Stocks fluctuated near breakeven on Thursday morning amid a new round of earnings reports and weekly employment data. The Labor Department said that first-time claims for state unemployment benefits rose to 419,000 for the week ended July 17, up from 368,000 a week earlier and above the consensus forecast of 350,000. The Dow fell 0.2%, the S&P was flat, and the Nasdaq rose 0.2%. Crude oil rose slightly to $71 per barrel, while gold traded near $1807 per ounce.

Stocks Stumble as the Economy Moves Ahead

In late May, we commented on a trend that was developing in the weekly insider-sentiment data from Vickers Stock Research. Specifically, we noted a seeming shift in the behavior of insiders at companies that list on the NYSE as compared to those that list on the tech-heavy Nasdaq.

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.

This edition features opportunities in electric vehicles; our quarterly market outlook; an examination of ViacomCBS' streaming capabilities; and updates on Facebook, Tesla, and Darden.

Investors have enjoyed a bouyant first half, but should note that the markets are entering the poorest performing quarter of the year. By our calculations, 3Q performance has been underwhelming compared to 1Q, 2Q, and 4Q returns. We analyzed data collected on S&P 500 performance from 1980-2018. The strongest quarter has been 4Q, which has generated average gains of 4.4%. 1Q and 2Q returns have averaged 2.1% and 3.2%, respectively. On the other hand, 3Q is barely positive, with an average return of 0.5%. Not every 3Q is a disaster. In fact, the "win percentage" for the quarter is 63%; this means that markets deliver positive returns in the quarter more than three-fifths of the time. But the actual quarters that are negative can really hurt: -12% in 1981, - 15% in 1990, - 15% in 2000, - 18% in 2001, -14% in 2008 and -14% in 2011. Some of the events that occurred in these quarters are random: the September 11 attacks in 2001; the Lehman bankruptcy in 2008; and the S&P U.S. Treasury downgrade in 2011. But 3Q is also when companies start to know if they are going to meet their estimates for the year. As well, the Federal Reserve can be active. We think the current fundamentals are positive for stocks as 3Q21 begins, but will be watching closely for emerging risks, especially after the 8.1% return for stocks in 2Q19.

The market prospered in June, partly because of the strong (but not too strong) May payrolls report and the FOMC post-meeting commentary that confirmed the Fed is on track with its lower-for-longer approach to short-term rates.

On Wednesday, we talked about the strength of Technology sector stocks and their primary indices. We focused on the Nasdaq 100 (QQQ) and showed a very top-heavy situation. Seven stocks make up 48% of the ETF. Five of them are at/near all-time highs (ATHs) and AAPL is 6% from an ATH. TSLA is 22% from its ATH, but has been strong in the past couple of days, retaking both its 50- and 200-day averages over the past week.

Data Confirm Economic Recovery, with Caveats

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.

The S&P 500, Nasdaq, and Nasdaq 100 (QQQ) haven't seen much follow-through over the last five days. The S&P Mid-Cap 400 and Russell 2000 (IWM) have made some headway, with the "400" approaching its all-time closing high (ATH) from May 7 and the small-caps nearing their ATH from March 16.

This edition features Ford's electric future; the funeral industry in Australia; Amazon's move to buy MGM; and notes from Toll Brothers, General Mills, and Intuit.

The Housing Economy Awaits its Next Act

We continue to (mostly) ignore market sentiment as bullish extremes become even more extreme. Indeed, other than some mild pullbacks, we haven't seen anything close to real fear since the COVID-19 collapse in February and March of 2020.

Stocks were mixed on Friday morning following a positive manufacturing activity report and new housing market data. IHS Markit said that its flash manufacturing PMI rose to 61.5 in the first half of May, up from a final reading of 60.5 in April and above the consensus forecast. The National Association of Realtors said that U.S. existing home sales fell 2.7% in April to an annualized 5.85 million, below the consensus of 6.09 million. At the same time, the median existing home price rose 19.1% from the prior year to $341,600. On the earnings front, Deere shares rose more than 3% after the farm equipment maker posted strong fiscal 2Q results and raised its full-year earnings guidance. The Dow rose 0.7%, the S&P rose 0.3%, and the Nasdaq fell 0.1%. Crude oil traded near $64 per barrel, while gold fell $6 to $1876 per ounce.