector peers Dover, Emerson Electric, Parker-Hannifan and Stanley Black & Decker.

Up nicely from its 2022 low but still, 12% below its 2021 record high, analysts see more room to run for Nordson. The consensus price target of $272 implies a 15% upside from here. Not too shabby for a low-volatility dividend grower.

Big things are expected for Norsdon’s upcoming fiscal Q4 earnings release. On December 14th, the Street will look for 24% year-over-year earnings growth reflecting strong end-market demand and effective cost-cutting measures. The company has surpassed EPS expectations in nine of the last 10 quarters.

Aside from the dividend prowess, another reason to like Nordson long-term is the recent acquisition of CyberOptics, a leading global manufacturer of 3D sensing technologies. The addition is slated to boost Nordson’s semiconductor testing capabilities and may turn out to be well-timed given an anticipated rebound for chipmakers.

Worst to first. It can happen fast when it comes to U.S. stocks.

MarketBeat.com – MarketBeat

One of the hottest groups in the recent market rally is consumer cyclicals. Long a distant underperformer in 2022, the sector has come to life in recent weeks thanks to some improved economic data, signs that inflation may have peaked and a more dovish Fed.

Economically sensitive companies are finding favor again because investors are seeking out oversold names in hopes of a lengthy rebound. From home improvement stores and apparel retailers to hotels and restaurants, some big gains are emerging from the S&P 500’s October 13th bottom.

With many consumer discretionary stocks arguably way oversold, the gains may just be getting started. More positive economic releases and a less aggressive Fed rate hike campaign could turn the sector from a laggard to a leader in 2023. 

These three stocks already have the wind at their back heading into the new year.

Will Peloton Stock Be a 2023 Winner? 

Peloton Interactive, Inc. (NASDAQ: PTON) has doubled off its 2022 low and seems to be finding favor as a turnaround story. The indoor cycling company rode a seven-day win streak into December despite a rather lackluster third-quarter earnings report. A wider-than-expected net loss reflected supply chain disruptions, higher material, and freight costs, and a shift from at-home exercise to gym memberships.

Regardless, sentiment around Pelton has turned bullish with the market sensing the worst may be over for the former pandemic winner. A healthier economy next year could mean increased consumer confidence and spending on connected fitness equipment and subscriptions. Combined with an improvement in logistics constraints and cost inflation, Peloton’s bottom line would theoretically be in better shape.

Whether demand for interactive fitness strengthens in a healthier economy remains to be seen. Absent the pandemic boost, Peloton does still have two powerful tailwinds: 1) global interest in health and wellness and 2) work-from-home trends. Both are supportive of purchasing digital fitness experiences. 

Still, the biggest key to a 2023 Peloton comeback may lie in the effectiveness of recently formed partnerships with UnitedHealthCare, Dick’s Sporting Goods, Hilton, and Amazon which could significantly expand Peloton’s audience. 

Has Alibaba Stock Finally Found a Bottom?

Alibaba Group Holding Limited (NYSE: BABA) has bounced approximately 50% off this year’s low and is starting to see higher trading volume. It’s a combination that could point to a big 2023 for a stock that is widely considered a measuring stick of the Chinese consumer.

Of course, Alibaba’s disappointing plunge from $300 has much to do with China’s strict Covid policies. Heading into its third calendar year, zero tolerance seems to have reached a tipping point with protests spreading throughout the country. The market is hoping the angst leads to an end to lockdown restrictions that will allow China’s workers to make and spend more money.

However, a potential recovery at Alibaba is about more than just the Chinese government. Recent financial results have been better. Fiscal second-quarter sales and profits were up year-over-year thanks to momentum in the domestic and international commerce businesses as well as growing demand for cloud computing services. 

The consensus forecast for fiscal 2024 revenue implies 11% and 6% growth in revenue and earnings respectively. Not the lofty figures we grew accustomed to prior to the pandemic, but recovery must start somewhere. And when you command around 80% of a China e-commerce market that’s backed by 1.4 billion consumers, it’s a recovery that will eventually be one of the massive proportions.

Does Wynn Stock Have More Upside?

Wynn Resorts, Limited (NASDAQ: WYNN) entered December on a three-month winning streak that was accompanied by good trading volume. The resort and casino operator got a Halloween day boost from news that Golden Nugget Casino owner Tilman Fertitta took a 6.1% stake in Wynn, and it hasn’t looked back since.

Wynn’s ensuing 31% November 2022 surge was largely driven by a strong third quarter report that showed resilient consumer demand for experiences and entertainment despite the broader macroeconomic pressures. The company’s new Encore Boston Harbor property hauled in 10% higher revenue and Las Vegas revenue jumped 14%. The return of conventions stands to bring even more people to the properties next year.

An improving global economy coupled with easing inflation could translate to a sustained recovery for Wynn and its peers in 2023. Loosened Covid restrictions in Macau and an end to the Russia-Ukraine conflict would certainly be a boon to international business. 

Back at home, Wynn’s most undervalued trump card may be its expanding online sports betting platform. The WynnBET app continues to gain traction in the market and favorable state legislative momentum could lead to a much wider customer base over the next few years. Building momentum in land-based casinos and digital assets has this stock looks like a win-win for 2023.