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Some predicted 2023 would be a good year for commodities -- but, so far, that has not been the case. We did have some nice moves in precious metals from early March until early May, including silver (SLV), gold (GLD), and platinum (PPLT), but recent strength is waning -- with SLV already breaking down. Year-to-date, GLD is leading with a 9% gain, while PPLT and SLV are flat and the industrial metal Copper is up 4%. The big loser, Palladium (PALL), is down 17%.
We recently raised our rating on the Technology sector to Over-Weight from Market-Weight. As interest rates start to fall, IT demand in enterprise and data center markets is holding up. And mounting interest in ChatGPT could herald the age of AI, which could be a huge industry driver. Over the long term, we expect the Technology sector to benefit from pervasive digitization across the economy, greater acceptance of transformative technologies, and the development of the Internet of Things (IoT). Healthy company and sector fundamentals are also positive. For individual companies, these include high cash levels, low debt, and broad international business exposure. The sector is outperforming the market thus far in 2023, with a gain of 12.4%. Tech underperformed the market in 2022, with a loss of 28.9%, and outperformed in 2021, with a gain of 33.4%. The P/E ratio on projected 2023 earnings is 23, above the market multiple. Earnings are expected to grow 14.5% in 2023 after having fallen 3.3% in 2022. Earnings rose 37.9% in 2021 and 7.7% in 2020. The sector's debt ratios are below the market average, as is the average dividend yield of 0.5%. Here is how we use our analysts' Technology sector ideas in our Focus List and Model Portfolios.
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.
Stocks rose on Friday morning, extending their Thursday rally. Services sector data was better than expected. The Institute for Supply Management said that its nonmanufacturing PMI slipped to 55.1 in February, down slightly from 55.2 in January but still indicating expansion. The reading also topped the Reuters consensus forecast of 54.5. On the earnings front, Costco shares fell more than 3% after the company missed the fiscal 2Q consensus sales estimate amid cautious consumer spending. The Dow rose 0.7%, the S&P 1.1%, and the Nasdaq 1.3%. Crude oil rose more than 1% to $79 per barrel, while gold rose $13 to $1853 per ounce.Stocks rose on Friday morning, extending their Thursday rally. Services sector data was better than expected. The Institute for Supply Management said that its nonmanufacturing PMI slipped to 55.1 in February, down slightly from 55.2 in January but still indicating expansion. The reading also topped the Reuters consensus forecast of 54.5. On the earnings front, Costco shares fell more than 3% after the company missed the fiscal 2Q consensus sales estimate amid cautious consumer spending. The Dow rose 0.7%, the S&P 1.1%, and the Nasdaq 1.3%. Crude oil rose more than 1% to $79 per barrel, while gold rose $13 to $1853 per ounce.
At least for the short-term, the stock market appears to be at a crossroads and doesn't know which way to go. Put another way, the market has fallen asleep at the stop sign. Indecision and confusion are hallmarks of the current equity and bond markets, and many believe we won't get out of this prison until future Fed actions and the status of corporate earnings are clearer.
The S&P 500 (SPX) has broken out over 4,100, as the index jumped 3.5% from its intraday low Wednesday. The SPX has traced out a higher high and higher low, is above its 200-day, broke its bear-market trendline, and is seeing a golden cross as the 50-day crossed above the 200-day on Thursday -- albeit by only a couple of points. At times, indices do not trace out textbook bottoms such as an inverse head-and-shoulders (H&S) and double bottoms at major lows. Unfortunately, the SPX bottom doesn't fit neatly into a typical bottoming pattern.
The big rally on Friday took the S&P 500 (SPX) near to, but not above, the top of its 15-day range (between 3,764 and 3,908). The index did break out of a small triangle that started on December 21 and also bumped its head against the 50-day average. The SPX surged 2.3% for the day, while the Nasdaq popped 2.6%, and the Nasdaq 100 ripped higher by 2.8%. NYSE breadth was strong, with net advancers at 2,284. NYSE advancers/issues and advancing volume/volume was 84%.
There's an old saying about the stock market: 'The mid-December lows are the only free lunch on Wall Street.' In addition, December is strong historically. Unfortunately, the current market is not following the script. Indeed, you can throw all the studies in the trash during a bear market.
Sometimes, you just shake your head and don't ask questions! For many individual investors, the current stock market just doesn't make sense, especially based on the news. But after Tuesday, even many professional investors are scratching their heads.
In this edition, the Wisdom of Buying into Wiley, Plunging Into Geberit, and Valuing Qube's Shares, and Bath and Body Works, Broadcom and Chewy
ESG (Environmental, Social, Governance) investing continues to grow. According to the Global Sustainable Investment Association, global assets under management in ESG strategies had grown to $40 trillion in 2020, up from $23 trillion in 2016 and on track for $50 trillion by 2025. As assets have flowed in over the past 40 years, Sustainable Impact Investing has evolved. The discipline, originally known as Socially Responsible Investing, focused at first on excluding companies that conducted business in South Africa, or participated in industries such as tobacco, alcohol and firearms. In time, the list of industries to avoid increased to include soft drinks, fast food, and oil and gas, among numerous others. Performance of these initial strategies lagged, and the approach has been modified. Now, instead of merely identifying industries to avoid, the discipline promotes "sustainable" business practices across all industries that can have an "impact" on global issues such as the climate, hunger, poverty, disease, shelter, and workers' rights. At Argus Research, we track ESG developments at specific companies as part of our Management analysis - one of the six points in our proprietary Six-Point Fundamental Approach. In addition to reviewing and measuring the ESG proclamations from the companies under coverage, we partner with an ESG research firm, the JUST Capital Foundation, and leverage its analysis and insights on the topic as well. JUST Capital's mission is to drive measurable corporate change to create a stakeholder-centric, inclusive form of capitalism that reflects the priorities of the American public. JUST utilizes a combination of data-driven research and strategic engagement in an attempt to shift norms and practices in corporate America and the financial markets. JUST ESG Custom Ratings rank stocks in the Russell 1000 on criteria using a scale of 1-100. Drawing on the JUST Capital rankings, we have compiled focused lists of companies followed by Argus Research that are in position to have this type of "sustainable impact" on the environment, workplace, community, and marketplace. These firms have exemplary records not only in delivering on the bottom line, but also in improving the environment, contributing to community relations, and showing respect for their employees. We also have a Theme Model Portfolio based in part on the ESG criteria. To build the Argus U.S. ESG Model Portfolio, we applied financial concepts such as industry diversification, income generation, risk reduction and growth at a reasonable price to our various lists. In addition, all stocks must be on the Argus BUY list. Here are the new stocks that have been added to the Argus U.S. ESG Model Portfolio. For more JUST Score details on these companies, and others in the portfolio, please visit the JUST Capital website, www.justcapital.com.
Sustainable Impact Investing, or ESG investing, is gaining traction not only with Argus Research clients but also with the global investment community. BlackRock CEO Lawrence Fink, who oversees approximately $9 trillion in assets, announced in January 2020 that his firm would be investing in companies that are making progress on sustainability. He doubled down in his January 2021 letter, calling on company managements to disclose their plans for making their businesses "compatible with a net-zero economy" by 2050. As assets have flowed in over the past 40 years, Sustainable Impact Investing has evolved. The discipline, originally known as Socially Responsible Investing, focused at first on excluding companies that conducted business in South Africa, or participated in industries such as tobacco, alcohol, and firearms. Performance of these initial strategies lagged, and the approach has been modified. Now, instead of merely identifying industries to avoid, the discipline promotes "sustainable" business practices across all industries that can have an "impact" on global issues such as climate, hunger, poverty, disease, shelter, and workers' rights.
The major stock indices passed a key test late last week as they all held important support. For the S&P 500, a 61.8% retracement of the rally off the June lows targeted 3,900 -- and last week's low was 3,904. As well, a measured move based on the small head-and-shoulders top came in at 3,910. A 61.8% giveback for the Nasdaq was 11,564 (last week's low was 11,547), and for the QQQs, the same retrace targeted 293.84 (with the intraday low last week at 293).
Stocks rallied on Thursday morning, helped by strong earnings reports from major retailers. Macy's shares rose 16% after the company posted stronger-than-expected first-quarter sales and earnings and raised its full-year guidance. Dollar General also rose strongly following above-consensus first-quarter results. The Dow rose 1.5%, the S&P 1.8%, and the Nasdaq 2.3%. Crude oil rose $4 to $114 per barrel, while gold fell $2 to $1847 per ounce.
After another good day for the stocks on Tuesday, the S&P 500 has seen a minor break above the prior highs that were logged in the early part of February (around the 4,590 region). In addition, the index has retraced more than 61.8% of its correction; the next Fibonacci hurdle is a 78.6% retracement up at 4,668. It is hard to pick one piece of chart resistance overhead, but we will go with the 4,700 area. Since the last closing low on March 14, the index has rallied 11% in just 11 days, the largest gain in that number of days since April 2020.
Stocks fell sharply on Friday morning as continued concerns about the war in Ukraine overshadowed a strong monthly employment report. The Labor Department said that the U.S. economy added 678,000 payroll jobs in February, up from a revised 481,000 in January and well above the Bloomberg consensus forecast of 423,000. The official unemployment rate fell to 3.8%, the lowest reading since February 2020, from 4.0% in January. The Dow fell 1.4%, the S&P 1.6%, and the Nasdaq 2.2%. Crude oil jumped to $112 per barrel, while gold traded near $1965 per ounce.
Explosive growth in mobile and fixed-line traffic is driving demand for robust data centers that are enabled for artificial intelligence (AI) and can manage rising and increasingly-complex traffic flow. Two-thirds of the world will have internet access by 2023, while the number of connected devices is expected to grow to three-times the global population. IoT (machine to machine or M2M) connections are expected to grow at a 30% CAGR. Security is a top need, as "denial of service" attacks are set to double by 2023. To handle the challenges of managing, storing, and securing data amid this explosive traffic growth, data centers will need to harness the power of artificial intelligence. AI enhances data center capabilities though the power of machine learning, inference, and deep learning, all in an application-accelerated environment. The AI data center also makes use of non-traditional and emerging technologies that provide more computing power than traditional CPU-based architectures. These include GPU Compute from NVidia and Tensor cores from Google/Alphabet. As of mid-year 2021, about 600 hyperscale data centers were in operation around the world, up from about 500 at year-end 2019 and double the number from five years ago. The bulk of data center construction is by hyperscale providers including AWS from Amazon.com, Microsoft Azure, Google Cloud from Alphabet, as well as with Chinese companies including Baidu and Alibaba. Co-location companies are another major data center driver, including Equinix and Digital Realty Trust. International Business Machines is providing hybrid cloud services that bridge public and private clouds. Other data center suppliers include semiconductor companies Broadcom, Marvell Technology, Intel, and Advanced Micro Devices. Stocks on the Argus Research BUY list that are in position to benefit include the following.
Eight Fundamental Forecasts for 2022
Just like that, Christmas is less than two weeks away and the end of the year is nigh. And just like the bathrobe-clad kid in "The Polar Express," investors want to believe -- if not in Santa, than at least in his rally.
This edition features cement companies, grocery stores, and virtual banking.
Stocks closed a losing week with modest strength on Friday, and key indices remained close to all-time highs. Unlike the prior week, when jobs data jazzed the market, stocks last week were hit by concerning CPI data that showed consumer prices rising year-over-year at the fastest clip since the 1990s.
The stock market moved slightly lower last week as investors eyed inflation metrics and earnings season slowed down. Tech stocks performed similarly to blue chips on the week. During Friday's session, the Dow Jones Industrial Average increased 179 points, or 0.50%. The S&P 500 was up 0.72%, and the Nasdaq Composite was up 1.00%. For the week, the DJIA was down 228 points, or 0.63%, the S&P 500 was down 0.31%, and the Nasdaq Composite was down 0.69%. Year-to-date, the DJIA is up 17.95%, the S&P 500 is up 24.67%, and the Nasdaq Composite is up 23.06%.
The Technology sector started slowly in 2021 as investors focused on value stocks. But the sector has come on strong in recent months (up 22% year-to-date) and now is outperforming the market (up 20.7%) as well as value sectors such as Consumer Staples (+8%), Utilities (+10%), Materials (+17%), and Industrials (+18%). The sector is the largest in the U.S. market and now accounts for more than 28% of the S&P 500. Over the long term, we expect the sector to benefit from pervasive digitization across the economy, greater acceptance of transformative technologies, and the development of the Internet of Things (IoT). Healthy company and sector fundamentals are also positive. For individual companies, these include high cash levels, low debt, and broad international business exposure. We have an Over-Weight ranking on the Tech sector and think investors should look to allocate up to 30% of their diversified portfolios to the group. Here is how we use our analysts' Tech sector ideas in our Focus List and Model Portfolios.
The stock market was mixed last week, with Tech stocks outperforming blue chips by a sizeable margin for the second straight week. During Friday's session, the Dow Jones Industrial Average fell 75 points, or 0.2%. The S&P 500 was down 0.03%, and the Nasdaq Composite was up 0.21%. For the week, the DJIA was down 87 points, or 0.24%, the S&P 500 was up 0.58%, and the Nasdaq Composite was up 1.55%. Year-to-date, the DJIA is up 15.56%, the S&P 500 is up 20.75%, and the Nasdaq Composite is up 19.21%.
Stocks edged lower on Monday morning as investors continued to weigh Friday's May employment report. Alphabet shares fell slightly after the company settled a French antitrust case by agreeing to make changes in its advertising practices and paying a fine of 220 million euros. Over the weekend, members of the G7 agreed to support a global minimum corporate tax rate of at least 15%. The deal, which in its current form includes significant loopholes, will now be subject to additional negotiations among G20 and OECD countries. The Dow fell 0.4%, the S&P 0.3%, and the Nasdaq 0.1%. Crude oil traded near $69 per barrel, while gold rose $4 to $1896 per ounce.
Stocks rose again on Monday morning, adding to Friday's gains, despite further increases in Treasury yields. Treasury Secretary Janet Yellen said that the passage of the administration's $1.9 trillion coronavirus relief package over the weekend would enable Americans to 'get to the other side of the pandemic' and help to drive a 'very strong' economic recovery. The Dow rose 1.2%, the S&P 0.9%, and the Nasdaq 0.6%. Crude oil traded near $65.50 per barrel, while gold fell $12 to $1687 per ounce.
Growth stocks may be outperforming value, again, in 2020. But in an environment of historically low interest rates (and with the coronavirus and economic shutdown seemingly poised to keep them low for a long time), many investors are still searching for high levels of income, which can often be found in value stocks. Progress on COVID-19 vaccines has given a lift to some of the cyclical companies (energy companies and regional banks) that have lagged in recent quarters, and value stocks have kept up the pace with growth stocks in the past quarter. The current yield on the iShares Russell 1000 Value Index ETF is 2.5%, compared to the 1.0% current yield on the iShares Russell 1000 Growth Index ETF. This is not unimportant, as the current yield on the 10-year Treasury bond is 0.95%.
Stocks fell last week, with a final drop on Friday as hopes for a stimulus plan fizzled. The details, rather than the size of the deal, are the sticking points. A troubling initial UE claims report also weighed on sentiment. On Friday, the Dow Jones Industrial Average eked out a win of 47 points, or 0.16%, as DIS shares rallied. The S&P 500 fell 4 points, or 0.13%, and the Nasdaq Composite dropped 28 points or 0.23%. Last week, the Dow was down 0.6%, the S&P 500 was down 1.0%, and the Nasdaq was down 0.7%. For the year-to-date, the DJIA is up 5.3%. The S&P is up 13.4%, and the Nasdaq remains in front with a gain of 38.0%. Over the past 52 weeks, the Dow is up 6.8%, the S&P 500 is up 15.6%, and the Nasdaq is up 41.7%.
The Technology sector has led the market recovery from the COVID-19 depths of March 2020. Through November 20, the sector was up 31% for the year, compared to a 10% gain for the S&P 500. The Tech sector is the largest in the U.S. market and now accounts for more than 27% of the S&P 500. Over the long term, we expect the Tech sector to benefit from pervasive digitization across the economy, greater acceptance of transformative technologies, and the development of the Internet of Things (IoT): Healthy company and sector fundamentals are also positive. For individual companies, these include high cash levels, low debt, and broad international business exposure. We have an Over-Weight ranking on the Tech sector and think investors should look to allocate up to 30% of their diversified portfolios to the group. Here is how we use our Tech sector ideas from our analysts in our Focus List and Model Portfolios.
Apple introduced four new iPhones last week. The phones range in price from $699 to $1,099 and employ the new 5G standard promising lightning-fast download speeds. While the devices themselves do not pack a lot of 'wow' factor, the ultra-fast A14 Bionic processor powers applications and enables cutting-edge display and camera performance. The Street is banking on iPhone 12 triggering Apple's biggest upgrade cycle in years, and that creates some disappointment risk if the cycle is merely average. We believe that 5G itself, and consumers' desire to remain in the Apple ecosystem, will drive a reasonably strong upgrade cycle. Apple Inc. is on the Argus BUY list and expected to benefit. The iPhone ecosystem also includes other stocks we rate BUY, listed below.
Revisiting our bearish technical call on Technology, we note that both the Nasdaq 100 (QQQ) and the S&P Sector SPDR (XLK) bounced off their 50-day averages after a very quick pullback of about 11% into the September 8 closing low. After a weak bounce, they are sitting right on the 50-day once again. Since September 1, both have underperformed the S&P 500. While we know these ETFs are top heavy, the breakdown by the average stock inside the QQQ and XLK is still a little unnerving.
Stocks continued to drop on Tuesday morning for the third straight day, led by technology stocks. The National Federation of Independent Business index of small business rose to a seasonally adjusted annual rate of 95.4. The Dow fell 1.4%, the S&P 1.8%, and the Nasdaq 2.6%. Crude oil fell below $37 per barrel, while gold traded near 1942 per ounce.
This pick list highlights constituents of the Morningstar US Large Cap Index that we believe offer investors the best risk-adjusted return prospects. Stocks of large-cap companies where neither growth nor value characteristics predominate. Stocks in the top 70% of the capitalization of the U.S. equity market are defined as large cap.
Our weekly review of insider-trading data from Vickers Stock Research provides little in the way of a surprise. Corporate executives, directors and beneficial owners are trading in manner that is very much in keeping with their historical habits.
