After a calm first quarter, when the VIX Volatility Index averaged a low 13.5, the closely watched "fear index" has jumped five points in April and the S&P 500 has slipped 5%. Are we headed for a market correction or even a visit from the bear? After a remarkable 27% run from late October 2023 through March, stocks appear to be reacting to some of the risks we have highlighted for 2024, such as geopolitical developments (Mideast, Russia, China), high interest rates (the Fed hasn't cut yet), the chance of recession (the yield curve is still inverted), stubborn inflation, and the upcoming 2024 U.S. presidential election. On the positive side, we continue to anticipate that the U.S. economy will avoid a recession into 2025, the Federal Reserve will start to lower interest rates later this year, and earnings growth is poised to accelerate over the next few quarters. All that said, the current VIX reading is around 18.5, which is below the 15-year average of 20.5 and signals that investors aren't overly worried (yet) about the outlook. This reading compares to the average VIX of 24 during the most-recent bear market and 35 during the financial crisis of 2008-2009. During the long bull market in the 2010s, the VIX averaged 18 and even touched lows below 10 in 2017. We continue to think that the S&P 500 is in the early innings of a new bull market that dates to October 2022. And while the path for equities won't be straight up, we suggest investors over-weight their portfolios toward stocks at the current market and economic juncture.

U.S. stocks were down on Wednesday following Chairman Powell's speech yesterday. He noted current monetary policy could be maintained until inflation shows more downward progress. Investors are now looking at September for the first rate cut according to CME's FedWatch tool, and are split as to whether or not there will be just one or two rate cuts this year - a significant departure from last year when markets had anticipated five rate cuts in 2024. The Dow was down 0.3%, the S&P 500 fell 0.4% and the Nasdaq lost 0.6%. Crude oil is trading near above $84 per barrel and gold fell $6 to $2401 per ounce.

Historically, April is the second-best month of the year for stocks. The average gain for the S&P 500 in the month of April since 1980 is 1.70%. We note that market returns in April have exceeded 5% on eight occasions since 1980, including a 9.4% gain in 2009 (as the market was beginning to recover from the financial crisis of 2007-2009), a 12.7% surge in 2020 (as the market started to recover from the onset of the COVID-19 pandemic), and a 5.1% gain in 2021 (as COVID-19 vaccines were rolled out). There also have been some clunkers, including 2002 (-6.1%), 2000 (-3.1%), and 1981 (-2.3%). Last year, stock prices in April increased 0.9%. April is a busy month on Wall Street, as companies report first-quarter results. This year, 1Q earnings are expected to grow for the third consecutive quarter, as the economy continues to expand. Investors will focus on the income statements of the Technology companies, which have led the rally. Interest rates will be an important topic well, as markets process the latest readings related to inflation and also prepare for the Federal Reserve's next meeting at the end of the month. As long as interest rates remain under control, stock investors may be able to build off their 1Q gains.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

The stock market had a rough day on Tuesday, but it could have been worse if not for a burst of late-day buying. In the current market, after only six hours of weakness, buyers step in. Once again, the major indices held support from the typical short-term moving averages such as the 10- and 21-day exponential averages. The S&P 500 (SPX) gave back 1%, while the Nasdaq and Nasdaq 100 (NDX) fell 1.7%.

Tuesday was another risk-off day. Losses for the small-, mid-, and mega-cap indices were between 0.6% to 1.4%. The 11 S&P 500 (SPX) sectors reflected the risk-off mood, with Consumer Staples (XLP +1.1%) the only sector to rise, while Utilities (XLU) and Real Estate (XLRE) booked tiny losses. The biggest losses were from Technology (XLK -1%), with Consumer Discretionary (XLY) and Energy (XLE) both off 0.9%. The market is probably in wait-and-see mode ahead of some monster quarterly reports this week.

The long-term laggards in the S&P 500 (SPX) finally rose on Tuesday, while many of the major Technology sector stocks finally took a breather. Some of the low-relative-strength stocks got a lift from Q4 earnings and forward guidance, while others gained from analyst upgrades.

Major indices made nice intraday recoveries on Tuesday -- but for a second day in a row, market breadth disappointed. In early trading, the S&P 500 was down about 30 points, but finished down only seven. The Nasdaq and Nasdaq 100 were off almost 1% early on, but closed with minor gains. Small- and mid-cap indices were a bit soft, with the Russell 2000 off 0.9% and the S&P 400 down 0.7%. NYSE breadth (advances-declines) was -1,535 while NYSE up issues/total issues was weak at 28% and NYSE up volume/total volume was only 25%.

The bearish mantra espoused by the Federal Reserve and all its governors and ex-governors, and often reiterated by most economists in the U.S., just blew up. The Fed finally admitted that the fed funds rate will come down in 2024, with three rate cuts indicated in the revised dot-plot forecast. Fed Chair Powell said that the central bank did not want to make the mistake of keeping rates restrictive for too long. Meanwhile, the CME FedWatch Tool is showing a 68% probability of the first cut at the Fed's meeting on March 20, 2024; a 74% chance of two to three cuts by the June 12 meeting; and an 81% chance that fed funds will be between 3.5% and 4.25% by the end of 2024.

The Russell 2000 (IWM) offers a fascinating and challenging-to-read chart (long-term neutral). IWM peaked near the $160 level in September 2018 and in early 2020. Then, after the pandemic, small-caps ripped higher, with IWM peaking just below $240 in November of 2021. The index then crashed into mid-2022, right to the prior highs from 2018 and 2020 near $160. After a rally to near a prior breakout level around $200, IWM fell right back to its prior peak at $160 in October 2022. Another trip to the top of the range near $200 failed, as did an attempt to break out of the range in July 2023, which led to another successful test of the bottom of the range near $160 in October 2023.

The Portfolio Selector features the Argus Focus List, a group of 30 "best idea" stocks generated and regularly updated by Argus' analysts and investment policy committee. It also includes the director of research’s monthly investment strategy column, stock recommendations and sector picks, economic forecasts, and an asset allocation model. This month, the Focus List additions are MongoDB Inc (MDB); General Mills, Inc. (GIS); Unitedhealth Group Inc (UNH); TJX Companies, Inc. (TJX) and the Focus List deletions are Merck & Co Inc (MRK); J.M. Smucker Co. (SJM); Splunk Inc (SPLK); Ulta Beauty Inc (ULTA).

Stocks were mostly higher on Wednesday morning ahead of the Federal Reserve's afternoon policy statement. While the Fed is expected to leave rates unchanged, investors will be listening closely to commentary from Fed Chair Powell for clues about additional rate hikes this year and the pace of expected rate cuts in 2024. The Dow rose 0.5%, the S&P rose 0.3%, and the Nasdaq was flat. Crude oil traded near $91 per barrel, while gold rose $9 to $1963 per ounce.

Stocks fell on Thursday amid economic and interest rate concerns as investors weighed new employment data. ADP reported much stronger-than-expected jobs growth at U.S. companies in June, with a gain of 497,000, while first-time claims for state unemployment benefits rose from the prior week and topped the consensus forecast. Continuing claims fell slightly to 1.72 million. The data came ahead of the government's June employment report on Friday morning. The Reuters consensus calls for 225,000 new payroll jobs, down from 339,000 in May, and a slightly lower unemployment rate of 3.6%. The Dow fell 1.07%, the S&P 0.79%, and the Nasdaq 0.82%. Crude oil traded near $72 per barrel, while gold fell $11 to $1917 per ounce.

The debate in Congress over raising the debt ceiling -- thereby allowing the United States to continue to pay its obligations -- has raised more fears in the bond market than it has in the equity market. The issue is pressing because the Treasury Department has announced that the U.S. will run out of money if the ceiling is not lifted by June 1. The MOVE Index, which is a gauge of fear among fixed-income traders, has jumped in the past two weeks as speculation mounts over whether the country that issues the world's reserve currency will actually default on its debt. Over in the equity markets, the VIX Volatility Index has stayed below 20 over the past two weeks, indicating that stock investors are less worried. Investors in both markets have seen this drama play out several times in recent years, including in 2011 when credit rating agency S&P Global ultimately took away an "A" from the United States' former AAA credit rating -- and never gave it back. (Stocks almost fell into a bear market at that time.) Historically, the debt ceiling is lifted and investors switch their focus back to the economy, interest rates, and earnings. One day -- but probably not today -- that may not be the case, given the increasing polarization among the politicians in Washington. From our standpoint, every time the debt ceiling debate re-emerges, the United States loses a little more of its credibility in the global financial markets.

Argus has published its latest Portfolio Selector, which features its popular Focus List. Each month, Argus' Director of Research Jim Kelleher, CFA, surveys the team of Argus Research industry analysts for their timeliest recommendations out of the company's fundamental universe of approximately 500 stocks. The Focus List typically includes 30 stocks: turnover is high, as Jim typically adds three or four new stocks per month. Below are the latest additions, all of which are rated BUY at Argus.

The Portfolio Selector features the Argus Focus List, a group of 30 "best idea" stocks generated and regularly updated by Argus' analysts and investment policy committee. It also includes the director of research’s monthly investment strategy column, stock recommendations and sector picks, economic forecasts, and an asset allocation model. This month, the Focus List additions are Alcon Inc. (ALC); Ulta Beauty Inc (ULTA); Comcast Corp (CMCSA); ProLogis (PLD) and the Focus List deletions are AstraZeneca PLC (AZN); Omnicom Group, Inc. (OMC); Target Corp (TGT); Equinix Inc (EQIX).

Market breadth is sitting in neutral territory, with both bullish and bearish characteristics. Until breadth becomes overwhelmingly bullish, it is impossible for technicians to describe the current stock market as anything more than a sideways consolidation following a bear market. In other words, the price action of the major indices, despite big moves since last October, is simply neutral when we take a few steps back.

Historically, April is the second-best month of the year for stocks. The average gain for the S&P 500 in April since 1980 is 1.70%. We note that market returns in April have exceeded 5% on eight occasions since 1980, including a 9.4% gain in 2009 as the market was beginning to recover from the financial crisis of 2007-2009; a 12.7% surge in 2020 as the market started to recover from the onset of the COVID-19 pandemic; and a 5.1% gain in 2021 as COVID-19 vaccines were rolled out. There have been some clunkers as well, including 2002 (-6.1%), 2000 (-3.1%), and 1981 (-2.3%). Last year, stock prices in April plummeted 8.8% as the Federal Reserve shifted into high gear in its battle against inflation. April is a busy month on Wall Street, as companies report their first-quarter results. This year, earnings are expected to start under pressure, with the early forecasts calling for a second consecutive negative-growth quarter. Investors will focus very closely on the income statements and balance sheets of the banks. Interest rates will be an important topic as well, as the markets process the latest readings related to inflation and prepare for the Federal Reserve's next meeting in May. As long as interest rates remain under control, stock investors may be able to build on their first-quarter gains.

Stocks rose on Thursday, led by the Technology and Consumer Discretionary sectors, as investors weighed new GDP and labor market data, and awaited a key inflation report on Friday morning. The Commerce Department said that the U.S. economy expanded at a 2.6% annualized rate in 4Q, down slightly from its prior estimate of 2.7%, while weekly unemployment claims pointed to a still tight labor market. The Labor Department said that first-time claims for state unemployment benefits rose by 7,000 to 198,000 for the week ended March 25, slightly above the consensus forecast. Continuing claims rose by 4,000 to 1.689 million. The Dow rose 0.43%, the S&P 0.57%, and the Nasdaq 0.73%. Crude oil traded near $74 per barrel, while gold rose $15 to $1999 per ounce.

There are periods when the stock market trades "technically" and there are periods when the action goes haywire. We are in one of the latter periods, with support and resistance levels being taken out only to see a failure and a lack of follow through. As a trader or short-term player, this is a time to sit on your hands, go outside, enjoy the warming weather, or take up a new hobby. Trading in this environment will chew you up -- and in a hurry.

ARGUS ANALYSTS' TOP PICKS FOR 2023

Stocks were higher on Thursday morning after Fed Chair Powell emphasized that he is committed to fighting inflation, leading to expectations that the central bank will raise rates by 75 basis points at the next policy meeting. Weekly jobless claims unexpectedly declined to 222,000 unemployment claims, against estimates for 246,000 claims. Crude oil rose 2% to $83.29 per barrel, while gold fell to $1718 per ounce. The Dow rose 0.6%, the S&P 500 rose 0.7% and the Nasdaq was up 0.8%.

The Vickers Top Buyers & Sellers is a daily report that identifies the five companies the largest insider purchase transactions based on the dollar value of the transactions as well as the five companies the largest insider sales transactions based on the dollar value of the transactions.

In this edition, Global Beauty Looking Good, Paypal Looks Promising, Utilities Facing Challenges, and Hasbro, Ipsen, and Toast ties up with Sling.

Softening Economic Data Reveals Rising Recession Risks

The Market Tries to Come Back

Stocks fell sharply on Tuesday morning on more signs of accelerating inflation. The Labor Department said that its producer price index rose 9.6% in the 12 months through November, up from 8.8% in October and above the Reuters consensus forecast of 9.2%. The core PPI, excluding food and energy, rose 6.9%, up from 6.3% in October. The Dow fell 0.5%, the S&P 1.2%, and the Nasdaq 1.9%. Crude oil fell 2.5% to $69.50 per barrel, while gold fell $14 to $1774 per ounce.

Stocks were largely flat at midday on Tuesday after paring early losses. On the housing front, the Case-Shiller index showed a sharp 19.1% rise in the price of single-family homes for the 12 months ended in June, up from 17.1% a month earlier and above the Reuters consensus forecast of 18.5% growth. Consumer confidence data was weaker than expected. The Conference Board said that its consumer confidence index fell to 113.8 in August, down from 125.1 in July and below the consensus of 123.0. The Dow rose 0.1%, the S&P was flat, and the Nasdaq fell 0.1%. Crude oil traded near $69 per barrel, while gold fell $2 to $1810 per ounce.

Stocks rose on Friday morning, led by the Technology sector, as another disappointing jobs report diminished concerns about an overheating economy and the potential for a near-term reduction in the Fed's bond buying program. The Labor Department said that the U.S. added 559,000 payroll jobs in May, up from 278,000 in April but below the Reuters consensus forecast of 650,000. The official unemployment rate fell to 5.8% from 6.1% in April. The Dow rose 0.3%, the S&P 0.6%, and the Nasdaq 1.4%. Crude oil traded near $69 per barrel, while gold rose $22 to $1895 per ounce.

In our review of insider-trading data from Vickers Stock Research last week, we noted some improvement in sentiment among corporate executives, directors and beneficial owners. That improvement was in the face of sentiment that has been cautious, but not panicked, for several months. Some follow through this week would represent a developing trend change that had some legs. But that was not to be.

Small- and mid-cap stocks (SMID stocks) surged in the past quarter. They also have outperformed large-caps over the past 12 months and may be in a better position to generate market-beating returns going forward. For one thing, SMID companies tend to focus on domestic markets, so their businesses could be poised to rebound more quickly once COVID-19 vaccines are widely distributed and the economy recovers. As well, the prices of SMID stocks are generally lower than the prices of large-caps. While SMID stocks can be risky, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 20%-25% of the U.S. stock market's capitalization is comprised of SMID stocks. Investors used to use a $2 billion market-cap threshold to define a small-cap stock and a $10 billion threshold for a mid-cap. We note that the Russell 2000 index now includes numerous companies with market capitalizations above $15 billion. For our purposes, we use a threshold of $20 billion to define a SMID stock.

Small- and mid-cap stocks (SMID stocks) surged in the past quarter. They also have outperformed large-caps over the past 12 months and may be in a better position to generate market-beating returns going forward. For one thing, SMID companies tend to focus on domestic markets, so their businesses could be poised to rebound more quickly once COVID-19 vaccines are widely distributed and the economy recovers. As well, the prices of SMID stocks are generally lower than the prices of large-caps. While SMID stocks can be risky, diversified investors look to have exposure to small- and mid-caps based on the long-term performance record. We estimate that 20%-25% of the U.S. stock market's capitalization is comprised of SMID stocks. Investors used to use a $2 billion market-cap threshold to define a small-cap stock and a $10 billion threshold for a mid-cap. We note that the Russell 2000 index now includes numerous companies with market capitalizations above $15 billion. For our purposes, we use a threshold of $20 billion to define a SMID stock.

Stocks pared early losses on Thursday morning amid new employment data and continued mixed signals regarding a fiscal stimulus package in Washington. The Labor Department reported that first-time claims for state unemployment benefits rose to 853,000 for the week ended December 5, up from a revised 716,000 a week earlier and above the Bloomberg consensus forecast of 725,000. The reading was the first above 800,000 since mid-September. The Dow fell 0.1%, the S&P rose 0.1%, and the Nasdaq rose 0.7%. Crude oil rose more than 3% to $47 per barrel, while gold traded near $1851 per ounce.

Our rating on the Consumer Discretionary sector is Over-Weight. Many employees are splitting time between work and home, and we expect efforts to refresh the home space to continue. Consumer Discretionary niches including housing and retail have been strong, and we look for this strength to extend to the recovering auto industry going forward. The sector accounts for approximately 11% of the S&P 500. We think investors should consider allocating 13%-14% of diversified portfolios to the group. The following are the Consumer Discretionary picks we use in our model portfolios and our Focus List.

Our rating on the Consumer Discretionary sector is Over-Weight. Many employees are splitting time between work and home, and we expect efforts to refresh the home space to continue. Consumer Discretionary niches including housing and retail have been strong, and we look for this strength to extend to the recovering auto industry going forward. The sector accounts for approximately 11% of the S&P 500. We think investors should consider allocating 13%-14% of diversified portfolios to the group. The following are the Consumer Discretionary picks we use in our model portfolios and our Focus List.

Stocks rose on Friday morning, recovering from early losses. The Commerce Department reported that core capital goods orders excluding aircraft rose 1.8% in August, down from 2.5% in July but above the Reuters consensus forecast of 0.5% growth. Costco posted better-than-expected fiscal 4Q results, though the shares fell on concerns about high coronavirus costs. Boeing shares rose 3% on news that the European regulatory ban on the 737 MAX jet could be lifted in November. The Dow rose 0.1%, the S&P 0.3%, and the Nasdaq 0.8%. Crude oil fell slightly to $40 per barrel, while gold traded near $1866 per ounce.

Stocks rose on Friday morning, recovering from early losses. The Commerce Department reported that core capital goods orders excluding aircraft rose 1.8% in August, down from 2.5% in July but above the Reuters consensus forecast of 0.5% growth. Costco posted better-than-expected fiscal 4Q results, though the shares fell on concerns about high coronavirus costs. Boeing shares rose 3% on news that the European regulatory ban on the 737 MAX jet could be lifted in November. The Dow rose 0.1%, the S&P 0.3%, and the Nasdaq 0.8%. Crude oil fell slightly to $40 per barrel, while gold traded near $1866 per ounce.

We have published our latest version of the Argus Millennial Generation portfolio. This new generation of consumers - the Millennials - has recently become the largest demographic cohort in the country, and this group, with new lifestyle preferences and different career goals, is demanding a new menu of sustainable products and services. The intersection of important Millennial trends - sustainability, healthier living, an entrepreneurial spirit - has resulted in the emergence and growth of numerous companies well suited to the new generation. Many of these companies are expected to be future industry leaders and are included in the dynamic Argus Universe of Coverage. A diversified portfolio, of course, is more than just a list of companies linked to themes. To build the Argus Millennial Generation Portfolio, we applied financial concepts such as industry diversification, income generation, risk reduction and growth at a reasonable price.

Millennials recently became the largest demographic cohort in the country, and this group -- with new lifestyle preferences and different career goals -- is demanding a new menu of sustainable products and services. There are now over 80 million Millennials, born between 1982 and 2000 and ranging in age from their early 20s to their late-30s. This generation is the largest in history -- bigger than even the Baby Boomers. And it is moving into its higher earning years. Millennials are coveted by marketers, even though their annual spending is 40% below that of the generation ahead of them, Gen X, and 30% below the spending of Baby Boomers, who are slowing down. As Millennials age into maturity, their earnings are expected to grow. The intersection of these trends -- sustainability, healthier living, and entrepreneurial spirit -- has resulted in the emergence and growth of numerous companies well suited to the new generation. Many of these are expected to be future industry leaders and are included in the dynamic Argus Universe of Coverage.

Millennials recently became the largest demographic cohort in the country, and this group -- with new lifestyle preferences and different career goals -- is demanding a new menu of sustainable products and services. There are now over 80 million Millennials, born between 1982 and 2000 and ranging in age from their early 20s to their late-30s. This generation is the largest in history -- bigger than even the Baby Boomers. And it is moving into its higher earning years. Millennials are coveted by marketers, even though their annual spending is 40% below that of the generation ahead of them, Gen X, and 30% below the spending of Baby Boomers, who are slowing down. As Millennials age into maturity, their earnings are expected to grow. The intersection of these trends -- sustainability, healthier living, and entrepreneurial spirit -- has resulted in the emergence and growth of numerous companies well suited to the new generation. Many of these are expected to be future industry leaders and are included in the dynamic Argus Universe of Coverage.