Both the potential onset of recession (if the economy is not in one already) and the sharp move higher in interest rates have pulled the foundation out from under the equity market in 2022. Few sectors have been spared, with only the Energy industry in the green on a year-to-date basis. The broad retrenchment has dragged down small-caps, mid-caps, large-caps, and even the mega-caps that had previously pushed stocks to new heights as the economy recovered from the pandemic. In our opinion, some of these world-class companies have been oversold. For our list this week, we have identified 11 BUY-rated large- or mega-cap companies across numerous industries that are selling at attractive valuations and are more than 20% below their 52-week highs.

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.

Innovation may be hard to define. But to borrow from former U.S. Supreme Court Justice Potter Stewart, you know it when you see it. The United States economy is full of innovation. It has to be. Manufacturing industries that dominated the economy decades ago - textiles, televisions, even automobiles to a large degree - have moved overseas, where labor and materials costs are lower. Yet the U.S. economy, even during the pandemic and the current period of high inflation, has expanded to record levels. If U.S. corporations weren't innovating, creating new products (such as vaccines) and services (such as Zoom calls) and moving into new markets and applications, the domestic economy would not be growing, and capital would not be flooding into the country. The current high level of the U.S. dollar relative to currencies around the world attests to the confidence that global investors have in the innovative U.S. economy.

Stocks were mixed on Wednesday morning as investors weighed earnings reports from Netflix, Procter & Gamble, and Abbott Laboratories, and new housing market data. The Commerce Department said that U.S. housing starts fell 8.1% in September to a seasonally adjusted annual rate of 1.439 million, below the Reuters consensus forecast of 1.475 million. Building permits rose 1.4% to an annualized 1.564 million, above the consensus of 1.530 million. The Dow rose 0.2%, the S&P fell 0.3%, and the Nasdaq fell 0.4%. Crude oil rose slightly to $83 per barrel, while gold fell $17 to $1639 per ounce.

Last week, the headline that came from the insider-transaction data supplied by Vickers Stock Research was that insider sentiment on the Nasdaq was noticeably weaker than on the NYSE. That said, overall insider sentiment remained bullish - as it has been since early September. This week, Nasdaq insiders again remains more cautious than others do, but not to the same degree as last week. And, again, overall insider sentiment remains bullish.

Stocks rallied on Monday morning, reversing course once again after sharp losses on Friday. Bank of America shares rose nearly 5% after the company posted better-than-expected third-quarter results, helped by strong growth in net interest income. In China, the National Bureau of Statistics surprised investors by delaying the release of its 3Q GDP report, along with retail sales and industrial production data for September. The Dow rose 1.6%, the S&P 2.4%, and the Nasdaq 2.9%. Crude oil traded near $86 per barrel, while gold rose $20 to $1669 per ounce.

Stocks fell on Friday morning, reversing course after Thursday's rally, as investors weighed the first round of 3Q earnings reports from major banks. JPMorgan and Citigroup posted lower 3Q earnings, reflecting weakness in investment banking and higher loss provisions, though both banks topped consensus EPS forecasts with help from higher net interest income. Wells Fargo missed the consensus EPS estimate as earnings fell sharply from the prior year. The Dow fell 0.4%, the S&P 1.1%, and the Nasdaq 1.6%. Crude oil fell more than 3% to $86 per barrel, while gold traded near $1654 per ounce.

PepsiCo and the big banks are typically the first to report earnings, and those announcements are beginning this week. The consensus has 3Q earnings for S&P 500 companies growing 3.0%, year-over-year. For the 3Q22 earnings period, our model assumes that about half of the 11 sectors will post lower earnings in 3Q22 than in 3Q21. These include Technology, Communication Services, Consumer Staples, Financial Services, Healthcare, and Materials. We are modeling positive EPS growth from Consumer Discretionary (for the first time in three quarters), Utilities, REITs, and Industrials. We expect Energy, which has posted sector EPS growth exceeding 200% in 1Q22 and 2Q22, to post one final quarter of triple-digit percentage growth in the 110%-120% range. In subsequent quarters, tougher prior-year comparisons are expected to limit Energy EPS growth to double digits. Largely because of this final triple-digit EPS growth contribution from Energy, we continue to model positive earnings growth for 3Q22. Based on our multi-input model, we are lowering our estimate of S&P 500 earnings from continuing operations for 2022 from $225 to $224. That may not seem like much, and it reflects a few factors. First, half of the 2022 earnings year is in the record books; and first-half earnings overall were slightly better than our expectations. Second, we are modeling stronger growth in a few sectors (Energy, Consumer Discretionary) in the back half of 2022. Our 2022 EPS model assumes 9% growth from our 2021 estimate, in line with earlier expectations. Our 2023 estimate now calls for a lesser gain, of 5%, to $235. Our preliminary 2024 estimate is $258.

All of the major indices (the S&P 500, the Nasdaq, the Nasdaq 100 (QQQ), the NYSE, the Dow Industrials, the S&P MidCap 400, and the Russell 2000) completed bullish ABC reversals last week. Chart formations during market bottoms tend to be similar and generally occur at the same time. The exact opposite occurs at market tops.

We are starting to see both relative as well as absolute strength from Financial sector stocks, as the S&P Financial Sector Fund (XLF) has been outperforming the S&P 500 since August 4. While a month of outperformance isn't a whole lot to hang your hat on, it is interesting for several reasons that may give this early trend some time to play out.

Value stocks -- a market segment that includes high-yield stocks -- are outperforming growth stocks in 2022 for the first time since 2016. Indeed, for the past decade, the performance record has favored growth. In nine of the past 10 years, growth stocks have topped value stocks. But the tide may be turning. The rollout of 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 year. Now, the Federal Reserve lifting interest rates to fend off inflation, which will likely cap multiple expansion for growth companies. Regardless, the value sector is the place to achieve income. The current yield on the iShares Russell 1000 Value Index ETF is 2.1%, compared to the 0.8% current yield on the iShares Russell 1000 Growth Index ETF. For our High-Yield Theme Model Portfolio, we are seeking stocks with yields of at least 3.0%. This moves us deep into the value segment of the market.

The major indices have come a long way off their June lows, likely further than most expected. Where they stop, nobody knows. Many bears are throwing in their towels quicker than children lose their attention when doing homework. So far, every piece of resistance (until Tuesday) has been sliced through like a laser through metal.

Last week was the busiest of the quarter for earnings, with many sharp stock-price moves following above- or below-consensus results or changes in guidance. Through July 26, Refinitiv noted that 133 S&P 500 companies had reported earnings, with 76% beating expectations, above the long-term average of 66%. The blended (actual for those reporting and consensus for those still to report) growth rate is 6.2%, near the 5.6% expectation and indicating the "beats" have not been robust. But the sour mood coming into the quarter is being greeted with relief that profit shortfalls and lowered guidance are not rampant. Our analysts always look for companies that boost outlooks during earnings season. Raising guidance can be a catalyst for strong returns in the quarters ahead. Here is an initial list of BUY-rated companies in Argus coverage with raised guidance or increased outlooks during the 2Q22 EPS reporting season.