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Tag: STOCKS

  • Where is the Bottom for this Bear Market?

    Where is the Bottom for this Bear Market?

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    Bounces will pop up here and there as they did this past week…but don’t think for a second that this bear market is over because the Fed is not yet done with their mission to tamp down the flames of recession. When all is said and done we will have a recession and the S&P 500 (SPY) will be much lower. This leads to the key question: Where is bottom? Investing veteran Steve Reitmeister shares his views in his updated market outlook below.


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    September was downright brutal ending with a crescendo of selling that sent stocks to the lowest levels of this bear market. Not surprisingly this created ripe conditions for a 6% relief rally for the S&P 500 (SPY) to kick off October…how quickly that party ended.

    Thursday investors took a modest step back. But then after hours we received word of a terrible earnings report from Advanced Micro Devices (AMD).

    These are not just AMD problems. Unfortunately it speaks to a wide spread slow down in computer products along with supply chain issues that will no doubt harm many in the sector.

    Couple the above with a Friday jobs report that was just a tad too good which investors know will embolden the Fed to keep raising rates aggressively. This increases the odds of a hard landing for the economy down the road pushing more investors to hit the sell button.

    Long story short…welcome back to the bear market. Get the rest of the investment story and trading plan in the fresh commentary below…

    Market Commentary

    Right now investors are in a can’t win situation as good news sparks stock sell off as readily as bad news. Yes, that is quite odd but it aligns with the general premise of…

    Don’t Fight the Fed!

    When the Fed was lowering rates, as they did for nearly 12 years straight, we all used this saying as a battle cry to stay bullish. That is because lower rates are a catalyst for economic growth, which is great fuel for stock prices.

    Now we have the opposite.

    A Fed that is dead set on extinguishing the flames of inflation with the most aggressive rate hiking policy in history. Meaning the pace at which they are raising rates is unprecedented.

    The reason for this fast pace is not just the high rate of inflation. Sadly, the Fed was asleep at the wheel calling early inflation “transitory” and thus not something to be burdened with.

    When the Fed finally woke up to the stickiness of this inflation, then their only recourse was to aggressively raise rates. The goal is to slow down the economy, which by extension will tame inflation.

    Or let me put it another way. Recession by its very nature leads to less demand. Everyone who ever took Econ 101 knows this will lower prices thus reigning in inflation.

    Putting these pieces together means the Fed is actively trying to create a recession. And yes, recessions and bear markets go together like peanut butter and jelly.

    This explains why “Don’t Fight the Fed!” now translates as “watch out below!” for stock prices.

    And this also explains why even good news on the economic front is greeted with selling. The most recent instance of that was the October Employment Report on Friday showing robust job gains that only gives the Fed a green light to continue to aggressively raise rates.

    The only real questions are how deep of a recession will we have and thus how far down stock prices should go?

    Those betting on a soft landing would be right to think the recent lows at 3,585 for the S&P 500 (SPY) would seem like a fair bottom for stocks as it represents a nearly 26% decline from the all time highs.

    Unfortunately I have yet to talk to anyone calling for a soft bottom. That’s because with the Fed slow to react to inflation, that they have to be more aggressive in the steps taken. Not just the pace they are raising rates, but also the unwinding of Quantitative Easing. (aka Quantitative Tightening).

    Most investors forgot about this one.

    Now they are unwinding that massive balance sheet $90 billion dollars a month. Here again, lets go back to our Econ 101.

    If the Fed sells these bonds, then it increases the supply of bonds. If demand is the same as the past, then it will naturally lead to higher rates to attractive investors to buy the bonds. This is yet another form of putting the brakes on the economy.

    Back to the point…where is all of this heading?

    Unfortunately the smart money is on much higher rates and a much weaker economy and thus much lower stock prices.

    Let’s not forget that the average bear market endures a 34% decline in stock prices. That would equate to 3,180 this time around.

    But also the average bear market comes hand in hand with a Fed that was LOWERING rates to help the economy recover. Now you have the exact opposite. So it likely points to a weaker economy and lower lows.

    Second, when you have low rates on bonds, it makes the stock market look like a more attractive investment by comparison. That is NOT true when rates are going higher.

    Imagine Treasury yields of 5-7%. That will be the safe money investment choice. Likely corporate bonds paying 2-3% above that.

    It will be very tempting to take that safer route to investment returns. Especially if you believe that rates will come down in the future only padding the return on these bond investments.

    This is another way of saying that demand for stocks will not be as strong at the bottom of this cycle as the typical recession and bear market. And thus it is not crazy to contemplate that stocks will need to fall further to get more investors off the sidelines.

    That is why you need to contemplate that 40% drop is not out of the question. That translates to 2,891 for the S&P 500 (SPY).

    No one rings a bell at the top or the bottom. So timing this perfectly is not in the cards.

    However, it does say that right now the wise choice is to bet on stocks going lower…much lower.

    What To Do Next?

    Discover my special portfolio with 9 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 +4.65% gain as the S&P 500 (SPY) tanked over 15%.

    If you have been successfully 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 9 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

    SPY shares fell $0.17 (-0.05%) in after-hours trading Friday. Year-to-date, SPY has declined -22.73%, versus a % rise in the benchmark S&P 500 index during the same period.

    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 Where is the Bottom for this Bear Market? appeared first on StockNews.com

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    Steve Reitmeister

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  • 2 Regional Banks With Sector-Beating Price Performance

    2 Regional Banks With Sector-Beating Price Performance

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    Large-cap financials such as JPMorgan Chase (NYSE: JPM), Bank of America (NYSE: BAC) and Wells Fargo (NYSE: WFC)  rallied early this week along with the broader market, while some smaller bank stocks, like First Citizens Bancshares (NASDAQ: FCNCA), have been outpacing the wider sector. 


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    First Citizens, like its entire industry, has seen net interest income and margins expand as interest rates increase. That typically occurs in an environment of rising rates. 

    Regional banks can fly beneath the radar as investment opportunities. Unless you live in an area where one of these banks operates, they aren’t obvious candidates that fall under the famous Peter Lynch “buy what you know” category of investment ideas. But a screener, such as the one you’ll find on MarketBeat.com, can help you identify some not immediately obvious names. 

    First Citizens is a North Carolina-based regional bank that operates 529 branches and offices in 19 states and Washington, DC. It has a market capitalization of $13.48 billion, making it the largest company within the southeast/regional bank sub-industry. 

    The stock has been outperforming not only the financial sector as a whole, but also its regional banking peers. Shares are up 5.78% in the past month and 25.47% in the past three months. 

    MarketBeat analyst data for the stock shows a “moderate-buy” rating with a price target of $925, a potential upside of 9.67%. 

    The stock staged a cup-with-handle breakout on September 12, but chopped along with the broader market volatility. It’s been unable to sustain the breakout, and closed below its 50-day moving average the week ended September 30, but regained that price line. It’s currently trading above its 10- and 21-day moving averages.

    The company reports third-quarter earnings on October 27, with Wall Street eyeing net income of $19.77 per share on revenue of $1.02 billion. Those would be increases of 62% and 110%, respectively. 

    For the full year, analysts expect the company to earn $69.33 per share, up 29% over 2021. Next year, that’s seen rising an additional 31% to $91.05 per share. 

    Other banks, of course, will benefit from a rising-rate environment, and some are already showing share-price appreciation reflecting strong fundamentals. 
    2 Regional Banks With Better Price Action Than Larger Financials

    Currently, Pennsylvania-based Fulton Financial (NASDAQ: FULT) is also outperforming financials as a whole. The stock is up 5.94% in the past month and 15.43% in the past three months.

    Fulton has a market capitalization of $2.635 billion, putting it either the higher end of the small-cap categorization or lower end of mid-cap. 

    It’s currently forming a cup-with-handle pattern, with a potential buy point above $17.67. It’s been languishing below that point since mid-August. 

    According to MarketBeat earnings data on the stock, Fulton topped earnings views in five of the past six quarters. In the quarter ended in December 2021, the company met views of $0.37 per share. 

    Fulton is due to report its third quarter on October 18, after the closing bell. Analysts expect the company to earn  $0.44 per share on revenue of $198.64 million. Both would be lower than the year-earlier results, but often, positive guidance can offset declines in revenue or earnings, and send the stock higher. 

    Fulton is categorized as a super-regional bank, meaning it has significant operations in several states.

    Larger, more familiar super-regional banks include PNC (NYSE: PNC). This Pittsburgh-based bank has a large presence in the northeast, with more than 2,600 branches. The stock has been in a correction since January, but so far, has been finding a floor between $146 and $147.

    Another large-cap super-retional is U.S. Bancorp (NYSE: USB), which is down 24.37% year-to-date. It’s also been correcting since January. Unlike PNC, it’s not clear that it’s found its price floor yet.

    It’s not always the largest, most familiar names that offer the best opportunity at any given time. While it’s true that the traditional advice to “buy low, sell high” is correct in any market cycle, it’s not necessarily best to identify the most beaten-down stocks, when a stock that’s holding up better than the broader market may present more opportunity.
    2 Regional Banks With Better Price Action Than Larger Financials

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    Kate Stalter

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  • 3 Stocks With Market-Beating Price Performance

    3 Stocks With Market-Beating Price Performance

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    Mid-caps Digi International (NASDAQ: DGII), Lamb Weston Holdings (NYSE: LW) and Wingstop (NASDAQ: WING) all climbed higher recently n heavy trading volume, even as the broader market reversed lower. 


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    As a whole, mid-caps have been slightly outperforming the S&P 500. The SPDR S&P MidCap 400 ETF (NYSEARCA: MDY) is up 5.53% so far this week, while its large-cap counterpart, the SPDR S&P 500 ETF (ASX: SPY) is up 4.48%.

    Mid-caps typically are those with a market capitalization between $2 and $10 billion. They often have fewer shares in float than you’ll find with larger stocks. These characteristics make mid-caps somewhat more volatile and riskier than large caps, at least in terms of broad asset classes.  

    Digi International advanced 2.34% in nearly triple average turnover Wednesday, tacking on gains to its recent outperformance, which includes gains of:

    • 1 month: +16.19%
    • 3 months: +58.88
    • Year-to-date: +53.32

    The Minnesota-based company specializes in the Internet of Things, which involves connecting products, apps, and services through various wireless devices. Those devices can include factory and industrial settings; household applications, such as appliances and security systems; and automotive gear, among many other examples.

    Digi International gapped up 15.66% on August 4 following the company’s fiscal third-quarter report, in which it topped earnings and revenue views, as you can see using MarketBeat data on the stock. 

    Earnings growth accelerated in the past two quarters, from 13% to 80%, while revenue growth accelerated from 8% to 31% in the past three quarters. Its three-year annual earnings growth rate is 34%, while revenue grew 12%. 

    That level of fundamental strength is driving the stock price increases. An increase in fourth-quarter guidance also helps.

    On a technical basis, the stock is in a buy range, but continue to be cognizant of broad-market volatility that could pull it, and any stock, sharply lower. 
    3 Stocks With Market-Beating Price Performance

    Lamb Weston is in the decidedly unglamorous business of producing, packaging, and distributing frozen potato products to restaurants, as well as via private-label brands for consumers. But potatoes are apparently in high demand: The stock advanced 4.19% Monday following a better-than-expected fiscal first quarter.

    Earnings of $0.75 per share marked a 317% increase over the year-ago quarter. MarketBeat earnings data for Lamb Weston show the company trounced views by $0.26 per share. Revenue was slightly disappointing, coming in at $1.13 billion, versus analyst expectations of $1.14 billion. Still, that was a year-over-year increase of 14%.

    Other packaged food stocks have held up well recently, and the industry as a whole is among leaders. On Thursday, large-cap food company ConAgra (NYSE: CAG) reported earnings and revenue that topped Wall Street views.

    Lamb Weston shares built upon Wednesday’s gains, rallying in Thursday morning trading. Analysts see the company growing earnings by 36% for the full year, which is fiscal 2023. Next year, that’s expected to rise another 32%, to $3.72. That kind of potential is attracting institutional buyers, MarketBeat data show. 
    3 Stocks With Market-Beating Price Performance

    Another food-related mid-cap flashing gains for the week is restaurant franchisor Wingstop. 

    There was no specific company news, but the stock has been the subject of recent positive attention from Wall Street, according to MarketBeat analyst data for the stock. In the past month, Stephens initiated coverage with an overweight rating and Wedbush boosted its price target with a rating of outperform 

    As noted previously by MarketBeat, Wingstop is among food-related stocks that have been capitalizing on consumers’ willingness to continue purchasing food, including dining out,  even as they cut back on other discretionary items. 

    The consensus rating is “moderate buy,” with a price target of $138.65, a potential upside of 4.21%. 

    The company is slated to report its fiscal third quarter on October 26, before the opening bell. Analysts expect earnings of $0.35 per share on revenue of $89.30 million. Those would be increases on both the top- and bottom lines. 

    Earnings data compiled by MarketBeat show that Wingstop beat earnings views in the most recent quarter, although revenue lagged. That didn’t stop investors from piling in, as margins came in well above views. 
    3 Stocks With Market-Beating Price Performance
    3 Stocks With Market-Beating Price Performance

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    Kate Stalter

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  • Why Royal Caribbean and Carnival Stock Will Recover

    Why Royal Caribbean and Carnival Stock Will Recover

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    For the past two years, since the covid pandemic hit in late-February 2020, the cruise industry has taken one punch after another. And, while the situation has improved from the extended period when cruises were not allowed to sail from United States ports, that does not mean that it’s back to 2019 for Royal Caribbean International (RCL) , Carnival Cruise Line (CCL) , and Norwegian Cruise Line (NCLH) .

    The industry has done a remarkable job bringing operations back to near-normal. All three cruise lines not only have put all their ships back in service, they’re also still moving forward with plans for new ships and other investments including improvements to private islands, and developing new ports.

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